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. )
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Filed by the Registrant
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Filed by a Party other than the
Registrant o
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Check the appropriate
box:
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x
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Preliminary Proxy
Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a‑6(e)(2))
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material under
§240.14a‑12
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AVALONBAY
COMMUNITIES, INC.
(Name of Registrant
as Specified In Its Charter)
(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check
the appropriate box):
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x
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No fee required.
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Fee computed on table below per
Exchange Act Rules 14a‑6(i)(1) and 0‑11.
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(1)
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Title of each class of
securities to which transaction applies:
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(2)
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Aggregate number of securities
to which transaction applies:
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(3)
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Per unit price or other
underlying value of transaction computed pursuant to Exchange Act
Rule 0‑11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed maximum aggregate
value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with
preliminary materials.
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Check box if any part of the
fee is offset as provided by Exchange Act Rule 0‑11(a)(2) and
identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Dear Fellow
Stockholders:
I welcome you to
join me and the entire Board of Directors at our 2020 Annual
Meeting of Stockholders, which will be held on May 12, 2020,
at the Company's offices at 4040 Wilson
Boulevard,
Arlington, Virginia
22203.
At this year’s
meeting we will vote on the election of ten directors and the
ratification of Ernst & Young as the Company’s independent
auditor. We will also conduct a non‑binding, advisory vote to
approve the compensation of the Company’s named executive officers.
This year we are also asking you to vote on an amendment to our
Charter that will reduce the required stockholder vote on future
changes to the Charter or material corporate events from two-thirds
of outstanding shares to a majority of outstanding
shares.
Your vote is
important. Whether or not you plan to attend the meeting, we want
your shares to be represented. Please authorize a proxy to vote
your shares as soon as possible electronically through the
Internet, by telephone, or by completing, signing and returning the
proxy card enclosed with the proxy statement. More detailed
instructions on how to vote are provided on page four of the Proxy
Statement. Please also refer to the information on page five of the
Proxy Statement about how to monitor any change in plans for
conduct of the Annual Meeting as a result of current public health
issues.
To attend the
meeting, a government‑issued photo identification is required and
we encourage you to register in advance for admission to the
meeting. To register in advance, please follow the instructions on
page three of the Proxy Statement.
Our Board of
Directors values your participation as a stockholder and
appreciates your continued support of AvalonBay.
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March 31,
2020
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Sincerely,
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Timothy J.
Naughton
Chairman
of the Board
and Chief Executive Officer
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AvalonBay
Communities, Inc.
4040 Wilson
Boulevard, Suite 1000
Arlington, VA
22203
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NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD ON
MAY 12, 2020
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NOTICE IS HEREBY
GIVEN that the 2020 Annual Meeting of Stockholders (the “Annual
Meeting”) of AvalonBay Communities, Inc., a Maryland
corporation (the “Company”), will be held on Tuesday, May 12,
2020, at 8:00 a.m., local time, at the Company's offices at
4040 Wilson Boulevard, Arlington, VA 22203, for the following
purposes:
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1.
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To elect the
following ten directors to serve until the 2021 Annual Meeting of
Stockholders and until their respective successors are elected and
qualify: Glyn F. Aeppel, Terry S. Brown, Alan B.
Buckelew, Ronald L. Havner, Jr., Stephen P. Hills,
Richard J. Lieb, Timothy J. Naughton, H. Jay Sarles,
Susan Swanezy and W. Edward Walter.
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2.
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To consider and
vote upon ratification of the selection of Ernst &
Young LLP by the Audit Committee of the Company’s Board of
Directors to serve as the Company’s independent auditors for
2020.
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3.
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To consider and
vote upon a resolution to approve, on a non‑binding, advisory
basis, the compensation of certain executives of the Company as
more fully described in the accompanying Proxy
Statement.
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4.
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To consider and
vote upon approval of an amendment to the Company’s charter to
eliminate supermajority voting requirements for future charter
amendments and other extraordinary actions.
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5.
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To transact such
other business as may be properly brought before the Annual Meeting
and at any postponements or adjournments thereof.
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The Board of
Directors has fixed the close of business on March 16, 2020,
as the record date for determining the stockholders entitled to
receive notice of and to vote at the Annual Meeting and at any
postponements or adjournments thereof. Only holders of record of
the Company’s common stock, par value $0.01 per share (the “Common
Stock”), at that time will be entitled to receive notice of and to
vote at the Annual Meeting and at any postponements or adjournments
thereof.
We request that you
authorize a proxy to vote your shares, which is being solicited by
the Board of Directors, by telephone or over the Internet by
following the instructions on your proxy card. If you request
printed copies of the proxy statement by mail, you may also
authorize a proxy to vote your shares by completing and signing the
enclosed proxy card and by mailing it promptly in the enclosed
postage-prepaid envelope. Any proxy authorized by a holder of
Common Stock may be revoked by delivering notice to the Company
stating that the proxy is revoked using the same method as the
original proxy authorization or by delivery of a properly
authorized, later dated proxy. Holders of record of Common Stock
who attend the Annual Meeting may vote in person, even if they have
previously delivered a signed proxy or authorized a proxy by
telephone or over the Internet, but the presence (without further
action) of a stockholder at the Annual Meeting will not constitute
revocation of a previously delivered proxy.
If
you plan to attend the meeting, we encourage you to register in
advance for admission to the meeting. To register, please follow
the instructions set forth on page three of the accompanying
proxy statement. All meeting attendees must present
government‑issued photo
identification, such as a driver’s license or passport, at the
meeting.
We intend to hold our Annual Meeting in person. However, we are
actively monitoring information about the coronavirus (COVID-19),
and we are sensitive to the public health and travel concerns our
stockholders may have and the protocols that federal, state, and
local governments may impose. In the event it is not possible or we
deem it inadvisable to hold our Annual Meeting in person or solely
in person, we will announce alternative arrangements for the
meeting as promptly as practicable, which may include holding the
meeting solely by means of remote communication. Please monitor our
website at http://investors.avalonbay.com/Corporateprofile
under SEC Filings and Proxy Materials and Annual Meeting
Information for updated information. If you are planning to attend
our meeting, please check the website ten days prior to the meeting
date. As always, we encourage you to vote your shares prior to the
Annual Meeting.
Important:
In the event we determine to hold the Annual Meeting fully or
partially via remote communication, in order to attend the Annual
Meeting or ask questions at the Annual Meeting you will need
to enter the control number found next to the label for postal mail
recipients or within the body of the email sending you notice
of the Annual Meeting. Please retain this control number in a
safe place.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 12, 2020:
The Notice of
Annual Meeting, proxy statement, Annual Report to Stockholders and
Annual Report on Form 10-K for the year ended December 31, 2019,
are available at www.proxyvote.com.
By Order of the
Board of Directors
Arlington,
Virginia
Edward M. Schulman
March 31,
2020
Secretary
Proxy Statement
Table of Contents
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Page
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Proxy Summary
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I.
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Some Questions You May Have Regarding This Proxy
Statement
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II.
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Proposals
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Proposal 3 -- Non-Binding,
Advisory Vote on Executive Compensation
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Required Vote and
Recommendation
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Proposal 4 - Amendment of the
Charter to Eliminate the Supermajority Voting Requirements for
Future Charter Amendments and Other Extraordinary
Actions
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Required Vote and
Recommendation
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III.
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Corporate Governance And Related Matters
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Fiscal 2018 and 2019 Audit Fee
Summary
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Audit Committee Pre‑Approval of Audit and
Permissible Non‑Audit Services of Independent Auditors
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IV.
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Compensation
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CEO Pay Ratio
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V.
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Officers, Stock Ownership And Other Information
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Delinquent Section 16(a)
Reports
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VI.
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Other Matters
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Proxy Summary
This summary
highlights certain information about AvalonBay
Communities, Inc., a Maryland corporation (the “Company”), and
its 2020 Annual Meeting of Stockholders and summarizes 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 before voting. For more
complete information regarding the Company’s 2019 performance,
please review the Company’s Annual Report on Form 10‑K for the
year ended December 31, 2019, and the Company’s 2019 Annual
Report to Stockholders, both of which are available to stockholders
online at www.proxyvote.com and on the Company's website at
www.avalonbay.com/investors. This proxy statement and the
accompanying Notice of Annual Meeting and proxy card are first
being made available to stockholders on or about March 31,
2020.
2020
Annual Meeting of Stockholders Information
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Date and
Time:
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Tuesday, May 12, 2020, at
8:00 a.m. local time
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Place:
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4040 Wilson Boulevard,
Arlington, VA 22203
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Record
Date:
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March 16, 2020
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Meeting Agenda
and Voting Matters
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Proposal
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Board’s Voting
Recommendation
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Page
References
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1. Election of
Directors
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FOR EACH NOMINEE
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6-10
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2. Ratification of Selection of
Independent Auditors
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FOR
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11
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3. Non-Binding, Advisory Vote to
Approve Executive
Compensation
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FOR
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11-12
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4. Amendment to
Charter
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FOR
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12-13
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Election of
Directors (Proposal 1)
The Board of
Directors recommends a vote FOR each director
nominee.
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Name
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Age
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Director
Since
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Independent
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Committees*
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Timothy J. Naughton
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58
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2005
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IFC
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Glyn F. Aeppel
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61
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2013
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X
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IFC, NCG
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Terry S. Brown
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58
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2015
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X
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IFC (Chair), NCG
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Alan B. Buckelew
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71
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2011
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X
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AC, CC
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Ronald L. Havner,
Jr.
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62
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2014
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X
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AC (Chair), IFC
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Stephen P. Hills
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61
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2017
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X
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AC, IFC
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Richard J. Lieb
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60
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2016
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X
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AC, CC
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H. Jay Sarles
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74
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2005
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X
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CC, NCG (Chair)
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Susan Swanezy
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61
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2016
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X
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NCG, IFC
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W. Edward Walter**
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64
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2008
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X
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CC (Chair), NCG
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* IFC =
Investment and Finance Committee, AC = Audit Committee,
CC = Compensation Committee, NCG = Nominating and
Corporate Governance Committee. Immediately following the Annual
Meeting, the Board expects to appoint Richard Lieb as Chair of the
Compensation Committee.
** Mr. Walter
is the Lead Independent Director.
Ratification of
Selection of Auditors (Proposal 2)
The Board of
Directors recommends a vote FOR ratification of the selection of
Ernst & Young by the Audit Committee of the Company’s
Board of Directors to serve as the Company’s independent auditors
for 2020.
Advisory Vote to
Approve Executive Compensation (Proposal 3)
The Board of
Directors recommends a vote FOR the resolution to approve, on a
non‑binding, advisory basis, the compensation paid to the Company’s
Chief Executive Officer and other officers named in the Summary
Compensation Table on Page 46.
Vote
on Amendment to Charter Reducing the Required Stockholder Vote for
Extraordinary Actions to a Majority of Shares Outstanding (Proposal
4)
The Board of
Directors recommends a vote FOR the resolution to approve an
amendment to the Company’s charter (the “Charter”), to reduce the
required stockholder vote for amendment of the Charter and other
extraordinary actions to a majority of all of the votes entitled to
be cast on the matter.
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Corporate
Governance Best Practices
All
directors are independent other than the CEO
Commitment
to Board refreshment including guidelines on director and committee
chairman tenure
Regular
Board, committee and director evaluations
Annual
election of all directors and majority voting in uncontested
elections
Lead
Independent Director
Independent
Audit, Compensation and Nominating and Corporate Governance
Committees
Regular
executive sessions of independent directors, including at each
regularly scheduled Board meeting
Director
and officer stock ownership guidelines
Robust
Anti-Hedging, Anti-Speculation and No Pledging
policies
No
former employees serve as directors
Policy
regarding stockholder approval of future severance agreements that
provide for severance benefits above a certain level
No
employment agreements with officers
Bylaws
contain provisions for stockholder rights relating to proxy access
and Bylaw amendments
Policy
on recoupment of incentive compensation (clawback
policy)
No
stockholder rights plan (“poison pill”) and policy regarding
adoption of future plans
Double-trigger
equity compensation vesting in the event of a change in
control
Policy
on political contributions and government relations
Policy
to encourage and reimburse directors for attendance at director
education events
Published
comprehensive sustainability and corporate social responsibility
report
Annual
advisory vote to ratify independent auditor
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I.
Some Questions You May Have Regarding This Proxy
Statement
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Q.
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Why am I
receiving these materials and what is included in the proxy
materials?
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A.
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The proxy materials
for our 2020 Annual Meeting of Stockholders include the Notice of
Annual Meeting, this proxy statement, our Annual Report to
Stockholders for the year ended December 31, 2019, and the
Company's Form 10-K for the year ended December 31, 2019. If you
received a paper copy of these materials, the proxy materials also
include a proxy card or voting instruction form. The accompanying
proxy is solicited on behalf of the Board of Directors of the
Company. We are providing these proxy materials to you in
connection with our 2020 Annual Meeting of Stockholders to be held
on Tuesday, May 12, 2020, at 8:00 a.m., local time, at
4040 Wilson Boulevard, Arlington, Virginia 22203, and any
postponements or adjournments thereof (the “Annual Meeting” or the
“2020 Annual Meeting”). As a Company stockholder, you are invited
to attend the Annual Meeting and are entitled and requested to vote
on the proposals described in this proxy statement. Directions on
how to attend the Annual Meeting in person are available on the
Company’s Internet website at www.avalonbay.com.
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Q.
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How can I
access the proxy materials electronically?
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A.
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This proxy
statement, our 2019 Annual Report to Stockholders and our Annual
Report on Form 10‑K for the year ended
December 31, 2019 are available online at www.proxyvote.com.
Instead of receiving copies of our future annual reports, proxy
statements, and proxy cards by mail, stockholders can elect to
receive an email that will provide electronic links to our proxy
materials and an electronic link to the proxy voting site. Choosing
to receive your future proxy materials online will save us the cost
of printing and mailing documents to you and help conserve natural
resources. You may sign up for electronic delivery by visiting
www.proxyvote.com. If you elect to receive these materials by
electronic delivery, you may change your election at any
time.
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Q.
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Who may vote
at the Annual Meeting?
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A.
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You may vote all
the shares of our common stock, par value $0.01 per share (“Common
Stock”), that you owned at the close of business on March 16,
2020, the record date for determining stockholders entitled to
receive notice of, and to vote on, these matters (the “Record
Date”). On the Record Date, the Company had 140,734,678 shares of
Common Stock outstanding and entitled to vote at the meeting. You
may cast one vote for each share of Common Stock held by you on all
matters.
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Q.
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How do I
obtain admission to the Annual Meeting?
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A.
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If
you plan to attend the Annual Meeting, we encourage you to register
in advance. All meeting attendees must present
government‑issued photo
identification, such as a driver’s license or passport, at the
meeting. In addition, if you are authorized to represent a
corporate or institutional stockholder, you must also present
written evidence that you are the authorized representative of such
stockholder. Please submit your request to register on or before
Friday, May 8, 2020, by mailing a request to the Company’s
Corporate Secretary at 4040 Wilson Boulevard, Suite 1000,
Arlington, VA 22203, or sending an email to
AnnualMeeting@AvalonBay.com. Please include the following
information: (a) your name and mailing address,
(b) whether you need special assistance at the meeting and
(c) if your shares are held for you in the name of your
broker, bank or other nominee, evidence of your stock ownership
(such as a current letter from your broker or a photocopy of a
current brokerage or other account statement) as of March 16,
2020. The meeting facilities will open at 7:30 a.m., local
time, to facilitate your registration and security clearance. For
your security you will not be permitted to bring any packages,
briefcases, large pocketbooks or bags into the meeting room. Also,
cellular phones, audio (tape or digital) recorders, video and still
cameras, pagers, laptops and other portable electronic devices as
well as pets, other than service animals, may not be permitted into
the meeting room. Thank you in advance for your cooperation with
these rules.
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Q.
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What
constitutes a quorum at the Annual Meeting?
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A.
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The presence, in
person or by proxy, of holders of a majority of all of the shares
of Common Stock entitled to vote is necessary to constitute a
quorum for the transaction of business at the Annual Meeting.
Abstentions and “broker non‑votes” will be counted for
purposes of determining whether a quorum is present for the
transaction of business at the Annual Meeting. A “broker
non‑vote” refers to a share
represented at the meeting held by a broker, as to which
instructions have not been received from the beneficial owner or
person entitled to vote such share and with respect to which, on
one or more but not all matters, the broker does not have
discretionary voting power to vote such share.
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Note that under New
York Stock Exchange (“NYSE”) rules, if you hold shares through a
bank, broker or other institution and you do not provide your
voting instructions to them at least ten days before the
Annual Meeting, that firm has the discretion to vote your shares on
proposals that the NYSE has determined are routine, such as the
ratification of the appointment of the independent public
accounting firm. A bank, broker or institution that holds your
shares cannot vote your shares on non‑routine matters, such as the
election of directors, approval of compensation‑related matters, a charter
amendment, or a proposal submitted by a stockholder, without your
voting instructions.
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Q.
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What proposals
will be voted on at the Annual Meeting?
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A.
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At the Annual
Meeting, stockholders will be asked to: (1) elect ten
directors of the Company, (2) consider and vote upon
ratification of the selection of Ernst & Young LLP as
the Company’s independent auditors for 2020, (3) consider and
vote upon a resolution to approve, on a non‑binding, advisory basis, the
Company’s named executive officer compensation, (4) consider and
vote upon a resolution to amend the Company’s Charter to reduce the
required stockholder vote to amend the Charter or approve other
extraordinary actions to the affirmative vote of stockholders
entitled to cast a majority of all the votes entitled to be cast on
the matter, and (5) transact such other business as may be
properly brought before the Annual Meeting, in each case as
specified in the Notice of Annual Meeting and more fully described
in this proxy statement.
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A.
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Whether you hold
shares directly as the stockholder of record or indirectly as the
beneficial owner of shares held for you by a broker or other
nominee (i.e., in “street name”), you may direct your vote
without attending the Annual Meeting. You may vote by granting a
proxy or, for shares you hold in street name, by submitting voting
instructions to your broker or nominee. In most instances, you will
be able to do this over the Internet, by telephone or, if you
request printed copies of the proxy materials, by mail. Please
refer to the summary instructions below and those included on your
proxy card or, for shares you hold in street name, the voting
instruction card provided by your broker or nominee.
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By Internet-If you have Internet access,
you may authorize your proxy from any location in the world by
following the “By Internet” instructions on the proxy card or, if
applicable, the Internet voting instructions that may be described
on the voting instruction card sent to you by your broker or
nominee.
By Telephone-If you are calling from the
United States or Canada, you may authorize your proxy by following
the “By Telephone” instructions on the proxy card or, if
applicable, the telephone voting instructions that may be described
on the voting instruction card sent to you by your broker or
nominee.
By Mail-If
you request printed copies of the proxy materials, you may
authorize your proxy by signing your proxy card and mailing it in
the enclosed, postage‑prepaid and addressed envelope.
For shares you hold in street name, you may sign the voting
instruction card included by your broker or nominee and mail it in
the envelope provided.
For shares held
directly in your name, you may change your proxy instructions at
any time prior to the vote at the Annual Meeting. You may do this
by granting a new properly executed and later‑dated proxy using the same
method you originally used to authorize your proxy, by filing a
written revocation with the Secretary of the Company at the address
of the Company set forth above, or by attending the Annual Meeting
and voting in person. Attendance at the Annual Meeting without
further action will not cause your previously granted proxy to be
revoked. You may change your proxy instructions for shares
you
beneficially own by
submitting new voting instructions to your broker or nominee in the
manner and within the time periods they prescribe.
If a properly
signed proxy is submitted but not marked as to a particular item,
the proxy will be voted (i) FOR the election of the nominees for
director of the Company named in this Proxy Statement, (ii) FOR the
ratification of the selection of Ernst & Young LLP as
the Company’s independent auditors for 2020, (iii) FOR the
non‑binding, advisory resolution to
approve the Company’s named executive officer compensation, and
(iv) FOR the Amendment to the Company's Charter. It is not
anticipated that any matters other than those set forth in the
proxy statement will be presented at the Annual Meeting. If other
matters are presented, proxies will be voted in the discretion of
the proxy holders.
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A.
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If you and other
residents at your mailing address own shares of Common Stock in
street name, your broker, bank or other nominee may have sent you a
notice that your household will receive only one annual report,
notice of annual meeting and proxy statement. This procedure is
known as “householding” and is intended to reduce the volume of
duplicate information stockholders receive and also reduce our
printing and postage costs. If you consented or were deemed to have
consented to householding, your broker, bank or other nominee may
send one copy of our annual report, notice of annual meeting and
proxy statement to your address for all residents that own shares
of Common Stock in street name. If you wish to revoke your consent
to householding, you must contact your broker, bank or other
nominee. If you are receiving multiple copies of our annual report,
notice of annual meeting and proxy statement, you may be able to
request householding by contacting your broker, bank or other
nominee.
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If you wish to
request extra copies free of charge of our annual report or proxy
statement, please send your request to the Corporate Secretary at
the address below, call us with your request at 703‑329‑6300
or visit the “Investor relations” section of our website at
www.avalonbay.com.
The Company’s 2019
Annual Report to Stockholders and a copy of the Company’s Annual
Report on Form 10‑K for the year ended December 31, 2019,
as filed with the Securities and Exchange Commission (“SEC”), are
being made available to stockholders concurrently with the
availability of this proxy statement. The Annual Report to
Stockholders and Form 10‑K, however, are not part of the proxy
solicitation materials. A copy of any
or all exhibits to the Company’s Annual Report on
Form 10‑K, and a copy
of the Company’s Code of Business Conduct and Ethics, may be
obtained free of charge by writing to the Company at its principal
executive offices at the following address: AvalonBay
Communities, Inc., 4040 Wilson Boulevard, Suite 1000,
Arlington, VA 22203, Attention: Corporate Secretary or by accessing
the “Investor Relations” section of the Company’s website
(www.avalonbay.com).
Important
Note:
We intend to hold our Annual Meeting in person. However, we are
actively monitoring information about the coronavirus (COVID-19),
and we are sensitive to the public health and travel concerns our
stockholders may have and the protocols that federal, state, and
local governments may impose. In the event it is not possible or we
deem it inadvisable to hold our Annual Meeting in person or solely
in person, we will announce alternative arrangements for the
meeting as promptly as practicable, which may include holding the
meeting solely by means of remote communication. Please monitor our
website at http://investors.avalonbay.com/Corporateprofile
under SEC Filings and Proxy Materials and Annual Meeting
Information for updated information. If you are planning to attend
our meeting, please check the website ten days prior to the meeting
date. As always, we encourage you to vote your shares prior to the
Annual Meeting.
In the event we determine to hold the Annual Meeting fully or
partially via remote communication, in order to attend the Annual
Meeting or ask questions at the Annual Meeting you will need
to enter the control number found next to the label for postal mail
recipients or within the body of the email sending you notice
of the Annual Meeting. Please retain this control number in a
safe place.
Proposal 1:
Election of Directors
The Board of
Directors currently consists of ten members. The Board of Directors
has nominated for election all current directors. Accordingly, ten
nominees will stand for election at the Annual Meeting and if
elected will serve until the 2021 Annual Meeting of Stockholders
and until their successors are elected and qualify. The following
individuals have been nominated by the Board of Directors to serve
as directors: Glyn F. Aeppel, Terry S. Brown,
Alan B. Buckelew, Ronald L. Havner, Jr., Stephen P.
Hills, Richard J. Lieb, Timothy J. Naughton, H. Jay
Sarles, Susan Swanezy and W. Edward Walter (each, a “Nominee”
and, collectively, the “Nominees”). The Board of Directors
anticipates that each of the Nominees, if elected, will serve as a
director. However, if any person nominated by the Board of
Directors is unable to serve or for good cause will not serve, the
proxies will be voted for the election of such other person as the
Board of Directors may recommend. You may not vote for more than
ten directors at the Annual Meeting.
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Required Vote and
Recommendation
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Only holders of
record of Common Stock as of the close of business on the Record
Date are entitled to vote on this proposal. Proxies will be voted
for all of the Nominees unless contrary instructions are set forth
on the enclosed proxy card. Under the Company’s Bylaws, a majority
of the total votes cast as to each Nominee is required to elect
such Nominee. Under Maryland law, abstentions and broker
non‑votes are not treated as votes
cast. Accordingly, an abstention or broker non‑vote will have no effect on the
result of the vote.
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The Board of Directors unanimously recommends a vote FOR all of
the Nominees.
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Information
Regarding Nominees
The Nominating and
Corporate Governance Committee and the full Board are focused on
ensuring that the composition of the Board continues to provide the
diversity of experience, functional skill set, expertise, and
thought necessary to appropriately address the needs of the Company
and its stockholders.
Board Tenure
and Gender Diversity for 2020 Nominees
The Company’s Board
of Directors has included in the Company’s Corporate Governance
Guidelines term expectations that reflect the Company’s view of the
importance of Board succession planning and
refreshment.
In general, the
Company expects that a non-employee director will not be
re-nominated after the completion of 12 full years of service or
within the several years that follow.
Director
Skills/Experience Matrix
The following table
summarizes the key qualifications, skills and experiences of each
director that the Board considers most important in its decision to
nominate or re-nominate that individual to the Board.
Exclusion of a factor for a Nominee does not necessarily mean the
Nominee does not possess that attribute. It means only that when
the Nominating and Corporate Governance Committee considered the
skills and experiences of that Nominee in the overall context of
the members of the Board of Directors, that attribute is not
considered a key factor in the determination to nominate or
re-nominate that individual.
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Skill,
attribute or experience
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Naughton
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Aeppel
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Brown
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Buckelew
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Havner
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Hills
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Lieb
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Sarles
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Swanezy
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Walter
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Accounting/Financial
Literacy
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x
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x
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x
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x
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x
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x
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x
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x
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x
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x
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Public Company CEO
Experience
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x
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x
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x
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C-Level Management
Experience
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x
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x
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x
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x
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x
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x
|
x
|
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x
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Non-AVB Public Board
Experience
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x
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x
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x
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x
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x
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x
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Financial/Capital Markets
Experience
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x
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x
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x
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x
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x
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x
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x
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x
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Marketing/Brand Management/
Consumer Focus
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x
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x
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x
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x
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Real Estate
Industry
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x
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x
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x
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x
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x
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x
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x
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REIT Format
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x
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x
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x
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x
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x
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x
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Real Estate
Development/
Investment
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x
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x
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x
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x
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x
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x
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Technology and
Innovation
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x
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x
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The full Nominee
biographies below describe each director’s qualifications and
relevant experience in more detail. The age of each Nominee shown
below is as of the date of this proxy statement.
Employee
Director Nominee:
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Timothy
J. Naughton
Age:
58
Director
Since: September 2005
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AvalonBay
Committees:
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Other
Public Company Boards:
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Investment and
Finance
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Park Hotels and
Resorts, Inc.
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Mr. Naughton is the Company’s
Chairman of the Board, Chief Executive Officer and President and
has been a director of the Company since September 2005. He has
served as Chairman of the Board since May 2013, as Chief Executive
Officer since January 2012, and as President since February 2005.
Mr. Naughton’s prior roles included serving as the Company’s Chief
Operating Officer, Chief Investment Officer, and Regional Vice
President - Development and Acquisitions. Mr. Naughton has been
with the Company and its predecessors since 1989. Mr. Naughton is a
director of Park Hotels & Resorts, Inc., a publicly traded
hotel real estate investment trust. He is a former Chairman of the
National Association of Real Estate Investment Trusts (“NAREIT”).
Mr. Naughton is also a member of The Real Estate Round Table, is a
member and past chairman of the Multifamily Council of the Urban
Land Institute (“ULI”), and is a member of the Real Estate Forum.
He sits on the board of the Jefferson Scholars Foundation at the
University of Virginia. Mr. Naughton received his Masters of
Business Administration from Harvard Business School in 1987 and
earned his undergraduate degree from the University of Virginia,
where he was elected to Phi Beta Kappa.
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Non‑Employee
Director Nominees:
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Glyn
F. Aeppel
Age:
61
Director
Since: May 2013
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AvalonBay
Committees:
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Other
Public Company Boards:
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Investment and
Finance
Nominating and Corporate Governance
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Simon Property
Group, Inc.
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Ms. Aeppel has more than 30
years of experience in property acquisitions, development and
financing. Ms. Aeppel established a hotel investment and advisory
company, Glencove Capital, in June 2010, and serves as its
President and Chief Executive Officers. From October 2008 to May
2010, Ms. Aeppel served as Chief Investment Officer of Andre Balazs
Properties, an owner, developer and operator of luxury hotels. From
April 2006 to October 2008, she served as Executive Vice President
of Acquisitions and Development for Loews Hotels and as a member of
its Executive Committee. From April 2004 to April 2006, she was a
principal of Aeppel and Associates, a hospitality advisory
development company, during which time she assisted Fairmont Hotels
and Resorts in expanding in the United States and Europe. Prior to
April 2004, Ms. Aeppel held executive positions with Le Meridien
Hotels, Interstate Hotels and Resorts, Inc., FFC Hospitality, LLC,
Holiday Inn Worldwide and Marriott Corporation. Ms. Aeppel is a
director of Simon Property Group, Inc., a publicly traded real
estate investment company. She also serves on three private company
boards, Exclusive Resorts, Gilbane, Inc. and Concord Hospitality
Enterprises.
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Terry
S. Brown
Age:
58
Director
Since: January 2015
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AvalonBay
Committees:
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Other
Public Company Boards:
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Investment and
Finance (Chair)
Nominating and
Corporate Governance
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None
currently
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Mr. Brown is the Chairman and
Chief Executive Officer of Asana Partners, a private real estate
investment company, which he helped found in 2015. Prior to that he
was Chairman and Chief Executive Officer of EDENS, one of the
country’s leading private owners, operators and developers of
retail real estate. Mr. Brown joined EDENS as its CEO in 2002.
Before joining EDENS he was Chief Executive Officer of Anderson
Corporate Finance LLC (NASD broker dealer subsidiary of Arthur
Andersen LLP) where he was responsible for strategy and investment
banking activities on a global basis across the real estate,
manufacturing, technology, services and energy
industries.
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Alan
B. Buckelew
Age:
71
Director
Since: September 2011
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AvalonBay
Committees:
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Other
Public Company Boards:
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Audit
Compensation
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None
currently
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Mr. Buckelew retired in December
2018 from his position as Chief Information Officer of Carnival
Corporation, a publicly traded cruise line holding company, a
position he had held since December 2016. From 2013 to 2016 he
served as Carnival’s Chief Operating Officer. Prior to that he was
President of Princess Cruises, Inc. from 2004 to 2013, overseeing
the brand and operations of Princess Cruises. Mr. Buckelew also
served as Chief Operating Officer for Cunard Cruise Line from 2004
to 2007. Prior to these roles, Mr. Buckelew served from 2000 to
2004 as Executive Vice President of Corporate Services and Chief
Financial Officer for Princess Cruises, with responsibility for the
Company’s strategic planning, marketing and yield management
functions.
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Ronald
L. Havner, Jr.
Age:
62
Director
Since: September 2014
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AvalonBay
Committees:
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Other
Public Company Boards:
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Audit
(Chair)
Investment and
Finance
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Public
Storage
PS Business Parks,
Inc.
Shurgard
Self-Storage, SA
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Mr. Havner is the Chairman of
the Board of Public Storage, a publicly traded self-storage
facility real estate investment trust. Mr. Havner stepped down from
his position as Chief Executive Officer of Public Storage at the
end of 2018. He was elected CEO of Public Storage in 2002 and was
elected Chairman of the Board in August 2011. Mr. Havner has been
Chairman of the Board of PS Business Parks, Inc., a publicly traded
real estate company, since March 1998 and is Chairman of the Board
of Shurgard Self-Storage SA, an owner and operator of self-storage
facilities in Europe whose shares are listed for trading on the
Euronext Brussels Exchange. Mr. Havner is a previous Chairman of
the Board of Governors of NAREIT.
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Stephen
P. Hills
Age:
61
Director
Since: September 2017
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AvalonBay
Committees:
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Other
Public Company Boards:
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Audit
Investment and
Finance
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None
currently
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In 2016, Mr. Hills joined the
Georgetown University Law Center, where is the Founding Director of
the law school’s Business Skills Program. Prior to joining
Georgetown Law, Mr. Hills worked for 28 years with the Washington
Post, where he had served since 2002 as President and General
Manager. Mr. Hills holds degrees from Yale University and Harvard
Business School.
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Richard
J. Lieb Age:
60
Director
Since: September 2016
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AvalonBay
Committees:
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Other
Public Company Boards:
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Audit
Compensation
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CBL &
Associates Properties, Inc.
VEREIT,
Inc.
iStar,
Inc.
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Mr. Lieb is a Senior Advisor at
Greenhill & Co., LLC, a publicly traded investment bank. Prior
to that he was a Managing Director and Chairman of Real Estate at
Greenhill. Mr. Lieb previously served Greenhill in a variety of
senior positions, including as head of Greenhill’s Real Estate,
Gaming and Lodging Group. Mr. Lieb was also Greenhill’s Chief
Financial Officer from 2008 to 2015. Prior to joining Greenhill in
2005, Mr. Lieb spent more than 20 years with Goldman, Sachs &
Co., where he headed its Real Estate Investment Banking Department
from 2000 to 2005. Mr. Lieb is also a director of CBL &
Associates Properties, Inc, VEREIT, Inc. and iStar, Inc., each a
publicly traded REIT. He also serves on the board of Domio, Inc., a
private technology company.
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H.
Jay Sarles
Age:
74
Director
Since: September 2005
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AvalonBay
Committees:
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Other
Public Company Boards:
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Nominating and
Corporate Governance (Chair)
Compensation
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None
currently
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Mr. Sarles retired from full
time business leadership positions in 2005, having most recently
served as vice chairman of Bank of America Corporation. Prior to
that he served as Vice Chairman and Chief Administrative Officer of
Fleet Boston Financial (“Fleet”) with responsibility for
administrative functions, risk management, technology and
operations, treasury services, corporate strategy and mergers and
acquisitions. During his 37 years at Fleet, Mr. Sarles oversaw
virtually all of Fleet’s businesses at one time or another,
including the company’s wholesale banking business from 2001 to
2003. These included commercial finance, real estate finance,
capital markets, global services, industry banking, middle market
and large corporate lending, small business services and investment
banking businesses.
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Susan
Swanezy
Age:
61
Director
Since: September 2016
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AvalonBay
Committees:
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Other
Public Company Boards:
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Nominating and
Corporate Governance
Investment and
Finance
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None
currently
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Since 2010, Ms. Swanezy has been
a partner at Hodes Weill & Associates L.P., a global advisory
firm focused on the real estate investment management industry.
Previously, Ms. Swanezy served as Managing Director, Global Head of
Capital Raising for Real Estate Products at Credit Suisse Group AG,
and held a variety of positions at Deutsche Bank AG and its
affiliates, including serving as a Partner and Managing Director -
Client Relations for RREEF, the real estate investment management
business of Deutsche Bank’s Asset Management division.
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W.
Edward Walter
Age:
64
Director
Since: September 2008
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AvalonBay
Committees:
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Other
Public Company Boards:
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Compensation
(Chair)
Nominating and
Corporate Governance Lead Independent Director
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Ameriprise
Financial, Inc.
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Mr. Walter has served as the
Global Chief Executive Officer for ULI since June 2018. Prior to
that he was the Robert and Lauren Steers Chair in Real Estate at
the Steers Center for Global Real Estate at Georgetown University’s
McDonough School of Business where he continues to serve as an
adjunct professor. He served as President and Chief Executive
Officer of Host Hotels and Resorts, Inc. (“Host”), a publicly
traded premier lodging real estate company, from October 2007
through December 2016, with his employment ending on January 31,
2017. From 2003 until October 2007, he served as Executive Vice
President and Chief Financial Officer of Host. From 1996 until 2003
he served in various senior management positions with Host,
including Chief Operating Officer. Mr. Walter is also past Chairman
of NAREIT, the Chairman of the Federal City Council and a member of
the Board of Visitors of the Georgetown University Law Center. Mr.
Walter serves on the board of Ameriprise Financial, Inc., a
publicly traded financial planning services company.
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Proposal 2:
Ratification of Selection of Independent Auditors
The Board
recommends that the stockholders ratify the Audit Committee’s
selection of Ernst & Young LLP (“Ernst &
Young”) as the independent auditors of the Company for fiscal year
2020. Ernst & Young was also the Company’s principal
independent auditors for fiscal year 2019. If the selection of
Ernst & Young is not ratified, the Audit Committee
anticipates that it will nevertheless engage Ernst & Young
as auditors for fiscal year 2020 but will consider whether it
should select a different auditor for fiscal year 2021. If the
selection of Ernst & Young is ratified by the
stockholders, the Audit Committee may nevertheless determine, based
on changes in fees, personnel or for other reasons, to engage a
firm other than Ernst & Young for the 2020
audit.
Representatives of
Ernst & Young are expected to be present at the Annual
Meeting and will have the opportunity to make a statement, if they
desire to do so, and to respond to appropriate
questions.
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Required Vote and
Recommendation
|
Only holders of
record of Common Stock as of the close of business on the Record
Date are entitled to vote on this proposal. Proxies will be voted
for ratification of the selection of Ernst & Young as the
Company’s independent auditors for fiscal year 2020 unless contrary
instructions are set forth on the enclosed proxy card. A majority
of the total votes
cast on the
proposal at the Annual Meeting is required to ratify the selection
of Ernst & Young. Under Maryland law, abstentions and
broker non‑votes are not treated as votes cast. Accordingly, an
abstention or broker non‑vote will have no effect on the result of
the vote.
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The Board of Directors unanimously recommends a vote FOR the
ratification of the selection of Ernst & Young as the
Company’s independent auditors for fiscal year 2020.
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Proposal 3:
Non‑Binding, Advisory Vote on Executive Compensation
The Compensation
Discussion and Analysis beginning on page 22 of this proxy
statement describes the Company’s executive officer compensation
program and decisions made by the Compensation Committee and the
Board of Directors with respect to the 2019 compensation of our
Chief Executive Officer and other officers named in the Summary
Compensation Table on page 46 (the “Named Executive
Officers”). As noted in the Compensation Discussion and Analysis,
the Company’s goals for its executive compensation program are
(i) to attract, motivate and retain experienced and effective
executives, (ii) to direct the performance of those executives
with clearly defined goals and measures of achievement and
(iii) to align the interests of management with the interests
of our stockholders.
At our 2017 Annual Meeting of
Stockholders, our stockholders voted on a proposal regarding the
frequency of holding a non-binding, advisory vote on the
compensation of our named executive officers (a “Say-on-Pay Vote”),
among other matters. A majority of the votes cast on the frequency
proposal were cast in favor of holding a Say-on-Pay Vote every
year, which was consistent with the recommendation
of our Board of Directors. Our
Board currently intends for the Company to hold a Say-on-Pay Vote
every year at least until the 2023 Annual Meeting of Stockholders,
which is the next required advisory vote on the frequency of
holding a Say-on-Pay Vote.
While the vote on
the following resolution is advisory in nature and therefore will
not bind us to take any particular action, our Board of Directors
will carefully consider the stockholder vote resulting from the
proposal in making future decisions regarding our compensation
program. The Board of Directors is asking stockholders to cast a
non‑binding, advisory vote on the following
resolution:
“RESOLVED, that the
compensation paid to the Company’s Named Executive Officers, as
disclosed pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the Compensation
Discussion and Analysis, compensation tables and any related
material disclosed in this proxy statement, is hereby APPROVED, on
a non‑binding, advisory basis, by the stockholders of the
Company.”
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Required Vote and
Recommendation
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Only holders of
record of Common Stock as of the close of business on the Record
Date are entitled to vote on this proposal. Proxies will be voted
for adoption of the resolution approving the compensation disclosed
unless contrary instructions are set forth on the enclosed proxy
card. A majority of the votes cast on the proposal at the
Annual
Meeting is required
to provide non‑binding, advisory approval of the compensation paid
to the Company’s Named Executive Officers. Under Maryland law,
abstentions and broker non‑votes are not treated as votes cast.
Accordingly, an abstention or broker non‑vote will have no effect
on the result of the vote.
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The Board of Directors unanimously recommends a vote FOR the
resolution to approve, on a non-binding, advisory basis, the
compensation paid to the Company’s Named Executive
Officers.
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Proposal 4:
Amendment of the Charter to Eliminate the Supermajority Voting
Requirements for Future Charter Amendments and Other Extraordinary
Actions
Maryland
Law. Under
Maryland law, a Maryland corporation such as AvalonBay generally
cannot (i) amend its charter, or (ii) merge, consolidate, convert,
sell all or substantially all of its assets, engage in a statutory
share exchange or dissolve (an “Extraordinary Transaction”), unless
the charter amendment or Extraordinary Transaction is advised by
the board of directors and approved by the affirmative vote of
stockholders entitled to cast at least two-thirds of the
votes entitled to be cast on the matter. However, a Maryland
corporation may provide in its charter for approval of these
actions by less than two-thirds, but not less than a majority, of
all of the votes entitled to be cast on the
matter.
AvalonBay
Charter. AvalonBay’s Articles of
Amendment and Restatement, as amended and supplemented (the
“Charter”), provides that certain amendments to the Charter require
the affirmative vote of a majority of the votes entitled to be cast
on the matter while other amendments to the Charter require the
affirmative vote of at least two-thirds of the votes entitled to be
cast on the matter. In addition, with respect to Extraordinary
Transactions, the Charter does not provide that a lower percentage
than two-thirds of the votes entitled to be cast on the matter may
approve any Extraordinary Transaction, and therefore the required
vote is at least two-thirds of the votes entitled to be
cast.
Proposed
Amendment. The Board has considered the
matter and determined it is in the best interests of the Company to
amend the Charter to provide that the required vote for approval of
all future amendments to the Charter and all Extraordinary
Transactions will be a majority of the votes entitled to be cast on
the matter. In reaching this conclusion, the Board considered the
advantages and disadvantages of the proposed amendment. Many
investors and corporate governance advocates believe that
supermajority vote requirements impede stockholder action on items
such as mergers and business combinations that are critical to
stockholder interests. In addition, the Board considered that the
ability of the Company to obtain the affirmative vote of sufficient
stockholders to approve future Charter amendments and Extraordinary
Transactions that may be beneficial to stockholders' long-term
interests would be improved by adoption of a majority vote standard
for these activities.
Description
of Proposed Amendment. The proposed amendment would
change the following provisions of the Charter:
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1.
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Delete the third
paragraph of Section 10.2 of Article X of the Charter, which, in
summary, provides that certain provisions of the Charter may be
amended by the vote of a majority of the votes entitled to be cast
on the matter while the amendment of other provisions of the
Charter requires the vote of at least two-thirds of the votes
entitled to be cast on the matter. By deleting Section 10.2, the
required stockholder vote to approve all
amendments to the
Charter will be a majority of the votes entitled to be cast on the
matter. The
third paragraph of Section 10.2, which will be deleted if this
proposal is approved, reads in its entirety as
follows:
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Whenever any vote
of the holders of voting stock is required to amend or repeal any
provision of these Articles, then in addition to any other vote of
the holders of voting stock that is required by these Articles, the
affirmative vote of the holders of a majority of the outstanding
shares of Stock of the Corporation entitled to vote on such
amendment or repeal, voting together as a single
class, and the
affirmative vote of the holders of a majority of the outstanding
shares of each class entitled to vote thereon as a class, shall be
required to amend or repeal any provision of these Articles;
provided,
however, that the
affirmative vote of the holders of not less than two -thirds of the
outstanding shares entitled to vote on such amendment or repeal,
voting together as a single class, and the affirmative vote of the
holders of not less than two-thirds of the outstanding shares of
each class entitled to vote thereon as a class, shall be required
to amend or repeal any of the provisions of Sections 6.4, 6.5 or
6.6 of Article VI, Article X or Article XII of these
Articles.
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2.
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Add a new Section
10.3 of Article X of the Charter that will have the effect of
requiring only the affirmative vote of stockholders entitled to
cast a majority of all the votes entitled to be cast on the matter
for the approval of all amendments to the Charter and all
Extraordinary Transactions It should be noted that Section 6.4 of
Article VI of the Charter sets forth a requirement that removal for
cause (as defined in that Section) of a director requires the
affirmative vote of at least 75% of the shares entitled to vote on
the matter; while the amendments to the Charter being proposed will
not modify that requirement, the amendments will reduce, to a
majority of the outstanding shares entitled to be voted on the
matter, the required vote to approve an amendment to Section
6.4.
|
The full text of
our Charter is available with our filings with the Securities and
Exchange Commission and was most recently presented as Exhibits
3(i).1, 3(i).2, and 3(i).3 of our Report on Form 10-K for the year
ended December 31, 2019, which can be found at the following links
to the SEC website:
Articles of
Amendment and Restatement of Articles of Incorporation of the
Company, dated as of June 4, 1998;
Articles of
Amendment, dated as of October 2, 1998;
Articles of
Amendment, dated as of May 22, 2013.
Stockholder
Vote. Therefore, the Board is asking
you to vote as follows:
To approve the
following amendment to the Company’s Charter:
FIRST: The charter
of the Corporation (the “Charter”) is hereby amended by deleting
the third paragraph of Section 10.2 of Article X in its
entirety.
SECOND: The Charter
is hereby further amended by adding a new Section 10.3 of Article X
to read as follows:
10.3 Extraordinary
Actions. Except as specifically provided in Section 6.4 of Article
VI (relating to removal of Directors), notwithstanding any
provision of law requiring any action to be taken or approved by
the affirmative vote of stockholders entitled to cast a greater
number of votes, any such action shall be effective and valid if
declared advisable by the Board of Directors and taken or approved
by the affirmative vote of stockholders entitled to cast a majority
of all the votes entitled to be cast on the matter.
If Proposal 4 is
approved, then promptly following the Meeting, we will file with
the State Department of Assessments and Taxation of Maryland the
applicable Articles of Amendment of the Charter.
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Required Vote and
Recommendation
|
Only holders of
record of Common Stock as of the close of business on the Record
Date are entitled to vote on this proposal. Proxies will be voted
for amendment of the Charter to reduce the stockholder vote
required for future charter amendments and Extraordinary
Transactions to a majority of the votes entitled to be cast unless
contrary instructions are set forth on the enclosed proxy card. The
affirmative vote of the holders of two-thirds of all outstanding
shares of Common Stock is required to approve the proposal. An
abstention or broker non‑vote will have the effect of a vote cast
against the proposal.
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The Board of Directors unanimously recommends a vote FOR the
resolution to amend the Charter to reduce the stockholder vote
required for future Charter amendments and certain other
extraordinary actions to a majority of shares
outstanding.
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Other
Matters
The Board of
Directors does not know of any matters other than those described
in this proxy statement that will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be
voted in the discretion of the proxy holders.
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Regardless of
the number of shares you own, your vote is very important to the
Company. Please authorize a proxy by telephone or over the Internet
to vote your shares by following the instructions on your proxy
card or complete, sign, date and promptly return the enclosed proxy
card.
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III.
Corporate Governance And Related Matters
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Code
of Ethics and Corporate Governance Guidelines
The Company has
adopted a Code of Business Conduct and Ethics (the “Code”). The
Code constitutes a “code of ethics,” as defined by the SEC, that
applies to the Company’s Board of Directors as well as its Chief
Executive Officer, Chief Financial Officer, principal accounting
officer, controller, and other employees of the Company. In
addition, the Company has adopted Corporate Governance Guidelines.
Copies of the Code and the Corporate Governance Guidelines are
available on the Investor Relations section of the Company’s
website (www.avalonbay.com)
under “Corporate
Governance
Documents.” To the extent required by the rules of the SEC and the
NYSE, we will disclose amendments and waivers relating to these
documents in the same place on our website. Additional information
on corporate governance policies is included in “Compensation
Policies” on pages 42-43, including information on the following
Company policies: Executive Stock Ownership Guidelines;
Anti-Hedging, Anti-Speculation and No Pledging Policies; Severance
Policy; and Policy on Recoupment of Incentive Compensation
(Clawback Policy).
Board
of Directors and its Committees
The Board of
Directors currently consists of ten directors. Each of the current
directors is a candidate for election. The Board of Directors met
five times during 2019. The Board of Directors generally schedules
regular executive sessions at each of its meetings during which the
Company’s independent directors meet without management
participation. During 2019, each of the directors attended at least
75% of the total number of meetings of the Board of Directors and
meetings of the committees of the Board of Directors of which he or
she was a member. The Board’s policy is that each director attend
the Company’s annual meetings of stockholders at which he or she is
a nominee, and all directors who were nominees were in attendance
at the 2019 Annual Meeting of Stockholders.
As discussed below
under Nominating and Corporate Governance Committee, the Board
considers a variety of factors when choosing candidates for Board
appointment or nomination. While the Board values long‑tenured
directors who know the Company and management well, the Board also
believes that it is important to assure that from time to time
vacancies occur on the Board that
create
opportunities for new directors who may bring different or more
recent experiences or expertise to the Board. Consistent with this
philosophy, five new directors have joined the AvalonBay Board at
or subsequent to the 2014 Annual Meeting of Stockholders: Ron
Havner (2014), Terry Brown (2015), Richard Lieb (2016), Susan
Swanezy (2016), and Stephen Hills (2017).
The Company’s
Corporate Governance Guidelines incorporate term expectations that
reflect the Board’s view of the importance of board succession
planning. Specifically, the Corporate Governance Guidelines
(i) express an expectation that an independent director will
not be re‑nominated after the completion of 12 full years of
service or within the several years that follow; (ii) express
an expectation that the Lead Independent Director will serve in
that role for approximately three to five years; and
(iii) express an expectation that Committee chairs will serve
for three to five years. In each case, the guideline is flexible
and the exact timing for any transition will depend on the needs of
the Board at the time and the timing of identification and
nomination of a successor.
The Board of Directors has
established an Audit Committee. The current members of this
committee are Messrs. Havner (Chair), Buckelew, Hills and
Lieb. The Board of Directors has determined that each of
Messrs. Havner, Buckelew and Lieb is an “audit committee
financial expert” as defined by the SEC. In the case of Mr. Havner,
this determination
was based on his past
experience as a Certified Public Accountant and Chief Financial
Officer and Chief Executive Officer of a public company. In the
case of Mr. Buckelew, this determination was based on his
experience as Chief Financial Officer at Princess Cruises, and the
fact that the Internal Audit Function of Carnival Cruises had
reported to him.
For Mr. Lieb, the determination
was based on his past experience as Chief Financial Officer of
Greenhill & Co. and his experience with Goldman Sachs. The
designation of each of Messrs. Havner, Buckelew and Lieb by the
Board as an “audit committee financial expert” is not intended to
be a representation that they are experts for any purpose as a
result of this designation, nor is it intended to impose on them
any duties, obligations or liabilities that are greater than the
duties, obligations or liabilities imposed on them as members of
the Audit Committee and the Board in the absence of this
designation. The Board of Directors has determined that the members
of the Audit Committee, including the audit committee financial
experts, are “independent” under the rules of the NYSE and
financially literate. The Audit Committee, among
other functions, has the sole
authority to appoint and replace the independent auditors, is
responsible for the compensation and oversight of the work of the
independent auditors, reviews the results of the audit engagement
with the independent auditors, and reviews and discusses with
management and the independent auditors the Company's quarterly and
annual financial statements and major changes in accounting and
auditing principles. The Audit Committee met seven times during
2019. The Board of Directors has adopted a written charter for the
Audit Committee. A copy of the Audit Committee charter is available
on the “Investor Relations” section of the Company’s website
(www.avalonbay.com)
under “Corporate Governance Documents.”
The Board of
Directors has established a Compensation Committee. The current
members of this committee are Messrs. Walter (Current Chair),
Buckelew, Lieb and Sarles. Following the Annual Meeting, the Board
expects that Mr. Lieb will be appointed as Chair of the
Compensation Committee. The Board of Directors has determined that
the members of the Compensation Committee are “independent” under
the rules of the NYSE. The Compensation Committee, among other
functions, reviews, designs and determines management compensation
structures, programs and amounts, establishes corporate and
management performance goals and objectives, and reviews and makes
recommendations to the Board of Directors regarding the Company’s
incentive compensation plans, including the Company’s Second
Amended and Restated 2009 Equity Incentive Plan, as amended (the
“Equity Incentive Plan”). The Compensation Committee also reviews
employment agreements and arrangements with senior officers (there
are no employment agreements with executives at present). In
addition, our Equity
Incentive Plan
provides that the Compensation Committee, in its discretion, may
delegate to the Chief Executive Officer of the Company all or part
of the Committee’s authority to grant awards to individuals who are
not subject to the reporting and other provisions of
Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subject to limitations and guidelines set by
the Committee from time to time. The Compensation Committee has
engaged Steven Hall & Partners, an executive compensation
consulting firm, to provide it with independent advice and counsel
on executive compensation, as well as competitive pay practices.
Steven Hall & Partners does not provide any services
directly to the Company or its management. The Compensation
Committee met four times during 2019. The Board of Directors has
adopted a written charter for the Compensation Committee. A copy of
the Compensation Committee charter is available on the “Investor
Relations” section of the Company’s website (www.avalonbay.com)
under “Corporate Governance Documents.”
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Nominating and
Corporate Governance Committee
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Composition,
Independence and Function: The Board of Directors has
established a Nominating and Corporate Governance Committee. The
current members of this committee are Mr. Sarles (Chair), Ms.
Aeppel, Ms. Swanezy, and Messrs. Brown and Walter. The Board of
Directors has determined that the members of the Nominating and
Corporate Governance Committee are “independent” under the rules of
the NYSE. The Nominating and Corporate Governance Committee’s
functions include: identifying individuals qualified to become
Board members; recommending to the full Board each year a slate for
nomination for election to the Board;
considering
policies relating to Board and committee meetings; reviewing and
recommending changes to director compensation; recommending the
establishment or dissolution of Board committees; reviewing and
considering succession plans with respect to the positions of
Chairman of the Board and Chief Executive Officer (including
through periodic evaluation and discussion with the Board of
internal candidates for such succession); reviewing policies and
activities in the areas of political contributions, charitable
giving and corporate responsibility; and addressing other issues
regarding corporate governance. The Nominating and
Corporate
Governance Committee met four times during 2019. The Board of
Directors has adopted a written charter for the Nominating and
Corporate Governance Committee. A copy of the Nominating and
Corporate Governance Committee charter is available on the
“Investor Relations” section of the Company’s website
(www.avalonbay.com)
under “Corporate Governance Documents.”
Evaluation
and Nomination of Director Candidates: One of the Nominating and
Corporate Governance Committee's key functions is identifying and
nominating candidates for service on the Board. In this regard, the
Nominating and Corporate Governance Committee considers the
qualifications set forth in the Company’s corporate governance
guidelines, which include the nominee’s business and professional
background; history of leadership or contributions to other
organizations; functional skill set and expertise; general
understanding of marketing, finance, accounting and other elements
relevant to the success of a publicly‑traded company in today’s
business environment; and service on other boards of
directors.
Given the current
business, opportunities and challenges of the Company, among the
key attributes the Nominating and Corporate Governance Committee
looks for in director candidates are the following:
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Accounting/Financial
Literacy
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Public Company CEO
Experience
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C-Level Management
Experience
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•
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Other Public Board
Experience
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•
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Financial/Capital
Markets Experience
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•
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Marketing/Brand
Management/Consumer Focus
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•
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Real Estate
Industry Experience
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•
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REIT Structure
Experience
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•
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Real Estate
Development Experience
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Technology and
Innovation Experience
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In addition, the
Board may consider diversity of background, experience and thought
in evaluating and recommending candidates for election. The Board
believes that diversity is important because a variety of points of
view can contribute to a more effective decision‑making process.
In recommending a
slate of nominees for director and in identifying new candidates
for service, the Nominating and Corporate Governance Committee
considers whether there is and will be an adequate distribution and
representation of relevant skills and experiences across the Board
as a whole. The Nominating and Corporate Governance Committee may
employ a variety of methods for identifying and evaluating nominees
for director.
In considering
whether to recommend re-nomination of a current director for
another term, the Nominating and Corporate Governance Committee
considers
whether the skills,
commitment and performance as a director of the individual are such
that the individual's continued service on the Board is desirable.
The Nominating and Corporate Governance Committee may also assess
the size of the Board, the need for particular expertise on the
Board, the upcoming election cycle of the Board and whether any
vacancies are expected, due to retirement or
otherwise.
In the event that
vacancies are anticipated or otherwise arise, the Nominating and
Corporate Governance Committee will consider various potential
candidates for director who may come to the Nominating and
Corporate Governance Committee’s attention through current Board
members, professional search firms, stockholders or other persons.
Where the Board engages a professional search firm to help identify
candidates, the search firm is instructed to include
demographically diverse candidates in its search. These candidates
are evaluated at regular or special meetings of the Nominating and
Corporate Governance Committee, and they may be considered at any
time during the year.
Nominees
Recommended by Stockholders: In exercising its function of
recommending individuals for nomination by the Board for election
as directors, the Nominating and Corporate Governance Committee
will consider nominees recommended by stockholders. The procedure
by which stockholders may submit such recommendations is set forth
in the Company’s Bylaws. See “Other Matters - Stockholder
Nominations for Directors and Proposals for Annual Meetings” for a
summary of these requirements. When nominations are properly
submitted, the Nominating and Corporate Governance Committee will
consider candidates recommended by stockholders under the criteria
summarized above. Following verification of the stockholder status
of persons proposing candidates, the Nominating and Corporate
Governance Committee makes an initial analysis of the
qualifications of any candidate recommended by stockholders or
others pursuant to the criteria summarized above to determine
whether the candidate is qualified for service on the Board of
Directors before deciding to undertake a complete evaluation of the
candidate. If any materials are provided by a stockholder or
professional search firm in connection with the nomination of a
director candidate, such materials are forwarded to the Nominating
and Corporate Governance Committee as part of its review. The same
identifying and evaluating procedures apply to all candidates for
director nomination, including candidates submitted by
stockholders. In the case of stockholder nominations, the Board may
also consider the specific information required to be provided by
the nominating stockholder pursuant to the
requirements
of the Company’s
Bylaws. Stockholders may also nominate directors in accordance with
the proxy access provisions of the Company’s Bylaws, as described
in “Other Matters - Stockholder Nominations for Directors and
Proposals for the Annual Meeting.”
If you would like
the Nominating and Corporate Governance Committee to consider a
prospective
candidate, please
submit the candidate’s name and qualifications and other
information in accordance with the requirements for director
nominations by stockholders in the Company’s Bylaws to: AvalonBay
Communities, Inc., 4040 Wilson Boulevard, Suite 1000,
Arlington, VA 22203, Attention: Corporate Secretary. See also
the discussion of Stockholder Engagement and Responsiveness
included in this proxy statement.
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Investment and
Finance Committee
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The Board of
Directors has established an Investment and Finance Committee. The
current members of this committee are Mr. Brown (Chair), and
Messrs. Havner, Hills, and Naughton, and Ms. Swanezy. The
Investment and Finance Committee was formed, among other reasons,
to review and monitor the acquisition, disposition, development and
redevelopment of the Company’s communities, and to review and
monitor the financial structure,
capital sourcing
strategy and financial plans and projections of the Company. The
Investment and Finance Committee has authority, subject to certain
limits and guidelines set by the Board of Directors and Maryland
law, to approve investment and financing activity. The Investment
and Finance Committee met three times during 2019.
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Leadership
Structure and Lead Independent Director
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Timothy J.
Naughton, our Chief Executive Officer and President, also serves as
the Company’s Chairman of the Board. The Board believes that the
Company is best served by having Mr. Naughton serve as
Chairman of the Board in addition to Chief Executive Officer and
President, as opposed to appointing one of the other current
directors or a future director to serve as Chairman of the Board.
Among other benefits, Mr. Naughton’s role as Chief Executive
Officer and President enables him, working with the Lead
Independent Director, to act as a bridge between management and the
Board, helping management and the Board to act with a common
purpose. Mr. Naughton’s combined roles as Chief Executive
Officer, President and Chairman of the Board promote unified
leadership and direction for the Company. To help assure sound
corporate
governance
practices, the Board of Directors established the position of Lead
Independent Director in 2003. Mr. Walter has served as the Lead
Independent Director since May 2019. The role of Lead Independent
Director includes presiding at all meetings of the Board of
Directors at which the Chairman of the Board is not present,
serving as a liaison between the Chairman of the Board and the
independent directors, establishing and approving meeting agendas
for the Board, having the authority to call meetings of the
independent directors, conferring with the Chairman of the Board
and the Chief Executive Officer regularly, and acting as a contact
person for stockholders and others who wish to communicate with the
independent directors.
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Board of
Directors Risk Oversight
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The Company and the
Board have a number of practices with regard to Board oversight of
risk management matters. The charter of each of the Company’s Board
committees provides that each committee shall, from time to time to
the extent that committee deems appropriate, review risk and
compliance matters relevant to that committee and report the
results of such review to the full Board. As required by NYSE
rules, the charter of the Audit Committee states that the Audit
Committee will assist with Board oversight of risk and compliance
matters, and in any event will review the perceived
major financial
risk exposures of the Company and the steps management has taken to
monitor and control such exposures. At most regularly scheduled
Board meetings, the Board reviews key matters relating to the
Company’s finances, liquidity, operations and investment activity.
On an annual basis, the Board and/or the Audit Committee of the
Board engages in a broader discussion about company‑wide risk
management.
Although it is not
the primary reason for the selection of the current leadership
structure by the Board, the Company and the Board believe that the
current
leadership
structure of the Board, including both a Chairman of the Board and
a separate Lead Independent Director, helps facilitate these risk
oversight functions by providing multiple channels for risk-related
concerns and comments. The Company’s operations involve various
risks that could have adverse consequences, including those
described in the Company’s Annual Report on Form 10‑K and
other filings with the SEC. The Board
recognizes that it
is neither possible nor prudent to eliminate all risk. Despite the
risk oversight activities described above, there can be no
assurance that the Company’s current practices have identified
every potential material risk, are sufficient to address these
risks, or that any risks will not result in a material adverse
effect on the Company’s business or operations.
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Independence of
the Board
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The NYSE has
adopted independence standards for companies listed on the NYSE,
which apply to the Company. These standards require a majority of
the Board of Directors to be independent and every member of the
Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee to be independent. NYSE standards
provide that a director is considered independent only if the Board
of Directors “affirmatively determines that the director has no
material relationship with the listed company (either directly or
as a partner, shareholder or officer of an organization that has a
relationship with the company).” In addition, NYSE rules and
related NYSE commentary generally provide that:
A director who is
an employee, or whose immediate family member is an executive
officer, of the Company is not independent until three years after
the end of such employment relationship;
A director who
receives, or whose immediate family member receives, more than
$120,000 per year in direct compensation from the Company, other
than director and committee fees and pension or other forms of
deferred compensation for prior service (provided such compensation
is not contingent in any way on continued service), is not
independent until three years after he or she ceases to receive
more than $120,000 per year in such compensation; compensation
received by an immediate family member for service as an employee
of the Company (other than an executive officer) need not be
considered in determining independence under this
test;
A director is not
independent if (A) the director is a current partner or
employee of a firm that is the Company’s internal or external
auditor; (B) the director has an immediate family member who
is a current partner of such a firm; (C) the director has an
immediate family member who is a current employee of such a firm
and personally works on the Company’s audit; or (D) the
director or an immediate family member was within the last three
years (but is
no longer) a
partner or employee of such a firm and personally worked on the
Company’s audit within that time;
A director who is
employed, or whose immediate family member is employed, as an
executive officer of another company where any of the Company’s
present executives serve on that company’s compensation committee
is not independent until three years after the end of such service
or the employment relationship; and
A director who is
an executive officer or an employee, or whose immediate family
member is an executive officer, of a company that makes payments
to, or receives payments from, the Company for property or services
in an amount which, in a single fiscal year, exceeds the greater of
$1 million or 2% of such other company’s consolidated gross
revenues, is not independent until three years after falling below
such threshold.
To determine which
of its members is independent, the Board of Directors used the
above standards and also considered whether a director had any
other past or present relationships with the Company which created
conflicts or the appearance of conflicts.
Based on
consideration of the foregoing and the absence of any other such
transactions, relationships or arrangements found as a result of
this review, the Board determined that all nominees for director
are independent, except for Mr. Naughton, who currently serves
as the Chairman of the Board and the Company's Chief Executive
Officer and President.
NYSE rules provide
for additional independence standards that apply to members of the
Audit Committee and the Compensation Committee. The Board has
determined that each current and proposed member of these
committees satisfies these additional standards.
Stockholder
Engagement and Responsiveness
We consider our
relationship with our stockholders to be an important part of the
Company’s success and we value the outlook and opinions of our
investors. During 2019 and early 2020 our management reached out to
stockholders who collectively held a majority of the Company’s
outstanding stock to discuss the Company’s practices and policies
with respect to environmental, social and governance matters
(“ESG”), and other matters. Management spoke with stockholders who
responded to that outreach regarding such issues, in addition to
speaking with the stockholder advisory firms Institutional
Shareholder Services ("ISS") and Glass Lewis. These discussions
addressed governance matters including Board composition and
refreshment, stockholder rights, executive compensation and
sustainability efforts. The feedback from stockholders was conveyed
to and discussed with the Nominating and Corporate Governance
Committee and the full Board.
The goal of these
conversations was to ensure that management and the Board
understood and considered the ESG issues that are most important to
our stockholders and to enable the Company to address them
effectively.
In addition to
conversations with our stockholders, the Company from time to time
receives correspondence from stockholders and stockholder advocacy
groups and responds and/or shares this correspondence with the
Nominating and Corporate Governance Committee and the full Board
where requested or otherwise appropriate. The Board of Directors
also considers the votes of stockholders at the Company's Annual
Meeting and discusses potential issues raised through that
forum.
Contacting the
Board
Any stockholder or
other interested party may contact any of our directors, including
the Lead Independent Director or our independent directors as a
group, by writing to them at the following address. The envelope in
which you send your letter should clearly specify the name of the
individual director or group of directors to whom your letter is
addressed. Any communications received in this manner will be
forwarded as addressed.
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[Name of Director or Group of
Directors]
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c/o AvalonBay
Communities, Inc.
4040 Wilson Boulevard, Suite 1000
Arlington, VA
22203
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Attention: Corporate
Secretary
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Report of the
Audit Committee
The Audit Committee
of the Board of Directors of AvalonBay Communities, Inc., a
Maryland corporation (the “Company”), reviews the financial
reporting process of the Company on behalf of the Board of
Directors. Management has primary responsibility for this process,
which includes the preparation of the Company’s consolidated
financial statements in accordance with generally accepted
accounting principles and the design, implementation and evaluation
of the Company’s internal controls over financial reporting. The
Company’s independent auditors, and not the Audit Committee, are
responsible for auditing and expressing an opinion on the
conformity of the Company’s audited financial statements to
generally accepted accounting principles and evaluating the
effectiveness of the Company’s internal controls over financial
reporting. In this context, during 2019
and 2020, the Audit
Committee reviewed and discussed the audited financial statements
and Ernst & Young’s evaluation of the Company’s internal
control over financial reporting with management and the
independent auditors. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by the
applicable standards of the Public Company Accounting Oversight
Board (“PCAOB”). In addition, the Audit Committee received from the
independent auditors the written disclosures required by the PCAOB
regarding the independent auditor’s independence, and the Audit
Committee discussed with the independent auditors their
independence from the Company and its management. Relying on the
reviews, disclosures and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in the Company’s
Annual
Report on
Form 10‑K for the year ended December 31, 2019, for
filing with the SEC, and the Board of Directors has approved this
recommendation. The Audit Committee and the Board have also
recommended, subject to stockholder ratification, the selection of
Ernst & Young as the Company's independent registered public
accounting firm for the year ending December 31, 2020.
Submitted by
the Audit Committee
Ronald L. Havner,
Jr. (Chair)
Alan B.
Buckelew
Stephen P.
Hills
Richard J.
Lieb
Fiscal 2018 and
2019 Audit Fee Summary
During fiscal years
2018 and 2019, the Company retained its principal independent
auditors, Ernst & Young, to provide services in the
categories and for the approximate fee amounts shown
below:
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2018
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2019
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Audit fees
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$1,935,660
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$2,163,075
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Audit related
fees(1)
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$568,846
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$611,628
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Tax
fees(2)
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$782,181
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$873,719
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All other fees
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$0
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$0
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(1)
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Audit related fees
include fees for services traditionally performed by the auditor
such as subsidiary audits, employee benefit audits, and accounting
consultation.
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(2)
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Tax fees include
preparation and review of subsidiary tax returns and taxation
advice.
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Audit
Committee Pre‑Approval of Audit and Permissible Non‑Audit Services
of Independent Auditors
The Audit Committee
pre‑approves all audit and permissible non‑audit services provided
by the independent auditors. These services may include audit
services, audit‑related services, tax services and other services.
Pre‑approval is provided for up to one year, and any pre‑approval
is detailed as to the particular service or category of services
and is subject to a specific budget.
The independent
auditors and management are required to periodically report to the
Audit Committee regarding the extent of services provided by the
independent auditors in accordance with this pre‑approval, and the
fees for the services performed to date. The Audit Committee may
also pre‑approve particular services on a case‑by‑case
basis.
Transactions with
Related Persons, Promoters and Certain Control Persons
The Company’s Code
of Business Conduct and Ethics, adopted by the Company’s Board of
Directors and evidenced in writing, provides that no employee of
the Company, including an executive officer or director, may engage
in activities that create a conflict of interest with the Company
unless all relevant details have been disclosed and an appropriate
waiver permitting the conduct has been received. An activity
constitutes a conflict of interest under the Code if (i) the
activity could adversely affect or compete with the Company,
(ii) any interest, connection or benefit to the employee or
director from the activity could reasonably be expected to cause
such employee or director to consider
anything other than
the best interest of the Company
when deliberating
and voting on Company matters
or (iii) any
interest, connection or benefit to the
employee or
director from the activity could give such employee or director or
a member of his or her family an improper benefit that he or she
obtains on
account of his or
her position within the Company. An executive officer or member of
the Board of Directors may only receive a waiver from the Board or
any designated committee of the Board, and any waiver granted to an
executive officer or director will be disclosed to the Company’s
stockholders to the extent required by law or NYSE rules. The
Nominating and Governance Committee of the Board (or any other
committee that is designated) is responsible for administering the
Code for executive officers and directors.
Compensation
Discussion and Analysis
This Compensation
Discussion and Analysis (“CD&A”) provides a description of
(i) how the Board of Directors and the Company think about
compensation for the Company’s executive officers, and
(ii) what decisions were made in setting 2019 compensation,
including the establishment of goals and aligning of compensation
with performance and stockholder interests.
Specifically, the
CD&A contains the following sections:
INTRODUCTION AND
EXECUTIVE SUMMARY
Summary of 2019
Achievements
Summary of our
Executive Compensation Program
Our Executive
Compensation Philosophy
Our Named Executive
Officers in 2019
Compensation
Overview
Chairman and CEO
2019 Compensation At‑a‑Glance
Chairman and CEO
2019 Target Opportunity Mix
Impact of the
Company’s Performance on our Named Executive Officer
Compensation
Realized Pay for
2019 Performance
Best Practices
Incorporated into our Compensation Programs
ADDITIONAL
DISCUSSION
Consideration of
the Results of the 2019 Stockholder Advisory Vote on Executive
Compensation
Our Decision Making
Process
Who is Involved in
Compensation Decisions
How We Review
Market Compensation
How We Select and
Use Peer Groups
Who Are our
Compensation Consultants
What We Pay and
Why: Elements of Compensation
How We Establish
Goals and Determine Achievement for Incentive
Compensation
Review of 2019
Performance and Pay
Annual Cash and
Stock Incentive Program
Long‑Term Incentive
Program
2019 Compensation
Determinations
INTRODUCTION
AND EXECUTIVE SUMMARY:
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Summary of 2019
Achievements
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Summary:
2019 Core FFO of $9.34 per share was $0.04 per share above the
midpoint of our initial outlook provided in January 2019. This
outperformance was primarily driven by accretive acquisition
activity and favorable capital market conditions.
Over the course of
2019, we (i) started approximately $850 million of new development
and completed approximately $665 million of new development, (ii)
raised approximately $1.3 billion of new capital, (iii) continued
to grow our presence in our expansion markets, (iv) made important
strides within the area of corporate responsibility, and (v)
advanced various corporate initiatives.
Operating
Activity: Rental revenue for
Established Communities increased 2.9% in 2019. Established
Communities operating expenses increased 2.8% in 2019, which was 20
basis points below our initial outlook. During 2019 we also
incorporated several new technologies and processes into our
operating platform that we believe will enable us to better serve
our customers’ needs, contain operating expense growth, and improve
net operating income margins in the future.
Development
Activity: We completed seven new
development communities containing over 2,000 apartment homes for
approximately $665 million in total capital cost in 2019. During
the year, we also started eight new development communities that
are expected to contain nearly 2,400 apartment homes for a total
capital cost of approximately $850 million.
Dividend
Growth: In January 2020, we
announced a dividend increase of 4.6%, to a quarterly rate of $1.59
per share. Since the first quarter of 2011, we have increased the
quarterly dividend 78%.
Portfolio
Management: During 2019, we
continued to grow our presence in our expansion markets by
acquiring two operating communities and securing a development
right in Southeast Florida, and, in the Denver area, acquiring one
operating community, commencing construction on one development
community, and securing a development right.
Earnings and
Core FFO Growth: 2019 earnings per
share-diluted was $5.63. Core FFO per share increased by 3.8% over
the prior year to $9.34. For the three-year period ended
December 31, 2019 (the period measured for this metric in our
maturing performance awards), our Core FFO grew at an annualized
rate of 4.5%.
Other
Achievements: We continued our ESG
(Environmental, Social and Governance) leadership in the
multifamily sector in 2019 by establishing approved science-based
emissions reduction targets. We ranked #1 in our sector both
regionally and globally in the Global Real Estate Sustainability
Benchmark (GRESB). In addition, a number of ESG ratings agencies
which evaluate our ESG performance for investors continue to rank
us as one of the most advanced U.S. companies on a variety of ESG
metrics, including the Carbon Disclosure Project, which rated us
A-. We were included in Corporate Responsibility Magazine’s
100 Best Corporate Citizens list and we again were included in the
FTSE4Good Index Series.
We remain in the
90th percentile in associate engagement, as measured by a
third-party service provider which surveys leading companies on
workforce engagement. In 2019, we were recognized by Glassdoor
employee choice ratings as one of the Top 100 companies to work for
in the U.S. Both Indeed, another online recruiting website,
and The Washington Post named the Company as a Top Place to Work in
the DC Metro Area.
Definitions
and Reconciliations: For definitions and
reconciliations of FFO, Core FFO, Established Communities, and NOI,
see pages 31-33, 18, and 37, respectively, of the Company’s
Annual Report on Form 10‑K for the year ended
December 31, 2019 (the “Form 10-K”), as filed with the
SEC.
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Summary of our
Executive Compensation Program
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Our
Executive Compensation Philosophy
AvalonBay’s Total
Compensation Program is designed to:
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Attract, retain,
and motivate talent within the Company,
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Align the interests
of management with the interests of stockholders,
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Direct performance
with clearly defined goals and measures of achievement,
and
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Assure that
compensation is aligned with performance
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Our
Named Executive Officers in 2019
This CD&A
describes the compensation of the following Named Executive
Officers:
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Name
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Title
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Timothy
Naughton
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Chairman, Chief Executive
Officer and President
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Kevin
O’Shea
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Chief Financial
Officer
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Sean
Breslin
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Chief Operating
Officer
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Matthew
Birenbaum
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Chief Investment
Officer
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Leo
Horey*
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Former Chief Administrative
Officer
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* Retired as of
January 1, 2020
Compensation
Overview
Consistent with our
total compensation philosophy, a substantial majority of the target
pay of our Named Executive Officers is variable and contingent on
performance. 
Chairman and
Chief Executive Officer 2019 Compensation At‑A‑Glance
Base
Salary. Mr.
Naughton’s base salary has been maintained at $1,000,000 since
2018.
Cash
Bonus. Mr. Naughton’s target cash
bonus was 200% of base salary in 2019. Seventy-five percent of the
target cash bonus is based on corporate performance factors and 25%
is based on individual performance. The achievement levels for the
corporate performance and individual factors for 2019 were
determined to be 103.0% and 125%, respectively, resulting in a
final cash bonus for 2019 of $2,170,000.
Stock
Bonus. Mr.
Naughton’s target stock bonus for 2019 was $1,800,000. The
performance measures used in calculating the stock bonus reflect
different elements of the Company’s performance and are not
duplicative of the performance measures used to evaluate corporate
performance under the annual cash bonus program. The achievement
level for these stock bonus performance measures for 2019 was
107.7%, which resulted in a payout of $1,938,600. The payout is
delivered in the form of restricted stock that vests ratably over
three years from the date of grant. Please note that under
applicable SEC rules this award will be disclosed in the 2021 proxy
statement Summary Compensation Table as the actual grant of stock
based on 2019 achievement occurred in 2020.
Performance
Awards. Mr.
Naughton’s target performance award for the 2019 - 2021 performance
period was $5,600,000. Sixty percent of the target award was tied
to three-year total shareholder return (“TSR”) metrics, including
absolute and relative comparisons, and 40% of the target award was
tied to three-year relative financial operating metrics as
described in more detail below.
With respect to the
three-year performance cycle concluding in 2019, Mr. Naughton's
award was settled in 31,288 shares of restricted stock valued at
$7,058,260 based on the closing stock price of the Company’s Common
Stock on the NYSE on February 13, 2020 of $225.59. The 2017 -
2019 performance award was awarded in February 2017 and the
performance cycle ended in December 2019, with the Board of
Directors certifying the actual achievement in February 2020.
Consistent with the other performance awards granted by the
Company, 60% of the target award was tied to three-year TSR
metrics, including absolute and relative comparisons, and 40% of
the target award was tied to three-year relative financial
operating metrics. The Company achieved 123.2% of target payout for
the 2017 - 2019 performance awards.
Chairman and
CEO 2019 Target Opportunity Mix
* includes annual
restricted stock bonus
Impact
of Company’s Performance on Named Executive Officer
Compensation
A substantial
portion of our Named Executive Officers’ compensation is linked to
performance, both short‑term and
long‑term.
Annual
Cash Bonus:
Core FFO per
Share: Core
FFO per share is a key measure of the Company’s performance and it
(or a similar measure) is commonly used in the REIT industry, and
accordingly it was given a 50% weighting in determining achievement
of the corporate component of the 2019 annual bonus goals. The
following table shows that the Company increased its target goal
for Core FFO per share in each of the past four years, from $8.23
per share in 2016 to $9.30 in 2019. The target goal represents a
compounded annual growth rate of 4.16% for the past three years.
For 2019, actual Core FFO per share was $9.34, which was higher
than the target goal of $9.30, resulting in achievement at 111.4%
of target performance.
Development
and Redevelopment NOI: At the beginning of the year,
budgeted NOI is established for each development and redevelopment
community based on construction progress and expected deliveries
and occupancies. At year end, actual NOI for each community is
compared to budgeted NOI. Variances to budgeted NOI may be
attributed to schedule accelerations or delays, faster or slower
absorption of delivered units, or expense savings or overruns,
among other factors. The target goal is to achieve budgeted NOI.
Significant variances from budget, both positive and negative, are
capped at threshold and maximum levels. For 2019, the actual
variance for development NOI fell below threshold level, resulting
in achievement at 0% of target. The actual variance for
redevelopment NOI was slightly above threshold level, resulting in
achievement at 65.5% of target.
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Performance
Measure
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Weight
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Threshold
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Target
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Max
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Actual
%
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%
of Target
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2019 Development Lease-Up NOI of
$24M vs. Budget of $27M
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10%
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-10.0%
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0.0%
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10.0%
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-10.2%
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0.0%
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2019 Redevelopment NOI of $83M
vs. Budget of $85M
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5%
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-3.0%
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0.0%
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3.0%
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-2.1%
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65.5%
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Development
Yield: The
development yield (i.e., projected NOI divided by total capital
cost) performance for communities completed during the year is
compared to our original underwritten yield for such developments.
The target goal is to meet our pre-established underwritten yield
for each development community. Performance is determined based on
the weighted average of the stabilized development yields compared
to the weighted average of the original underwritten yields for the
basket of annual completions. The yields are weighted based on
total capital cost of the community. The original underwritten
development yield is established at construction start for each
property based on the property's projected NOI divided by total
capital cost. The actual variance in projected yield for
communities completed in 2019 compared to original underwritten
yield was approximately 0.02%, resulting in slightly above target
performance.
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Performance
Measure
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Weight
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Threshold
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Target
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Max
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Actual
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%
of Target
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2019 Development Yields (Yield
of 6.51% vs. Projected Yield of 6.49%)
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10%
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-0.75%
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0.0%
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0.75%
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0.02%
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102.5%
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Corporate
Objectives: Progress on strategic and
corporate initiatives is a qualitative judgment of the Company's
achievement on multi-year corporate investments and
projects.
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Performance
Measure
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Weight
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Threshold
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Target
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Max
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%
of Target
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Progress on
Strategic and Corporate Initiatives
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10%
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50%
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100%
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200%
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135%
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Effectiveness of
Management
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15%
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50%
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100%
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200%
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135%
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Our 2019 strategic
initiatives included continuing our expansion into the Denver and
Southeast Florida markets, pursuing mixed use development through
partnerships with shopping mall owners and retailers, implementing
value added product features and services, such as furnished
housing, package lockers, etc., reimagining our operating model
through the implementation of artificial intelligence, automation
and centralization to improve customer experience and enhance NOI,
implementing quality assurance improvements, and developing talent.
Our 2019 corporate initiatives focused on technology platforms. The
Compensation Committee determined that the achievement on strategic
corporate initiatives in 2019 was 135% of target based on
significant progress on each of the initiatives.
Effectiveness of
management includes capital allocation, portfolio management,
management of liquidity through match funding and controlling land
inventory, balance sheet management, and associate engagement. For
2019, the Compensation Committee determined that achievement on
this category was 135% of target.
Annual
Stock Bonus:
Mr. Naughton's 2019
annual stock bonus component consisted of the following performance
measures:
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Performance
Measure
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Weight
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Threshold
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Target
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Max
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Actual
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%
of Target
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Same Store Controllable NOI vs.
Budget
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20%
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-2%
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0%
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2%
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0.14%
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106.8%
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Customer Service - Mid-Lease
Net Promoter Score ("NPS")
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20%
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30
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33
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36
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31
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66.7%
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Construction
Performance, Including Budget, Quality, Schedule and
Safety
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20%
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Qualitative
Assessment
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115.0%
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Development Starts
and Completions vs. Plan
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20%
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Qualitative
Assessment
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100.0%
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Talent Development
and Succession Planning
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20%
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Qualitative
Assessment
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150.0%
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Total
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100%
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107.7%
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The above
performance measures represent different aspects of the Company’s
business and are not duplicative of the measures under the
corporate annual cash bonus program. Same Store Controllable NOI
measures our stabilized community performance. NPS is a measure of
customer loyalty and satisfaction, which allows the Company to
assess the value of our services to our customers. Construction and
Development metrics reflect key financial business drivers of the
Company’s success and the CEO’s commitment to safety. Talent
Development and Succession Planning ensures that future leaders of
the Company are thoroughly trained and developed.
The annual stock
bonus for the Named Executive Officers other than the CEO was based
on their respective business unit performance.
Once the final
achievement for the annual stock bonus is determined, the number of
shares of restricted stock is calculated and awarded to each Named
Executive Officer. The restricted stock will vest ratably over
three years after the date of grant, subject to the Named Executive
Officer's continued employment through each such vesting date, but
subject to earlier acceleration of vesting in the event of a
termination due to death, disability, retirement, or termination by
the Company without cause. The annual stock bonus performance
period was calendar year 2019, however the actual issuance of the
time-based restricted stock occurred in February 2020.
Performance
Awards: Our
performance awards with performance periods ending in 2019
consisted of the following measures:
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TSR
Performance Measures
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Weight
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Threshold
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Target
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Max
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Actual
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%
of Target
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Achievement
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Absolute 3-yr TSR
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33.4%
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4.0%
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8.0%
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12.0%
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10.5%
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163.4%
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Above Target
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AVB 3-yr TSR vs. NAREIT Equity
REIT Index
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33.3%
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-4.0%
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0.0%
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4.0%
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2.2%
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154.0%
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Above Target
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AVB 3-yr TSR vs. NAREIT Apt
Index
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33.3%
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-3.0%
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0.0%
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3.0%
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-1.6%
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72.7%
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Above Threshold
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TSR Metric
%
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100.0%
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130.0%
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Operating
Performance Measures
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Weight
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Threshold
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Target
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Max
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Actual
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%
of Target
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Achievement
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3-yr Core FFO per share growth
vs. Peers
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66.7%
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-3.0%
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0.0%
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3.0%
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0.2%
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105.7%
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Above Target
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3-yr Net Debt-to-Core EBITDA vs.
Peers
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33.3%
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1.5x
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0.0x
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-1.5x
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-0.4x
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126.6%
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Above Target
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Operating
Metric %
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100.0%
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112.7%
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Final
Achievement %
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100.0%
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123.2%
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Sixty percent of
each officer's total performance award target value was tied to the
TSR metrics identified above and 40% of the total performance award
target value was tied to the operating metrics identified above.
Because the Monte Carlo value of a unit was used to calculate the
number of target performance units tied to TSR metrics and the
actual stock price was used to calculate the number of target
performance units tied to operating metrics, the actual total
number of units awarded reflected 60.5% based on the TSR metrics
and 39.5% based on the operating metrics.
Realized
Pay for 2019 Performance
The following table
shows one way in which our Compensation Committee looked at the
compensation paid and awarded to each of the Named Executive
Officers for service and performance with respect to 2019. This
table differs from the Summary Compensation Table provided on
page 46, which includes several items that are driven by
accounting and reporting requirements that are not necessarily
reflective of the compensation actually realized by the executive
with respect to a particular year. 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 which
year the awards were made with respect to or (in the case of
performance awards) which year the awards pay out in the form of
restricted shares. As a result, a significant portion of the total
compensation for 2019 reported in the Summary Compensation Table
relates to restricted stock awards granted in early 2019 for
performance in 2018 or, in the case of performance awards, awards
for the 2019 - 2021 performance cycle for which performance has not
yet been determined and for which the value is uncertain (and which
may end up having no realized value at all).
In contrast, the
table immediately below is provided to illustrate the actual cash
and value of restricted shares received by each Named Executive
Officer for service and performance in 2019 and the value of
restricted shares realized for performance awards maturing on
December 31, 2019. Note that the amounts reported below differ
substantially from the amounts determined under SEC rules and
reported in the Summary Compensation Table. This table is not a
substitute for the Summary Compensation Table.
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Name
and Principal
Position
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Year
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Salary ($)
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Annual
Bonus and Earned
Performance
Awards
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All
Other
Compensation
($)(3)
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Total
($)
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Cash
(1)
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Restricted Stock (2)
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Timothy
Naughton
Chief Executive
Officer
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2019
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1,000,000
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2,170,000
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8,996,755
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23,382
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12,190,137
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Kevin
O’Shea
Chief Financial
Officer
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2019
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600,000
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798,000
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2,467,503
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25,237
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3,890,740
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Sean
Breslin
Chief Operating
Officer
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2019
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600,000
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823,500
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2,627,221
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24,456
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4,075,177
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Matthew
Birenbaum
Chief Investment
Officer
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2019
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600,000
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844,800
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2,666,699
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24,711
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4,136,210
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Leo Horey
(4)
Former Chief
Administrative Officer
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2019
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525,000
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1,003,410
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940,936
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18,208
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2,487,554
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(1)
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Amounts in this
column reflect the cash awards made in February 2020 with respect
to performance under the annual bonus program in 2019. For Mr.
Horey, the amount includes the achieved stock bonus paid in cash,
consistent with his retirement.
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(2)
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Amounts in this
column reflect the value of shares of restricted stock awarded in
February 2020 (i) with respect to performance under the Annual
Bonus program in 2019, and (ii) for achievement under the
long‑term incentive performance awards maturing on
December 31, 2019, all with a value per share of $225.59, the
closing price of the Company’s Common Stock on the NYSE on
February 13, 2020.
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(3)
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Amounts in this
column include the same components described in the “All Other
Compensation” column of the Summary Compensation
Table.
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(4)
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Mr. Horey retired
effective January 1, 2020.
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Best
Practices Incorporated into our Compensation Programs
The Company
implements and maintains leading practices in its executive
compensation programs. These practices include the
following:
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Review of
competitive market information when considering executive
pay
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Caps on annual and
long‑term incentives
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No employment
agreements with officers
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Policy on
recoupment of incentive compensation (clawback policy)
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Double-trigger
equity compensation vesting in the event of a change in
control
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Director and
executive officer stock ownership guidelines
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Separate board and
management compensation consultants
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Prohibition against
hedging, pledging or borrowing against Company stock by directors
and officers
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ADDITIONAL
DISCUSSION
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Consideration of
the Results of the 2019 Stockholder Advisory Vote on Executive
Compensation
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As previously
announced at the 2019 Annual Meeting of Stockholders, the Company’s
executive officer compensation for 2019 was approved by over 94% of
the votes cast on the matter. The Compensation Committee and the
Company considered these results to be an endorsement by
stockholders of the Company’s compensation structure, target level
and actual executive compensation.
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Our Decision
Making Process
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Who
is Involved in Compensation Decisions
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Independent
Board Members
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Independent
Compensation Committee
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Review and approve the Company’s
business plan
Review and ratify
the compensation of the Chief Executive Officer and the other
executive officers as approved and recommended by the Compensation
Committee
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Reviews and recommends to the
independent members of the Board the setting of performance goals
for corporate bonus programs after the full Board reviews and
approves the business plan
Approves and
recommends to the independent members of the Board for ratification
the target and actual total compensation of the CEO and executive
officers
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Independent
Compensation Consultant
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Shareholders
and Other Key Stakeholders
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Provides guidance on executive
compensation programs in terms of prevailing market
practice
Steven
Hall & Partners is the Compensation Committee's
independent compensation consultant
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Provide feedback on
various executive pay practices and governance during periodic
meetings with management
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Chief
Executive Officer
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Makes
recommendations and provides input with respect to compensation for
NEOs, other than himself.
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How
We Review Market Compensation
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In determining the
total compensation for each Named Executive Officer, which is the
sum of base salary, bonus and long‑term incentives, the
Compensation Committee generally considers a number of factors on a
subjective basis, including:
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(i)
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the scope of the
officer’s responsibilities within the Company and in relation to
comparable officers at various companies within the peer group
described below;
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(ii)
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the experience of
the officer within our industry and at the Company;
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(iii)
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performance of the
officer and his or her contribution to the Company;
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(iv)
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the Company’s
financial budget and general level of wage increases throughout the
Company for the coming year;
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(v)
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a review of
historical compensation information for the individual
officer;
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(vi)
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the recommendations
of the Chief Executive Officer (other than with regard to his own
compensation); and
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(vii)
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data regarding
compensation paid to officers with comparable titles, positions or
responsibilities at REITs that are considered by the Compensation
Committee to be comparable for these purposes.
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An officer’s target
compensation is not mechanically set to be a particular percentage
of the peer group average, although, as noted, the Compensation
Committee does review the officer’s compensation relative to the
peer group to help the Compensation Committee perform the
subjective analysis described above.
An officer’s target
compensation may vary from the peer group data for the following
reasons:
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(a)
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the officer’s role
and experience within the Company may be different from the role
and experience of comparable officers at the peer
companies;
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(b)
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the actual
compensation for comparable officers at the peer companies may be
the result of a year of over-performance or under-performance by
the peer group;
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(c)
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the target
compensation and performance goals for comparable officers at peer
companies may not have the same rigor as at the Company;
and
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(d)
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the Compensation
Committee believes that ultimately the decision as to appropriate
target compensation for a particular officer should be made based
on the full review described above.
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Our incentive
programs are designed so that actual performance in excess of the
performance targets results in payouts above target (with caps on
above target payouts) and actual performance below the performance
targets results in payouts below target or no payout.
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How We Select and
Use Peer Groups
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Companies
for Market Compensation Purposes:
The Company
regularly reviews the reference peer group described below, which
it uses when evaluating the appropriate levels of executive
compensation, in order to maintain consistency and relevancy. In
determining the peer group composition, the following elements are
considered.
The final peers
selected have one or more of the following
characteristics:
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|
Asset Focus
(multi‑family/complexity of operations): a meaningful portfolio of
multi-family properties and/or intense property management
operations
|
|
|
•
|
Size: defined as
total capitalization (equity plus debt) within 0.5x to 2.0x of
AvalonBay
|
|
|
•
|
Talent: companies
with whom we could compete for talent
|
The Company uses
the following 14 companies in its peer group for comparison of
total compensation.
Source: S&P
Global
Companies
for Performance Award Measurement Purposes
The Company uses a
different peer group for determining performance under its
performance awards. The peer group for determining the level of
total target compensation is based in part on size parameters since
the Company is competing with similar sized companies for executive
talent. For the performance awards, size is less of a consideration
and more emphasis is placed on multi‑family peers since operating
performance and shareholder return are more appropriately compared
with direct competitors in our specific industry.
For the
2017 - 2019 performance awards relating to
three‑year relative TSR, the
following indices were used:
|
|
•
|
FTSE NAREIT
Apartment Total Return Index represents REITs in the multi-family
housing industry across the U.S.
|
|
|
•
|
FTSE NAREIT Equity
REITS Index represents a comprehensive group of REITs that spans a
variety of commercial real estate space (such as retail, office,
storage and multi-family) across the U.S.
|
For the
2017 - 2019 performance awards relating to operating
metrics, the following multi-family REITs were used as peer
companies:
|
|
–
|
Apartment
Investment and Management Company
|
|
|
–
|
Essex Property
Trust, Inc.
|
|
|
–
|
Mid‑America Apartment
Communities, Inc.
|
These companies
were chosen primarily because they are publicly-traded companies in
the multi-family industry.
|
|
Who Are our
Compensation Consultants
|
The Compensation
Committee has engaged Steven Hall & Partners, an executive
compensation consulting firm, to provide it with advice and counsel
on executive compensation as well as competitive pay practices.
Steven Hall & Partners did not provide any services
directly to the Company or its management. Management uses the
services of FPL Associates, another compensation consulting firm,
to provide it with information about competitive pay practices and
data. The Compensation Committee undertook an assessment of whether
any material conflict of interest exists in connection with the
services of Steven Hall & Partners to the Compensation
Committee or the services of FPL Associates to management and
concluded that there was no such material conflict of
interest.
With respect to the
three-year performance awards relating to TSR, the Company utilizes
FAS Solutions Inc. to provide the Monte Carlo
valuation.
|
|
What We Pay and
Why: Elements of Compensation
|
Our executive
compensation program contains the following pay
components:
|
|
•
|
Base Salary –
Fixed cash compensation
|
|
|
•
|
Annual Incentive
Award – Payable in cash and stock contingent upon achievement
of performance measures and goals
|
|
|
•
|
Long‑Term Incentive
Awards – Payable in the form of performance-based awards with
pre‑established measures and goals
|
|
|
|
|
|
Type
|
Component
|
Description
|
Connection
to the Company’s business
strategy/philosophy
|
Fixed
Compensation
|
Base
Salary
|
This amount, payable
in cash, is generally established each year in February and
effective in March.
|
Attract and retain
key talent
|
|
Performance‑Based
Compensation
|
Annual Incentive
Award
|
Threshold, target
and maximum targets and goals are established in February of each
year and payouts are made the following year.
Two forms of payments -
cash and restricted stock that vests ratably over three
years.
|
Drive Company and business unit
performance
Motivate individual
performance
Retain the services
of the executive
|
Long‑Term Incentive
Awards
|
A target number of performance
units is granted and the number of units earned may increase or
decrease contingent upon absolute and relative TSR and operating
performance against peer groups.
Multi-year
performance awards granted prior to 2018 are settled upon maturity
in restricted shares that are subject to additional three-year
time-vesting requirements.
|
Align executive officers’
compensation with the interests of stockholders
Maximize the
Company’s performance and reward management’s long‑term
perspective
|
|
|
How We Establish
Goals and Determine Achievement for Incentive
Compensation
|
Setting
Goals: At
the beginning of the year, the Board of Directors reviews and
approves the Company’s business plan and budget. Subsequently, the
Company’s management proposes corporate goals for that year for the
annual bonus program and long‑term incentive program. The
Compensation Committee reviews these proposed goals, adopts any
revisions it may deem appropriate, and recommends the final
corporate goals to the full Board of Directors for ratification and
approval by a vote of the independent directors who would qualify
for membership on the Compensation Committee.
Annual business
unit goals are drafted by the head of each business unit and
reviewed, modified, and approved by the Chief Executive
Officer.
The individual
goals for the annual bonus program are determined in a similar
manner, with the exception that 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.
Determining
Achievement: At the end of each year, the
Chief Executive Officer reviews and recommends to the Compensation
Committee his assessment of the achievement of corporate goals for
both the annual bonus program and the long‑term incentive program,
and the business unit and individual goals for the annual bonus
program for the other Named Executive Officers. Recommendations for
bonus awards and compensation changes for the Chief Executive
Officer and all executive officers are approved by the Compensation
Committee and are then ratified by the independent directors who
qualify for membership on the Compensation Committee.
Design of the
Annual Cash Incentive Program: Our annual bonus program
emphasizes short term goals and is paid in cash.
Three components
are measured to determine performance under the 2019 Annual Cash
Incentive Program:
|
|
•
|
Corporate
performance, consisting of Core FFO per share, development and
redevelopment NOI, development yield and management
performance
|
|
|
•
|
Business
unit performance (applies to all Named Executive Officers except
the Chief Executive Officer)
|
Why These
Performance Measures are Selected:
|
|
|
Corporate
Performance
|
Rationale
|
Core FFO per
Share
|
Core FFO per share (or similar
measures such as Operating FFO) is a key metric used by many REITS
and tracked by equity research analysts.
Core FFO per share is reported
in our quarterly results and periodic guidance to the
market.
|
Development Lease-Up NOI
and Redevelopment NOI vs. Budget
|
Development and
redevelopment are core competencies of the Company that contribute
to value creation.
Development and
redevelopment NOI are profit related measures that are important to
fulfillment of the annual business plan.
NOI helps investors and
management to understand the core operations of a community or
communities prior to the allocation of any corporate-level or
financing-related costs. NOI reflects the operating performance of
a community and allows for an easy comparison of the operating
performance of individual assets or groups of assets.
|
Development
Completions (Yield vs. Underwritten Yield)
|
Development yield
(i.e., projected NOI/total capital cost) is a return measure that
reflects the economic returns from a development community as a
percentage of the capital we invested in it.
As a performance
measure, we measure development yield on completed developments
against the original underwritten yield for that asset, which is
established at the start of construction.
|
Management’s
Performance vs. Goals
|
There are two
components to the qualitative assessment of management’s
performance for which we gauge ourselves against pre-established
annual and multi-year goals and objectives: (i) strategic and
corporate initiatives, and (ii) management
effectiveness.
|
|
|
Review of 2019
Performance and Pay
|
Annual
Cash and Stock Incentive Program:
The goals, metrics
and achievement for the corporate component of the 2019 Annual Cash
Incentive Program are graphically illustrated in the following
charts. Total performance under all corporate goals was determined
to be 103.0% of target.
Individual
Goals and Achievement for Annual Cash Component
Individual goals
for the officers include the executive’s leadership and managerial
performance as well as specific objectives, and are evaluated on a
subjective basis annually. Individual performance for
Mr. Naughton was determined by the Compensation Committee. The
Compensation Committee also determined individual performance for
the other Named Executive Officers after receiving recommendations
from Mr. Naughton. The Compensation Committee determinations
were ratified and approved by the independent members of the Board
who would qualify to serve on the Compensation
Committee.
Mr. Naughton’s
individual goals for 2019 related to (i) various strategic
objectives, including expansion into Denver and Southeast Florida,
and growing a pipeline of mixed use development opportunities; (ii)
capital allocation and financial management objectives, including
goals related to portfolio management, the development rights
pipeline, balance sheet and liquidity management and overhead
costs; (iii) operations and asset management, including goals
relating to the customer experience, community performance, and
expanding the scope of our asset management platform; (iv) talent
management with respect to associate engagement, diversity, and
leadership development; and (v) communication and culture,
including goals related to stockholder engagement, corporate social
responsibility, safety, and cyber security culture.
Mr. O’Shea’s
individual goals for 2019 included (i) effective management of
the Company’s capital plan, including the issuance of debt and
equity, as well as joint venture activity; (ii) providing effective
oversight of the accounting, financial reporting, financial
planning and analysis, risk management, tax, treasury, and
investment management functions; (iii) providing oversight of the
Company’s shared service center; (iv) providing administrative
oversight of the Company’s internal audit group; (v) directing the
Company’s investor relations efforts; and (vi) strengthening talent
management and leadership development in the Financial Services
Department.
Mr. Breslin’s
individual goals for 2019 included (i) achieving budgeted
performance for the Company’s portfolio of communities; (ii)
maintaining an engaged workforce that represents approximately
two-thirds of the Company; (iii) achieving certain customer related
metrics; (iii) continuing to execute the innovation strategy for
the Company’s operating model; (iv) assessing the efficiency and
effectiveness of the maintenance organization; and (v) developing
core talent.
Mr. Birenbaum's
individual goals for 2019 related to: (i) making progress in market
expansion and mixed use expansion; (ii) progress on portfolio
management objectives; (iii) working with the development group to
prioritize and optimize holdings of development rights, including
land; (iv) continued progress on the corporate social
responsibility function, including progress on ESG goals; and (v)
assisting with executive leadership on organizational
planning.
Mr. Horey’s
individual goals for 2019 included: (i) management embedding the
application of data analytics across various departments; (ii)
integrating Retail and Revenue departments into the organization
and ensuring their resources are leveraged to optimize performance;
(iii) evolving Information Technology initiatives to be more
strategic with the Company’s business; (iv) being the thought
leader on key corporate initiatives; and (v) driving the talent and
succession planning initiative.
The achievement of
Mr. Naughton against his individual goals for 2019 was determined
to be 125% of target. Achievement against individual goals by all
other Named Executive Officers was determined to be within 20% of
individual target performance.
Annual Stock
Bonus Component
Each of the Named
Executive Officers had an annual stock bonus component in their
total pay package in 2019. Mr. Naughton’s annual stock bonus is
based on a mix of quantitative and qualitative factors, as
described below. Messrs. O’Shea, Breslin, Birenbaum and Horey
each received an annual stock bonus based upon the achievement of
their business unit goals. When the annual stock bonus award is
earned, it is awarded in the form of restricted stock that vests
ratably over three years, based on continued employment but subject
to earlier acceleration of vesting in the event of a termination
due to death or disability, a termination without cause, or
retirement. The value of Mr. Horey's annual stock bonus was paid to
him in cash due to his retirement following year end because he
retired on January 1, 2020.
Mr.
Naughton:
Mr. Naughton’s performance measures for his annual stock bonus
consisted of the following: (i) same store controllable NOI vs
budget; (ii) customer service - NPS; (iii) review and assessment of
overall
construction
performance, including budget, quality, schedule and safety; (iv)
review and assessment of development starts and completions against
plan; and (v) talent development and succession planning. Mr.
Naughton’s achievement for 2019 was determined to be 107.7% of
target.
Mr. O’Shea:
Mr. O’Shea’s business unit component was 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 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. The major goals of the Financial
Services Group in 2019 included: (i) sourcing an attractive
mix of debt, equity and joint venture capital from the capital and
transaction markets to fund our capital uses, primarily related to
our investment and financing activity; (ii) executing the
Company’s accounting, financial reporting, tax and risk management
activities; (iii) executing and enhancing the Company’s
budgeting and forecasting process; (iv) executing our internal
audit program; (v) ongoing management of the Company’s
investment management funds; (vi) executing the Company’s
investor relations activities; (vii) making improvements on the
process and productivity for the Company’s shared service center;
and (viii) strengthening talent management and leadership
development. For 2019, the overall achievement for
Mr. O’Shea’s business unit was determined to be 108.0% of
target.
Mr. Breslin:
Mr.
Breslin’s business unit component was based on the achievements of
the Residential Services, Redevelopment and Asset Management,
Marketing, Consumer Insight and Brand Strategy and Engineering
functions, for which Mr. Breslin has direct oversight
responsibility. The major goals of these groups in 2019 included:
(i) attaining certain portfolio performance targets, including
absolute and relative rental revenue growth, and controllable NOI
and operating expense performance vs. budget; (ii) achievement of
NPS (the Company’s primary customer metric) targets; (iii)
execution of changes to the Company’s operating model to increase
the efficiency of the operating platform; and (iv) certain
production and performance metrics for the Company’s portfolio of
redevelopment communities. For 2019, the overall achievement for
Mr. Breslin’s business units was determined to be 114.0% of
target.
Mr. Birenbaum:
Mr. Birenbaum’s business unit component was based on the
achievements of the Investments, Market Research,
Sustainability/Corporate Responsibility, West Coast Development and
Asset Management groups, for which Mr. Birenbaum has direct
oversight responsibility. The major goals of these groups in 2019
included: (i) effective portfolio management through
investments, acquisitions and dispositions; (ii) progress in
expansion markets; (iii) working with senior leaders to prioritize
and right-size the development pipeline; (iv) supporting the
Company’s ESG efforts; and (v) introducing a broader-based
portfolio management function within the asset management group.
For 2019, the overall achievement for Mr. Birenbaum’s business
unit was determined to be 118.6% of target.
Mr. Horey:
Mr. Horey’s business unit component was based on the achievements
of Human Resources, Information Technology, Data Analytics, Retail
Management, Revenue Management, Property Tax and Operations &
Investment Services groups. The major goals of these groups in 2019
included: (i) creation of the human resources business partner
model and integrating it with the various businesses; (ii)
sunsetting legacy IT systems and integrating new business solutions
for the Company; (iii) integration of data analytics into decision
making; (iv) collaboration of retail work on all development deals;
and (v) expansion of revenue management platform to non-traditional
revenue avenues. For 2019, the overall achievement for
Mr. Horey’s business unit was determined to be 110.1% of
target.
Long‑Term
Incentive Program:
Design of the
Long‑Term Incentive
Program: 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 2019-2021 performance period, the
performance units that are earned at the end of the performance
period are settled in unrestricted shares of Common Stock. In
addition to receiving one share of fully vested stock for each unit
earned as determined at the end of the performance period, a cash
payment will be made equal to the dividends that accrued on such
number of earned shares during the performance period.
The metrics under
the performance awards made in 2019 with a three‑year performance
period ending on December 31, 2021 are as
follows:
|
|
|
|
|
|
TSR
Metrics (Weighted 60%)
|
Performance Level
and Metric(1)(2)
(relative
performance stated as percentage
above
or below index performance)
|
|
Threshold
|
Target
|
Maximum
|
Percent
of
TSR
Metrics
|
Absolute
metric
|
3.0%
|
8.0%
|
13.0%
|
25.0%
|
Relative to FTSE
NAREIT Equity REITs Index
|
-5.0%
|
0.0%
|
5.0%
|
25.0%
|
Relative to FTSE
NAREIT Apartments Index
|
-3.0%
|
0.0%
|
3.0%
|
50.0%
|
|
|
|
|
|
|
Operating
Metrics (Weighted 40%)
|
Performance Level
and Metric(1)
(relative
performance stated as (i) percentage
above
or below average peer performance(3)
or
(ii) difference between AVB performance and average
peer
performance)
|
|
Threshold
|
Target
|
Maximum
|
Percent
of
Operating
Metrics
|
Core FFO per share growth vs.
peers
|
-3.0%
|
Equal to Peer Avg.
|
+3.0%
|
66.7%
|
Net Debt-to-Core EBITDA ratio
vs. peers
|
1.5x
|
Equal to Peer Avg.
|
-1.5x
|
33.3%
|
|
|
(1)
|
For target
performance, 100% achievement is earned, for performance at maximum
or above, 200% achievement is earned, and for threshold
performance, 50% achievement is earned. For results between
threshold and target, or between target and maximum, payouts shall
be based on interpolation. For performance below threshold, no
achievement is earned.
|
|
|
(2)
|
The absolute and
relative metrics above reflect the metrics used for the awards made
in 2019 for the performance period maturing on December 31,
2021.
|
|
|
(3)
|
The peers used in
calculating each of the Operating Performance Metrics include:
Apartment Investment and Management Company, Mid‑America Apartment
Communities, Inc., Camden Property Trust, Equity Residential,
Essex Property Trust, 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 for which they were publicly traded companies that published
operating results.
|
Why These
Performance Measures are Selected
The performance
awards strengthen the alignment of executive compensation with
long‑term stockholder value creation. TSR metrics provide our Named
Executive Officers with the opportunity to earn a number of shares
of AvalonBay Common Stock, which number adjusts based on absolute
increases in our stock price as well as AvalonBay’s TSR relative to
the FTSE NAREIT Equity REITs Index and FTSE NAREIT Apartments
Index. These two indices are selected because they represent the
broader REIT industry and the REIT apartment industry,
respectively.
Operating metrics
in the form of Core FFO per share growth and Net Debt‑to‑Core
EBITDA ratio against peers are chosen to motivate our officers to
focus on critical operating performance objectives that we believe
will contribute to sustainable stockholder returns over the long
term.
How the
Company Performed for Performance Awards Ending December
2019
The goals, metrics
and achievement for the performance awards maturing on
December 31, 2019 are graphically illustrated in the following
charts:
|
|
2019 Compensation
Determinations
|
The following
tables provide information on the Named Executive Officers’ 2019
Compensation:
Review of 2019
Base Salary:
|
|
|
Name
|
Base
Salary
($)
|
Mr.
Naughton
|
1,000,000
|
Mr.
O’Shea
|
600,000
|
Mr.
Breslin
|
600,000
|
Mr.
Birenbaum
|
600,000
|
Mr.
Horey*
|
525,000
|
* Retired as of
January 1, 2020
Review of 2019
Annual Cash Bonus:
|
|
|
|
|
|
|
|
Annual
Weight of Each Component
|
Name
|
Corporate
|
|
Business
Unit
|
|
Individual
|
Mr.
Naughton
|
75%
|
|
—
|
|
25%
|
Mr.
O’Shea
|
40%
|
|
40%
|
|
20%
|
Mr.
Breslin
|
40%
|
|
40%
|
|
20%
|
Mr.
Birenbaum
|
40%
|
|
40%
|
|
20%
|
Mr.
Horey
|
40%
|
|
40%
|
|
20%
|
|
|
|
|
|
|
Name
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Actual
Cash
Bonus
($)
|
Mr.
Naughton
|
1,000,000
|
2,000,000
|
4,000,000
|
2,170,000
|
Mr.
O’Shea
|
375,000
|
750,000
|
1,500,000
|
798,000
|
Mr.
Breslin
|
375,000
|
750,000
|
1,500,000
|
823,500
|
Mr.
Birenbaum
|
375,000
|
750,000
|
1,500,000
|
844,800
|
Mr.
Horey
|
262,500
|
525,000
|
1,050,000
|
563,010
|
Review of 2019
Annual Stock Bonus (based on business unit performance for Named
Executive Officers other than Mr. Naughton):
|
|
|
|
|
|
Name
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Actual Stock
Bonus
($)
|
Mr.
Naughton
|
900,000
|
1,800,000
|
3,600,000
|
1,938,600
|
Mr.
O’Shea
|
380,000
|
760,000
|
1,520,000
|
820,800
|
Mr.
Breslin
|
430,000
|
860,000
|
1,720,000
|
980,400
|
Mr.
Birenbaum
|
430,000
|
860,000
|
1,720,000
|
1,019,960
|
Mr.
Horey
|
200,000
|
400,000
|
800,000
|
440,400
|
With the exception
of Mr. Horey, the actual stock bonus payout is delivered in the
form of restricted stock that vests ratably over three years from
the date of grant. Mr. Horey retired on January 1, 2020 and
received his stock bonus in the form of cash compensation. This
stock bonus will be disclosed in the 2021 proxy statement Summary
Compensation Table as it was awarded in February 2020 following
review of 2019 results.
2017 – 2019
Performance Awards Update
The following table
shows the actual performance units earned at the completion of the
three‑year performance period ended December 31, 2019, that were
settled in restricted shares of stock subject to an additional
three year service-based vesting requirement.
|
|
|
|
|
Name
|
Target
Number of Performance Units
|
Actual
Performance
Achievement
%
|
Actual Number of
Performance
Units
Earned (restricted shares subject to
additional
time vesting)
|
Mr.
Naughton
|
25,405
|
123.2%
|
31,288
|
Mr.
O’Shea
|
5,927
|
123.2%
|
7,300
|
Mr.
Breslin
|
5,927
|
123.2%
|
7,300
|
Mr.
Birenbaum
|
5,927
|
123.2%
|
7,300
|
Mr.
Horey
|
3,387
|
123.2%
|
4,171
|
2019 – 2021
Performance Awards Update
The target,
threshold and maximum number of performance units granted in 2019
that may be earned for the performance period 2019 -
2021:
|
|
|
|
|
|
|
|
|
|
|
2019
– 2021 TSR Metric
|
2019
– 2021 Operating Metric
|
Name
|
Target
Dollar Value
($)
|
Threshold
(#)
|
Target(1)
(#)
|
Maximum
(#)
|
Threshold
(#)
|
Target(1)
(#)
|
Maximum
(#)
|
Mr.
Naughton
|
$5,600,000
|
8,229
|
16,458
|
32,916
|
5,723
|
11,445
|
22,890
|
Mr.
O’Shea
|
$1,140,000
|
1,675
|
3,350
|
6,700
|
1,165
|
2,330
|
4,660
|
Mr.
Breslin
|
$1,290,000
|
1,896
|
3,791
|
7,582
|
1,318
|
2,636
|
5,272
|
Mr.
Birenbaum
|
$1,290,000
|
1,896
|
3,791
|
7,582
|
1,318
|
2,636
|
5,272
|
Mr.
Horey
|
$600,000
|
882
|
1,763
|
3,526
|
613
|
1,226
|
2,452
|
|
|
(1)
|
To derive the
target number of units, 60% of the target dollar value
(representing the portion of the award tied to TSR Metrics) was
divided by the Monte Carlo value as of February 14, 2019 (the
approval date) to determine the number of units based solely on the
TSR metrics ($204.15 per unit), and 40% of the target dollar value
(representing the portion of the award tied to Operating Metrics)
was divided by the closing price of the Common Stock on
February 14, 2019 ($195.72 per share) to determine the number
of units based solely on operating metrics. The shares of stock
that may be issued upon settlement of awards are not subject to
further additional time vesting requirements.
|
Pursuant to our
Deferred Compensation Plan, certain employees, including the Named
Executive Officers, may defer up to 25% of base annual 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 allows 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 a purchase period or the closing price of the
Common Stock on the last day of a purchase period. For 2019 there
were two purchase periods, January 1 -
June 10 and July 1 - December 10, with the
opportunity to purchase up to $12,500 of our Common Stock at the
discounted rate previously mentioned during
each of the two
purchase periods (up to $25,000 annually). In addition, 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 plans, a portion of the cost of which is
paid by the employee. We also provide life insurance, accidental
dismemberment insurance, and short‑term and
long‑term
disability insurance for each employee.
Stock
Ownership Guidelines. The Company believes that stock
ownership by its senior officers is important and 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
The full text of
the Senior Officer Stock Ownership Guidelines, which includes the
time periods by which such ownership must be achieved and a
retention policy during periods of non‑achievement, is posted on
the Investor Relations section of the Company’s website
(www.avalonbay.com)
under “Corporate Governance Documents.” The Company also has
Director Stock Ownership Guidelines as discussed in the “Director
Compensation and Director Stock Ownership Guidelines” section of
the proxy statement.
Anti-Hedging
and Anti-Speculation Policy. AvalonBay’s Board of Directors
has adopted the following Anti-Hedging and Anti-Speculation Policy
which applies to all employees and the Board of
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."
|
No
Pledging Policy. 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."
Severance
Policy. 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 entered into after adoption of the
policy 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 Severance Policy,
which is posted on the Investor Relations section of the Company’s
website (www.avalonbay.com)
under “Corporate Governance Documents,” provides additional detail
regarding the application of this policy.
Policy on
Recoupment of Incentive Compensation (Clawback Policy).
The Board has
adopted a Policy for Recoupment of Incentive Compensation
(i.e., 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 the material
non‑compliance of the Company 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 had
previously received. Excess Compensation is defined as that part of
the cash or equity incentive compensation received by a covered
officer during the three‑year period preceding the publication of
the restated financial statement that was in excess of the amount
that 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.”
|
|
Practices with
Regard to Dates and Pricing of Stock and Option Grants
|
The Compensation
Committee determines the number of shares underlying options and/or
number of shares of restricted stock to award to officers as part
of annual compensation. Those members of the Board of Directors who
would qualify for service on the Compensation Committee review and
ratify these awards at the Board’s regularly scheduled February
meeting. The award date for options and stock grants is generally
the date of ratification but may be delayed to a date after such
ratification 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 dates described
above; (ii) on the date of (or a date set in connection with)
a new hire’s start with the Company as approved by the Chief
Executive Officer in advance of the start date; or (iii) on
the date of approval by the Chief Executive Officer for retention
or recognition purposes 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. Additionally, 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), 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:
|
|
•
|
annual bonus and
long‑term incentive awards are based upon pre‑existing, defined
goals;
|
|
|
•
|
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;
|
|
|
•
|
goals include
corporate, business unit, and individual performance
goals;
|
|
|
•
|
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 or are earned based upon achievement of pre-determined
goals;
|
|
|
•
|
bonus and long‑term
equity programs include maximum payouts or “caps”;
|
|
|
•
|
all unvested equity
awards are forfeited upon a termination for cause or voluntary
termination under certain circumstances;
|
|
|
•
|
the metrics that
are included in our long‑term performance awards include a goal
addressing appropriate leverage ratios;
|
|
|
•
|
achievement of
metrics is not determined on an “all or nothing” basis, but rather
goals may be achieved on a graduated basis based on performance
against the stated target; 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, although no assurances can be given in this
regard.
The SEC requires
that this report comment upon the Company’s policy with respect to
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Tax Code"), which limits the deductibility on the
Company’s tax return of compensation over $1 million paid to
certain executive or former executive officers. The Company
believes that, because it qualifies as a REIT under the Tax Code
and pays dividends sufficient to minimize federal income taxes,
Section 162(m) will generally not affect the Company’s net
income, although the loss of deductibility under
Section 162(m) could modestly affect the Company’s dividend
requirements to qualify as a REIT or the tax characterization of
such dividends. The Company does not believe that
Section 162(m) will materially affect its dividend
requirements or the taxability of stockholder distributions,
although no assurance can be given in this regard due to the
variety of factors that affect the tax position of each
stockholder. For these reasons, the Compensation Committee’s
compensation policy and practices are not directly guided by
considerations relating to Section 162(m).
|
|
Compensation
Committee Report
|
The Compensation
Committee of the Board of Directors of AvalonBay
Communities, Inc., a Maryland corporation, has reviewed and
discussed the Compensation Discussion and Analysis required by
Item 402(b) of Regulation S‑K of the Securities and
Exchange Commission with management and, based on such review and
discussions, the Compensation Committee recommended to the Board
that the Compensation Discussion and Analysis be included in this
Proxy Statement.
Submitted by
the Compensation Committee
W. Edward
Walter (Chair)
Alan B.
Buckelew
H. Jay
Sarles
Richard J.
Lieb
Compensation
Committee Interlocks and Insider Participation
During 2019, the
members of the Compensation Committee were W. Edward Walter
(Chair), Alan B. Buckelew, H. Jay Sarles, and Richard J. Lieb. None
of them has served as an officer of the Company or any of its
subsidiaries. None of our Named Executive Officers serves as a
member of the board of directors or compensation committee of any
company that has one or more of its executive officers serving as a
member of our Board of Directors or Compensation Committee. No
member of the Compensation Committee has any other business
relationship or affiliation with the Company or any of its
subsidiaries (other than service as a director).
Summary
Compensation Table
The table below
summarizes the compensation amounts paid in or earned by each of
the Named Executive Officers for the fiscal years ended
December 31, 2019, December 31, 2018 and
December 31, 2017.
Executives are
eligible to defer a portion of their salaries and bonuses under our
Nonqualified Deferred Compensation Plan. The amounts shown below
are before any deferrals under the Nonqualified Deferred
Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Principal
Position
|
Year
|
Salary
($)(1)
|
Bonus
($)
|
Stock
Awards
($)(2)(3)
|
|
Option
Awards
($)(2)(4)
|
Non–Equity
Incentive
Plan
Compensation
($)(5)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(6)
|
All
Other
Compensation
($)(7)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Timothy Naughton
|
2019
|
1,000,000
|
-
|
7,727,980
|
(8)
|
-
|
2,170,000
|
-
|
23,382
|
10,921,362
|
Chairman, CEO and
|
2018
|
1,000,000
|
-
|
6,688,757
|
|
-
|
2,368,500
|
-
|
22,177
|
10,079,434
|
President
|
2017
|
990,385
|
-
|
5,064,956
|
|
|
1,750,000
|
-
|
88,486
|
7,893,827
|
Kevin O’Shea
|
2019
|
600,000
|
-
|
1,905,782
|
(9)
|
-
|
798,000
|
-
|
25,237
|
3,329,019
|
Chief Financial
Officer
|
2018
|
595,192
|
-
|
1,804,617
|
|
-
|
846,900
|
-
|
24,979
|
3,271,688
|
|
2017
|
570,192
|
-
|
1,626,097
|
|
|
711,528
|
-
|
23,608
|
2,931,425
|
Sean Breslin
|
2019
|
600,000
|
|
2,246,921
|
(10)
|
-
|
823,500
|
-
|
24,456
|
3,694,877
|
Chief Operating
Officer
|
2018
|
595,192
|
-
|
1,983,318
|
|
-
|
886,800
|
-
|
23,577
|
3,488,887
|
|
2017
|
570,192
|
-
|
1,718,139
|
|
|
734,712
|
-
|
23,445
|
3,046,488
|
Matthew Birenbaum
|
2019
|
600,000
|
-
|
2,157,282
|
(11)
|
-
|
844,800
|
-
|
24,711
|
3,626,793
|
Chief Investment
Officer
|
2018
|
595,192
|
-
|
1,960,925
|
|
-
|
867,300
|
-
|
23,757
|
3,447,174
|
|
2017
|
570,192
|
-
|
1,798,004
|
|
|
725,880
|
-
|
23,608
|
3,117,684
|
Leo Horey
|
2019
|
525,000
|
-
|
1,041,805
|
(12)
|
-
|
1,003,410
|
-
|
18,208
|
2,588,423
|
Former Chief
|
|
|
|
|
|
|
|
|
|
|
Administrative
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts shown as
salary in column (c) reflect actual payments received in each
indicated year, which may vary slightly from the salary described
in the Compensation Discussion and Analysis as a result of
(i) the number of pay periods in each calendar year and
(ii) the fact that salary increases do not go into effect
until early March of each year.
|
|
|
(2)
|
The amounts in
column (e) include restricted stock actually granted during
the fiscal year for service in the prior fiscal year. For example,
the row for 2019 includes the value of stock awards made in
February 2019 with respect to 2018 service.
|
|
|
(3)
|
The amounts in
column (e) reflect the aggregate grant date fair value for
awards made in the fiscal years ended December 31, 2019,
December 31, 2018, and December 31, 2017 computed in
accordance with FASB ASC Topic 718 for restricted stock awards and
performance unit awards made pursuant to the Equity Incentive Plan.
The value of restricted stock awards is based solely on the closing
price of our Common Stock on the NYSE on the date of grant and no
assumptions were used in the calculation of this value. The value
of performance unit awards based on operating metrics established
in 2019 for measurement period 2019 - 2021 is based on the closing
price of our Common Stock on the NYSE on the date of grant of
$195.72. The value of performance unit awards based on TSR metrics
made in 2019 for measurement period 2019‑2021 is based on the Monte Carlo
value of $204.15. The total value of 2019‑2021 performance unit awards, if
earned at maximum and valued at the closing price of our Common
Stock on the NYSE on the date of grant, for the Named Executive
Officers is: Mr. Naughton-$10,922,350, Mr. O’Shea-$2,223,379,
Messrs. Birenbaum and Breslin-$2,515,785, and Mr. Horey -
$1,170,014.
|
|
|
(4)
|
No stock options
were granted to the Named Executive Officers in 2019, 2018 or
2017.
|
|
|
(5)
|
The amounts shown in
column (g) reflect the cash awards to the named individuals
determined in February of the following year (based upon the
achievement of the performance metrics established in the year
indicated, as more fully described in the Compensation Discussion
and Analysis above). For Mr. Horey, the non-equity incentive plan
compensation payouts included both his 2019 cash and stock bonus
payments paid in cash as a result of his retirement on January 1,
2020.
|
|
|
(6)
|
All earnings under
the Company’s nonqualified deferred compensation program are
determined by reference to returns of actual mutual funds and the
Company does not consider such earnings to be above
market.
|
|
|
(7)
|
For 2019, the
amounts shown in column (i) include, for each Named Executive
Officer (a) amounts contributed by the Company to the Named
Executive Officers’ 401(k) accounts in the amount of $8,400 each
for Messrs. Naughton, O’Shea, Breslin, Birenbaum, and Horey,
(b) medical benefit premiums paid by the Company and
contribution to health savings accounts paid by the Company in the
aggregate amount of $14,982 for Mr. Naughton, $14,987 for Mr.
O'Shea, $14,461 for Messrs. Breslin and Birenbaum, and $7,350 for
Mr. Horey and (c) the premiums paid by the Company for a standard
term life insurance policy in the face amount of $750,000 for:
Messrs. O'Shea and Birenbaum - $1,850; Mr. Breslin-$1,595; and
Mr. Horey - $2,458. For Mr. O'Shea, his 2018 all other compensation
has been updated to include the health savings account
amount.
|
|
|
(8)
|
Stock awards for
Mr. Naughton in 2019 included the following: 10,873 shares of
restricted stock awarded in respect of 2018 performance; 27,903
total target performance units maturing at the end of
2021.
|
|
|
(9)
|
Stock awards for
Mr. O’Shea in 2019 included the following: 3,913 shares of
restricted stock awarded in respect of 2018 performance; 5,680
total target performance units maturing at the end of the end of
2021.
|
|
|
(10)
|
Stock awards for
Mr. Breslin in 2019 included the following: 4,890 shares of
restricted stock awarded in respect of 2018 performance; 6,427
total target performance units maturing at the end of
2021.
|
|
|
(11)
|
Stock awards for
Mr. Birenbaum in 2019 included the following: 4,432 shares of
restricted stock awarded in respect of 2018 performance; 6,427
total target performance units maturing at the end of
2021.
|
|
|
(12)
|
Stock awards for
Mr. Horey in 2019 included the following: 2,258 shares of
restricted stock awarded in respect of 2018 performance; 2,989
total target performance units maturing at the end of
2021.
|
Grants
of Plan‑Based Awards
The table below
sets out the grants made to the Named Executive Officers in 2019
under the Equity Incentive Plan.
|
|
Grants of
Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future Payouts Under
Non–Equity
Incentive Plan
Awards(1)
|
Estimated
Future Payouts
Under
Equity
Incentive Plan
Awards(2)
|
All
Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3)
(i)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
(j)
|
Exercise or
Base
Price
of
Options Awards
($/Share)
(k)
|
Grant Date
Fair Value
of Stock
and Options
Awards
($)(2)(4)
(l)
|
Name
(a)
|
Grant
Date
(b)
|
Threshold
($)
(c)
|
Target
($)
(d)
|
Maximum
($)
(e)
|
Threshold
(#)
(f)
|
Target
(#)
(g)
|
Maximum
(#)
(h)
|
Mr. Naughton
|
2/14/2019
|
1,900,000
|
3,800,000
|
7,600,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2/14/2019
|
-
|
-
|
-
|
13,952
|
27,903
|
55,806
|
-
|
-
|
-
|
5,599,916
|
|
2/14/2019
|
-
|
-
|
-
|
-
|
-
|
-
|
10,873
|
-
|
-
|
2,128,064
|
Mr. O’Shea
|
2/14/2019
|
755,000
|
1,510,000
|
3,020,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2/14/2019
|
-
|
-
|
-
|
2,840
|
5,680
|
11,360
|
-
|
-
|
-
|
1,139,930
|
|
2/14/2019
|
-
|
-
|
-
|
-
|
-
|
-
|
3,913
|
-
|
-
|
765,852
|
Mr. Breslin
|
2/14/2019
|
805,000
|
1,610,000
|
3,220,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2/14/2019
|
-
|
-
|
-
|
3,214
|
6,427
|
12,854
|
-
|
-
|
-
|
1,289,851
|
|
2/14/2019
|
-
|
-
|
-
|
-
|
-
|
-
|
4,890
|
-
|
-
|
957,071
|
Mr. Birenbaum
|
2/14/2019
|
805,000
|
1,610,000
|
3,220,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2/14/2019
|
-
|
-
|
-
|
3,214
|
6,427
|
12,854
|
-
|
-
|
-
|
1,289,851
|
|
2/14/2019
|
-
|
-
|
-
|
-
|
-
|
-
|
4,432
|
-
|
-
|
867,431
|
Mr. Horey
|
2/14/2019
|
462,500
|
925,000
|
1,850,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2/14/2019
|
-
|
-
|
-
|
1,495
|
2,989
|
5,978
|
-
|
-
|
-
|
599,869
|
|
2/14/2019
|
-
|
-
|
-
|
-
|
-
|
-
|
2,258
|
-
|
-
|
441,936
|
|
|
(1)
|
The amounts shown in
columns (c), (d) and (e) reflect the threshold, target
and maximum payment levels for 2019 under our annual bonus plan,
which were established on February 14, 2019. The annual bonus
is paid in cash and restricted stock. The actual cash bonuses
received by each of the Named Executive Officers for performance in
2019, paid in 2020, are set out in column (g) of the Summary
Compensation Table. Under applicable SEC rules earned stock bonuses
will be disclosed in the 2021 proxy statement Summary Compensation
Table as the actual grant of stock based on 2019 achievement
occurred in 2020.
|
|
|
(2)
|
The amounts shown in
columns (f), (g) and (h) reflect the threshold, target
and maximum number of performance units awarded in 2019 for the
performance period 2019‑2021 under the long‑term incentive
performance program. The grant date fair value of 2019‑2021 awards
is based on the closing price on the grant date of $195.72 for the
operating metric portion of the award and the Monte Carlo value of
$204.15 for the TSR metric portion of the award. In addition to
receiving one share of fully vested stock for each unit earned as
determined at the end of the performance period, a cash payment
will be made equal to the dividends that accrued on such number of
earned shares during the performance period.
|
|
|
(3)
|
The number of shares
of restricted stock shown in column (i) were granted on
February 14, 2019 represents the actual number of shares of
restricted stock granted to the Named Executive Officers, with
respect to performance in 2018, and such shares do not represent
compensation for performance in 2019. Dividends are payable on the
shares at the same rate as dividends are paid on all outstanding
shares of our Common Stock.
|
|
|
(4)
|
For the February 14,
2019 grants of restricted stock, the value was calculated based on
the closing price of the Common Stock on the date of grant of
$195.72.
|
|
|
Outstanding
Equity Awards at Fiscal Year-End
|
The table below
sets out outstanding equity awards held by the Named Executive
Officers as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards(1)
|
Name
|
Grant
Date
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Exercisable
(#)
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Unexercisable
(#)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#) (2)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)(6)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)(7)
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)(6)
|
(a)
|
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Mr. Naughton
|
2/28/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
14,106
|
(2
|
)
|
2,958,028
|
|
—
|
|
—
|
|
2/26/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,292
|
(3
|
)
|
4,255,232
|
|
—
|
|
—
|
|
2/11/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
24,205
|
(4
|
)
|
5,075,789
|
|
—
|
|
—
|
|
2/16/2017
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
32,340
|
(5
|
)
|
6,781,698
|
|
—
|
|
—
|
|
2/15/2018
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,954
|
|
1,248,554
|
|
67,608
|
|
14,177,398
|
|
2/14/2019
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,873
|
|
2,280,068
|
|
27,903
|
|
5,851,259
|
Mr. O’Shea
|
2/28/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,203
|
(2
|
)
|
461,969
|
|
—
|
|
—
|
|
2/26/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,122
|
(3
|
)
|
654,683
|
|
—
|
|
—
|
|
2/11/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,640
|
(4
|
)
|
973,008
|
|
—
|
|
—
|
|
2/16/2017
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,373
|
(5
|
)
|
1,755,818
|
|
—
|
|
—
|
|
2/15/2018
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,123
|
|
654,893
|
|
13,522
|
|
2,835,563
|
|
2/14/2019
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,913
|
|
820,556
|
|
5,680
|
|
1,191,096
|
Mr. Breslin
|
2/28/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,392
|
(2
|
)
|
501,602
|
|
—
|
|
—
|
|
2/26/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,844
|
(3
|
)
|
806,087
|
|
—
|
|
—
|
|
2/11/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,869
|
(4
|
)
|
1,021,029
|
|
—
|
|
—
|
|
2/16/2017
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,544
|
(5
|
)
|
1,791,677
|
|
—
|
|
—
|
|
2/15/2018
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,366
|
|
705,850
|
|
15,066
|
|
3,159,340
|
|
2/14/2019
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,890
|
|
1,025,433
|
|
6,427
|
|
1,347,742
|
Mr. Birenbaum
|
2/28/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,990
|
(2
|
)
|
627,003
|
|
—
|
|
—
|
|
2/26/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,844
|
(3
|
)
|
806,087
|
|
—
|
|
—
|
|
2/11/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,156
|
(4
|
)
|
1,081,213
|
|
—
|
|
—
|
|
2/16/2017
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,693
|
(5
|
)
|
1,822,922
|
|
—
|
|
—
|
|
2/15/2018
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,274
|
|
686,558
|
|
15,066
|
|
3,159,340
|
|
2/14/2019
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,432
|
|
929,390
|
|
6,427
|
|
1,347,742
|
Mr. Horey
|
2/28/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,518
|
(2
|
)
|
528,025
|
|
—
|
|
—
|
|
2/26/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,882
|
(3
|
)
|
604,355
|
|
—
|
|
—
|
|
2/11/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,438
|
(4
|
)
|
720,949
|
|
—
|
|
—
|
|
2/16/2017
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,983
|
(5
|
)
|
1,044,935
|
|
—
|
|
—
|
|
2/15/2018
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,794
|
|
376,202
|
|
7,728
|
|
1,620,562
|
|
2/14/2019
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,258
|
|
473,503
|
|
2,989
|
|
626,793
|
|
|
(1)
|
Stock awards vest
one-third starting on March 1 of the year following the date
of the grant. Dividends are payable on the shares at the same rate
as dividends paid on all outstanding shares of our Common Stock.
For performance units, cash dividends will be accrued and paid at
the end of the performance period based on the actual number of
performance units earned starting with the 2018 - 2020 performance
awards.
|
|
|
(2)
|
Represents
restricted stock issued on the conversion of performance units that
were earned under the 2014-2016 performance period on February 16,
2017 vesting in three annual installments beginning March 1,
2018.
|
|
|
(3)
|
Represents
restricted stock issued on the conversion of performance units that
were earned under the 2015-2017 performance period on February 15,
2018 vesting in three annual installments beginning March 1,
2019.
|
|
|
(4)
|
Represents
restricted stock issued on the conversion of performance units that
were earned under the 2016-2018 performance period on February 14,
2019 vesting in three annual installments beginning March 1,
2020.
|
|
|
(5)
|
Represents annual
stock bonus awards issued in 2017 for 2016 performance and
performance unit awards that were earned under the 2017-2019
performance period, which converted into time-based restricted
stock on February 13, 2020 vesting in three annual installments
beginning March 1, 2021.
|
|
|
(6)
|
Based on the closing
price of the Common Stock as reported on the NYSE on
December 31, 2019 of $209.70 per share.
|
|
|
(7)
|
The amounts in
column (i) include performance unit awards at maximum payout
maturing at the end of 2020 and performance unit awards at target
performance for awards maturing at the end of 2021.
|
Option
Exercises and Stock Vested Table
The following table
identifies the number of shares underlying options exercised during
2019 for each of the Named Executive Officers, the value realized
on such exercises, the number of shares of restricted stock that
vested during 2019 for each such officer and the value of such
shares on the date of vesting. The value realized upon exercise of
the options is the product of (1) the stock price of our
Common Stock on the date of exercise minus the exercise price
multiplied by (2) the number of shares of Common Stock
underlying the exercised options.
|
|
|
|
|
|
|
Option
Awards
|
Stock
Awards
|
|
|
|
|
|
Name
(a)
|
Number of
Shares
Acquired
on
Exercise
(#)
(b)
|
Value
Realized
on
Exercise
($)
(c)
|
Number of
Shares
Acquired on
Vesting (#)
(d)
|
Value
Realized
on
Vesting
($)(1)
(e)
|
Mr.
Naughton
|
73,778
|
5,282,608
|
40,560
|
7,878,780
|
Mr.
O’Shea
|
-
|
-
|
9,105
|
1,768,646
|
Mr.
Breslin
|
1,544
|
64,706
|
10,754
|
2,088,965
|
Mr.
Birenbaum
|
-
|
-
|
11,595
|
2,252,329
|
Mr.
Wilson
|
-
|
-
|
9,109
|
1,769,423
|
(1)
Value reflects
shares of restricted stock that vested on March 1, 2019. The
closing price of our Common Stock, as reported on the NYSE for
March 1, 2019 was $194.25 per share.
Nonqualified
Deferred Compensation
Pursuant to our
Deferred Compensation Plan, certain employees of the Company,
including the Named Executive Officers, may defer up to 25% of base
annual 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 investment funds. The table below
shows the investment funds available under the Deferred
Compensation Plan and their annual rate of return for the calendar
year ended December 31, 2019. Since the investment funds are
all publicly available, we do not consider any of the earnings
credited under the Deferred Compensation Plan to be “above
market".
|
|
|
Name
of Fund
|
2019 Rate of
Return (%)
|
American Funds Europacific
Growth R4 (REREX)
|
26.98
|
American Funds Fundamental Invs
R4 (RFNEX)
|
27.56
|
Cohen & Steers Realty Shares
(CSRSX)
|
32.90
|
Columbia Dividend Opportunity
Inst (CDOZX)
|
23.67
|
Fidelity® 500 Index
Institutional (FXSIX)
|
31.47
|
Fidelity® Government MMkt
(SPAXX)
|
1.84
|
Fidelity®
International Index Premium (FSIVX)
|
22.00
|
Fidelity® Mid Cap
Index Premium (FSCKX)
|
30.51
|
Fidelity® Small Cap
Index Premium (FSSVX)
|
25.71
|
Fidelity® US Bond Index
(FXNAX)1
|
8.48
|
Janus Henderson Triton A
(JGMAX)
|
28.02
|
JHancock Disciplined Value Mid
Cap I (JVMIX)
|
30.14
|
|