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This excerpt taken from the EQR DEF 14A filed Apr 16, 2009. Elements of Total Compensation The Company takes a “total compensation” approach to executive compensation, meaning that each element of direct compensation is considered both separately and in terms of the total amount paid to an executive. An executive’s direct compensation consists of three elements: a fixed annual salary; short-term incentives in the form of a discretionary annual cash bonus; and discretionary annual long-term incentive compensation, which consists of Share Awards and Option Awards (see definitions under “Long-Term Compensation Awards”) that vest over time. Other forms of compensation, including change in control/post-employment payments, if any, are discussed in the Compensation Tables. Annual Salary Annual salaries of executive officers are set at levels competitive with other companies engaged in the real estate industry and with other businesses of comparable size and scope with whom we compete for executive talent. The Compensation Committee sets the compensation philosophy and reviews base salaries for the executive officers annually and makes adjustments, if any, to reflect market conditions, changes in responsibilities and potential merit increases consistent with compensation practices throughout our organization. None of the named executive officers received a salary increase for 2009. Cash Bonus The second element of direct compensation is an annual cash bonus which is meant to reward achievement of current-year objectives, as well as the long-term success of the Company and encourage the retention of key executives by providing competitive compensation and opportunities for superior pay for superior performance. The target cash bonus, as a percentage of annual salary, is 150% for Mr. Neithercut and 100% for the other named executives. The cash bonus an executive officer actually receives may be greater or less than the target. Long-Term Incentive Compensation The third element of direct compensation, in addition to annual salary and cash bonus, is long-term incentive compensation consisting of Share Awards and Option Awards. The Company believes that share ownership by our executive officers is the most direct way to align their interests with those of our shareholders. As a result, each executive officer’s total annual compensation package includes a significant portion of Share Awards and Option Awards. Vesting requirements also encourage the retention of the executive officers. The larger the executive’s total compensation, the larger the percentage long-term incentive compensation will represent of his or her total annual compensation. The target long-term compensation award as a percentage of cash compensation (annual salary plus target cash bonus) is 150% for Mr. Neithercut and 100% for the other named executives. The long-term incentive compensation award an executive officer actually receives may be greater or less than the target.
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Table of ContentsThis excerpt taken from the EQR DEF 14A filed Apr 16, 2007. Elements of Total Compensation The Company takes a “total compensation” approach to executive compensation, meaning that each element of direct compensation is considered both individually and in terms of the total amount paid to an executive. An executive’s direct compensation program consists of three elements: a fixed annual salary; short-term incentives in the form of a discretionary annual cash bonus; and discretionary annual long-term compensation, which consists of both share and option awards that vest over time. Other forms of potential compensation, including potential change in control/post-employment payments, are discussed in the Compensation Tables. Annual Salary Annual salaries are paid to Executive Officers with the same objectives as salaries paid to all employees of the Company:
The Company reviews its overall salary structure annually to determine that salaries remain competitive. The review considers data from compensation surveys of the real estate industry in general, the multi-family housing industry and, for certain positions, general industry. Individual salaries are reviewed at least annually, with most reviews taking place at year-end. Salary increases may be granted based on both performance and the employee’s position in the applicable salary range. For Executive Officers, the annual salary is determined at the beginning of the year, taking into consideration each executive’s responsibilities, qualifications, performance in the previous year, the degree to which the executive has reached full proficiency in the position, ongoing contributions to the Company’s success, salaries paid to the other executive officers and external benchmarking data. Mr. Neithercut’s annual salary for 2006 of $600,000 was determined by the Compensation Committee, together with the other independent members of the Board, in January 2006. The Committee 22 took into consideration the factors discussed in the previous paragraph. Because this was Mr. Neithercut’s first year as CEO, the Committee made an assessment, with outgoing CEO Bruce Duncan, of Mr. Neithercut’s 2005 performance as EVP Corporate Strategy and as President for seven months of that year. For Executive Officers other than the Chief Executive Officer and President, annual salaries for 2006 were determined by Mr. Neithercut in consultation with Mr. Duncan, Mr. Spector (except for his own salary) and the Compensation Committee, in a series of meetings in December 2005 and January 2006. The factors discussed above were taken into consideration in making those decisions. Annual Cash Bonus The second element of direct compensation is an annual cash bonus, which for executive officers is meant to:
Executive Officers are awarded discretionary cash bonuses annually based on a number of factors, including both Company performance and individual performance. The amount of the award is determined as follows. Each Executive Officer has a bonus target amount. The target is set at the time of hire or promotion, although it can be adjusted from time to time, typically at the time of the year-end compensation process. The bonus target is expressed as a percentage of annual salary. In any year, the cash bonus an Executive Officer actually receives can be greater or less than the target. Mr. Neithercut’s cash bonus target for 2006 was $900,000: 150% of his annual salary. His actual annual cash bonus is determined by the Compensation Committee and approved by the independent members of the Board. Factors taken into account in this determination include the bonus target, the Committee’s assessment of performance against Company goals and department goals, bonuses paid to the Company’s chief executive officer in prior years, bonuses paid to the other Executive Officers, external benchmarking data, the Company’s overall financial condition, and any other factors deemed relevant by the Compensation Committee. Bonus targets as a percentage of salaries for the named executives other than Mr. Neithercut are: Mr. Spector - 127%; and Mr. George, Mr. Tuomi and Ms. Brandin - 75%. Each Executive Officer’s actual bonus is determined by Mr. Neithercut in consultation with Mr. Spector (except for his own bonus) and the Compensation Committee, using the bonus target as a baseline, and considering the assessment of Company performance, the assessment of individual performance against department goals, bonuses paid to the other Executive Officers and employees, external benchmarking data, the Company’s overall financial condition, and any other factors deemed relevant by Mr. Neithercut. Cash bonuses paid to the ten executive officers as a group for 2006 were 18.5% above target as a result of the achievements discussed in Company Performance in 2006, as well as each executive’s individual performance. Bonuses paid to the ten Executive Officers as a group for 2006 were 15.5% higher than bonuses paid to the ten Executive Officers for 2005. 23 Emphasis on Long-Term Compensation: Share Awards and Option Awards The third element of direct compensation, after annual salary and cash bonus, is long-term compensation consisting of Share Awards and Option Awards, which are meant to:
The Company believes that share ownership by our Executive Officers is the most direct way to align their interests with those of our shareholders. As a result, each executive officer’s total annual compensation package includes a significant portion of Share Awards and Option Awards. The larger one’s total compensation is, the larger the percentage that Share Awards and Option Awards will make up of the total annual compensation. Sixty percent of Mr. Neithercut’s 2006 total annual compensation is comprised of Share Awards and Option Awards that vest over time. Executive Officers are awarded long-term compensation annually based on a number of factors, including both Company performance and individual performance for the previous year. The amount of the awards is determined as follows: Each Executive Officer is assigned a long-term compensation target amount. The long-term compensation target is expressed as a percentage of annual salary or of annual salary plus cash bonus. In any year, the long-term compensation an Executive Officer actually receives can be greater or less than the target. Mr. Neithercut’s long-term compensation target for 2006 was $2,250,000 - 150% of his total cash compensation. His annual long-term compensation is determined by the Compensation Committee together with the other independent members of the Board. Factors taken into account in this determination include the long-term compensation target, Company performance, the value of similar awards to chief executive officers of comparable companies, the long-term compensation awards given chief executive officers in past years, the Company’s overall financial condition, long-term compensation paid to the other executive officers and employees for the current year, as well as any other factors deemed relevant by the Committee. Long-term compensation targets for 2006 for the named executive officers other than Mr. Neithercut are Mr. Spector: 188% of cash compensation; Mr. George and Mr. Tuomi: 100% of cash compensation; and Ms. Brandin: 75% of annual salary. The actual long-term compensation award is determined by Mr. Neithercut in consultation with Mr. Spector (except for his own long-term compensation) and the Compensation Committee, using the target as a baseline. Factors taken into account in determining each Executive Officer’s actual long-term compensation award include Company financial performance for the year, the Company’s overall financial condition, the executive’s performance against annual goals and objectives, the percentage of long-term compensation target paid to the other Executive Officers and employees. Long-term compensation earned by the ten Executive Officers as a group for 2006 was 18.6% above target as a result of the achievements discussed in Company Performance in 2006, as well as each executive’s individual performance. Long-term compensation paid to the ten Executive Officers as a group for 2006 was 21.7% higher than long-term compensation paid to the ten Executive Officers for 2005. 24 Share Awards. For all Executive Officers, 75 percent of long-term compensation is issued as Share Awards (or “restricted shares”). The number of shares is determined by dividing the dollar value of the Share Award by the grant price. Share Awards vest in full upon completion of three years of continuous employment from the grant date, encouraging the retention of key executives. Dividends are paid on restricted shares at the same rate as on unrestricted common shares. Option Awards. The remaining 25 percent of long-term compensation is issued as Option Awards. The Company believes that Option Awards are particularly well-suited to aligning executives’ interests with those of shareholders and for motivating future performance because Option Awards have no value unless the share price appreciates. The number of options is determined by dividing the dollar value of the Option Award by the option value per share. Option Awards vest over a period of three years of continuous employment at a rate of one-third of such award each year, providing further encouragement for the retention of key executives. Pricing and Dates of Share Awards and Option Awards. The Company has a detailed policy establishing the grant date and valuation for its annual issuance of Share Awards and Option Awards. The Share Award value and the exercise price of the Option Awards shall be the price of the Company’s common shares at the close of business on the grant date approved by the Company’s Board. The Company’s Chief Financial Officer and/or Chief Accounting Officer provides the Compensation Committee with management’s recommendation for the value of each option to be used in the Option Award, including all assumptions to be used. The Company uses the same valuation methodology for the value of each option as it uses to determine accounting expense for Option Awards in accordance with Statement of Financial Accounting Standards No. 123, Share-Based Payment, as revised ("SFAS 123 (R)"). The Company’s Board, after reviewing the Compensation Committee’s recommendation, then approves the grant date (which must be on or after the approval date and is typically one business day after the Company’s release of its fourth quarter earnings), the value of each option, the allocation between Share Awards and Option Awards, and the annual salary increases and Share Awards and Option Awards for all employees, including its executive officers. Any grant date for out of cycle grants (i.e., an initial award to a new hire or an award to an existing employee in the case of a promotion) to the Company’s executive officers requires the approval of the Compensation Committee or the Company’s Board. Performance Share Unit Awards. For services performed for years prior to 2006, Executive Officers were granted Performance Share Unit Awards, which made up ten percent of their total compensation. The purpose was to promote the overall financial objectives of the Company and its shareholders by linking the financial interests of the executives to the achievement of long-term growth in shareholder value, and to continue their employment with the Company. The Performance Share Units gave the executive an opportunity to earn in common shares an amount as little as 0% to as much as 225% of the number of Performance Share Units earned, depending on Company performance, as more fully explained in the Executive Compensation section of this proxy. The Company has discontinued the awarding of Performance Share Units and did not award any such units in early 2007 for services performed during 2006. The Company believes that the objectives of Performance Share Units are accomplished by Share Awards and Option Awards. The amount that previously would have been granted to each Executive Officer as Performance Share Units is now included in the 2006 long-term compensation, with 75% issued as Share Awards and the remaining 25% issued as Option Awards. 25 | EXCERPTS ON THIS PAGE:
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