This excerpt taken from the EQR DEF 14A filed Apr 17, 2006.
Base Annual Compensation. Employee trustees receive no additional compensation for their services as a trustee. To link trustee compensation to performance and to more effectively align the Boards interests with the interests of the shareholders, over 50% of the non-employee trustees base annual compensation (excluding committee or other Board service fees) is payable in some form of Company equity. Effective January 2006, the Board approved an increase in the base annual compensation, from $95,000 to $125,000, and certain committee fees paid to its non-employee trustees (other than its Chairman) and the lead trustee fee, which increases are reflected herein. The Compensation Committee recommended these increases to bring total trustee compensation to a level near the 50th percentile of the competitive market based on the results of an independent published report on director compensation.
For services in 2005, each non-employee Trustee received an annual cash fee of $45,000 (increased to $50,000 in 2006) and an annual long-term incentive grant of $50,000 (increased to $75,000 in 2006) of options and restricted shares, with the exception of Mr. Zell who received restricted shares and options for his services as Chairman as described in Employment Contracts and Change of Control Agreements. The annual long-term incentive grant of $50,000 was allocated 25% to options and 75% to restricted shares, utilizing the same valuation criteria and in the same ratio as approved by the Board for the annual long-term incentive grants to the Companys executive officers. Dividends are paid on restricted shares at the same rate as on unrestricted common shares. The Company also reimburses the trustees for travel expenses incurred in connection with their activities on behalf of the Company, with the exception of Mr. Zell who is responsible for his own business related expenses. Trustees who are first appointed or elected to the Board after the beginning of a fiscal year receive prorated cash fees and long-term incentive grants for their first year of service.
Committee Fees. In 2005, Trustees who served on the Audit, Compensation, Nominating, Corporate Governance or Executive Committee received an additional $4,000 (increased to $6,000 in 2006 for Audit Committee members only) in cash per year for each committee on which they served. The chair of the Audit Committee received an additional $11,000 (increased to $17,500 in 2006) in cash per year and the chairs of the Compensation, Nominating and Corporate Governance Committees each received an additional $6,000 (increased to $10,500 in 2006) in cash per year. Mr. Zell does not receive a fee for acting as Chair of the Executive Committee.
Lead Trustee Fee. In 2005, Ms. Rosenberg received an additional annual cash fee of $10,000 (increased to $20,000 in 2006) for her services as Lead Trustee.
Vesting of Options and Restricted Shares Granted to Non-Employee Trustees. Options vest in approximately equal installments of six months, one year and two years from the date of grant. Restricted shares vest in full on the third anniversary of the grant date. For non-employee trustees retiring from the Board or completing a scheduled term on the Board without re-nomination, vesting of all outstanding options and restricted shares granted as compensation for serving as a trustee is accelerated, and options may be exercised through the expiration of the exercise period (i.e., ten years from the grant date). Options and restricted share awards issued to Mr. Zell as Chairman of the Board are subject to the same vesting restrictions as other employees of the Company pursuant to Mr. Zells Amended and Restated Compensation Agreement, as further described below in Employment Contracts and Change in Control Agreements.
Optional Deferred Compensation Plan. The Company has an optional deferred compensation plan in which trustees may participate. The trustees may defer receipt of any percentage of their annual cash compensation, which amount is then deposited in a Supplemental Executive Retirement Plan (the SERP) on a tax-deferred basis. These deferred funds (as well as any cash trustee fees that are not deferred) may be used to purchase Company common shares under the Companys Employee Share Purchase Plan (the ESPP) at the applicable discounted purchase price under the plan not to exceed $100,000 per year. Each trustee is immediately 100% vested in his or her acquired ESPP shares held in the SERP and is allowed to begin withdrawals over a one to ten year period following termination of his or her trusteeship. The majority of the trustees participate in the SERP and defer the taxation of all cash trustee fees. The trustees may also elect to defer receipt of their restricted shares to the SERP prior to the vesting of the shares. Non-employee trustees do not participate in the Companys profit sharing or 401(k) plan or receive any matching contributions on any fees or restricted shares.
Share Ownership Guidelines. Since a significant ownership stake leads to a stronger alignment of interests between the Board and shareholders, all trustees are expected to own, within three years of joining the Board, at least $250,000 in Company shares or limited partnership interests (OP Units) in ERP Operating Limited Partnership (the Operating Partnership), of which the Company is the general partner. OP units are exchangeable on a one-for-one basis into the Companys common shares. We recognize, of course, many trustees will have much larger ownership stakes in the Company and view this as desirable.