This excerpt taken from the SLG DEF 14A filed Apr 30, 2009.
How We Determine Executive Compensation
Our Compensation Committee determines compensation for our named executive officers and is comprised of our three independent directors, John H. Alschuler, Jr. (Chairman), Edwin Thomas Burton, III and John S. Levy. Our Compensation Committee exercises independent discretion in respect of executive compensation matters and administers our equity incentive plan, including reviewing and approving equity grants to our executives pursuant to this plan. Our Compensation Committee operates under a written charter adopted by the Board, a copy of which is available on our website at http://www.slgreen.com.
Our Compensation Committee has retained Gressle & McGinley LLC as its independent outside compensation consulting firm and has engaged Gressle & McGinley to provide the Compensation Committee with relevant data concerning the marketplace, our peer group and its own independent analysis and recommendation concerning executive compensation. Gressle & McGinley regularly participates in Compensation Committee meetings. Our Compensation Committee has the authority to replace Gressle & McGinley as its independent outside compensation consultant or hire additional consultants at any time. Gressle & McGinley does not provide any additional services either to our Compensation Committee or otherwise to the Company.
The Company has separately retained The Schonbraun McCann Group, a real estate advisory practice of FTI Consulting, Inc., or the SM Group, to provide the Company and our Chief Executive Officer with market and industry data. The market and industry data provided by the SM Group, which is incorporated as a component of the materials and data reviewed by our Compensation Committee, Gressle & McGinley and the Company during the compensation-setting process, is separate and apart from the independent analyses and reports prepared by Gressle & McGinley. The SM Group has
participated in Compensation Committee meetings and meetings with management. The SM Group also provides additional professional services to the Company.
With respect to the compensation of our named executive officers, our Compensation Committee solicits recommendations from our Chief Executive Officer regarding total compensation for the other named executive officers and reviews his recommendations regarding total compensation, the allocation of this compensation among base salary, annual bonus amounts and other long-term incentive compensation, as well as the portion of overall compensation to be provided in cash and equity. Our Chairman also advises our Compensation Committee on these matters as they pertain to the compensation of our Chief Executive Officer. The other named executive officers do not play a role in determining their own compensation, other than discussing their performance with our Chief Executive Officer. We do not have a pre-established policy for the allocation between cash and non-cash compensation or between annual and long-term incentive compensation, but our Compensation Committee has generally sought to have a majority of the overall compensation opportunity for named executive officers represented by long-term equity-based incentives. In making compensation decisions, our Compensation Committee also considers the after-tax impact of stock that vested during the fiscal year. For a discussion of our long-term incentive compensation arrangements, including our Outperformance Plans, see "Long-Term Incentives." This has resulted in a substantial portion of our named executive officer's total compensation consisting of equity of the Company. Our Compensation Committee also reviews materials and data provided by Gressle & McGinley and the SM Group in analyzing these recommendations. The ultimate determination of total compensation and the elements that comprise that total compensation is made solely by our Compensation Committee.
Our Compensation Committee meets regularly during the year (five meetings in 2008) to evaluate executive performance, to monitor market conditions in light of our goals and objectives, to solicit input from the compensation consultants on market practices, including peer group pay practices, and new developments and to review our executive compensation practices. As part of these meetings, in formulation of its executive compensation policies and practices for 2008, the Compensation Committee reviewed then existing policies of the RiskMetrics Group and other governance groups. The Compensation Committee periodically reviews our executive compensation policies and practices to insure that such policies are in line with current market practices. Our Compensation Committee makes regular reports to the Board.
Our named executive officers' compensation and performance for 2008 was evaluated on both an absolute basis and by reference to a "peer group" that was selected based upon the following characteristics: (i) industry sector/business model, (ii) equity market capitalization, (iii) peer group continuity from year to year, (iv) peer group utilized for performance review, and (v) geographic location. However, peer groups are used only as a point of reference; our Compensation Committee does not specifically target a percentile or range of percentiles when determining executive compensation. Depending upon the Company's business and individual performance results, a named executive officer's total direct compensation may be within, below or above the market range for that position. The peer group for named executive officer compensation consisted of the following 15 REITs: Alexandria Real Estate Equities, Inc., AMB Property Corporation, Boston Properties, Inc., Brandywine Realty Trust, Corporate Office Properties Trust Inc., Douglas Emmett, Inc., Duke Realty Corporation, First Industrial Realty Trust, Inc., iStar Financial Inc., Kilroy Realty Corporation, Lexington Realty Trust, Liberty Property Trust, Mack-Cali Realty Corporation, ProLogis Trust and Vornado Realty Trust. During 2008, the composition of the peer group that we used in 2007 was re-evaluated, and, as a result, Digital Realty Trust, Inc. was removed due to its focus on the technology industry and technology-related real estate and was replaced for 2008 by Lexington Realty Trust, a New York City-based REIT with a sizable office portfolio.
Additionally, in order to be more exhaustive and evaluate a broader scope of information in determining executive compensation, a selective chief executive officer peer group was utilized by our
Compensation Committee for 2008 that consisted of the following 11 companies: Annaly Mortgage Management, Inc., CapitalSource, Inc., Douglas Emmett, Inc., iStar Financial Inc., Kilroy Realty Corporation, Marriott International, Inc., MGM Mirage Incorporated, NorthStar Realty Finance Corporation, Ventas, Inc., Vornado Realty Trust, and Wynn Resorts, Limited. During 2008, the composition of the selective chief executive officer peer group was re-evaluated and Alexandria Real Estate Equities, Inc., Healthcare Property Investors, Inc., Hilton Hotels Corporation and Starwood Hotel & Resorts Worldwide, companies that formed part of the 2007 peer group, were removed and were replaced for 2008 with Douglas Emmett, Inc., Ventas, Inc. and Wynn Resorts Limited.
Further, our Compensation Committee recognized that our primary peer group contained an insufficient number of executive chairman and therefore a selective chairman peer group was utilized for 2008 that was comprised of executives who function exclusively as chairperson and not as chief executive officer. For 2008, the selective chairman peer group consisted of the following 10 companies: Ashford Hospital Trust, Inc., Boston Properties, Inc., Digital Realty Trust, Inc., Douglas Emmett, Inc., Hersha Hospitality Trust, Host Hotels & Resorts, Inc., Lexington Realty Trust, W.P. Carey & Co. LLC, Washington Real Estate Investment Trust, and Weingarten Realty Investors. During 2008, in order to ensure that this peer group continues to consist of companies with executives who function exclusively as chairperson and not as chief executive officer, the peer group was re-evaluated and, as a result, Equity One, Inc., Felcor Lodging Trust Incorporated, Health Care REIT and Spirit Finance Corporation, which formed part of the 2007 peer group, were removed and were replaced for 2008 by Hersha Hospitality Trust, Host Hotels & Resorts, Inc. and Washington Real Estate Investment Trust.