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Nearly 40 million Americans invest in REITs

Compensia Analyst Says REITs Should Know Vulnerabilities in Say-on-Pay Vote

04/28/2014 | By Sarah Borchersen-Keto

Mark Borges, principal at Compensia, joined REIT.com for a video interview during REITWise 2014: NAREIT’s Law, Accounting and Finance Conference held in Boca Raton, Fla.

Borges commented on the steps a REIT should take to win a say-on-pay vote.

“I think it’s important to plan ahead. In the past, you could simply file your proxy statement and attend your annual meeting and see what happened, but today you have to treat it more like a campaign,” Borges said.

That means two things, according to Borges: “First and foremost, you have to know as you’re preparing your materials for your annual meeting what your potential vulnerabilities are from the institutional investor community, and you need to draft your disclosure to anticipate and respond to those potential vulnerabilities.”

He also recommended planning ahead for any contingency: “It’s better to have an action plan in hand as to how you’re going to respond, so that within that short period between the time that the proxy advisory firms issue their recommendation and your annual meeting, you have the ability to reach out to your key investors and to give them your side of the story.”

Borges was also asked whether any trends or best practices are emerging with regard to executive pay.

“Today it all comes down to being able to demonstrate pay-for-performance, and typically what that means is that you’re going to have to show in your discussion of your executive compensation plan the correlation between how you’ve performed financially year-over-year and the compensation that you’ve paid to your top executives,” Borges said. He advocated using a combination of “narrative” and “graphic disclosure” to “present your strongest case.”

Meanwhile, Borges recommended that companies adequately consider how they set up their short-term and long-term incentives. He also encouraged them to make sure that they’ve selected metrics to determine the amount of those incentives. Companies also need to be in a position to explain why they met, surpassed or missed particular targets that were set for the year, Borges said.