Jeremy Banoff, senior managing director at FPL Associates L.P., joined REIT.com for a video interview to discuss the 2015 NAREIT Compensation Survey.
FPL partners with NAREIT on the annual NAREIT Compensation Survey. This year’s survey contains record-setting responses from 135 REITs and real estate operating companies providing information on 132 positions. Participants in the survey represent approximately 75 percent of the equity market capitalization of listed Equity REITs.
The 2015 survey covered a number of topics, including organizational design, staffing, structuring, expense loads, salary, bonuses, equity, board compensation and employment agreements.
Banoff noted that one of the highlights of the survey showed that 92 percent of companies have either already started hiring or plan to hire this year. At the same time, retention of top talent is a number one concern, which bodes well for the industry, Banoff said.
In turns of compensation, Banoff pointed out that total shareholder return is the number one metric that has been added to programs. Other findings include the fact that 51 percent of companies said they utilize employment agreements. Banoff observed that this is the lowest level seen in several editions of the survey.
Banoff added that FPL’s research also shows that the average compensation payout was above target in 2014, at a level of 126 percent. Of the three main compensation components -- salary, cash bonus and long-term incentives -- the cash bonus was the number one driver of the increase in pay, Banoff said. Meanwhile, at least 50 percent of compensation came in the form of long-term incentives or equity.
Banoff also touched on the issues that are most important to REIT compensation committees at this time. He noted that committees are particularly focused on the goal-setting process, specifically what defines an executive’s target performance. Committees are also paying attention to whether they have the right team in place, Banoff said.
In the meantime, Banoff observed that the Securities and Exchange Commission (SEC) is now considering various aspects of executive compensation that were raised in the Dodd-Frank financial reform legislation. Banoff noted that the SEC released a proposal on clawback policies earlier this month: “I do think clawback policies will get here sooner rather than later.”
Another SEC proposal to compare the average pay for a CEO and other executives with their peer groups is also expected to generate a lot of comments, Banoff said.