DEF 14A 1 nc10020951x1_def14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12
REALTY INCOME CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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April 1, 2021
Dear Stockholder:
You are cordially invited to attend our 2021 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 9:00 a.m., Pacific Time on May 18, 2021. Due to the ongoing public health impact of the coronavirus pandemic (COVID-19), and to support the health and well-being of our partners and stockholders, this year’s Annual Meeting will again be a completely virtual meeting of stockholders, conducted via live audio webcast. The virtual format provides the opportunity for participation by a broader group of our stockholders and enables stockholders to participate fully, and equally, from any location around the world, at little to no cost. You can attend the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/realty2021 by using the control number which appears on your proxy card and the instructions provided as a part of your Proxy Materials. You may submit questions in advance of and in real-time during the Annual Meeting via the meeting website. The business that will be conducted at the Annual Meeting is described in the Notice of the 2021 Annual Meeting of Stockholders and Proxy Statement.
During 2020, we grew Adjusted Funds From Operations (AFFO) per share, or the cash earnings available to pay dividends to our stockholders, by 2.1% to $3.39. As The Monthly Dividend Company®, we remain committed to providing our stockholders with dependable monthly dividends that increase over time. During 2020, we paid twelve monthly dividends and increased the dividend per share by 3.1% over 2019 to $2.794. I would like to thank our team for their continued focus on our strategic objectives with our One Team approach together with hard work and dedication during these unprecedented times. I am also extremely thankful for our Board of Directors continued support, vast experience and guidance for today and our future. We are excited about the current position of the company and remain committed to continuing to responsibly manage your company as prudent stewards of your capital.
In connection with our 2021 Proxy Statement, we have issued our inaugural Sustainability Report which provides detail on our environmental, social and governance (“ESG”) initiatives. The Sustainability Report can be found in the Corporate Responsibility section of our corporate website, and I encourage you to read the Sustainability Report to understand the significant emphasis we place on ESG initiatives for the communities we serve, the environment and our future.
We encourage you to review the information contained in the Proxy Statement. It is meant to provide an overview of our company’s achievements during the year, including information on our company’s compensation program and corporate governance practices. After your review, we hope that you will vote, in person virtually or by proxy, in accordance with the Board of Directors’ recommendations. Your vote is important to us and we appreciate your continued support of our company.
Sincerely,

Sumit Roy
President, Chief Executive Officer
Member, Board of Directors

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Notice of the 2021
Annual Meeting of Stockholders
NOTICE IS HEREBY GIVEN that the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of Realty Income Corporation, a Maryland corporation (the “company”), will be held as follows:
MEETING DATE:
Tuesday, May 18, 2021
MEETING TIME:
9:00 a.m. Pacific Time
VIRTUAL MEETING ACCESS:
www.virtualshareholdermeeting.com/realty2021
RECORD DATE: You may vote if you were a holder of record of shares of our common stock, par value $0.01 per share, at the close of business on March 12, 2021.
ITEMS OF BUSINESS:
1.
The election of nine director nominees named in this Proxy Statement to serve until the 2022 annual meeting of stockholders and until their respective successors are duly elected and qualified.
2.
The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2021.
3.
A non-binding advisory proposal to approve the compensation of our named executive officers as described in this Proxy Statement.
4.
The approval of the Realty Income Corporation 2021 Incentive Award Plan.
5.
The transaction of such other business as may properly come before the Annual Meeting or any postponement or adjournment of the Annual Meeting.
The Proxy Statement following this Notice describes these matters in detail. We have not received notice of any other proposals to be presented at the Annual Meeting. During the Annual Meeting, management will report on the current activities of the company and comment on its future plans. A discussion period is planned so that stockholders will have an opportunity to ask questions and make appropriate comments. All presentation materials shared at the Annual Meeting will be made available on the company’s website at www.realtyincome.com/investors/financial-information/annual-reports-and-proxy.
PROXY VOTING: Your vote is important. Whether or not you plan to participate in our virtual Annual Meeting, we urge you to submit your proxy as soon as possible to ensure your shares are represented and voted at our Annual Meeting. You may authorize a proxy to vote your shares by telephone, via the Internet, or – if you have received and/or requested paper copies of our Proxy Materials by mail – by signing, dating and returning the proxy card in the envelope provided. If you participate in our virtual Annual Meeting, you may, if you wish, vote your shares (or withdraw your proxy) at www.virtualshareholdermeeting.com/realty2021.
No person is authorized to make any representation with respect to the matters described in this Proxy Statement other than those contained herein and, if given or made, such information or representation must not be relied upon as having been authorized by us or any other person.
You are encouraged to read this Proxy Statement in its entirety before voting or authorizing a proxy to vote on your behalf.
By Order of the Board of Directors,

Michelle Bushore
Executive Vice President, Chief Legal Officer, General Counsel and Secretary
April 1, 2021

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Proxy Summary
MEETING DATE:
Tuesday, May 18, 2021
MEETING TIME:
9:00 a.m. Pacific Time
VIRTUAL MEETING ACCESS:
www.virtualshareholdermeeting.com/realty2021
RECORD DATE:
March 12, 2021
The Board of Directors (or, the “Board”) of Realty Income Corporation, a Maryland corporation (the “company”), is soliciting proxies for the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) and any postponement or adjournment of the Annual Meeting. This Proxy Summary provides an overview of the proposals to be considered and voted on at the Annual Meeting and information contained in the Proxy Statement, but does not contain all of the information that should be considered before voting. We encourage you to read the Proxy Statement in its entirety before voting.
How to Vote
On or about April 1, 2021, we will mail or e-mail a copy of our Notice of 2021 Annual Meeting of Stockholders, Proxy Statement, proxy card, and 2020 Annual Report (collectively “Proxy Materials”) to our stockholders according to their previously indicated preference. Some of our stockholders will be mailed a Notice of Availability of Proxy Materials, which contains instructions on how to request and receive a paper or e-mailed copy of our Notice of 2021 Annual Meeting of Stockholders, Proxy Statement and 2020 Annual Report, and how to view these materials online. We encourage you to vote your shares prior to the Annual Meeting. You may vote by telephone, over the Internet or by mail by completing your proxy card, even if you plan to participate in the virtual Annual Meeting. All methods of correspondence will provide stockholders with instructions on how to vote or authorize a proxy to vote using any of the following methods:

Beneficial Stockholders: If your shares of common stock are held through a bank, broker or other holder of record, please follow the instructions you receive from your bank, broker or other nominee on how to vote your shares of common stock at our Annual Meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares online at our Annual Meeting unless you obtain a “legal proxy” from the bank, broker or other holder of record that holds your shares, giving you the right to vote the shares at the Annual Meeting. Obtaining a “legal proxy” may take several business days.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 18, 2021: This Proxy Statement, our 2020 Annual Report and our Sustainability Report are available on our website at www.realtyincome.com/investors/financial-information/annual-reports-and-proxy. You may also view these materials at www.proxyvote.com prior to the day of the virtual Annual Meeting or at www.virtualshareholdermeeting.com/realty2021 on the day of and during the virtual Annual Meeting by using the control number that is provided to you either on your proxy card, in your e-mailed Proxy Materials, or on your Notice of Availability of Proxy Materials. We encourage you to access and review all of the information contained in the Proxy Materials before voting.
Virtual Stockholder Meeting
Due to the ongoing public heath impact of the coronavirus pandemic (COVID-19), and to support the health and well-being of our partners and stockholders, the Board has again decided to hold a virtual Annual Meeting this year. The Board believes that the virtual format for the Annual Meeting will provide the opportunity for participation by a broader group of our stockholders, while reducing the costs associated with planning, holding, and arranging logistics for in-person meeting proceedings. The virtual meeting format enables stockholders to participate fully, and equally, from any location around the world, at little to no cost. It also reduces the
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Proxy Summary
environmental impact of our Annual Meeting. We designed the format of our Annual Meeting to ensure that our stockholders that attend our Annual Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting and to enhance stockholder access, participation and communication through online tools. Our directors will participate in the virtual Annual Meeting.
Date and Time: The Annual Meeting will be held “virtually” through a live audio webcast on Tuesday, May 18, 2021, at 9:00 a.m. Pacific Time. There will be no physical meeting location. The meeting will only be conducted via an audio webcast.
Access to the Audio Webcast of the Annual Meeting: The live audio webcast of the Annual Meeting will begin promptly at 9:00 a.m. Pacific Time. Online access to the audio webcast will open approximately fifteen minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. We encourage our stockholders to access the meeting prior to the start time.
Log in Instructions: To attend the virtual Annual Meeting, log in at www.virtualshareholdermeeting.com/ realty2021. Stockholders will need their unique control number which appears on the Notice and the instructions that accompanied the Proxy Materials. In the event that you do not have a control number, please contact your broker, bank, or other nominee as soon as possible and no later than Tuesday, May 11, 2021, so that you can be provided with a control number and gain access to the meeting.
Submitting Questions prior to and at the virtual Annual Meeting: An online pre-meeting forum will be available to our stockholders at www.proxyvote.com approximately two weeks prior to the day of the Annual Meeting. By accessing this online forum, our stockholders will be able to submit questions in writing in advance of the day of the Annual Meeting, vote, view the Annual Meeting’s Rules of Conduct (“Rules of Conduct”), and obtain copies of Proxy Materials, including our Annual Report. Stockholders may also submit questions in writing on the day of or during the Annual Meeting at www.virtualshareholdermeeting.com/ realty2021. Stockholders will need their unique control number which appears on their Notice, the proxy card and the instructions that accompanied the Proxy Materials.
As part of the Annual Meeting, we will hold a live Q&A session, during which we intend to answer questions submitted before or during the meeting in accordance with the Rules of Conduct that are pertinent to the Company and the meeting matters, as time permits. Answers to any such questions that are not addressed during the meeting will be published following the meeting on the Company’s website at www.realtyincome.com/investors. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. In order to promote fairness and efficient use of the Company’s resources and in order to ensure all stockholders are responded to, we will respond to up to three questions from a single stockholder.
The Rules of Conduct will be posted on www.proxyvote.com approximately two weeks prior to the day of the Annual Meeting.
Technical Assistance: Beginning 15 minutes prior to the start of and during the virtual Annual Meeting, we will have a support team ready to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting.
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Stockholder Meeting login page.
Voting Shares: Stockholders may vote their shares at www.proxyvote.com prior to the day of the virtual Annual Meeting or at www.virtualshareholdermeeting.com/realty2021 on the day of and during the virtual Annual Meeting. If your shares of common stock are held by a bank, broker or other holder of record, you may not vote these shares online at our Annual Meeting unless you obtain a “legal proxy” from the bank, broker or other holder of record that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Availability of Live Webcast: The live audio webcast will be available to not only our stockholders, but also our team members and other constituents.
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Proposal Guide
PROPOSAL
PAGE
BOARD VOTE
RECOMMENDATION
PROPOSAL 1 – ELECTION OF DIRECTORS
Our Board of Directors believes that the nine director nominees named herein contribute the breadth and diversity of knowledge and experience needed for the advancement of our business strategies and objectives.
For
PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board of Directors has appointed KPMG LLP as the independent registered public accounting firm for the year ending December 31, 2021 and requests stockholders to ratify the appointment.
For
PROPOSAL 3 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Our Board of Directors believes our compensation program is appropriately structured to reward our named executive officers for the continued performance of the company, encourage a disciplined approach to management, and maintain focus on the creation of long-term value for our stockholders.
For
PROPOSAL 4 – APPROVAL OF THE REALTY INCOME CORPORATION 2021 INCENTIVE AWARD PLAN
Our Board of Directors believes that the Realty Income Corporation 2021 Incentive Award Plan is important to our continued growth and success and its approval will assist us in attracting, motivating and retaining selected individuals who will serve as our employees, directors, and consultants, and who are expected to contribute to our success and the achievement of our long-term objectives.
For
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Performance Highlights
We achieved another year of positive earnings growth in 2020 as measured by AFFO per share that allowed us to continue to pay dependable monthly dividends that increase over time.


(1)
For a reconciliation of net income to AFFO, see Appendix A on page 81 of this Proxy Statement.


Our focus on providing dependable monthly dividends that increase over time helps drive strong total shareholder return (“TSR”) performance.



(1)
TSR is calculated assuming the contemporaneous reinvestment of dividends on the ex-dividend date. Data sourced from Bloomberg as of December 31, 2020.
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Executive Compensation Highlights
We believe our performance demonstrates the effectiveness, over time, of the execution of our strategic business plan and the alignment of our compensation program with our philosophy to reward executives for enhancing long-term stockholder value. Our compensation program focuses on pay-for-performance principles that are linked to short-term and long-term financial, operational metrics, and relative TSR. In 2020, we attained overwhelmingly favorable say-on-pay approval results of 94.9%. The increases to 2020 total target compensation for our executives remained closely aligned with the median of the peer group. The following are the two primary components of the 2020 incentive compensation program:


The majority of the compensation awarded under the programs is at-risk. Approximately 71% of our CEO’s total target direct compensation for the 2020 performance year consisted of compensation that was at-risk based on the achievement of certain performance metrics. Salary and time-based equity awards made up the remaining 29% of our CEO’s compensation.

Our Business Philosophy
As the Monthly Dividend Company®, we strive to pay dependable and growing monthly dividends for the benefit of our stockholders. Our diversified portfolio of actively managed commercial properties under long-term net lease agreements seeks to produce consistent and predictable income. We believe this also benefits other stakeholders, including employees, clients, lenders, and the communities in which we serve. We refer to our tenants as clients, because we strive to build mutually beneficial relationships and we believe their success is our success.
Over time, we intend to grow our earnings and dividends by expanding existing operations and entering new businesses without materially altering our risk profile. Our international expansion is an example of our deliberate approach, and other growth initiatives that remain under active consideration. Our goal remains to acquire high-quality real estate with clients that already are or could become industry leaders, both in the U.S. and abroad.
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We are focused on delivering long-term growth across fluctuating market cycles and are therefore highly selective in the transactions we pursue, typically buying less than 10% of acquisition opportunities sourced. Our internal team dedicated to sourcing such opportunities has long-standing relationships with clients, owners/developers, brokers and advisers and is regularly seeking to form new relationships. We research and analyze all potential transactions to remain focused on buying the right properties with the right clients, and we are dedicated to continuing to monitor the health of our clients and locations post-acquisition.
As a result, we also seek to create value through active portfolio and asset management, and seek to maximize returns through a combination of re-leasing, development, or sale. Our long-term relationships and outreach with clients and industry experts help us remain well-informed on current and emerging trends.
Our size, scale, cost of capital and reputation are meaningful competitive advantages that differentiate us. We also continue to invest in our technological infrastructure to increase this differentiation, including predictive analytics.
Strategic Planning
Our goal is to continue managing the company in a manner that supports sustainable, long-term value creation for our stockholders. The Board of Directors frequently reviews and discusses the company’s strategy as part of regularly scheduled Board meetings. The discussions allow the Board of Directors to assess further potential opportunities and threats to the business and properly position the company to continue to perform in the future. The company’s named executive officers and additional members of management, including the company’s in-house research and strategy departments, participate in the discussions on topics such as e-commerce and other disruptive technologies, changing demographics, the macroeconomic and political landscape, the impacts from the COVID-19 pandemic, and their implications for our company. From time to time, experts on various topics are invited to the discussions to challenge thinking and invite healthy discourse at the meetings. The company also supports management’s and directors’ participation at various conferences and speaking engagements in order to introduce new topics and materials for discussion and further broaden long-term views on the business. We will continue to incorporate similar strategic reviews in our Board of Directors meetings and strive to stay in front of emerging trends by making adjustments to our strategy as needed.
Human Capital Management
Building enduring relationships for a brighter future inspires us to focus our efforts on nurturing an engaging work environment that offers growth opportunities, meaningful work, and investment into our people. Our principled practices, procedures, and systems strengthen a sense of matter and belonging to each individual. We attract, retain and develop best-in-class, talented team members who help create long-term value for our stakeholders around the world. Our gifted team members accomplish our objectives by doing the right thing, taking ownership, empowering each other, celebrating differences, and giving more than we take. In all that we do, we prioritize long-lasting, meaningful connections anchored in trust.
Realty Income relies on talented, engaged team members to fulfill our mission and achieve our vision. Fostering a culture that values diverse backgrounds and perspectives and creates an inclusive environment contributes positively to our employer reputation, employee engagement, health and well-being, and other socioeconomic benefits beyond our workplace.
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Supporting our employees through the COVID-19 pandemic
The COVID-19 pandemic presented challenges to our employees. In response, during 2020, we took the following actions to assist and protect our employees:
Transitioned all employees to working remotely through secure systems supported by our IT department;
Utilized online meetings, email, conference calls, and a “drive-through check-in with our CEO” to support regular communication, collaboration, and continued training;
Virtually trained on new safety office protocols, physical building safety enhancements, and universal cleanliness and environmental health practices;
Increased dialogue from our team leaders, including our CEO, who scheduled regular check-in calls with departments and employees;
Conducted our sesquiennial (every 18 months) employee engagement survey; and
Administered an employee survey to gather perspectives on what we should consider when reopening our office
Provided resources to employees who were directly impacted by the COVID-19 pandemic;
Financial support
Work-life balance flexibility
Connected employees to our “Resources for Living” program, which provides support for financial, legal, mental, and emotional well-being, life and family resources, and more. Areas that our team members can access range from parenting, care-giving (adult and child), COVID-19 knowledge, managing stress, depression, suicide prevention, and pet resources to staying healthy, self-improvement, and coping with trauma, grief, and loss
Transitioned our well-being program, which we refer to as our “O”verall Well-Being program, to virtual and addressed topics such as mindfulness, exercise, nutrition, and at-home office ergonomics, 20-day wellness learning path, along with financial wellness webinars
Implemented a business continuity plan that includes emergency planning, disaster recovery, alternative communication outlets, and real-time testing simulations; and
Established virtual engagement activities to bring colleagues together through the “Team Building Committee” and “Green Team.”
Supporting our community
Building enduring relationships and continuously renewing our connection with the community through serving others and supporting nonprofits whose aim is to sustainability improve and uplift community members by encouraging our employees to give back where we live and work through volunteering time and making financial donations.
During 2020, we took the following actions to support, build, and improve our community:
Increased the financial matching donation made by employees to nonprofits to $500 per person to double the impact of their charitable gifts
Increased the financial contribution of employees donations to nonprofits who volunteer their time to $400 per person to double the impact of their volunteer time
Made corporate financial donations to San Diego Habitat for Humanity, San Diego COVID-19 Community Response Fund, and San Diego Center for Children
Held virtual employee contests with prizes where an employee could choose to donate to a nonprofit of their choice
Held virtual employee contests with prizes that supported local businesses, included those focused on minorities, women, disabled veterans, those who identify as LGBTQ, and other underrepresented communities
Highlighted locally owned businesses in our monthly employee newsletter, included those focused on minorities, women, disabled veterans, those who identify as LGBTQ, and other underrepresented communities
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Corporate Governance Highlights
We remain committed to managing the company for the benefit of our stockholders and maintaining good corporate governance practices. We continue to maintain the following corporate governance practices to enhance the company’s reputation for integrity and serving our stockholders responsibly:
Corporate Governance Highlights
All directors are subject to annual election with a majority voting standard in uncontested elections.
Our directors conduct annual self-evaluations and participate in orientation and continuing education programs.
All directors, with the exception of our CEO, are independent, and all Board committee members are independent.
Our directors, officers, and other employees are subject to a Code of Business Ethics.
An Enterprise Risk Management evaluation is conducted annually to identify and assess company risk.
Our directors, officers, and employees are subject to anti-hedging and anti-pledging policies.
Anonymous reporting is available through our whistleblower hotline, which is tested annually and reported quarterly to our Audit Committee or Nominating/Corporate Governance Committee, as appropriate.
Our directors and named executive officers have minimum stock ownership requirements.
Cash and equity incentive compensation is subject to a formal clawback policy.
Our Bylaws permit stockholders to request the calling of a special meeting.
No stockholder rights plan is in effect.
Our Bylaws permit stockholders to propose amendments to our Bylaws.
The restricted stock and restricted stock unit awards for our named executive officers have “double-trigger” acceleration provisions.
Our Bylaws include market-standard proxy access nominating provisions.
Our Board of Directors conducts regular executive sessions of independent directors.
We annually submit our executive compensation to a “say-on-pay” advisory vote by our stockholders.
We have a Chairman of the Board who is separate from and independent of our Chief Executive Officer.
Our Board’s Nominating/Corporate Governance Committee maintains direct oversight of the company’s ESG initiatives.
Environmental, Social and Governance (ESG)
We are committed to conducting our business according to the highest ethical standards. We are dedicated to providing an engaging, inclusive, and safe work environment for our employees, operating our business in an environmentally conscious manner, and upholding our corporate responsibilities as a public company for the benefit of our stakeholders – our shareholders, clients, employees, and community.
In recent years, our ESG efforts have quickly evolved from commitments to action. We continue to focus on how best to institutionalize efforts for a lasting and positive impact. We strive to be a leader in the net lease industry in ESG initiatives.
We believe that our commitment to corporate responsibility, which encompasses ESG principles, is critical to our performance and long-term success, and that we all have a shared responsibility to our community and the planet. That responsibility starts with our workforce and is demonstrated through our commitment to sound governance, our ethical operating behaviors, and responsible practices. Additionally, we formalized our Diversity, Equality, & Inclusion Policy, trained all team members on anti-discrimination, confronting bias in the workplace, driving inclusive conversations, and continue to adhere to our Equal Employer Opportunity Policy. The Nominating/Corporate Governance Committee of our Board of Directors has direct oversight of ESG matters.
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Our dedicated Sustainability Department drives many of these cross-departmental efforts, and ESG considerations touch all areas of the business at every level. We envision advancements in the coming years as we seek to execute on our strategy, by and on behalf of our internal and external stakeholders, while engaging all levels of our organization in the process.
Relationships with our stakeholders are key to our success. Additionally, our corporate partners help us achieve our mission. Accordingly, we assess ways in which we can generate and sustain value for all stakeholders, which generates long-term value for our stockholders. We believe our dedication to corporate responsibility will foster our ability to grow in a sustainable manner.
Our 2020 Sustainability Report is available in our website’s corporate responsibility section, and we encourage all stakeholders to review this report to understand the significant emphasis we place on these initiatives.
Stockholder Engagement During 2020
We believe engaging with our stockholders on an ongoing basis is important to understand what is important and ensure best practices. In addition to maintaining active communication with stockholders throughout the year, we engage with stockholder governance teams annually in anticipation of each annual meeting of our stockholders.













Reached out to stockholders collectively representing approximately 51% of shares outstanding and engaged with stockholders collectively representing approximately 30% of shares outstanding.

Our Board of Directors’ Independent Chairman participated in our stockholder engagement, providing stockholders direct access to our Board of Directors.

Discussed various topics, including environmental, social and governance considerations, executive compensation, board refreshment, composition and structure of our Board, and company culture.














Identified and regularly reported consistent themes from our outreach activities to our Board of Directors.

Considered input provided by our stockholders and our advisors as our Board reviewed and considered enhancements to its governance practices and public disclosures.

Pursuant to action taken by the Board, the Nominating and Corporate Governance Committee oversees the Company’s current and new ESG initiatives and strategies.

Continued to grow our ESG initiatives and enhance disclosure, including through issuing our inaugural Sustainability Report in April 2021.
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Proposals
Proposal 1 - Election of Directors
Our Board of Directors currently consists of nine directors who we believe contribute the breadth of knowledge and experience necessary for the advancement of our business strategies and objectives. Based on the recommendation of our Nominating/Corporate Governance Committee, our Board of Directors has nominated the following current nine directors for re-election at the Annual Meeting, each to serve until our annual meeting of stockholders in 2022 and until their respective successors have been duly elected and qualified:

(1)
Non-Executive Independent Chairman of the Board of Directors.
For more information regarding our nominees, please see the “Board of Directors and Corporate Governance” section of this Proxy Statement beginning on page 20.


OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” EACH OF THE NOMINEES LISTED ABOVE
Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee of our Board of Directors has appointed KPMG LLP as the independent registered public accounting firm to audit our consolidated financial statements and internal control over financial reporting for the year ending December 31, 2021. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will be provided an opportunity to make a statement if the representatives desire to do so. The representatives are also expected to be available to respond to appropriate questions.
Although ratification by our stockholders is not a prerequisite to the power of the Audit Committee to appoint KPMG LLP as our independent registered public accounting firm, our Board of Directors and the Audit Committee believe such ratification to be advisable and in the best interests of the company. Accordingly, stockholders are being requested to ratify, confirm, and approve the appointment of KPMG LLP as our independent registered public accounting firm to conduct the annual audit of our consolidated financial statements and internal control over financial reporting for the year ending December 31, 2021. If the stockholders do not ratify the appointment of KPMG LLP, the appointment of an independent registered public accounting firm will be reconsidered by the Audit Committee; however, the Audit Committee has no obligation to change its appointment based on stockholder ratification. If the appointment of KPMG LLP is ratified, the Audit Committee will continue to conduct an ongoing review of KPMG LLP’s scope of engagement, pricing and work quality, among other factors, and will retain the right to replace KPMG LLP at any time.


OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP
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Proposals
Proposal 3 - Advisory Vote to Approve the Compensation of Our Named Executive Officers
Our Board of Directors has adopted a policy of providing for annual “say-on-pay” advisory votes. In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and as a matter of good corporate governance, we are asking our stockholders to vote on a non-binding, advisory basis to approve the compensation paid to our named executive officers, as described in the Compensation Discussion and Analysis and the executive compensation tables narrative that follow.
In an effort to align the interests of management with those of our stockholders, our compensation program focuses on pay-for-performance principles that are linked to short-term and long-term financial, operational metrics, and relative TSR. Our compensation mix rewards the continued performance of the company, encourages a disciplined approach to management, and maintains focus on the creation of long-term value for our stockholders. We believe this structure is competitive and allows us to attract, motivate, and retain highly qualified executive officers.
In connection with reviewing our compensation program and the 2020 compensation paid to our named executive officers, it is important to consider the company’s performance during 2020 as well as our excellent long-term TSR performance. These performance results are discussed in detail in the “Executive Compensation” section beginning on page 38.
Based on the company’s performance in 2020, our named executive officers were awarded compensation in accordance with our Short-Term Incentive Program (“STIP”) and Long-Term Incentive Program (“LTIP”), in addition to a fixed compensation component. The majority of the compensation awarded under the 2020 STIP and LTIP is at-risk, is not guaranteed and is based on the following performance metrics:

The performance hurdles and weightings for each program are determined by the Compensation Committee in consultation with its independent compensation consultant. This structure effectively links the compensation awarded to our executives to the achievement of the company’s financial and strategic goals. The independent members of our Board of Directors believe that the performance-based structure of our compensation program, as summarized above and detailed in the “Executive Compensation” section beginning on page 38, allows the company to attract and retain talented executives while aligning their interests with the best interests of the company to support long-term value creation for the benefit of stockholders. Unless our Board of Directors modifies its determination on the frequency of future “say-on-pay” advisory votes, the next vote will be held at the annual meeting of stockholders in 2022.
Because this vote is advisory, it is not binding on us or our Board of Directors. Nevertheless, the views expressed by stockholders, whether through this vote or otherwise, are important to management and our Board of Directors and, accordingly, our Board of Directors and the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements.


OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL ON A NON-BINDING ADVISORY BASIS OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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Proposal 4 – Approval of the Realty Income Corporation 2021 Incentive Award Plan
Introduction
We are asking you to approve the Realty Income Corporation 2021 Incentive Award Plan (the “2021 Plan”). On March 16, 2021, our Board of Directors adopted, subject to stockholder approval, the 2021 Plan, pursuant to which we may grant equity awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and other stock or cash based awards to members of our Board of Directors, our employees and consultants, and employees and consultants of our subsidiaries.
The 2021 Plan is intended to replace our 2012 Incentive Award Plan (the “2012 Plan”), which will otherwise expire by its terms on March 5, 2022. If the 2021 Plan is approved by our stockholders, the 2012 Plan will terminate as of the date of such approval, and no further awards will be granted under the 2012 Plan; however, the terms and conditions of the 2012 Plan will continue to govern any outstanding awards granted under the 2012 Plan. If the 2021 Plan is not approved, the 2012 Plan will remain in effect and will expire pursuant to its terms on March 5, 2022, after which date no further awards may be granted under the 2012 Plan.
As of March 16, 2021, the date on which our Board of Directors adopted the 2021 Plan, 736,508 shares of our common stock remained available for grant under the 2012 Plan and 479,151 shares of our common stock were subject to outstanding awards under the 2012 Plan, including 224,813 unvested performance awards at target. The 2021 Plan authorizes the issuance of the sum of (1) 8,000,000 shares of our common stock, and (2) any shares subject to outstanding awards under the 2012 Plan which, on or after the effective date of the 2021 Plan, are forfeited or otherwise terminate or expire for any reason without the issuance of shares of common stock and become available for future issuance under the 2021 Plan pursuant to its terms.
The closing price of our common stock on March 16, 2021 was $63.96 per share.
Stockholder Approval
Stockholder approval of the 2021 Plan is necessary in order for the company to satisfy the terms of the 2021 Plan, to meet the stockholder approval requirements of the New York Stock Exchange and to satisfy the stockholder approval requirement under Section 422 of the Code so that the Compensation Committee has the discretion to grant incentive stock options, or ISOs. If the 2021 Plan is not approved by stockholders, the 2021 Plan will not become effective, and the 2012 Plan, will remain in effect. This would limit our ability to grant stock-settled awards in the future.
Background for Determination of the Share Reserve Under the 2021 Plan
We are asking our stockholders to approve the 2021 Plan because we believe that grants of equity incentive awards are important to our continued growth and success. The purpose of the 2021 Plan is to assist us in attracting, motivating and retaining selected individuals who will serve as our employees, directors, and consultants, and who are expected to contribute to our success and the achievement of our long-term objectives. We believe that the equity-based awards to be issued under the 2021 Plan will motivate recipients to offer their maximum effort to us and will help focus them on the creation of long-term value consistent with the interests of our stockholders. In addition, we believe we are disciplined in our use of equity incentive awards.
In determining whether to approve the 2021 Plan, our Board of Directors considered the following:
In setting the size of the share reserve under the 2021 Plan, our Board of Directors considered the historical amounts of equity awards granted under the 2012 Plan in the past three years. In 2018, 2019 and 2020, equity awards representing a total of approximately 462,203 shares, 221,390 shares, and 250,168 shares, respectively, were granted under the 2012 Plan, for a three-year average burn rate, as adjusted consistent with Institutional Shareholder Services’ burn rate calculation approach, based on
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grants made between 2018 and 2020, of 0.20%, well below Institutional Shareholder Services’ burn rate cap of 2.00% for the S&P 500 real estate industry (with full-value awards counted as having two times the value of other awards and assuming a volatility rate of 36.6%).
The company expects the share authorization under the 2021 Plan to provide enough shares for awards for at least ten years, assuming the company continues to grant awards consistent with its current practices and historical usage, as reflected in its historical burn rate, and further dependent on the price of its shares and hiring activity during the next few years, and noting that future circumstances may require the company to change its current equity grant practices. The company cannot predict its future equity grant practices, the future price of its shares of common stock or future hiring activity with any degree of certainty at this time, and the share reserve under the 2021 Plan could last for a shorter or longer time.
In 2018, 2019 and 2020, the end of year overhang rate was 0.5%, 0.4%, and 0.3%, respectively. If the 2021 Plan is approved by stockholders, the company expects its overhang at the end of 2021 will be approximately 2.1%. Overhang is calculated by dividing (1) the sum of the number of shares subject to equity awards outstanding at the end of the fiscal year plus shares remaining available for issuance for future awards at the end of the fiscal year by (2) the number of shares outstanding at the end of the fiscal year.
The 2021 Plan will enable us to continue to attract and retain top talent and to align our employees’ rewards with those of our stockholders, while also providing us with the flexibility to implement future equity grant practices.
The material features of the 2021 Plan are summarized below. This description is qualified in its entirety by reference to the 2021 Plan, attached as Appendix B to this Proxy Statement. We intend to register shares available for issuance under the 2021 Plan on a Registration Statement on Form S-8 under the Securities Act of 1933 as soon as is practicable, if we receive stockholder approval.
Material Features of the 2021 Plan
The 2021 Plan authorizes the Compensation Committee of our Board of Directors (or, if our Board of Directors determines, another committee of our Board of Directors) to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, and other stock or cash based awards within parameters set forth in the 2021 Plan, for the purpose of providing our directors, employees and consultants and the employees and consultants of our subsidiaries equity compensation, incentives and rewards for superior performance. Some of the key features of the 2021 Plan that reflect our commitment to effective management of incentive compensation are as follows:
No Repricing or Replacement of Options or Stock Appreciation Rights. The 2021 Plan prohibits, without stockholder approval: (i) the amendment of options or stock appreciation rights to reduce the exercise price and (ii) the replacement of an option or stock appreciation right with cash or any other award when the exercise price per share of the option or stock appreciation right exceeds the fair market value of underlying shares.
Share Counting. The 2021 Plan provides that the following shares may not be reused for additional grants under the 2021 Plan: (i) shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award, (ii) shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on its exercise, and (iii) shares purchased on the open market with the cash proceeds from the exercise of options.
Independent Administration. The Compensation Committee, which consists of only independent directors, will administer the 2021 Plan except with respect to awards granted to non-employee directors.
Claw-Back. The 2021 Plan provides that all awards granted pursuant to the 2021 Plan will be subject to the provisions of our claw-back policy and any claw-back policy that we may implement in the future to the extent set forth therein or in an applicable award agreement.
Director Compensation Limits. The 2021 Plan provides that the sum of any cash compensation and the aggregate grant date fair value of all awards granted to a non-employee director as compensation for services as a non-employee director during any calendar year (the “director limit”) may not exceed $1,000,000 (subject to limited exceptions).
No Discounted Awards. The 2021 Plan provides that stock options and stock appreciation rights must be granted at not less than 100% of fair market value on the date of grant.
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Summary of the 2021 Plan
Eligibility and Administration. Our employees, consultants and directors, and employees, consultants and other service providers of our subsidiaries are eligible to receive awards under the 2021 Plan. As of March 15, 2021, approximately 225 employees, no consultants and eight non-employee directors are eligible to receive awards under the 2021 Plan; however, this number is subject to change as the number of individuals in our business is adjusted to meet our operational requirements. The plan administrator has the authority to select from among eligible individuals those to whom awards will be granted.
The 2021 Plan will be administered by the Compensation Committee of our Board of Directors, provided, however, that our Board of Directors will administer the 2021 Plan with respect to awards granted to our non-employee directors, each of which may delegate its duties and responsibilities to committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to certain limitations that may be imposed under the 2021 Plan, Section 16 of the Exchange Act, and/or stock exchange rules, as applicable. The plan administrator has the authority to make all determinations and interpretations under, prescribe all forms for use with, and adopt rules for the administration of, the 2021 Plan, subject to its express terms and conditions. The plan administrator will also set the terms and conditions of all awards under the 2021 Plan, including any vesting conditions.
Limitation on Awards and Shares Available. An aggregate of 8,000,000 shares of our common stock are available for issuance under awards granted pursuant to the 2021 Plan, which shares may be authorized but unissued shares, or shares purchased in the open market. If the 2021 Plan is approved, we will cease to grant awards under the 2012 Plan, however awards previously granted under the 2012 Plan will remain outstanding, subject to the terms of the 2012 Plan.
If an award under the 2021 Plan or the 2012 Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the 2021 Plan. However, the following shares may not be used again for grant under the 2021 Plan: (i) shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award; (ii) shares subject to a stock appreciation right, or SAR, that are not issued in connection with the stock settlement of the stock appreciation right on its exercise; and (iii) shares purchased on the open market with the cash proceeds from the exercise of options. The payment of a dividend equivalent in cash in conjunction with any outstanding award will not reduce the shares available for issuance under the 2021 Plan.
Awards granted under the 2021 Plan upon the assumption of, or in substitution for, awards outstanding under a qualifying equity plan maintained by an entity with which we enter into a merger or similar corporate transaction will not reduce the shares available for grant under the 2021 Plan, except that shares acquired by exercise of substitute incentive stock options will count against the maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2021 Plan. In addition, shares available under certain pre-existing plans of an acquired company may be used for awards under the 2021 Plan and will not reduce the shares authorized for issuance under the 2021 Plan, provided that awards using such available shares may not be made after the date awards could have been made under the pre-existing plan and may only be made to individuals who were not our employees or directors prior to the acquisition.
The 2021 Plan provides that the sum of any cash compensation and the aggregate grant date fair value (determined as of the date of the grant under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all awards granted to a non-employee director as compensation for services as a non-employee director during any calendar year (the “director limit”) may not exceed $1,000,000 (subject to exceptions for individual non-employee directors in extraordinary circumstances).
Subject to certain adjustments in accordance with the 2021 Plan, the maximum aggregate number of shares of our common stock that may be granted to any one person in respect of one or more awards may not exceed 3,200,000 and the maximum aggregate amount of cash that may be paid during any calendar year in respect of one or more awards may not exceed $10,000,000. In addition, no more than 8,000,000 shares may be issued pursuant to the exercise of incentive stock options under the 2021 Plan.
Awards. The 2021 Plan provides for the grant of stock options, including incentive stock options, or ISOs, and nonqualified stock options, or NSOs, stock appreciation rights, or SARs, restricted stock, restricted stock units,
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or RSUs, dividend equivalents, and other stock or cash based awards. Certain awards under the 2021 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Internal Revenue Code, which may impose additional requirements on the terms and conditions of such awards. All awards under the 2021 Plan will be evidenced by an award agreement, which will detail all terms and conditions of the awards, including any applicable vesting and payment terms. Awards other than cash awards generally will be settled in shares of our common stock, but the applicable award agreement may provide for cash settlement of any award. A brief description of each award type follows.
Stock Options. Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Internal Revenue Code are satisfied. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders) and the term of a stock option may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). Vesting conditions may apply to stock options and may include continued service, performance and/or other conditions as set forth in the applicable award agreement.
SARs. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The exercise price of a SAR may not be less than 100% of the fair market value of the underlying share on the date of grant and the term of a SAR may not be longer than ten years. Vesting conditions may apply to SARs and may include continued service, performance and/or other conditions as set forth in the applicable award agreement.
Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of our common stock that remain forfeitable unless and until specified conditions are met, and which may be subject to a purchase price. RSUs are contractual promises to deliver shares of our common stock in the future, which may also remain forfeitable unless and until specified conditions are met, and may be accompanied by the right to receive the equivalent value of dividends paid on shares of our common stock prior to the delivery of the underlying shares. Delivery of the shares underlying RSUs may be deferred under the terms of the award or at the election of the participant, if the plan administrator permits such a deferral. Conditions applicable to restricted stock and RSUs may be based on continuing service, the attainment of performance goals and/or such other conditions as set forth in the applicable award agreement.
Other Stock or Cash Based Awards. Other stock or cash based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards.
Dividend Equivalents. Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of our common stock and may be granted in tandem with awards of restricted stock units. Dividend equivalents may be paid currently or credited to an account for the participant, settled in cash or shares and may be subject to the same restrictions on transferability and forfeitability as the restricted stock units with respect to which the dividend equivalents are granted.
Performance Awards. Performance awards include any of the foregoing awards that are granted subject to vesting and/or payment based on the attainment of specified performance goals or other criteria set forth in the applicable award agreement, which may or may not be objectively determinable. Performance criteria upon which performance goals are established may include but are not limited to: (1) the attainment by a share of a specified fair market value for a specified period of time; (2) book value per share; (3) earnings per share; (4) return on assets; (5) return on equity; (6) return on investments; (7) return on invested capital; (8) total stockholder return; (9) earnings or net income of the company before or after taxes and/or interest; (10) earnings before interest, taxes, depreciation and amortization; (11) revenues; (12) market share; (13) cash flow or cost reduction; (14) interest expense after taxes; (15) economic value created; (16) improvements in capital structure; (17) gross margin; (18) operating margin; (19) net cash provided by operations; (20) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion goals, cost targets, customer satisfaction, reductions in errors and omissions, reductions in
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lost business, management of employment practices and employee benefits, supervision of litigation and information technology, quality and quality audit scores, efficiency, working capital, goals relating to acquisitions or divestitures, net sales or closings, inventory control, inventory, implementation or completion of critical projects, or economic value; (21) adjusted earnings or loss per share; (22) certain financial ratios (including those measuring liquidity, activity, profitability or leverage); (23) debt levels, covenants, ratios or reductions; (24) financing and other capital-raising transactions; (25) year-end cash; (26) investment sourcing activity; (27) environmental, social and governance initiatives; (28) marketing initiatives; or (29) any combination of the foregoing, any of which may be measured either in absolute terms for us or any operating unit of our company or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices. The Compensation Committee may provide for the exclusion of the impact of an event or occurrence which the Compensation Committee determines should be appropriately excluded, including, without limitation, non-recurring charges or events, acquisitions or divestitures, changes in the corporate or capital structure, events unrelated to the business or outside of the control of management, foreign exchange considerations, and legal, regulatory, tax or accounting changes.
Non-Employee Director Awards. During the term of the 2021 Plan, commencing with our 2021 annual stockholders meeting, each person who is a non-employee director of the company as of the date of each such meeting will, on the date of such meeting, receive a grant of 4,000 shares of restricted stock (the “Annual Grant”). Each person who first becomes a non-employee director of the company on a date other than the date of an annual stockholders meeting of the company following the effective date of the 2021 Plan, will, upon his or her commencement of service as a non-employee director, receive a grant of 4,000 shares of restricted stock (an “Initial Grant”). Each Annual Grant and Initial Grant will be subject to the director limit described above and will vest based on the applicable director’s years of service as of the date of grant, in each case subject to the applicable director’s continued service on the applicable vesting date, as follows:
Shares of restricted stock granted to non-employee directors with fewer than six years of service will vest as to one-third of the restricted shares subject to the award on each of the first three anniversaries of the applicable grant date.
Shares of restricted stock granted to non-employee directors with at least six, but fewer than seven, years of service will vest as to one-half of the restricted shares subject to the award on each of the first two anniversaries of the applicable grant date.
Shares of restricted stock granted to non-employee directors with at least seven, but fewer than eight, years of service will vest in full on the first anniversary of the applicable grant date.
Shares of restricted stock granted to non-employee directors with eight or more years of service will be fully vested as of the grant date.
If the 2021 Plan is approved by our stockholders, the restricted stock awards granted to non-employee directors as described above will be in lieu of all future awards to non-employee directors under the 2012 Plan.
Certain Transactions. The plan administrator has broad discretion to take action under the 2021 Plan, as well as make adjustments to the terms and conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations and other corporate transactions. In addition, in the event of certain non-reciprocal transactions with our stockholders known as “equity restructurings,” the plan administrator will make equitable adjustments to the 2021 Plan and outstanding awards.
In the event of a change in control (as defined in the 2021 Plan), to the extent that the surviving entity does not continue, convert, assume or replace outstanding awards, all such awards will become fully vested and exercisable in connection with the transaction. Individual award agreements may provide for additional accelerated vesting and payment provisions.
Amendments to Awards; No Repricing. The plan administrator may amend, modify or terminate any outstanding award, provided that the participant’s consent to such action will generally be required unless the action does not materially and adversely affect the participant’s rights under the award, or the change is otherwise permitted under the 2021 Plan. Notwithstanding the foregoing, except in connection with certain changes in our capital structure, the plan administrator may not, without the approval of our stockholders, reduce the exercise price of outstanding options or SARs or cancel outstanding options or SARs in exchange for cash,
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options, SARs, or other awards when the option or SAR price per share exceeds the fair market value of the underlying shares.
Foreign Participants, Claw-Back Provisions, Transferability, and Participant Payments. The plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. All awards will be subject to the provisions of any claw-back policy implemented by our company to comply with applicable law to the extent set forth in such claw-back policy and/or in the applicable award agreement. With limited exceptions for estate planning, domestic relations orders, certain beneficiary designations and the laws of descent and distribution, awards under the 2021 Plan are generally non-transferable prior to vesting, and are exercisable only by the participant. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2021 Plan, the plan administrator may, in its discretion, accept cash or check, shares of our common stock that meet specified conditions (including shares retained from the award creating the obligation), a “market sell order” or such other consideration as it deems suitable.
Effectiveness, Plan Amendment and Termination. The 2021 Plan will become effective on the date on which our stockholders approve the 2021 Plan and will remain in effect until terminated by our Board of Directors. Our Board of Directors generally may amend or terminate the 2021 Plan at any time, and will obtain stockholder approval of any amendment to the extent necessary to comply with applicable law or the 2021 Plan. No incentive stock option may be granted pursuant to the 2021 Plan after the tenth anniversary of the earlier of (i) the date on which our Board of Directors adopted the 2021 Plan or (ii) the date our stockholders approved the 2021 Plan.
Certain Material U.S. Federal Income Tax Consequences
The following is a brief description of the principal United States federal income tax consequences related to awards under the 2021 Plan. This summary discusses the general federal income tax principles that may apply to awards and is provided only for general information only. It is not intended as tax advice to participants, who should consult their own tax advisors.
Non-Qualified Stock Options. A participant will not be subject to tax at the time a non-qualified stock option is granted, and no tax deduction will then be available to the company. Upon the exercise of a non-qualified stock option, an amount equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise will be included in the participant’s ordinary income and we will generally be entitled to deduct the same amount. Upon disposition of shares acquired upon exercise, appreciation or depreciation after the date of exercise will generally be treated by the participant or transferee of the non-qualified stock option as either capital gain or capital loss.
Incentive Stock Options. A participant will not be subject to regular income tax at the time an incentive stock option is granted or exercised, and no tax deduction will then be available to the company; however, the participant may be subject to the alternative minimum tax on the excess of the fair market value of the shares received upon exercise of the incentive stock option over the exercise price. Upon disposition of the shares acquired upon exercise of an incentive stock option, capital gain or capital loss will generally be recognized in an amount equal to the difference between the sale price and the exercise price, as long as the participant has not disposed of the shares within two years after the date of grant or within one year after the date of exercise and has been employed by us at all times from the grant date until the date three months before the date of exercise (one year in the case of permanent disability). If the participant disposes of the shares without satisfying both the holding period and employment requirements, the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price but, in the case of a failure to satisfy the holding period requirement, not more than the excess of the fair market value of the shares on the date the incentive stock option is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss.
We are not entitled to a tax deduction upon either the exercise of an incentive stock option or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
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Other Grants. The current federal income tax consequences of other grants authorized under the 2021 Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse; restricted stock units, dividend equivalents, unrestricted stock and performance awards are generally subject to taxation at the time of payment. Compensation otherwise effectively deferred is taxed when paid (other than employment taxes which are generally owed at the time such compensation is deferred or vested). In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes income, subject to Section 162(m) with respect to covered employees.
Section 162(m) of the Internal Revenue Code. Section 162(m) generally places a $1,000,000 annual limit on a publicly held corporation’s tax deduction for compensation paid to certain executive officers. Prior to the enactment of the Tax Cuts and Jobs Act, this limit did not apply to compensation that satisfied the applicable requirements for the “qualified performance-based compensation” exception to the Section 162(m) deductibility limitation. However, under the Tax Cuts and Jobs Act enacted in 2017, effective for tax years commencing after December 31, 2017, the performance-based compensation exception, and our ability to rely on this exception, were eliminated (other than with respect to certain grandfathered arrangements in effect on November 2, 2017), and the limitation on deductibility generally was expanded to include all named executive officers.
We believe that we qualify as a REIT under the Code and generally are not subject to federal income taxes, provided that we distribute to our stockholders at least 90% of our taxable income each year. As a result of the company’s tax status as a REIT, the loss of a deduction under Section 162(m) may not affect the amount of federal income tax payable by the company.
Section 280G of the Internal Revenue Code. If awards under the 2021 Plan are granted, vest or are paid contingent on a change in control or a subsequent termination of employment, some or all of the value of the award may be considered an “excess parachute payment” under Section 280G of the Internal Revenue Code, which would result in the imposition of a 20 percent federal excise tax on the recipients of the excess parachute payments and a loss of our deduction for the excess parachute payments.
Section 409A of the Internal Revenue Code. Certain types of awards under the 2021 Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest penalties and additional state taxes). To the extent applicable, the 2012 Plan and awards granted under the 2012 Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the plan administrator, the 2012 Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.
New Plan Benefits
Other than with respect to awards to non-employee directors (as described above), because grants under the 2021 Plan are generally within the discretion of the plan administrator, it is not possible to determine the future grants that will be made under the 2021 Plan.
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As described above, pursuant to the 2021 Plan, each of our non-employee directors is entitled to receive an annual equity grant in the form of 4,000 shares of restricted stock. The table below sets forth the number of shares that all non-employee directors as a group are expected to receive in 2021 pursuant to the 2021 Plan. If our stockholders do not approve the 2021 Plan, we expect that sufficient shares will remain available for our non-employee director grants at the Annual Meeting under the 2012 Plan.
NAMED EXECUTIVE OFFICERS
DOLLAR VALUE
NUMBER OF UNITS
Sumit Roy
Michael R. Pfeiffer
Christie B. Kelly
Neil M. Abraham
Mark E. Hagan
Sean P. Nugent
All current executive officers, as a group
All current non-executive officer directors, as a group
(1)
36,000(2)
All non-executive officer employees as a group
(1)
The dollar value of the shares of restricted stock to be granted to non-employee directors on the date of the 2021 Annual Meeting of Stockholders is not determinable at this time.
(2)
Includes 4,000 shares expected to be granted to each of the eight non-employee directors on the date of the 2021 Annual Meeting of Stockholders and an additional 4,000 shares for a director expected to be elected before December 31, 2021 to replace Christie Kelly, who resigned from the Board of Directors during January 2021 to become Chief Financial Officer of the company.
Stockholder approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal.


OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE REALTY INCOME CORPORATION 2021 INCENTIVE AWARD PLAN.
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Board of Directors and Corporate Governance
Director Nominees
The Board of Directors has nominated the following nine current directors, identified below, for re-election at the Annual Meeting, each to serve for a one-year term expiring at our annual meeting of stockholders in 2022, and until their respective successors are duly elected and qualified. The information presented below highlights each director nominee’s specific experience, qualifications, attributes, and skills that led our Board of Directors to the conclusion that he or she should serve as a director. We believe that all of our director nominees have a reputation for integrity, honesty, and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to Realty Income and our Board of Directors. We also value the additional perspective that comes from serving on other companies’ boards of directors and board committees. We continue to review the composition of the Board of Directors in an effort to assemble a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in various areas.

Kathleen R. Allen, Ph.D.

Age: 75
Director Since: 2000
Committees: Audit
Independent: Yes
Experience
Kathleen R. Allen, Ph.D. is Professor Emerita at the Marshall School of Business and the founding director of the Center for Technology Commercialization at the University of Southern California (1991-2016). She was the co-founder and chairwoman of Gentech Corporation (1994-2004) and in 2006 co-founded and became the Chief Executive Officer and served on the board of directors of N2TEC Institute, a nonprofit company focused on technology commercialization in rural America, until it completed its mission in 2013. Dr. Allen has co-founded four private companies, is currently a principal and on the board of directors of a real estate investment and development company, and serves on the board of advisors for two life science companies. She was a Visiting Scholar at the Department of Homeland Security, where she advised on issues related to technology deployment, including cybersecurity. She is the author of 15 books in the field of entrepreneurship and technology commercialization, a field in which she is considered an expert.
Qualifications
As a distinguished businesswoman, entrepreneur, and consultant, Dr. Allen has helped our Board of Directors identify and assess the risks associated with new endeavors. She has also worked with many early-growth and established companies to develop effective leadership and team-building skills. With her years of experience in risk management in the areas of business models, investment opportunities, and technology, Dr. Allen brings to the Board of Directors achievement in strategic business planning, which is a key part of our growth strategy.

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A. Larry Chapman


Age: 74
Director Since: 2012
Committees: Audit
Independent: Yes
Experience
A. Larry Chapman is a retired 37-year veteran of Wells Fargo, having served most recently as Executive Vice President and the Head of Commercial Real Estate from 2006 until his retirement in June 2011, and as a member of the Wells Fargo Management Committee. Mr. Chapman joined Wells Fargo in 1974 in its Houston Real Estate office. In 1987, he was promoted to President of Wells Fargo Realty Advisors, a wholly-owned subsidiary of Wells Fargo & Co. The subsidiary’s primary responsibility was managing Wells Fargo Mortgage and Equity Trust, which was formed in 1970 and sold in 1989. He remained President of Wells Fargo Realty Advisors until 1990, and was promoted to Group Head of the Wells Fargo Real Estate Group in 1993. Mr. Chapman managed the Wells Fargo Real Estate Group until his 2006 promotion to Executive Vice President and Head of Commercial Real Estate for Wells Fargo on a nationwide basis. Mr. Chapman is a former board member of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, past governor and trustee of the Urban Land Institute, former member of the National Association of Real Estate Investment Trusts (Nareit), and member and past trustee of the International Council of Shopping Centers (ICSC). He currently serves on the board of directors of CBL & Associates Properties, Inc. (NYSE: CBL) (August 2013-present).
Qualifications
Mr. Chapman’s financial acumen and extensive commercial real estate experience across many industries and tenant types provide valuable insight and expertise to the Board of Directors and our senior management team as we continue to expand our real estate portfolio. In addition, his background as a leader of a Fortune 500 company, and as a member of its management team, further enhances the quality of leadership and oversight provided by our Board of Directors.

Reginald H. Gilyard

Age: 57
Director Since: 2018
Committees: Nominating/Corporate Governance (Chair)
Independent: Yes
Experience
Reginald H. Gilyard is a Senior Advisor at the Boston Consulting Group, Inc. (BCG) where he is a recognized leader in strategy development and execution (2017-present). Prior to this role, Mr. Gilyard served as Dean of the Argyros School of Business and Economics at Chapman University (2012-2017). Under Mr. Gilyard’s leadership, the school significantly increased its national rankings at the undergraduate and graduate levels. Prior to joining Chapman University, Mr. Gilyard served as Partner and Managing Director at BCG where he led national and multi-national engagements with large corporations in strategy, M&A, and business transformation (1996-2012). Prior to BCG, Mr. Gilyard served nine years in the U.S. Air Force as a Program Manager, and was then promoted to Major in the U.S. Air Force Reserves where he served for an additional three years. Mr. Gilyard currently serves on the board of directors of First American Financial Corporation (NYSE:FAF) (2017-present), and CBRE Group Inc. (NYSE: CBRE) (2018-present), and is the Board Chair for Pacific Charter School Development, a 501(c)(3) real estate development company serving low-income families in urban centers across the United States.
Qualifications
Mr. Gilyard offers valuable knowledge regarding strategy development and execution, having worked with management teams and boards to develop and implement successful strategies for over 20 years. His extensive consulting experience includes leading national and multi-national strategic engagements, pre-and post-M&A activity, and business transformation. Mr. Gilyard’s skill set and experience in a broad array of industries allow him to provide diverse and valuable perspectives to our Board of Directors.
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Priya Cherian Huskins


Age: 49
Director Since: 2007
Committees: Compensation
(Chair) and Nominating/Corporate
Governance
Independent: Yes
Experience
Priya Cherian Huskins is Senior Vice President and partner at Woodruff-Sawyer & Co., a commercial insurance brokerage firm (2003-present). Prior to joining Woodruff-Sawyer & Co., Ms. Huskins served as a corporate and securities attorney at the law firm of Wilson Sonsini Goodrich & Rosati (1997-2003). She has served on the advisory board of the Stanford Rock Center for Corporate Governance since 2012, and the board of directors of Woodruff-Sawyer & Co. since 2016, as well as NMI Holdings, Inc. and Anzu SPAC 1 since 2021. She previously served on the board of directors of the Silicon Valley Directors’ Exchange (SVDX) (2013-2018), and served on the board of directors of the National Association of Corporate Directors, Silicon Valley Chapter (2006-2013).
Qualifications
With her background in law, insurance, and risk management, Ms. Huskins brings a focus on these areas to our Board of Directors. As a recognized expert in directors and officers liability risk and its mitigation, Ms. Huskins provides valuable insight into our risk management strategy. In addition, she brings experience regarding corporate governance matters, including compensation best practices, and ways that corporate governance can enhance stockholder value. Ms. Huskins’ experience makes her a valuable member of a well-rounded Board of Directors.

Gerardo I. Lopez


Age: 61
Director Since: 2018
Committees: Compensation
Independent: Yes
Experience
Gerardo I. Lopez is currently an Operating Partner and Head of the Operating Group for Softbank Investment Advisers (December 2018-present). Prior to this role, Mr. Lopez was an Operating Partner at High Bluff Capital Partners, a private equity firm focused on investing in consumer-facing companies, and Executive Chairman of Quiznos, Inc. which is privately owned by High Bluff Capital Partners (June 2018 – December 2018). Previously, Mr. Lopez served as President and Chief Executive Officer of Extended Stay America, Inc. and its paired-share REIT, ESH Hospitality, Inc. (paired together as NYSE: STAY), the largest owner/operator of company-branded hotels in North America (2015-2017). Mr. Lopez also served as President and Chief Executive Officer of AMC Entertainment Holdings, Inc. (NYSE: AMC), the top global theater operator, where he led the reinvention of the customer theater experience (2009-2015). Prior to AMC, Mr. Lopez held various positions, including Executive Vice President of Starbucks Coffee Company (NASDAQ: SBUX) and President of its Global Consumer Products, Seattle’s Best Coffee and Foodservice division (2004-2009), and President of the Handleman Entertainment Resources division of Handleman Company (2001-2004). Mr. Lopez has also held a variety of executive management positions with International Home Foods (1997-2000), PepsiCo, Inc. (NYSE: PEP) (1986-1996), and the Procter & Gamble Company (NYSE: PG) (1983-1986). Mr. Lopez currently serves on the board of directors of CBRE Group, Inc. (NYSE: CBRE) (2015-present), Newell Brands (NYSE: NWL) (2018-present) and OYO Hotels (2020-present).
Qualifications
Mr. Lopez brings extensive operational and leadership knowledge through serving as a senior executive at entertainment, hospitality, and consumer products companies. He has over 36 years of experience in marketing, sales and operations, and management of public and private companies, particularly across consumer-focused industries. Mr. Lopez adds real estate expertise and diverse board experience as an independent board member of private and public companies. The depth and breadth of his operational knowledge and leadership experience across various industries makes him a valuable contributor to our Board of Directors.
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Michael D. McKee

Age: 75
Director Since: 1994
Non-Executive Chairman Since:
2012
Committees: Compensation and
Nominating/Corporate
Governance
Independent: Yes
Experience
Michael D. McKee is a Principal at The Contrarian Group (March 2018-present). Mr. McKee previously served as Executive Chairman of HCP, Inc. (now Healthpeak Properties; NYSE: PEAK) (May 2016-February 2018), Chief Executive Officer of Bentall Kennedy (U.S.), a registered real estate investment advisor (February 2010-April 2016), and was the Vice Chairman (1999-2008) and Chief Executive Officer (2007-2008) of The Irvine Company, a privately-held real estate investment company, as well as its Chief Operating Officer (2001-2007), Chief Financial Officer (1997-2001) and Executive Vice President (1994-1999). Prior to joining The Irvine Company, Mr. McKee was a partner in the law firm of Latham & Watkins (1986-1994). Through each of these positions, Mr. McKee has obtained extensive real estate experience and provides valuable insight and expertise to the Board and our senior management team. He has served on the board of directors of HCP, Inc. (1987-2018), Bentall Kennedy (U.S.) (2008-2012), First American Financial Corporation (NYSE: FAF) (2011-present), Seattle Pacific University (2017-present), the Tiger Woods Foundation (2006-present), The Irvine Company (1998-2008) and Hoag Hospital Foundation (1999-2008).
Qualifications
Mr. McKee’s business and legal experience includes numerous acquisition and disposition transactions, as well as a variety of public and private offerings of equity and debt securities. Additionally, he has been exposed to various compliance issues as they relate to REITs. With his knowledge of the complex issues facing real estate companies today and his understanding of what makes businesses work effectively and efficiently, Mr. McKee provides valuable insight to our Board of Directors.

Gregory T. McLaughlin

Age: 61
Director Since: 2007
Committees: Audit and Compensation
Independent: Yes
Experience
Since 2018, Gregory T. McLaughlin has served in a dual role as the Chief Executive Officer of the PGA TOUR First Tee Foundation, a subsidiary of the PGA TOUR, and the World Golf Hall of Fame. Under Mr. McLaughlin's leadership, the First Tee Foundation and World Golf Hall of Fame have grown in global prominence to become among the world's top golf organizations. Most importantly, Mr. McLaughlin has served as a vital ambassador and spokesperson for the game of golf throughout the U.S. and abroad. Previously, Mr. McLaughlin served as the President of the PGA TOUR Champions and an Executive Vice President of the PGA TOUR (2014 – 2018). Prior to joining the PGA TOUR, Mr. McLaughlin served as the President and Chief Executive Officer of TGR Live and Tiger Woods Foundation in Irvine, California (1999 – 2014), the Vice President of Business Development of the Western Golf Association / Evans Scholars Foundation in Glenview Illinois (1993 – 1999), and the Vice President of Business Development of the Los Angeles Junior Chamber of Commerce in Los Angeles, California (1988 – 1993). Mr. McLaughlin currently serves on the Executive Committee of the PGA TOUR and formerly served on the board of directors of Nielsen Sports (2012 – 2014). Mr. McLaughlin holds a Juris Doctorate degree from Chicago-Kent School of Law and a Bachelor of Science degree in Economics from The Ohio State University.
Qualifications
As a result of his extensive experience working in golf, Mr. McLaughlin offers a unique perspective to the Board of Directors on a variety of business, finance, human resources and legal matters. Mr. McLaughlin’s robust experience includes tax-exempt financing, business development, capital raising, and program development Additionally, his leadership skills in managing a variety of different organizations bring financial reporting expertise, especially as it relates to audit and tax matters. His proven effectiveness working with complex issues makes him a valued member of the Board of Directors.
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Ronald L. Merriman

Age: 76
Director Since: 2005
Committees: Audit (Chair) and
Nominating/Corporate
Governance
Independent: Yes
Experience
Ronald L. Merriman is a retired Vice Chairman and partner of KPMG LLP, a global accounting and consulting firm (1967-1997). At KPMG LLP, Mr. Merriman served as Vice Chairman of the Executive Management Committee. More recently, Mr. Merriman was the managing director of Merriman Partners, a management advisory firm (2003-2011). Prior to founding Merriman Partners, Mr. Merriman served as a managing director of O’Melveny & Myers law firm (2000-2003), Executive Vice President of Carlson Wagonlit Travel (1999-2000) and President of Ambassador Performance Group, Inc. (1997-1999). Mr. Merriman serves on the board of directors of nVent Electric plc (NYSE: NVT) (2018-present) and serves as the chairman of its audit and finance committee. Mr. Merriman served on the board of directors of Pentair, Plc, formerly Pentair, Ltd. (NYSE: PNR) (2005-2018), and was the chairman of its audit committee. Mr. Merriman formerly served as the chairman of the audit committee and was a member of the compensation committee of Haemonetics Corporation (NYSE: HAE) (2005-2017). Mr. Merriman served on the board of directors of Aircastle Limited (NYSE: AYR) (2006-2020) and served as the chairman of its audit committee (2006-2020) and was a member of the nomination and governance committee (2012-2020).
Qualifications
Mr. Merriman is an experienced financial leader with the skills necessary to lead our Audit Committee. Throughout his career, he has been exposed to various global issues involving accounting and auditing standards, business law and corporate ethics. His professional background and experience on other audit committees make him a valuable asset, both on our Board of Directors and as the Chair of our Audit Committee. Mr. Merriman’s positions have provided him with a wealth of knowledge in addressing financial and accounting matters. The depth and breadth of his exposure to complex global financial issues makes him a skilled member of the Board of Directors.

Sumit Roy

Age: 51
Director Since: 2018
Committees: None
Independent: No
Experience
Mr. Roy has been our Chief Executive Officer since October 2018, and our President since November 2015. Mr. Roy served as Executive Vice President, Chief Operating Officer from October 2014 to October 2018, and as Chief Investment Officer from October 2013 to November 2015. Prior to that, Mr. Roy served as Executive Vice President, Acquisitions from March 2013 to October 2013, after being promoted from his prior role as Senior Vice President, Acquisitions from September 2011 to February 2013. Prior to joining us in September 2011, Mr. Roy was an Executive Director, Global Real Estate, Lodging & Leisure for UBS Investment Bank. Mr. Roy has also held positions at Merrill Lynch, and at Cap Gemini Ernst & Young LLP. Mr. Roy currently serves on the Advisory Board of Governors for the National Association of Real Estate Investment Trusts (Nareit).
Qualifications
Mr. Roy brings a deep understanding of financial strategy, real estate, and REITs through his experience in the financial and real estate industries. Additionally, he provides insight regarding strategic planning and execution through his consulting and advisory experience. His extensive knowledge of the company’s investments and operations across all areas of the business makes him a valuable contributor to our Board of Directors.
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Committees of the Board
Our Board has three standing committees that perform certain delegated functions of the Board: the Audit Committee, the Compensation Committee, and the Nominating/Corporate Governance Committee. Each committee is composed entirely of independent directors within the meaning of our director independence standards, of our Corporate Governance Guidelines, which reflect the NYSE director independence standards and the audit committee requirements of the SEC.
The following table provides a summary of the selected areas of Board and committee oversight in 2020:

Each committee operates under a written charter, all of which were reviewed by their respective committees during 2020. Our Nominating/Corporate Governance Committee updated its charter in February 2021, and our Compensation Committee also updated its charter in February 2020. Our Board may, from time to time, establish certain other committees to facilitate oversight over the management of the company. The charters of each of our standing committees are available on our company’s website: www.realtyincome.com/investors/corporate-governance/board-committees.
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AUDIT
COMMITTEE
 
 
 
Responsibilities
Members:

Ronald L. Merriman (Chair)
Kathleen R. Allen, Ph.D.
A. Larry Chapman
Christie B. Kelly*
Gregory T. McLaughlin

Independent: All
Meetings in 2020: 8
Oversee compliance with legal and regulatory requirements;
Oversee the integrity of our financial statements;
Provide assistance to our Board of Directors in its oversight of cybersecurity, information technology, and other data privacy risks, and enterprise-level risks that may effect our financial statements, operations, business continuity and reputation;
Provide assistance to our Board of Directors in its oversight of our guidelines and policies with respect to enterprise risk management;
Appoint, retain, and oversee our independent registered public accounting firm, approve any special assignments given to the independent registered public accounting firm, and review:
 
The scope and results of the audit engagement with the independent registered public accounting firm, including the independent registered public accounting firm’s letters to the Audit Committee;
 
The independence and qualifications of the independent registered public accounting firm;
 
The compensation of the independent registered public accounting firm;
 
The performance of our internal audit function;
 
Critical audit matters of the company; and
 
Any significant proposed accounting changes.
Our Board of Directors has determined that Messrs. Merriman, Chapman and McLaughlin, and Dr. Allen qualify, and that Ms. Kelly qualified during her tenure as audit committee financial experts, as defined in Item 407(d) of Regulation S-K, and that all members of the Audit Committee are financially literate under the current listing standards of the NYSE and meet the SEC independence requirements for audit committee membership.
*Christie B. Kelly resigned from our Board of Directors upon her appointment as our Executive Vice President, Chief Financial Officer and Treasurer in January 2021.
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COMPENSATION COMMITTEE
 
 
 
Responsibilities
Members:

Priya Cherian Huskins (Chair)
Gerardo I. Lopez
Michael D. McKee
Gregory T. McLaughlin

Independent: All
Meetings in 2020: 8
Review and approve remuneration levels for our executive officers;
Review significant employee benefits programs;
Establish and administer executive compensation programs;
Conduct an annual review of our compensation philosophy and incentive programs to ensure they reflect the company’s risk management philosophies, policies and processes;
Conduct an annual review of and approve the goals and objectives relating to the compensation of the CEO, including a performance evaluation based on such goals and objectives to help determine and approve his compensation;
Review and approve all executive officers’ severance arrangements as applicable;
Manage and annually review executive officer short-term and long-term incentive compensation;
Set performance metrics under all short-term and long-term incentive compensation plans as appropriate; and
Review the compensation of members of our Board of Directors.
Our Board of Directors has determined that all of the members of the Compensation Committee are “independent” within the meaning of our director independence standards, and the NYSE director independence standards (including those applicable to Compensation Committee members), and are “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act. The Compensation Committee may delegate any or all of its responsibilities to a subcommittee of the Compensation Committee to the extent permitted by applicable law.

NOMINATING/CORPORATE
GOVERNANCE COMMITTEE
Responsibilities
Members:

Reginald H. Gilyard (Chair)
Priya Cherian Huskins
Michael D. McKee
Ronald L. Merriman

Independent: All
Meetings in 2020: 4
Provide counsel to our Board of Directors on a broad range of issues concerning the composition and operation of the Board of Directors;
Develop and review the qualifications and competencies required for membership on our Board of Directors;
Review and interview qualified candidates to serve on our Board of Directors;
Oversee the structure, membership, and rotation of the committees of our Board of Directors;
Oversee environmental, social, and governance issues;
Assess the effectiveness of the Board of Directors and executive management;
Oversee succession planning for our executive management;
Review and consider developments in corporate governance to ensure that best practices are being followed; and
Board refreshment.
As part of these responsibilities, the Nominating/Corporate Governance Committee annually solicits input from each member of the Board of Directors to review the effectiveness of its operation and all committees thereof. The review consists of an assessment of its governance and operating practices, which includes our Corporate Governance Guidelines that, as more fully described below, govern the operation of the Board of Directors.
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Corporate Governance
We believe a company’s reputation for integrity and serving its stockholders responsibly is of critical importance. We are committed to managing the company for the benefit of our stockholders and are focused on maintaining good corporate governance.
Corporate Governance Guidelines
Our company maintains Corporate Governance Guidelines that promote the functioning of the Board of Directors and its committees and set forth expectations as to how the Board of Directors should operate. The guidelines include information about the composition of the Board of Directors, orientation and continuing education, director compensation, Board meetings, Board committees, management succession, evaluation and compensation of key executive officers (which includes all named executive officers), expectations of directors, and information regarding the annual performance evaluation of the Board of Directors. A current copy is available on our company’s website at www.realtyincome.com/investors/corporate-governance.
Code of Business Ethics
We maintain a Code of Business Ethics that applies to our directors, officers, and other employees, and addresses items such as (i) our policy on political contributions, (ii) disclosures and financial reporting, and (iii) protection and use of company assets. The Board of Directors adopted the Code of Business Ethics to codify and formalize certain of our long-standing policies and principles that help ensure our business is conducted in accordance with the highest standards of ethical behavior. We conduct annual training with our employees regarding ethical behavior and require all employees to acknowledge the terms of,
Whistleblower Policy

Our Board of Directors oversees the company’s “whistleblower” policy, which outlines a procedure for all interested parties, including employees, to submit confidential complaints, concerns, unethical business practices, violations or suspected violations for any and all matters pertaining to accounting, internal control, or auditing.
and abide by, our Code of Business Ethics. The full text of our Code of Business Ethics is available on our company’s website at www.realtyincome.com/investors/corporate-governance. We intend to disclose any future amendments to, or waivers of, certain provisions of our Code of Business Ethics applicable to our officers and directors on our website, within five business days following such amendment or waiver, or as otherwise required by the SEC or the NYSE.
Anti-Hedging and Anti-Pledging Policies
To ensure proper alignment with our stockholders, we have established policies that prohibit our directors, officers, other employees, and their family members from engaging in any transaction that might allow them to realize gains from declines in our securities. Specifically, we prohibit our directors, officers, employees, and their family members from engaging in transactions using derivative securities, short selling our securities, trading in any puts, calls or covered calls, writing purchase or call options and short sales, or otherwise participating in hedging, “stop loss,” or other speculative transactions involving our securities. In addition, margin purchases of our securities and pledging any of our securities as collateral to secure loans is prohibited. This prohibition means that our directors, officers, employees, and their family members are not permitted to hold our securities in a “margin account” nor are they permitted to pledge any of our securities for any loans or indebtedness.
Clawback Policy
Our Board of Directors has voluntarily adopted a formal clawback policy that applies to certain outstanding compensation awards and will apply to future awards. Our clawback policy provides that the company may recover certain cash and/or equity-based incentive compensation paid or granted to an executive officer during the three-year period preceding a “triggering event.” A “triggering event” includes:
(i)
a decision by the Audit Committee to effect an accounting restatement of previously published financial statements caused by material non-compliance by the company with any financial reporting requirement under the federal securities laws due to fraud, misconduct, negligence, or lack of sufficient oversight on the part of any named executive officer, and/or
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(ii)
a decision by the Compensation Committee that one or more performance metrics used for determining previously paid compensation was incorrectly calculated and, if calculated correctly, would have resulted in a lower payment to one or more executive officers.
The requirement to repay the incentive compensation that is recoverable under this policy shall only exist if the Board of Directors has actively taken steps to evaluate restating the company’s financial statements or its operating results, or recalculating other associated metrics prior to the end of the fifth year following the year in question. The company will not be bound by the three-year recoupment period or this five-year limitation in cases involving fraud or intentional misconduct. As applicable SEC regulations are adopted, we will reassess our clawback policy and implement appropriate changes to ensure that our policy is fully compliant with SEC regulations.
Company Culture and Employees
We put great effort into cultivating an inclusive company culture. We are one team, and together we are committed to providing an engaging work environment centered on our values of integrity, transparency, respect, and humility. We hire talented employees with diverse backgrounds and perspectives and work to provide an environment with regular open communication where capable team members have fulfilling careers and are encouraged to engage with and make a positive impact with business partners and in the communities in which we operate. We invest in our employees’ development and training, providing access to online learning, a mentorship program, professional development opportunities and a leadership development program.
Stockholder Engagement
During 2020, we continued to engage and interact with our stockholders through various means of communication, including virtual meetings and conferences, phone calls and emails. We believe engaging with our stockholders on an ongoing basis is important to understand what is important to them and ensure best practices.
Our outreach efforts for the 2021 proxy season included (i) reaching out to and (ii) holding engagement calls with the governance teams and/or portfolio management teams of our stockholders representing approximately 51% and 30% of our outstanding shares of common stock as of September 30, 2020, respectively. In addition to our internal engagement team, our Board’s Non-Executive Independent Chairman, Michael D. McKee, participated in certain of our calls, which provided stockholders direct access to the Board of Directors. During our conversations with stockholders, we discussed various topics, including:
Environmental, social, and governance considerations;
Diversity, equality and inclusion;
Executive compensation;
Board refreshment;
Board composition and structure; and
Company culture.
We report the details of our conversations and communication with stockholders to our Nominating/Corporate Governance Committee, Compensation Committee, and Board of Directors. This dialogue allows our Directors to hear what is most important to our stockholders and share perspectives on our compensation and governance processes. The Board of Directors considers the input provided by our stockholders and our advisors as it reviews and considers enhancements to its processes and disclosures.
While we believe that stockholders have been satisfied with the company’s current programs, the Board of Directors considers stockholder feedback and responds in the best interests of the company.
Director Selection Process
Director Qualifications
Director qualifications are determined by what the Nominating/Corporate Governance Committee believes to be the essential competencies required to effectively serve on the Board of Directors. The Nominating/Corporate Governance Committee seeks to include on our Board of Directors a complementary mix of professionals with the following qualities, skills, and attributes:
Business and professional background;
Diversity in background, expertise, perspectives, and thought;
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History of leadership or contributions to other organizations;
Functional skill set and expertise;
General understanding of marketing, finance, accounting, corporate governance, federal securities and other relevant laws and regulations, international experience, and other elements relevant to the success of a publicly-traded company in today’s business environment;
Experience as a member of the board of directors of another publicly-held company;
Commitment to devoting the time and effort necessary to be a responsible and productive member of the Board of Directors; and
Ability to perpetuate the success of the business and represent stakeholder interests through the exercise of sound business judgment.
Identifying and Evaluating Nominees for Directors
Our Corporate Governance Guidelines set forth the process by which our Nominating/Corporate Governance Committee identifies and evaluates nominees for our Board of Directors. The Nominating/Corporate Governance Committee first evaluates the current members of our Board of Directors to identify nominees for directors. Current members who are willing to continue service and who have qualifications and skills that are generally consistent with the Nominating/Corporate Governance Committee’s criteria for Board of Directors service are generally re-nominated.
As to new candidates, the Nominating/Corporate Governance Committee will generally poll members of our Board of Directors and members of executive management for their recommendations. The Nominating/Corporate Governance Committee has discretion to retain a search firm to assist with identifying new candidates for membership on our Board of Directors if deemed appropriate. An initial slate of candidates will be presented to the Chair of the Nominating/Corporate Governance Committee, who will then make an initial determination as to the qualification and fit of each candidate. Final candidates will be interviewed by one or more members of the Nominating/Corporate Governance Committee and other directors. The Nominating/Corporate Governance Committee will then approve final director candidates and, after review and deliberation of all feedback and data, will make its recommendation to our Board of Directors. Recommendations received from stockholders are subject to the same criteria as candidates nominated by the Nominating/Corporate Governance Committee and will be considered accordingly.
Board Refreshment
Our Board of Directors remains committed to active board refreshment to ensure optimal board structure, composition and the exercise of sound business judgment in discharging the Board’s responsibilities in accordance with evolving standards and practices. We seek to add directors who contribute to diversity of background, expertise, perspective, age, gender and ethnicity. Throughout 2020 we maintained a diverse Board of Directors, of which 30% identified as female and 40% were from underrepresented communities. The Nominating/Corporate Governance Committee aspires to obtain a desired mix of skills, experience, and diversity relevant to the company’s strategic direction and operations while leveraging the deep institutional knowledge and valuable insight associated with the Board’s more tenured directors. Our focus is to have a board that continues to deliver a high standard of performance and governance expected by investors.
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(1)
We define underrepresented communities in accordance with California Assembly Bill No. 979 as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.” We have captured individuals who self-identify as South Asian or Indian under the “Asian” category.
Stockholder Recommendations
The Nominating/Corporate Governance Committee’s policy is to consider candidates recommended by our stockholders. The stockholder must submit proof of Realty Income stock ownership along with a detailed résumé of the candidate and an explanation of the reasons why the stockholder believes the candidate is qualified for service on our Board of Directors. The stockholder must also demonstrate how the candidate satisfies our Board of Directors’ criteria and provide such other information about the candidate as would be required by the SEC rules to be included in a proxy statement, as well as our Bylaws. The consent of the candidate must be included along with a description of any arrangements or undertakings between the stockholder and the candidate regarding the recommendation. All communications are to be directed to the Chair of the Nominating/Corporate Governance Committee and sent to the address noted under “Communications with the Board” in this Proxy Statement on page 33.
A stockholder desiring to recommend a candidate for consideration by the Nominating/Corporate Governance Committee must deliver the recommendation along with the information noted above between November 2, 2021 and December 2, 2021 (not more than 150 days nor less than 120 days prior to the first anniversary of the date the company’s Proxy Statement is released to stockholders for the previous year’s annual meeting of stockholders) in order to be considered timely for consideration at next year’s annual meeting of stockholders. See “Stockholder Proposals for our 2022 Annual Meeting” in this Proxy Statement on page 79. Properly submitted stockholder recommendations will be evaluated by the Nominating/Corporate Governance Committee using the same criteria used to evaluate other director candidates.
Proxy Access
The company’s stockholders also possess the right to nominate candidates for election to the Board through the “proxy access” provisions of our Bylaws. We have adopted a proxy access right for stockholders, pursuant to which an eligible stockholder, or a qualifying group of up to 20 stockholders, owning at least 3% of our outstanding shares of common stock continuously for at least three years, may nominate up to the greater of two directors or the largest whole number that does not exceed 20% of the number of directors up for election as of the last day in which a proxy access nomination may be submitted under our Bylaws, for inclusion in our proxy materials, subject to complying with the requirements contained in Article III, Section 15 of our Bylaws.
Board Independence
Our Board of Directors has determined that each of our current directors, except for Mr. Roy, has no material relationship with us (either directly or indirectly through an immediate family member or as a partner, stockholder or officer of an organization that has a relationship with us) and is “independent” within the meaning of our director independence standards and NYSE director independence standards. Our Board of Directors established and employed categorical standards, which mirror NYSE independence requirements, in determining whether a relationship is material and thus would disqualify a director from being independent.
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Board of Directors and Corporate Governance
Non-Executive Independent Chairman of the Board
The Nominating/Corporate Governance Committee also evaluates the Board of Directors leadership structure. Since 1997, the positions of Non-Executive Chairman of the Board of Directors and CEO have been separate in recognition of the differences between the two roles. Mr. McKee serves as our Non-Executive Chairman of the Board of Directors and presides as lead independent director, while Mr. Roy serves as our CEO. The Board of Directors believes this is the most appropriate structure because it enables the independent directors to participate meaningfully in the leadership of our Board of Directors while utilizing most efficiently the leadership skills of both Messrs. McKee and Roy. In addition, separating the roles of Non-Executive Chairman and CEO allows our Non-Executive Chairman to serve as a liaison between the Board of Directors and executive management, while providing our CEO with the flexibility and focus needed to oversee our operations.
Board Role in Risk Oversight
Our Board of Directors has overall responsibility for risk oversight with a focus on the more significant risks facing our company, which included the impact of COVID-19 during 2020. The Board of Directors reviews and oversees our enterprise risk management (ERM) program, which is a company-wide program designed to effectively and efficiently identify and assess management’s visibility into critical company risks and to facilitate the incorporation of risk considerations into decision making. The ERM program does this by clearly defining risks facing the company and bringing together executive management to discuss these risks. This promotes visibility and constructive dialogue around risk at the executive management and Board levels, and facilitates appropriate risk response strategies. Throughout the year, as part of the ERM program, management and the Board of Directors jointly discuss major risks that face our business.
While the Board oversees the overall risk management process for the Company, each of the Board's committees also assists the Board in this oversight with respect to the following risks:
The Audit Committee oversees our risk policies and processes relating to the financial statements and financial reporting procedures, focusing on internal controls, as well as key credit risks, liquidity risks, cybersecurity risks, information technology risks, data privacy risks, market risks and compliance, and the guidelines, policies and procedures for monitoring and mitigating those risks and discuss major enterprise-level risk exposures;
The Compensation Committee monitors the risks associated with management resources and structure, including evaluating the effect the compensation structure may have on risk decisions; and
The Nominating/Corporate Governance Committee oversees the risk related to our governance structure and processes and risks arising from related party transactions.
By assigning such responsibilities, the Board of Directors believes it can more effectively identify and address risk. Throughout the year, the Board of Directors, and each of the Board’s committees review and discuss specific risk topics in significant detail in their respective meetings. Given the importance of the CEO to the success of the company and generation of stockholder value, the Board of Directors ensures that the company is developing and nurturing a pipeline of senior talent, including one or more individuals capable of becoming the CEO.
Compensation Risk Assessment
The Compensation Committee reviews our company-wide incentive programs to assess whether the incentive programs for all employees, including our named executive officers, encourage desirable behavior as it relates to our long-term growth, and reflect our risk management philosophies, policies and processes.
Named Executive Officers and Executive Vice Presidents. The total compensation is established after the Compensation Committee determines the appropriate performance metrics to best align the interests of management with the best interests of the company. The Short-Term Incentive Program metrics are based on financial, operational, and individual performance goals. The Long-Term Incentive Program metrics are primarily based on our TSR performance relative to our peers, and a value creation goal, and secondarily based on financial and operational goals. In addition, as previously discussed, we have adopted a clawback policy that enables us to recover incentive compensation awards in the event of negligence or misconduct directly related to a material restatement of our financial results, or miscalculated performance metrics that, if calculated correctly, would have resulted in a lower payment.
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All Other Employees. Other officer and non-officer employee compensation awards are unlikely to encourage the taking of unnecessary or excessive risks that could threaten long-term value creation. Management monitors the cash and equity incentive awards made to our employees and reviews those awards in light of the potential risks relative to the control environment, each respective employee’s responsibilities, and the general policies and procedures of our company. The Compensation Committee has sought to align the interests of our employees with that of our stockholders through grants of restricted stock and restricted stock unit awards, thereby giving employees additional incentives to protect and align with long-term value creation. Based on its evaluation, the Compensation Committee does not believe that the compensation programs give rise to any risks that are reasonably likely to have a material adverse effect on our company.
Meetings and Attendance
Our Board of Directors met 14 times during 2020. All directors attended at least 75% of the aggregate of (i) the total number of meetings of our Board of Directors while they were members of our Board of Directors, and (ii) the total number of meetings of the Committees of our Board of Directors on which such directors served during the period he or she served. Although we have no policy with regard to attendance of our directors at our annual meeting of stockholders, it is customary for, and we expect, all directors to attend. All members of our Board of Directors attended our 2020 annual meeting of stockholders.
To ensure free and open discussion among the independent directors, only independent directors attend executive sessions of our Board of Directors and Committee meetings unless, under certain circumstances, management is invited. As the Non-Executive Independent Chairman of our Board of Directors, Mr. McKee presided at each of the five executive sessions held during 2020.
Communications with the Board
Stockholders and other interested parties may communicate with the Non-Executive Chairman of our Board of Directors or with the non-employee directors, as a group, by either of the following methods:
Email:
Non-Executive Chairman of the Board of Directors
c/o Corporate Secretary
mbushore@realtyincome.com
Mail:
Non-Executive Chairman of the Board of Directors
c/o Corporate Secretary
Realty Income Corporation
11995 El Camino Real
San Diego, CA 92130
All appropriate correspondence will be promptly forwarded by the Corporate Secretary to the Non-Executive Chairman of our Board of Directors.
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Director Compensation
The Compensation Committee is responsible for reviewing the compensation of members of the Board of Directors. Compensation for the independent directors of our Board of Directors for 2020 consisted of a base annual cash retainer, plus additional cash retainers for service as the Non-Executive Chairman or Chairperson of one of the committees of our Board of Directors in amounts as set forth below. In addition, each independent director receives an annual equity retainer based on a fixed number of shares provided for in the 2012 Incentive Award Plan. Board of Director compensation for 2020 was unchanged from the 2019 program.
POSITION HELD
ANNUAL EQUITY
GRANT (IN SHARES)(1)
ANNUAL CASH
RETAINER(2)
Board of Directors – Member (including Non-Executive Chair)
4,000
$25,000
Board of Directors – Non-Executive Chair
125,000
Audit Committee Chair
25,000
Compensation Committee Chair
25,000
Nominating/Corporate Governance Committee Chair
10,000
(1)
The value of the annual equity retainer is variable, based on the closing share price on the date of grant.
(2)
Effective January 1, 2021, the annual cash retainer for the Audit Committee Chair increased to $30,000 and the Nominating/Corporate Governance Committee Chair increased to $15,000.
Our directors received the following aggregate amounts of compensation for the year ended December 31, 2020:
NAME
FEES EARNED OR
PAID IN CASH
STOCK
AWARDS(1)
ALL OTHER
COMPENSATION(2)
TOTAL
Kathleen R. Allen, Ph.D.(3)
$25,000
$206,680
$
$231,680
A. Larry Chapman(3)
25,000
206,680
231,680
Reginald H. Gilyard(3)
35,000
206,680
241,680
Priya Cherian Huskins(3)
50,000
206,680
256,680
Christie B. Kelly(3)
25,000
206,680
231,680
Gerardo I. Lopez(3)
25,000
206,680
231,680
Michael D. McKee(3)
150,000
206,680
356,680
Gregory T. McLaughlin(3)
25,000
206,680
10,000
241,680
Ronald L. Merriman(3)
50,000
206,680
256,680
Sumit Roy(4)
(1)
On May 12, 2020, the date of our 2020 Annual Meeting of Stockholders, each non-employee director at that time received 4,000 shares of restricted stock with a grant date fair value of $206,680 which is calculated by multiplying the 4,000 shares by the closing market price per share of our common stock on May 12, 2020 of $51.67, as prescribed by Accounting Standards Codification Topic 718. All of these restricted stock grants vest according to the vesting schedule described below under “Stock Awards for Directors” and include dividends paid from the date of grant.
(2)
Amount represents the annual retainer of $10,000 for serving as the director of Crest Net Lease, Inc. (“Crest”), a wholly-owned subsidiary of Realty Income.
(3)
As of December 31, 2020, the non-employee directors did not hold any stock options. Other than Messrs. Chapman, Gilyard, Lopez, and Ms. Kelly, who held 667, 8,001, 8,001 and 6,667 shares of unvested restricted stock, respectively, the non-employee directors did not hold any shares of restricted stock.
(4)
Mr. Roy, our President, Chief Executive Officer and Director, did not receive any compensation for his services on our Board of Directors or as a director of Crest during 2020. His compensation is reflected as part of the “Summary Compensation Table” on page 60.
Stock Awards for Directors
The 2012 Incentive Award Plan provides that upon the initial election to our Board of Directors, and at each annual meeting of stockholders thereafter, if the director continues to serve as a director after the meeting, each non-employee director is automatically granted 4,000 shares of restricted stock. This annual equity grant of 4,000 shares is specifically provided for in the 2012 Incentive Award Plan, which has been approved by our stockholders. Our proposed 2021 Plan similarly provides for these automatic grants and vesting schedules. See Proposal 4, “Approval of the Realty Income Corporation 2021 Incentive Award Plan.” For 2020, approximately 82% of director compensation was in the form of restricted shares of the company's stock, which effectively
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Director Compensation
aligns the interests of our Board with those of our stockholders. The vesting schedule for restricted shares granted to non-employee directors is as follows and is subject to the director’s continued service through each applicable vesting date:
YEARS OF SERVICE
VESTING
< 6 years
33.33% increments on each of the first three anniversaries of the grant date
6 years
50% increments on each of the first two anniversaries of the grant date
7 years
100% vested on the first anniversary of the grant date
≥ 8 years
Immediately
Other Payments for Directors
The members of our Board of Directors are also entitled to reimbursement of their travel expenses incurred in connection with attendance at Board of Directors and Board committee meetings. Additionally, the members of our Board of Directors are reimbursed for expenses incurred in connection with attending continuing education programs and conferences to assist them in remaining abreast of developments in corporate governance and other critical issues relating to the operation of public company boards.
Director Stock Ownership Guidelines
Our non-employee directors are subject to stock ownership guidelines. Under these guidelines, each non-employee director is required to hold stock valued at no less than five times the amount of the annual cash retainer of $25,000 paid to such director for service as a member of the Board of Directors, without reference to committee or chair service. The current stock ownership goal for each of our non-employee directors is five times their annual cash retainers as of December 31, 2020 of $25,000, or $125,000, divided by the closing price per share of our common stock as of December 31, 2020 of $62.17. This equals a minimum share ownership requirement of 2,011 shares.
All vested and unvested restricted stock awards qualify towards satisfaction of the requirement. For any new director, compliance with the guidelines will be required within five years after being elected to the Board of Directors. As of December 31, 2020, each director subject to the guidelines met or exceeded the stock ownership requirements.
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Information about our Executive Officers
The following table sets forth certain information as of the record date for the Annual Meeting of March 12, 2021 concerning our executive officers:
NAME AND CURRENT TITLE
AGE
BUSINESS EXPERIENCE
Sumit Roy
President and Chief
Executive Officer
51
Mr. Roy’s business experience is set forth in this Proxy Statement under “Director Nominees” on page 20.
Michael R. Pfeiffer
Executive Vice
President, Chief
Administrative Officer
60
Mr. Pfeiffer has been our Chief Administrative Officer since February 2019. He joined us in 1990 and served as Corporate Counsel until 1995, when he was named General Counsel and Secretary. Mr. Pfeiffer left us in September 2001 and served as Executive Vice President and General Counsel for Westfield Corporation, Inc., a retail shopping mall owner, until May 2002, at which time he returned to us as Executive Vice President, General Counsel and Secretary and served in this role until the January 2021 announcement of his planned retirement on or around June 30, 2021. Prior to joining us, Mr. Pfeiffer was in private practice with a law firm specializing in real estate transactional law and served as associate counsel with First American Title Insurance Company. He is a licensed attorney and member of the State Bar of California and Florida. Mr. Pfeiffer is a licensed Real Estate Broker in California and holds the real estate officer license for us.
Christie B. Kelly
Executive Vice
President, Chief
Financial Officer,
and Treasurer
59
Ms. Kelly served on our Board of Directors from November 2019 to January 19, 2021, at which time she resigned from the company’s Board of Directors and assumed the role of Executive Vice President, Chief Financial Officer, and Treasurer. Prior to joining us, Ms. Kelly served as the Global Chief Financial Officer at Jones Lang LaSalle Incorporated (2013-2018), Executive Vice President and Chief Financial Officer at Duke Realty Corporation (2009-2013) and Senior Vice President, Global Real Estate at Lehman Brothers.
Neil M. Abraham
Executive Vice
President, Chief
Strategy Officer
50
Mr. Abraham has been our Executive Vice President, Chief Strategy Officer since May 2018. He served as Executive Vice President, Chief Investment Officer from November 2015 to May 2018. Prior to that, he was our Senior Vice President, Investments, a position he held from April 2015 to November 2015. Prior to joining us, Mr. Abraham was a Portfolio Manager for equity and mortgage REITs at AllianceBernstein – Global Equities in New York (2007-2015). Prior to joining AllianceBernstein, he held positions as Associate Principal for McKinsey & Company, and Vice President, Fixed Income Derivatives at Salomon Brothers.
Mark E. Hagan
Executive Vice
President, Chief
Investment Officer
54
Mr. Hagan has been our Executive Vice President, Chief Investment Officer since May 2018. Prior to joining us, Mr. Hagan served as Managing Director, Real Estate Investment Banking at RBC Capital Markets, LLC (2010-2018), Managing Director, Real Estate Investment Banking at Deutsche Bank Securities, Inc. (2005-2009), and Director, Real Estate Investment Banking at Merrill Lynch & Co., Inc. (1998-2005).
Michelle Bushore
Executive Vice
President, Chief
Legal Officer,
General Counsel
and Secretary
53
Ms. Bushore has been our Executive Vice President, Chief Legal Officer, General Counsel and Secretary since February 2021. Prior to joining us, Ms. Bushore served as Executive Vice President, General Counsel, Chief Legal & Risk Officer and Corporate Secretary at Caesars Entertainment, Inc. (2018-2020), and Deputy General Counsel and Corporate Secretary at Monsanto (2016-2018), as well as Chief Legal Officer of The Climate Corporation. Earlier, she was in private practice with Latham & Watkins LLP.
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Information about our Executive Officers
NAME AND CURRENT TITLE
AGE
BUSINESS EXPERIENCE
Benjamin N. Fox
Executive Vice
President, Asset
Management and
Real Estate
Operations
41
Mr. Fox has been our Executive Vice President, Asset Management and Real Estate Operations since January 2018. He joined us in 2007 and served as Senior Vice President, Asset and Portfolio Management (2015-2017), Vice President, Asset Management (2013-2015), Vice President of Strategic Investments (2011-2013), and Acquisitions Director (2007-2011) before being promoted to his current position. Prior to joining us, Mr. Fox worked in investment banking at JPMorgan and in merchant banking at Cappello Capital.
Sean P. Nugent
Senior Vice
President,
Controller
48
Mr. Nugent served as our interim Principal Financial Officer and Treasurer from January 2020 to January 2021. He has been our Senior Vice President, Controller since 2017. He joined us in 2006 and served as Accounting Manager before being promoted to Associate Vice President, Assistant Controller, in 2012 and to Vice President, Controller in 2014. Prior to joining us, Mr. Nugent worked in various accounting positions for a number of San Diego companies. Mr. Nugent is a licensed Certified Public Accountant in California.
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Executive Compensation
Compensation Discussion and Analysis
This section discusses the compensation policies and programs for the following executive officers and former executive officer of the company (the named executive officers or NEOs):
NAME
CURRENT TITLE
Sumit Roy
President and Chief Executive Officer
Michael R. Pfeiffer(1)
Executive Vice President, Chief Administrative Officer
Neil M. Abraham
Executive Vice President, Chief Strategy Officer
Mark E. Hagan
Executive Vice President, Chief Investment Officer
Sean P. Nugent(2)
Senior Vice President and Controller, Former Interim Principal Financial Officer and Treasurer
Paul M. Meurer(2)
Former Executive Vice President, Chief Financial Officer and Treasurer
(1)
Effective February 8, 2021, Michelle Bushore joined the company as our new Executive Vice President, Chief Legal Officer, General Counsel and Secretary. Mr. Pfeiffer, our previous Executive Vice President, Chief Legal Officer, General Counsel and Secretary who plans to retire on or around June 30, 2021, continues to serve as our Executive Vice President, Chief Administrative Officer, until his retirement.
(2)
Mr. Meurer served as Executive Vice President, Chief Financial Officer and Treasurer through January 29, 2020, at which time he transitioned into his role as a senior advisor to the company. Mr. Meurer departed from the company on March 31, 2020. Mr. Nugent is included as an NEO since he served the role of Interim Principal Financial Officer from January 30, 2020 until January 19, 2021, when Christie Kelly became our Executive Vice President, Chief Financial Officer and Treasurer. His 2020 base salary, cash incentive award and restricted stock award, each as disclosed in the tables that follow this section, were discretionary and based on the recommendation of our CEO.
Executive Summary
The primary objectives of our compensation program are to:

Align the interests of management with those of stakeholders;

Link executive compensation to the company’s short-term and long-term performance; and

Attract, motivate, and retain highly qualified executive officers through competitive compensation arrangements.
We continue to adhere to balanced compensation and corporate governance practices as set forth in the following table:
WHAT WE DO:
WHAT WE DO NOT DO:
DO align pay to performance by linking a substantial portion of compensation to the achievement of predefined performance metrics that drive stockholder value creation
X
Do NOT allow for uncapped award opportunities
DO cap payouts for awards under our Short-Term Incentive Program (STIP) and our Long-Term Incentive Program (LTIP)
X
Do NOT provide any perquisites to our named executive officers
DO set meaningful and measurable performance goals at the beginning of the performance period and evaluate such performance over both an annual and multi-year period on a relative basis
X
Do NOT permit executive officers or directors to pledge or hedge our securities
DO maintain stock ownership requirements for our directors, CEO, and other named executive officers
X
Do NOT incentivize excessive risk taking
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WHAT WE DO:
WHAT WE DO NOT DO:
DO perform an annual compensation risk assessment to ensure our compensation programs and policies do not encourage excessive risk-taking behavior
X
Do NOT pay accrued dividends on performance shares unless and until they vest
DO allow for the Board to “clawback” incentive compensation in the event of certain financial restatements or incentive miscalculations
X
Do NOT provide our named executive officers with tax gross-ups on perquisites or other benefits
DO employ the services of an independent compensation consultant that reports to the Compensation Committee of the Board of Directors
X
Do NOT provide for excise tax gross ups
DO grant performance-based equity, which is at-risk and not guaranteed
X
Do NOT provide supplemental or other retirement plans, other than a 401(k) plan
DO align certain ESG initiatives to individual performance goals, rigorously reviewed by the Compensation Committee of the Board of Directors
X
Do NOT have employment contracts with our NEOs
2020 Performance
It is important to review and acknowledge the company’s performance results for the year and management’s execution of our strategy to create long-term stockholder growth and support monthly dividend growth. We focus on the following key areas when executing our strategy:
Continued our disciplined acquisition strategy, targeting well-located, freestanding, single-tenant commercial properties at favorable risk-adjusted returns.
We sourced $63.6 billion in real estate acquisition opportunities and remained selective in our investment strategy, acquiring $2.3 billion, representing 3.6% of the amount sourced.
We remained committed to diversifying our portfolio by client, industry, geography, and property type, while maintaining excellent credit quality in the portfolio. As of December 31, 2020, 50.5% of our annualized rental revenue was generated from investment-grade clients, their subsidiaries or affiliated companies.
Actively managed our portfolio to further enhance stockholder value
We achieved a strong year-end occupancy of 97.9%.
We recaptured 100% of expiring rent on properties released during the year.
We disposed of approximately $262.5 million of non-strategic assets and redeployed that capital into properties that better fit our investment strategy and support our ongoing portfolio optimization efforts, which was further developed in response to the COVID-19 pandemic.
Maintained a conservative balance sheet
Our balance sheet remains strong with our Moody’s and S&P credit ratings at A3/A- with a stable outlook, respectively in 2020.
We ended the year with a fixed charge coverage ratio of 5.1x, increasing our coverage by 0.1x compared to last year.
Maintained a strong financial position through occasionally turbulent market conditions during 2020 and remain committed to being one of only a handful of REITs with at least two credit ratings of A3/A- or better by the major rating agencies.
Established a $1.0 billion commercial paper program during the year, which further strengthens our financial position by providing additional access to low-cost debt financing, and we completed our debut public issuance of Sterling-denominated unsecured notes.
Raised approximately $1.9 billion of equity capital and $2.2 billion of long-term fixed-rate debt, achieving record-low coupon rates in the REIT sector for the 5-year and 12-year unsecured notes we issued in December 2020.
Remained well-positioned for 2021 with a conservative capital structure and strong liquidity, ending the year with full availability on our $3.0 billion multi-currency revolving credit facility and no outstanding balance under our $1.0 billion commercial paper program.
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Executive Compensation
While our focus remains forward-looking as we seek to leverage our position of strength for continued growth, it is important to reflect on and learn from challenging circumstances like the COVID-19 pandemic. We are pleased that our top industries of convenience stores, grocery stores, drug stores, and dollar stores, which comprise over 37% of our annualized rental revenue, sell non-discretionary essential goods and were mostly unaffected by the pandemic. Our business operations led to growth in FFO, AFFO, and dividends, delivering favorable risk-adjusted returns for our stockholders.
The company’s positive performance results in a challenging economic environment, and successful execution of our strategy, are significant contributors in determining the compensation awarded to our executives. Despite the impact of the COVID-19 pandemic on our financial results for 2020, which was significant, we did not amend or otherwise change any portion of our compensation program, resulting in a lower payout. Our compensation program is structured to effectively link compensation to the achievement of certain company performance metrics in order to create alignment with the interests of our stockholders. We believe our performance in 2020 demonstrates the effectiveness over time of the execution of our strategic business plan and the alignment of our compensation program with our philosophy of rewarding executives for enhancing long-term stockholder value.
Favorable Say-on-Pay Vote
We provide our stockholders with an annual advisory “say-on-pay” vote on the compensation of named executive officers. Our stockholders continue to express substantial support for the compensation of our named executive officers, as demonstrated by 94.9% of the votes cast approving the advisory say-on-pay vote during 2020, and over 90% of the votes cast, approving the advisory say-on-pay vote during each year since say-on-pay has been effective in the U.S., dating back to 2011. This continued support of our compensation program, as demonstrated below, reflects a strong alignment with the company’s performance and long-term value creation for our stockholders. In 2020, we continued our practice of engaging and interacting with our stockholders through various means of communication. In this regard, we routinely interact with stockholders throughout the year about executive compensation and other matters.

Compensation Process
In addition to say-on-pay vote results and other feedback from stockholders, the Compensation Committee considers other factors in evaluating our executive compensation programs, including but not limited to:
The Compensation Committee’s assessment of the alignment of our compensation program with our financial and operational objectives;
Retention and recognition of individual contribution towards our performance;
Recommendations provided by its independent consultant; and
A review of peer data.
Each factor is evaluated in the context of the Compensation Committee members’ responsibility to act in the company’s best interests.
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Executive Compensation
Compensation Consultant
In 2020, the Compensation Committee retained FPL Associates, L.P. (FPL), a nationally-known independent executive compensation and benefits consulting firm specializing in the real estate industry, to provide general executive compensation consulting services. In addition, the consultant performs special executive compensation projects and consulting services, as directed by the Compensation Committee.
The consulting services provided by FPL include:

Evaluating the current compensation program design and guidelines for named executive officers and assisting in structuring a compensation program that meets the objectives outlined by the Compensation Committee;

Providing peer information to assist the Compensation Committee in selecting the appropriate peer group;

Benchmarking the compensation for the named executive officers against the appropriate peer group;

Identifying the appropriate mix of compensation components, including base salary, annual incentives, and short-term and long-term incentive compensation to ensure proper incentive alignment;

Conducting an annual independent risk assessment on behalf of the Compensation Committee to ensure that our executive compensation is appropriately structured;

Discussing market-based incentive programs, including performance metrics and targets, within our peer group companies, and providing guidance and recommendations for modifications to program elements to ensure competitiveness; and

Reviewing an overview of industry trends related to human capital across the entire real estate industry.
FPL reports to the Compensation Committee and works with management as directed by the Compensation Committee. The Compensation Committee retains the right to terminate or replace FPL at any time. Pursuant to the Compensation Committee’s Charter, the Compensation Committee has the power to engage other consultants and advisors as required.
Through review and consultation with FPL, the Compensation Committee assessed the independence of FPL in light of, among other factors, the independence factors established by the NYSE. As a result of this assessment, the Compensation Committee has determined that FPL’s work raised no conflict of interest currently or during the year ended December 31, 2020.
Peer Group Data
The Compensation Committee uses comparison data from various companies it considers peers as a guide in its review and determination of base salaries, cash bonus payments, equity awards, and long-term performance awards. Prior to approving the 2020 incentive compensation program, the Compensation Committee reviewed peer group data to assist in its determination of total target direct compensation (on an aggregate and individual basis), as well as the appropriate mix of equity versus cash, short-term versus long-term, and performance-based versus time-based awards to be paid or granted for 2020 performance. The Compensation Committee evaluates whether the compensation elements and levels that are provided to our named executive officers are generally appropriate relative to the compensation elements and levels provided to their counterparts at peer companies, in light of our performance relative to peers and in light of each named executive officer’s contribution to performance. This approach allows us to respond to competitive dynamics in the market and provides us with the flexibility to maintain and enhance our named executive officers’ engagement, focus, and motivation.
2020 Peer Group for 2020 Compensation Decisions
The Compensation Committee, with the help of FPL, annually reviews the composition of our peer group and the criteria and data used in compiling our peer group to ensure that each company’s size and operations remain comparable to ours. Given our company’s continued growth, and that we have been above the median of our peer group for the past several years, the Compensation Committee determined that substitutions were warranted to ensure, among other factors, that our total and equity market capitalization remained near the median of the peer group for 2020. As we continue to grow in size as one of the largest REITs in the industry, and continue to be the largest net lease REIT, it has become increasingly difficult to include other net lease companies in our peer group due to their relative size. Our peer group for 2020 includes W.P. Carey and VEREIT, which are the next-largest companies in the net lease industry. Combined, their equity market capitalization is less than ours. Alexandria Real Estate Equities, Inc., Equity Residential, Public Storage, and Simon Property Group, Inc. were added to incorporate additional appropriately sized, best-in-class S&P 500 REITs, and a similar level of operational
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intensity. Equinix, Inc., Federal Realty Investment Trust, National Retail Properties, Inc., Spirit Realty Capital, Inc., The Macerich Company, and UDR, Inc. were removed based on relative size and/or additional qualitative factors. Our 2020 Peer Group consists of the following 16 public real estate companies:
2020 PEER GROUP (1)
Alexandria Real Estate Equities, Inc.
Kimco Realty Corporation
Avalon Bay Communities, Inc.
Public Storage
Boston Properties, Inc.
Simon Property Group, Inc.
Digital Realty Trust, Inc.
Ventas, Inc.
Equity Residential
VEREIT, Inc.*
Essex Property Trust, Inc.
Vornado Realty Trust
Healthpeak Properties, Inc.
W.P. Carey, Inc.*
Host Hotels & Resorts, Inc.
Welltower, Inc.
*
Denotes a net lease peer
(1)
With the exception of the net lease peers, the remainder of the 2020 group consists of S&P 500 REIT’s.
The companies in our 2020 Peer Group focus on a variety of asset classes with similar lease types, and those that are similar to us in size in terms of total market capitalization (common and preferred stock, partnership units convertible into stock and long and short-term debt) and equity market capitalization (common stock and convertible partnership units). The Compensation Committee believes that total market and equity market capitalization are the most relevant indicators of size for real estate companies, acknowledging that other industries may use different indicators like revenue. Using total market capitalization and equity market capitalization to determine peer groups is consistent with real estate industry practices. The companies were selected so that our total and equity market capitalization remained near the median of the peer group. The companies selected range from 0.4x to 2.6x our size based on total market capitalization, with the weighted average of 1.3x our size, and 50% of companies selected were below our size based on total market capitalization as further demonstrated in the 2020 Peer Group Comparison chart below.
2020 Peer Group Comparison (1)
(in billions)


(1)
As of December 31, 2019, the 2020 Peer Group had total market capitalization ranging from approximately $14.5 billion to $84.0 billion, placing us in the 50th percentile of our peer group. In terms of equity market capitalization, we were in the 63rd percentile of our peer group. Data sourced from S&P Global Market Intelligence as of December 31, 2019.
The Compensation Committee evaluates our peer group annually and may make adjustments to this peer group to reflect changes in the size or operations of the company or our peers.
Management Involvement
In setting compensation for named executive officers in 2020, the Compensation Committee solicited input from the CEO concerning each of the named executive officers other than himself. In addition, from time to time, the Compensation Committee will direct management to work with the Compensation Committee’s consultant in providing proposals, program design, and compensation recommendations. Each year, the CEO provides the Compensation Committee with a report of the company’s operating and financial results for the past fiscal year relative to the company’s performance metrics. Mr. Roy also discusses his personal assessment of individual performance of each of the other named executive officers. In addition, at the request of the Compensation Committee, the CEO makes recommendations regarding salary and incentive compensation
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awards for each named executive officer other than himself. The Compensation Committee considers these recommendations and other factors as discussed above in making the final determinations.
Elements of Compensation
In structuring executive compensation, the Compensation Committee considers how each component of compensation motivates performance, promotes retention, and creates long-term stockholder value. Base salaries are primarily intended to attract and retain highly qualified executives and to reward them for their continued service. Annual incentive cash payments, equity awards, and long-term performance shares are designed to (i) directly reward performance, (ii) achieve specific strategic and operating objectives, and (iii) provide incentives to create long-term stockholder value. The majority of our equity incentives are intended to align named executive officers’ long-term interests with the best interests of the company although we believe they also play a role in helping us reward performance and attract and retain top executives.
The following table outlines the primary elements of our 2020 executive compensation program:

Incentive Programs and Performance Metrics
Each year, the Compensation Committee, with input from FPL, reviews the metrics underlying the short-term and long-term incentive programs, and considers various industry performance indicators, including GAAP and non-GAAP earnings metrics. The Compensation Committee believes that the current mix of operational, liquidity, and financial earning metrics used for the 2020 performance year aligns with our strategy to attain long-term financial stability that will support sustained cash flows beneficial to our stockholders. In 2020, consistent with peer group compensation practices, the Compensation Committee maintained STIP and LTIP programs with maximum payouts at 200% of target, which required a corresponding level of rigor relative to projections to achieve maximum performance to further motivate and reward outstanding performance. The composition of our programs are weighted heavily in equity, at 67% tied to equity for our CEO, including a portion of compensation tied to long term, three-year performance.
Total Target Direct Compensation
The Compensation Committee worked with FPL to determine the levels of total target direct compensation to achieve the appropriate balance between (i) cash and equity compensation, (ii) long-term and short-term compensation, (iii) performance-based and time-based equity, and (iv) fixed and variable or at-risk compensation. As an initial reference point, the Committee reviewed the median benchmark of each executive as well as the aggregate level of total target direct compensation. This process allows the Committee to ensure pay is competitive for the individual and account for the individual’s tenure and experience, as well as ensure that the total amount for our executive team is reasonable. The Compensation Committee reviewed the median and aggregate total target direct compensation within our peer group based on market data provided in January 2020 by FPL. When establishing total target direct compensation levels for each named executive officer set forth below, the Compensation Committee gave consideration and special emphasis to individuals’ personal contributions to the organization, as well as skill sets, qualifications, and experience, seeking to incentivize high performing named executive officers with competitive pay. After review and consideration, the Compensation Committee approved the following total target direct compensation and structure for 2020 compensation. Total
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target direct compensation for 2020 was composed of (i) base salary, (ii) target annual short-term incentive opportunity (awarded in cash), (iii) performance shares, and (iv) the annual grant of time-based restricted shares.
TOTAL TARGET DIRECT COMPENSATION(1)
EXECUTIVE
2019
2020
Sumit Roy(2)
$6,337,500
$7,500,000
Michael R. Pfeiffer
2,100,000
2,150,000
Neil M. Abraham
1,850,000
2,050,000
Mark E. Hagan
1,750,000
1,900,000
Total
$12,037,500
$13,600,000
(1)
Mr. Meurer’s departure from the company was announced on January 29, 2020. As a result, total target direct compensation for Mr. Meurer was not applicable for 2020.
(2)
Mr. Roy was promoted to CEO effective October 2018. As a newly promoted CEO, his 2019 total target direct compensation fell below the median of our 2019 peer group. After demonstrating success over his first full year as CEO, the Compensation Committee made adjustments to his total target direct compensation for 2020 to bring him into closer alignment with the median peer group.
CEO Total Target Direct Compensation
The Compensation Committee believes that a significant portion of executive compensation should be performance-based in order to best align management’s interests with the best interests of the company. In 2020, approximately 71% of our CEO’s total target direct compensation consisted of compensation that is performance-based on achievement of certain objective performance metrics. For our CEO, the Compensation Committee used the following structure for determining the various elements of direct compensation payable for 2020:

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Set forth below is a table that illustrates the application of the structure for 2020 compensation decisions for our CEO.
CEO ANNUAL CASH
CEO ANNUAL EQUITY
CEO TOTAL
ANNUAL
SALARY
TARGET STIP
CASH AWARD
TARGET LTIP
PERFORMANCE
SHARES
TIME-BASED
LTIP
RESTRICTED
SHARES
TOTAL TARGET
DIRECT
COMPENSATION
$900,000
$1,600,000
$3,750,000
$1,250,000
$7,500,000

General Note to Discussion of Pay Components
Some of the components of 2020 compensation disclosed in the following sections of this “Compensation Discussion and Analysis” section differ from the “Summary Compensation Table” on page 60. SEC rules require that the Summary Compensation Table include equity compensation in the year granted, while in our case, the Compensation Committee awards time-based restricted stock equity compensation after the performance year, upon the successful completion of the external year-end audit process. Therefore, time-based equity awards granted in February 2020 for the 2019 performance year are shown in the Summary Compensation Table as 2020 compensation. The time-based restricted stock equity awards for 2020 discussed in the following sections for all named executive officers will be included in the Summary Compensation Table in next year’s proxy statement.
Base Salaries
In connection with its review of fiscal 2019 performance, and in consideration of the increased responsibilities that come with the continued growth of the company, the Compensation Committee decided to increase the base salaries paid to our named executive officers commencing on January 1, 2020. When making its decision to increase 2020 salaries, the Compensation Committee sought to incentivize high-performing named executive officers with competitive pay. The increases to base salaries were approved to not only better align our named executive officers’ pay with competitive market pay practices, but also adjusted for individual experience, tenure, performance, and other qualitative factors. The 2019 and 2020 annualized base salaries are reflected in the table below.
NAMED
EXECUTIVE OFFICER
 
SALARIES FOR FISCAL YEAR
PRINCIPAL POSITION IN 2020
2019
2020
Sumit Roy(1)
President, Chief Executive Officer
$850,000
$900,000
Michael R. Pfeiffer
Executive Vice President, Chief Administrative Officer, General Counsel and Secretary
500,000
515,000
Neil M. Abraham
Executive Vice President, Chief Strategy Officer
410,000
475,000
Mark E. Hagan
Executive Vice President, Chief Investment Officer
410,000
430,000
Paul M. Meurer(2)
Former Executive Vice President, Chief Financial Officer and Treasurer
550,000
137,500
(1)
The increase in base salary for Mr. Roy from 2019 to 2020 was reflective of the multi-year phase-in approach by the Compensation Committee to bring him into alignment with the median peer group.
(2)
Mr. Meurer’s salary for 2020 is for the first three months of the year, as he departed from the company on March 31, 2020.
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Short-Term Incentive Program (STIP)
During February 2020, the Compensation Committee approved the 2020 STIP metrics, which is structured so that the named executive officers’ annual incentive awards closely align with the company’s operating and financial performance. The components of the 2020 STIP were as follows:
Objective Company Performance Criteria – Weighted 70%
Individual Performance – Weighted 30%

All of the compensation awarded under this program was at-risk.

No compensation was awarded for below-threshold performance and maximum payouts were capped at 200% of target.

Awards were paid entirely in the form of cash.
2020 STIP Performance Goals
AFFO per share
Why we believe this metric is important: We believe that AFFO per share, a non-GAAP financial measure, provides useful information to investors because it is a widely accepted industry measure of the operating performance of REITs that is used by industry analysts and investors who look at and compare those companies. In particular, AFFO per share is included in the compensation program because it provides an additional measure to compare the operating performance of REITs without having to account for differing depreciation assumptions and other unique revenue and expense items which we believe are not pertinent to measuring a particular company’s on-going operating performance. Therefore, we determined that AFFO per share is an appropriate performance metric, and that the most appropriate GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders per share.
How the Compensation Committee set the 2020 goal: In our 2020 public guidance at the time the performance goals were set, we projected AFFO per share in a range of $3.50 to $3.56. Our 2020 target performance was set at $3.53 per share, or the midpoint of our performance benchmark range. The range of $0.03 per share around target resulted in a threshold of $3.50 per share and a maximum of $3.56 per share. The threshold of $3.50 per share exceeded our generation of $3.32 in AFFO per share in 2019 by $0.18. The maximum score was set at the high end of our public guidance at the time the performance goals were set. Maximum performance would only be achieved if we exceeded the high end of such guidance.
How the company performed against the goal: AFFO per share for 2020 was $3.39, falling short of the $3.50 threshold. The shortfall was primarily due to a challenging economic environment from the COVID-19 pandemic and resulting negative impact to revenue. We recorded rental revenue reserves of $44.1 million, which primarily related to our theater assets. In addition, the COVID-19 pandemic pushed the timing of our acquisitions to later in the year. We completed 72% of our overall investment activity in the second half of 2020, of which 44% was in the fourth quarter, resulting in lower-than-expected earnings accretion from 2020 investments.
Despite the fact that the primary reason for not meeting the AFFO objective was the COVID-19 pandemic, the Compensation Committee did not adjust any of the goals that were previously set and, as a result, we attributed a 0% payout for 2020 to the AFFO performance objective.
Fixed Charge Coverage Ratio
Why we believe this metric is important: The fixed charge coverage ratio measures the ability of our earnings to cover our fixed charges, such as debt payments and interest expense. This calculation, which is not based on GAAP measurements, is one of our note covenants presented to investors to show our ability to incur additional debt under the terms of our senior notes and bonds, and is not a measure of our liquidity or performance. In particular, fixed charge coverage ratio is included in the compensation program because it is a measure of our balance sheet strength, and of our ability to effectively and conservatively manage our outstanding debt levels.
How the Compensation Committee set the 2020 goal: Our fixed charge coverage ratio was 5.0x at December 31, 2019. Factoring in a generally stable interest rate environment for the majority of 2019, the
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Compensation Committee increased the maximum metric to 5.0x for 2020. The target (4.5x) and threshold (4.0x) metrics were separated by 0.5x.
How the company performed against the goal: Our fixed charge coverage ratio at December 31, 2020 was 5.1x, resulting in performance at maximum. Our metric exceeded the target primarily due to declining global interest rates throughout 2020, which supported a reduction in our financing costs in 2020. In addition, we repaid $108.8 million in principal of high interest bearing mortgage debt and completed the early redemption of $250 million in principal of 5.75% notes due January 2021, driving further improvement in our coverage ratio. We continuously evaluate our capital strategy and optimize our financing allocation between equity and long-term unsecured debt.
Portfolio Occupancy
Why we believe this metric is important: The stability of operating revenue is fundamental to the business model of any dividend-paying entity. Within the REIT industry, this takes the form of stability of rental revenue secured by clients occupying the portfolio’s real estate assets. As a result, maintaining a sufficiently high occupancy rate is of vital importance to the health of the company’s business model and, as such, it is essential that the company orients its operating strategy towards maximizing asset utilization as measured by the portfolio occupancy metric.
How the Compensation Committee set the 2020 goal: The Compensation Committee set 2020 target performance for portfolio occupancy at 98.1%. Threshold was set at 97.2% portfolio occupancy, and high was set at 98.6% portfolio occupancy. In setting an occupancy target, the Compensation Committee considers many variables that impact the portfolio occupancy rate, including the lease expiration schedule, existing vacancy pool, industry trends, product mix of expiring and vacant properties, past vacant resolution activity, and expected market conditions. Given that some of these factors exhibit nonlinear variability, the company’s past occupancy rates are only partially descriptive of future occupancy rates. For example, historical variability in acquisition volume can lead to uneven clustering of expiration schedules, creating short-term fluctuations in occupancy rates that are not necessarily indicative of long-term trends. Additionally, market shifts at the industry and client levels may carry disproportionate occupancy impact at the portfolio level. Only by accounting for the dynamics affecting each of these variables and by reforecasting occupancy expectations on a regular basis can the company set reasonable targets that consider the primary drivers of resultant occupancy rates.
How the company performed against the goal: Our portfolio occupancy at December 31, 2020 was 97.9%, resulting in performance of 88.9% of target. Although COVID-19 may have contributed to additional portfolio stress that may not have occurred otherwise, the Asset Management team was able to adaptively navigate the environment to achieve the resulting 2020 year-end occupancy rate.
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Objective Company Performance Criteria—70%
The company performance criteria, weightings, and amounts that may be earned under the 2020 STIP, in addition to our actual performance and amounts earned for 2020 performance, are set forth in the following table:

(1)
Total weighted payout prior to individual performance was 70% .
(2)
AFFO per share is defined as Funds from Operations adjusted for unique revenue and expense items, which we believe are not as pertinent to the measurement of our ongoing operating performance, and is consistent with the presentation of AFFO in our public SEC filings. Please refer to Appendix A on page 81 for a reconciliation of AFFO to net income.
(3)
Performance in excess of maximum goals was capped at 200% of target for that measure.
The Compensation Committee believes these annual targeted operating and financial goals align with our strategy to attain long-term financial stability that will support sustained cash flows beneficial to our stockholders. The goals for the AFFO per share metric were increased from 2019 with the maximum payout equaling the top end of the company's AFFO per share earnings guidance range initially provided for 2020. The target goals for both the fixed charge coverage ratio, a liquidity metric, and portfolio occupancy, an operational metric, were also increased from 2019. These goals are established each year after reviewing the company’s financial and operating projections, including the level of upcoming lease expirations. For the fixed charge coverage ratio, the company attained maximum-level payouts. For portfolio occupancy ratio metrics, the company attained a payout between the threshold and target levels. The Compensation Committee believes that these goals remain rigorous, requiring the company to manage its capital structure thoughtfully, successfully access the capital markets, and actively resolve lease rollover to achieve payouts in excess of target for this metric.
Individual Performance – 30%
As a component of the STIP, individual performance is used by the Compensation Committee to reward individual goals achieved. The Compensation Committee used the following process to establish individual performance goals and utilized discretion in assessing individual performance at the end of the performance year:

At the beginning of 2020, our Compensation Committee worked with the CEO to formulate his individual performance objectives for the year and reviewed with the CEO the performance objectives for the other named executive officers. Through this process, the individual performance objectives for our CEO and the other named executive officers are preset for the year. Performance objectives are defined and measurable, and the Compensation Committee assesses progress against the objectives throughout the year.
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In November 2020, the Compensation Committee reviewed each named executive officer’s individual performance objectives.

The CEO evaluated each named executive officer’s performance, other than his own, and recommended to the Compensation Committee the percentages that should be earned under the individual performance component.

The Compensation Committee engaged in a discussion with the CEO regarding his recommendations and his assessments and made the final determination regarding this metric.

The Compensation Committee engaged in a review of the CEO’s performance as it relates to the company’s performance, as well as the state of our industry and market competitive practices, in determining the percentage that the CEO earned under his individual performance component.
The Compensation Committee considered, discussed and decided to incorporate the recommendations provided by the CEO for the individual performance percentages for the named executive officers other than himself. The percentages earned under the individual performance metric and the material factors considered are set forth below.
Sumit Roy - 200%
Mr. Roy actively engaged with stockholders and other constituencies to communicate our results and advanced the strategic vision that included an agile response to the global pandemic, continuing to build an international presence, $4.1 billion raised in capital, including our debut Sterling denominated unsecured bond issuance and an all-time low coupon rate in the REIT sector for 5-year and 12-year unsecured USD note issuances. Additionally, we had an active year on the acquisitions front, investing $2.3 billion in real estate, alongside another year of strong portfolio occupancy despite the challenges with the COVID-19 pandemic, particularly with our theaters and health clubs. Under Mr. Roy’s leadership, management thoughtfully managed the balance sheet, maintaining low leverage to effectively deal with the pandemic and position the company to continue to grow the dividend and earnings going forward. Mr. Roy was essential to our success via the following initiatives: (1) continued talent development through ongoing leadership development, (2) the cultivation of an inclusive culture, supported by several open dialogue sessions with African American employees and small group meetings with our broader employee groups, and (3) continued employee engagement surveys, which yielded more positive results than last year. Mr. Roy continues to advocate for our newly formed Sustainability Department, where we participated in several reporting platforms that will culminate in the release of our inaugural Sustainability Report. Additionally, we were added to the S&P 500 Dividend Aristocrats index in 2020, and became one of only three REITs recognized as having increased dividends for over 25 consecutive years. The Compensation Committee determined that his performance well exceeded his objectives.
Michael R. Pfeiffer - 185%
Mr. Pfeiffer’s objectives focused on strategy, leadership and operations. In the area of strategy, Mr. Pfeiffer continued his focus on international growth, optimizing our legal entity structure and creating diligence processes to mitigate potential risks. During 2020, Mr. Pfeiffer championed the Sustainability Department through broadening the depth, structure and rigor relating to ESG topics, including preparing for our initial Sustainability Report. During the year, the technology committee continued bringing focus and discipline to integration of technology platforms aimed at increasing efficiencies. In leadership, Mr. Pfeiffer positively promoted continued development of key employees within the legal, technology and internal audit areas and other employees within the organization. He developed an action plan to improve employee engagement between departments. He successfully provided oversight and legal expertise for the $2.3 billion of acquisitions closed during the year and approximately $4.1 billion of capital raised. He also continued to enhance the company’s risk management oversight. Based on the foregoing, the Compensation Committee determined that his performance exceeded his objectives.
Neil M. Abraham - 190%
Mr. Abraham focused on several key initiatives in 2020, most notably improving employee engagement, growing the company’s international platform, collaboratively creating the company’s predictive analytics platform, and supporting the development of DE&I and ESG initiatives. His team’s collective action plan to improve employee engagement through communication, transparency, and commitment to individual and joint success resulted in engagement scores that the team is very proud of. This engagement also manifested itself in the team’s dedication to the company’s success during the throes of the pandemic as it shifted gears to
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support efforts to engage with clients and understand their financials in real-time, thereby supporting the company’s rent and financial forecasts. In parallel, Mr. Abraham’s team worked closely with the Acquisitions and Asset Management & Real Estate Operations teams to design an “optimal portfolio” for the company, reflecting lessons learned during the pandemic. This was partly underpinned by the company’s new predictive analytics capability, which leverages machine learning and “big data” to provide risk analytics and asset level insights. These insights helped inform and accelerate the company’s investment activity during the year. This includes the investments made by the international platform in the U.K., where the team deployed almost $1 billion in its first full year and recruited a senior leader in anticipation of further European growth. The Compensation Committee determined that his performance exceeded his objectives.
Mark E. Hagan - 195%
Mr. Hagan successfully executed our investment strategy in 2020, driving the acquisition of approximately $2.3 billion of high-quality real estate properties at attractive yields, while remaining selective and disciplined with our investment strategy. This level of property acquisitions, the second highest in the company’s history when excluding mergers & acquisitions, was achieved despite the challenges presented by the COVID-19 pandemic. At the onset of the pandemic, Mr. Hagan immediately pivoted our acquisition focus and resources from growing the investment pipeline to assisting with other key cross-departmental initiatives, such as client outreach, rent collection and asset optimization, while simultaneously keeping the team actively engaged in maintaining our investment sourcing channels. This balance proved to be instrumental in enabling us to rapidly shift back to growth mode as soon as it became prudent to do so, quickly rebuild the investment pipeline, and complete approximately $1.7 billion of property acquisitions in the second half of the year. Mr. Hagan also played a key role in our initiative to review our investment strategy and optimal portfolio in light of the pandemic, and he successfully aligned our property acquisitions with such strategy, including increasing our investment in high-quality industrial properties. Mr. Hagan’s other key objectives included employee engagement and leadership/talent development. Mr. Hagan furthered employee engagement by implementing an action plan that focused on communication, connectivity, collaboration, inclusion, and a healthy work life balance; all of which took on greater importance while working remotely. As a result of these efforts, Mr. Hagan achieved stronger results in our 2020 Employee Engagement Survey than the already successful results he attained in the 2019 survey. The Compensation Committee determined that his performance exceeded his objectives.
The incentive opportunities and the total actual incentive award earned by each named executive officer for 2020 under the STIP are set forth in the table below. The 2020 target incentive opportunities were intended to be between 21% and 24% of each individual’s 2020 total target direct compensation level. The earned incentive award was paid in cash in February 2021. While the Compensation Committee believes that company performed well despite a challenging economic environment, we did not amend or otherwise change any portion of our compensation program. This resulted in a lower payout relative to historic trends under our STIP.
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2020 Incentive Opportunities and Earned Incentive Compensation under the STIP
 
INCENTIVE OPPORTUNITY
EARNED INCENTIVE COMPENSATION
NAMED
EXECUTIVE
OFFICER
TARGET
ANNUAL
INCENTIVE(1)
MAXIMUM
ANNUAL
INCENTIVE(1)
PERCENTAGE
OF TARGET
EARNED(2)
PERCENTAGE
OF MAXIMUM
EARNED(2)
ACTUAL 2020
INCENTIVE
EARNED
Sumit Roy
$1,600,000
$3,200,000
108.9%
54.4%
$1,742,222
Michael R. Pfeiffer