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

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☐		Soliciting Material Pursuant to Section 240.14a-12.

LIFE STORAGE, INC.

                                                                                                                   

(Name of Registrant as Specified in its Charter)

 

                                                                                                                   

(Name of Person(s) Filing Proxy Statement,

if other than Registrant)

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6467 Main Street

Williamsville, New York 14221

Fellow Shareholders,

As Life Storage’s independent board chair, I would like to take this opportunity to invite you to participate in our inclusive, virtual annual meeting and to reflect on some of the bigger picture and longer-term drivers of our business.

First, as I write this, the rapidly evolving coronavirus (COVID-19) situation continues to unfold and challenge businesses in virtually all industries. Rest assured that we are working diligently and taking all reasonable measures to protect our employees, customers, stakeholders and assets. I am proud of how our technology focus has increased the resilience of our platform and preparedness for challenges such as this. Our people and customers are the foundation of our business and maintaining a safe environment is paramount to our success. As such, our robust business continuity plans and IT platforms have enhanced our team’s ability to effectively operate and serve our customers during volatile and challenging times. I believe that the combination of our team, technology platforms and self-storage assets helps create stability and efficiency for our consumer and business customers as their needs evolve. Further, I am confident that those attributes as well as our diverse customer base, ample access to liquidity and strong balance sheet position us well to protect shareholder value in the coming months.

As a real estate investment trust in the self-storage sector, Life Storage may not seem to be a likely leader in technology, environmental and social innovation, but we believe we are:

 

•

We created and rolled out an industry-leading innovative digital, contact-free rental platform that enables customers to self-serve and transact with us in any manner that they choose—online, by phone or in-person, while supporting more efficient operations.

 

•

We are taking measures to protect the environment while simultaneously improving the resiliency of our portfolio and making our operations more cost effective. These include having certified sustainable green buildings and deploying eco-efficient lighting, HVAC units, roofing technologies and landscaping practices.

 

•

We provide an array of training opportunities and benefits to our diverse employees and are proud that almost 60% of our managers and employees are women.

 

•

We analyze feedback from digital and human channels to protect our 93% customer satisfaction score and strong history of customer and community safety and support.

 

•

Our governance is similarly strong: our diverse board is younger and shorter tenured than average; we avoid unpopular provisions such as staggered boards, poison pills and plurality voting, and we have good internal and external pay parity.

Each of these is consistent with our four-pillar growth strategy focused on: (1) expanding our footprint; (2) leveraging technology to engage customers and improve efficiency; (3) investing in talent and culture; and (4) driving profitable growth. In 2019, we furthered this strategy by selling more than 50 low-rental rate, low-growth stores and redeploying proceeds into higher growth properties with better rental rates in markets with more attractive demographics, such as Seattle and Baltimore. We achieved higher same-store operating margins, grew revenue and funds from operations, and realized a 21% total shareholder return in 2019.

On behalf of the Life Storage, Inc. management team and Board of Directors, as Chair of the Board, I thank you for your continued support and confidence in our team. We look forward to communicating more about our Company’s successes, how our management team will continue to achieve great results going forward, and how our performance impacts our governance and compensation considerations.

Sincerely,

Mark G. Barberio

Non-Executive Chair of the Board

April 17, 2020

 

6467 Main Street

Williamsville, New York 14221

Dear Shareholder:

The Notice and Proxy Statement that follows contain details about our 2020 Annual Meeting of Shareholders (the “Annual Meeting”). Your proxy is being solicited by the Board of Directors of the Company. You will note that the Board of Directors of the Company recommends a vote “FOR” the election of eight directors to serve until the 2021 Annual Meeting of Shareholders, “FOR” the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for fiscal year 2020, “FOR” the proposal to adopt the Company’s 2020 Outside Directors’ Stock Award Plan, and “FOR” the proposal to approve the compensation of the Company’s executive officers.

In an effort to exercise caution with regard to the ongoing public health impact of COVID-19, and to support the health and well-being of our shareholders, partners and employees, this year’s Annual Meeting will be a virtual meeting held exclusively online via live webcast, and will not be held at a physical location. You will be able to attend the Annual Meeting, vote your shares electronically, and submit questions in writing during the meeting by visiting www.virtualshareholdermeeting.com/LSI2020 and entering your unique voter identification number. Additional information regarding attending the Annual Meeting and voting your shares can be found in the Proxy Statement. The vote of every Shareholder is important, and we believe that hosting a virtual meeting will enable more of our Shareholders to attend and participate in the meeting since our Shareholders can participate from any location around the world with Internet access.

This Proxy Statement and form of proxy are first being made available to Shareholders on April 17, 2020. While we currently expect to hold the Annual Meeting on May 28, 2020 as planned, the uncertainties presented by the public health impact of COVID-19 could result in a change to the date of the Annual Meeting. We will notify Shareholders accordingly should we decide to change the date of our Annual Meeting as a result of the impact of COVID-19.

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

When:		Thursday, May 28, 2020 • 9:00 a.m. (E.D.T.)

 

 

NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of Life Storage, Inc. (the “Company” or “Life Storage”), which will be a virtual meeting held over the Internet, will be held on Thursday, May 28, 2020, at 9:00 a.m. (E.D.T.), to consider and take action on the following:

Items of Business:

 

1.		The election of the eight directors of the Company named in this Proxy Statement to hold office until the next Annual Meeting of Shareholders and until their successors are elected and qualified.
2.		The ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2020.
3.		A proposal to adopt the Company’s 2020 Outside Directors’ Stock Award Plan.
4.		A proposal to approve (on a non-binding basis) the compensation of the Company’s executive officers.
5.		The transaction of such other business as may properly come before the meeting or any adjournments thereof.

Record Date:

 

		FURTHER NOTICE IS HEREBY GIVEN that the stock transfer books of the Company will not be closed, but only Shareholders of record at the close of business on March 30, 2020 will be entitled to notice of the meeting and to vote at the meeting.

  Voting:

 

		Even if you plan to attend the Annual Meeting virtually, we ask you to please complete, sign and return the enclosed proxy card or vote your shares by telephone or over the Internet. The Company’s Annual Meeting will be a virtual meeting held over the Internet. If you will need special assistance at the meeting, please contact Life Storage Investor Relations at (716) 633-1850. Please note that the Annual Meeting will only be held virtually, and there will be no physical meeting.

The Company is furnishing its proxy statement, proxy and Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) to you electronically via the Internet, instead of mailing printed copies of such materials to each Shareholder. The Company has sent to its Shareholders a Notice of Internet Availability of Proxy Materials that provides instructions on how to access its proxy materials on the Internet, how you can request and receive a paper copy of the proxy statement, 2019 Annual Report and proxy for the Annual Meeting, and how to vote online at www.proxyvote.com. Shareholders can also call 1-800-579-1639 to request proxy materials or 1-800-690-6903 to vote by telephone.

By Order of the Board of Directors,

Andrew J. Gregoire

Secretary

Williamsville, New York

April 17, 2020

 

		Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 28, 2020     The Proxy Statement and Annual Report on Form 10-K for the  year ended December 31, 2019 are available at www.proxyvote.com.

6467 Main Street

Williamsville, New York 14221

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement and does not contain all the information that you should consider. You should read the entire Proxy Statement carefully before voting. We intend to mail proxy materials to our shareholders on or about April 17, 2020.

This Proxy Statement and the form of proxy are furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board of Directors” or the “Board”) of Life Storage, Inc. (the “Company”) for the 2020 Annual Meeting of Shareholders (the “Annual Meeting”) to be held virtually over the Internet on Thursday, May 28, 2020 at 9:00 a.m. (E.D.T.), and at any adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. No physical meeting will be held. You will be able to attend the Annual Meeting, vote your shares electronically, and submit your questions during the live webcast of the Annual Meeting by visiting www.virtualshareholdermeeting.com/LSI2020 and entering your unique voter identification number. This Proxy Statement and form of proxy are first being made available to Shareholders on April 17, 2020.

Voting Matters

 

Meeting Agenda		Board Recommendation
1.  Election of Directors		FOR each nominee
2.  Ratify the Appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm		FOR
3.  Adoption of the Company’s 2020 Outside Directors’ Stock Award Plan.		FOR
4.  Advisory Vote to Approve Compensation of the Company’s Executive Officers.		FOR

 

 

Life Storage, Inc. 2020 Proxy Statement

 

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COMPANY BRIEF

Life Storage Locations as of December 31, 2019

 

 

 

As of 12/31/19

 

 

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OUR DIRECTORS

PROPOSAL 1. ELECTION OF DIRECTORS

We open this Proxy Statement by introducing ourselves, the members of your Board of Directors. We take our oversight responsibilities seriously as well as the importance of our accountability. We call your attention in particular to our oversight of a smooth CEO transition, with Joseph V. Saffire succeeding David L. Rogers as CEO in 2019. Sometimes the stronger indications of a board doing its job are the quietest—including that of good talent management and succession planning.

We also oversaw significant management actions in 2019 that are described elsewhere in this Proxy Statement. We invite you to read about us as individuals below and ask for your voting support.

The Board of Directors is soliciting the proxies herein and it is intended that such proxies will, unless otherwise directed, be voted to elect the nominees for director named below. Our bylaws provide that in an uncontested election the affirmative vote of a majority of the total of votes cast for or withheld as to a nominee at a meeting at which a quorum is present is necessary for the election of a director. For purposes of the election of directors, abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.

Effective as of November 26, 2019, the size of the Board decreased from nine to eight upon the resignation of Ms. Carol Hansell from the Board. As such, the number of directors to be elected at the Annual Meeting shall be eight.

WHO WE ARE

Nominees for Election to the Board of Directors

The nominees named herein will, if elected, hold office until the next succeeding Annual Meeting of Shareholders and until their successors are duly elected and qualified. In the event any nominee becomes unavailable to stand for election, it is intended that the persons named in the proxy may vote for a substitute recommended by the Nominating, Governance and Corporate Responsibility Committee of the Board of Directors subject to Board approval. Alternatively, the Board may reduce the size of the Board or may determine to leave the vacancy unfilled. The Board of Directors has no reason to believe that any of the nominees will be unable to serve as directors.

As reflected in the skills matrix and accompanying charts, the nominees for election to the Board of Directors listed below bring a diverse array of attributes, skills and experiences to Life Storage that we believe are important and that that led to the

 

 

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conclusion that such nominee should serve as a member of the Board of Directors. All nominees are presently members of the Board of Directors.

 

Operational Strategy Development and Risk Management

Real Estate

Self- Storage

Financial Literacy

Finance and Capital Markets

Corporate Governance and Compensation

Public Company Executive

Public Company Board*

Mark G. Barberio

X

X

X

X

X

X

X

Stephen R. Rusmisel

X

X

X

X

Arthur L. Havener, Jr.

X

X

X

X

X

X

X

Charles E. Lannon

X

X

X

X

X

X

Edward J. Pettinella

X

X

X

X

X

X

X

Dana Hamilton

X

X

X

X

X

X

X

David L. Rogers

X

X

X

X

X

X

Joseph V. Saffire

X

X

X

X

X

X

 

* Other than the Company.

 

DIRECTOR TENURE		DIRECTOR AGE

 

INDEPENDENT DIRECTORS		DIVERSITY

 

 

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Life Storage, Inc. 2020 Proxy Statement

 

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Life Storage, Inc. 2020 Proxy Statement

 

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Life Storage, Inc. 2020 Proxy Statement

 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”

THE ELECTION OF THE NOMINEES NAMED ABOVE

 

 

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HOW WE ARE SELECTED AND ELECTED

In identifying and evaluating the individual director nominees that it recommends to the Board of Directors, the Nominating, Governance and Corporate Responsibility Committee of the Board of Directors utilizes the following process: (i) the Nominating, Governance and Corporate Responsibility Committee reviews the qualifications of any candidates who have been properly recommended or nominated by a Shareholder, as well as those candidates who have been identified by management, individual members of the Board of Directors or, if the Nominating, Governance and Corporate Responsibility Committee determines, a search firm; (ii) the Nominating, Governance and Corporate Responsibility Committee evaluates the performance and qualifications of individual members of the Board of Directors eligible for re-election; (iii) the Nominating, Governance and Corporate Responsibility Committee considers the suitability of each candidate, including the current members of the Board of Directors, in light of the current size and composition of the Board of Directors; (iv) the Nominating, Governance and Corporate Responsibility Committee considers each individual candidate in the context of the current perceived needs of the Board of Directors, as a whole; and (v) the Nominating, Governance and Corporate Responsibility Committee seeks assurances from each candidate that such candidate will be readily available and timely respond to Board matters. After such review and consideration, the Nominating, Governance and Corporate Responsibility Committee recommends that the Board of Directors select the slate of director nominees.

The Nominating, Governance and Corporate Responsibility Committee does not have an express policy with regard to consideration of director candidates recommended by Shareholders, but it will consider director candidates proposed by Shareholders in the same manner as it considers other candidates. The Board of Directors and the Nominating, Governance and Corporate Responsibility Committee believe that candidates must be highly qualified, exhibiting the experience and expertise required of the Board of Directors’ own pool of candidates and interest in the Company’s business, and the ability to attend and prepare for Board of Directors, committee and Shareholder meetings. Any candidate must state in advance his or her willingness and interest in serving on the Board of Directors. Candidates should represent the interests of all Shareholders and not those of a special interest group. A Shareholder wishing to nominate a candidate should do so in accordance with the guidelines set forth below under the caption “Proposals of Shareholders for the 2021 Annual Meeting.”

While the Nominating, Governance and Corporate Responsibility Committee does not have a written policy regarding diversity in identifying director candidates, the Nominating, Governance and Corporate Responsibility Committee considers diversity in its search for the best candidates to serve on the Board of Directors. Generally, the Nominating, Governance and Corporate Responsibility Committee looks to incorporate diversity in all its forms including diversity of attributes, backgrounds, skills and experiences, all with a view to identify candidates that can assist the Board of Directors with its decision making. The Nominating, Governance and Corporate Responsibility Committee places primary emphasis on (i) judgment, character, expertise, skills and knowledge useful to the oversight of the Company’s business; (ii) diversity of perspectives, backgrounds, experiences and other demographics; (iii) business or other relevant experience; and (iv) the extent to which the interplay of the nominee’s expertise, skills, knowledge and experience with that of other members of the Board of Directors will build a board that is active, collegial and responsive to the needs of the

 

 

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Company. In addition, the Nominating, Governance and Corporate Responsibility Committee recognizes the importance of diversity of race and gender on the Board of Directors consistent with its fiduciary duties. The Board has taken this into consideration in establishing the list of nominees and will continue to do so in the future as part of the normal succession planning process.

The Company does not have a mandatory retirement age for directors as the Company believes that the composition of the Board should include not only appropriate experience and expertise, but also take into account the need for differing perspectives. As a result, the composition of the Board has evolved over time. The nominees for the Board as a whole reflect this balance. Six of the eight nominees have served on the Board for six years or less and only one director has service on the Board of more than 10 years.

Director Independence

The Board of Directors has reviewed all transactions or relationships between each director, director nominee, or any member of his or her immediate family and the Company, its senior management and its independent registered public accounting firm. Based on this review and as required by the independence standards of the New York Stock Exchange (“NYSE”), the Board of Directors has affirmatively determined that all directors, other than Messrs. Rogers and Saffire, are independent from management and its independent registered public accounting firm within the meaning of the NYSE listing standards and as defined in the rules and regulations of the Securities and Exchange Commission (“SEC”). There were no transactions, relationships or arrangements with any director or director nominee determined to be independent that were required to be disclosed pursuant to Item 404(a) of Regulation S-K under the Securities and Exchange Act of 1934 that the Board of Directors considered as part of such review.

Board Orientation, Education and Self-Assessment.

Each independent director, upon initial election to the Board, undergoes a rigorous orientation wherein such director meets all of the members of senior management, and attends presentations concerning the Company’s core disciplines, including marketing, sales, revenue management, acquisition and due diligence procedures, security and controls.

In addition to new director orientation, our directors regularly participate in continuing education to maintain the skills necessary to perform their duties and responsibilities and to keep abreast of industry trends, legal and regulatory developments and corporate governance practices. These include participation in NAREIT and other conferences, various presentations by outside advisors and consultants at board meetings and retreats, regular discussions with management and the opportunity to attend various external board education programs and membership in the National Association of Corporate Directors.

The Board of Directors performs an evaluation of its performance at least annually to determine whether it is functioning effectively. Each Board committee also performs an annual evaluation of its performance.

 

 

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HOW WE ARE ORGANIZED

Board Leadership Structure.

Mark G. Barberio serves as the Company’s non-executive Chair of the Board. Mr. Barberio’s extensive qualifications include responsibility for strategy, executive management, operations, finance, real estate, investor relations and business development. He has experience as a director, chief executive officer, chief financial officer, and as a board committee chair with other large companies. The Company believes that having a Chair of the Board who is not an executive officer of the Company is the appropriate leadership structure for the Company at this time as it allows the Executive Officers of the Company to focus on day-to-day business while allowing the Chair of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management.

Meetings of The Board of Directors and Board Committees

Board of Directors Committee Memberships.

Assuming election of all the nominees to the Board, the structure of the Audit and Risk Management Committee, Compensation and Human Capital Committee, and Nominating, Governance and Corporate Responsibility Committee will remain as follows:

 

		Audit and Risk Management		Compensation and Human Capital		Nominating, Governance and Corporate Responsibility
Mark G. Barberio				X		X
Stephen R. Rusmisel		X		C		X
Arthur L. Havener, Jr.		C				X
Charles E. Lannon		X		X
Edward J. Pettinella		X				C
Dana Hamilton		X		X
C = Committee Chair             X = Committee Member

 

 

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2019 Attendance at Board and Committee Meetings.

The chart below sets forth director attendance at Board and Committee Meetings in 2019 based upon each respective director’s term on the Board and each Committee.

 

Board Meetings

Committee Meetings

Total Rate of Attendance

Name

Regular

Special

Audit & Risk Mgmt

Comp & Human Capital

Nom, Gov, & Corp Resp

Board

Committee

Mark G. Barberio

8/8

3/3

n/a

6/6

4/4

100%

100%

Carol Hansell (1)

7/7

3/3

n/a

5/5

4/4

100%

100%

Dana Hamilton

8/8

3/3

6/6

5/6

n/a

100%

92%

Arthur L. Havener Jr.

8/8

3/3

6/6

n/a

4/4

100%

100%

Charles E. Lannon

8/8

3/3

6/6

6/6

n/a

100%

100%

Edward J. Pettinella

8/8

3/3

6/6

n/a

4/4

100%

100%

David L. Rogers

8/8

3/3

n/a

n/a

n/a

100%

n/a

Stephen R. Rusmisel (2)

8/8

3/3

6/6

6/6

n/a

100%

100%

Joseph V. Saffire (3)

7/7

3/3

n/a

n/a

n/a

100%

n/a

(1)    Ms. Hansell resigned from the Board of Directors effective November 26, 2019.

(2)    Mr. Rusmisel was appointed to the Nominating, Governance and Corporate Responsibility Committee effective March 1, 2020.

(3)    Mr. Saffire was appointed to the Board of Directors on March 14, 2019.

Board of Directors.

The Board of Directors held 11 meetings during the fiscal year ended December 31, 2019. Each director attended 100% of the total number of meetings held by the Board of Directors during such director’s tenure on the Board. Additionally, each director attended 100% of the total number of meetings held by all committees on which he or she served, with the exception of Ms. Hamilton who was excused from one meeting of the Compensation and Human Capital Committee for good reason. Our non-employee directors meet in executive session in conjunction with regularly scheduled meetings of the Board of Directors at least twice per year and on other occasions, as necessary, in accordance with the Company’s Corporate Governance Principles. Mark G. Barberio serves as Chair of the Board and he has presided at meetings of the Company’s directors.

The Company’s policy is that all directors should attend the Annual Meeting of Shareholders, either virtually or in-person (as applicable), absent a good reason. With the exception of one director who was excused for good reason, all directors who were then on the Board of Directors attended the 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting”) in person.

 

 

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The Board of Directors has three committees with the principal functions described below. The charter of each committee is posted on the Company’s website at www.lifestorage.com. A copy of each charter is available in print to any Shareholder upon request to the Company at 6467 Main Street, Williamsville, New York 14221, attention Andrew J. Gregoire, Secretary, or by telephone (716) 633-1850.

Audit and Risk Management Committee.

The Audit and Risk Management Committee is composed of Messrs. Havener, Rusmisel, Lannon, and Pettinella, and Ms. Hamilton. Mr. Havener serves as Chair. The Audit and Risk Management Committee oversees the accounting and financial reporting processes and audits of the financial statements of the Company. The Audit and Risk Management Committee has generally led the Board’s oversight of enterprise risk management, with the assistance of other Board committees. The Audit and Risk Management Committee assists the Board of Directors in oversight of the quality and integrity of the Company’s financial statements, the financial reporting process, the systems of internal accounting and financial controls, the performance of the Company’s internal audit function and internal auditors, the independent auditor’s qualifications and independence, and compliance with ethics policies and legal and regulatory requirements.

The Audit and Risk Management Committee is composed entirely of independent directors within the meaning of applicable NYSE listing standards and rules and regulations of the SEC. Each member must be “financially literate” under NYSE listing standards, or become financially literate within a reasonable period of time after appointment. The SEC has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an “Audit Committee Financial Expert” serving on its audit committee. The Board of Directors has determined that all members of the Audit and Risk Management Committee are financially literate. The Board of Directors has also determined that Mr. Havener meets the definition of an “Audit Committee Financial Expert.”

The Audit and Risk Management Committee’s duties are set forth in its charter, which can be found on the Company’s web site at www.lifestorage.com. Additional information regarding the Audit and Risk Management Committee and the Company’s independent registered public accounting firm is disclosed in the Report of the Audit and Risk Management Committee below. The Audit and Risk Management Committee held six meetings during 2019. The Audit and Risk Management Committee meets regularly in private session with the Company’s independent registered public accounting firm.

Compensation and Human Capital Committee.

The Compensation and Human Capital Committee is composed of Messrs. Rusmisel, Lannon and Barberio and Ms. Hamilton, each of whom is independent within the meaning of applicable NYSE listing standards. Mr. Rusmisel serves as Chair. Ms. Hansell was also a member of the Compensation and Human Capital Committee up to and until her resignation from the Board effective November 26, 2019. The Compensation and Human Capital Committee makes decisions with respect to compensation of the executive officers of the Company (the “Executive Officers”), reviews and recommends to the full Board of Directors director compensation levels and programs, and administers the Company’s

 

 

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Award and Option Plans. The Compensation and Human Capital Committee also generally oversees the Company’s management of its human resource policies and practices, including (from time to time) matters such as diversity and inclusion, workplace environment and culture, and talent development and retention.

The Compensation and Human Capital Committee met six times during 2019. Compensation and Human Capital Committee agendas are established by the Committee Chair, and the Compensation and Human Capital Committee deliberates and takes action only in executive session. The Compensation and Human Capital Committee’s charter does not permit delegation of its responsibilities or authority to others. Pursuant to its charter, the Compensation and Human Capital Committee has the authority to engage advisors, including compensation consultants. The Compensation and Human Capital Committee has engaged Longnecker & Associates as an independent consultant to assist in evaluating compensation for the Executive Officers and executive compensation programs generally. The consultant reports directly to the Compensation and Human Capital Committee and does not perform services for management.

On occasion, at the request and direction of the Compensation and Human Capital Committee, the consultant will review compensation levels recommended by the Executive Officers for other senior managers. The consultant advises the Compensation and Human Capital Committee with respect to compensation trends and best practices, plan design, reasonableness of individual compensation awards and general comparability with other publicly traded companies and companies in the real estate investment trust (“REIT”) industry. In accordance with the Compensation and Human Capital Committee’s policy on assessing advisor independence, the Compensation and Human Capital Committee determined that there were no conflicts of interest or issues related to independence during 2019 that would impact the advice to the Compensation and Human Capital Committee from Longnecker & Associates and the representatives of Longnecker & Associates who advise the Compensation and Human Capital Committee.

The Executive Officers do not participate in deliberations of the Compensation and Human Capital Committee. The Executive Officers, at the Compensation and Human Capital Committee’s request, prepare performance and operational data and financial and other information to assist the Compensation and Human Capital Committee in reaching its compensation determinations.

The functions of the Compensation and Human Capital Committee are further described below under the caption “OUR PAY” and in its charter, which can be found on the Company’s web site at www.lifestorage.com.

Nominating, Governance and Corporate Responsibility Committee.

The Nominating, Governance and Corporate Responsibility Committee of the Board of Directors serves as the Company’s nominating committee. The Nominating, Governance and Corporate Responsibility Committee is composed of Messrs. Havener, Barberio, Pettinella, and Rusmisel, each of whom is independent within the meaning of applicable NYSE listing standards. Ms. Hansell was also a member of the Nominating, Governance and Corporate Responsibility Committee, serving as Chair, up to and until her resignation from the Board effective November 26, 2019. Mr. Pettinella was appointed as Chair of the Nominating, Governance and Corporate Responsibility Committee effective

 

 

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December 9, 2019. Mr. Rusmisel was appointed to the Nominating, Governance and Corporate Responsibility Committee effective March 1, 2020. The Nominating, Governance and Corporate Responsibility Committee’s functions are set forth in its charter, which can be found on the Company’s website at www.lifestorage.com, and include assisting the Board of Directors by identifying individuals qualified to become Board members and recommending director nominees for the Annual Meeting of Shareholders, recommending to the Board the Corporate Governance Principles applicable to the Company, leading the Board of Directors in its annual review of the Board’s performance, and recommending the director nominees for each committee as further described in “HOW WE ARE SELECTED AND ELECTED”. The Nominating, Governance and Corporate Responsibility Committee also has worked closely with the Board and senior management on environmental, social, and governance (“ESG”) matters. The Nominating, Governance and Corporate Responsibility Committee must annually review the adequacy of its charter and its own performance. The Nominating, Governance and Corporate Responsibility Committee met four times during 2019.

HOW WE GOVERN AND ARE GOVERNED

Corporate Governance Guidelines.

The Board of Directors has adopted Corporate Governance Principles which can be found on the Company’s website at www.lifestorage.com or which can be mailed to any Shareholder upon request either to the Company at 6467 Main Street, Williamsville, New York 14221, or requested by telephone (716) 633-1850.

Our Corporate Governance Principles require, among other things, that a majority of directors on the Board of Directors meet the criteria for independence defined by the NYSE. Our governance structure includes, in addition, provisions for majority voting, annual director elections, one-share, one-vote and special meeting voting rights. We believe our corporate governance provisions, our approach to Board governance and our management of environmental, social, governance and compensation issues collectively put us in a strong position to deliver sustainable returns to shareholders while supporting our many stakeholder constituents.

Code of Ethics and Code of Ethics for Senior Financial Officers and Directors.

All of the Company’s directors and employees, including the Executive Officers, are required to comply with the Company’s Code of Ethics to help ensure that the Company’s business is conducted in accordance with the highest standards of moral and ethical behavior. The Company also has a Code of Ethics for Senior Financial Officers applicable to the Company’s principal executive officer, principal financial officer, principal accounting officer and controller, each of whom is also bound by the provisions set forth in the Code of Ethics relating to ethical conduct, conflicts of interest and compliance with the law. The Code of Ethics and Code of Ethics for Senior Financial Officers are published on the Company’s web site at www.lifestorage.com. The Company intends to disclose any changes in or waivers of its Code of Ethics and Code of Ethics for Senior Financial Officers by posting such information on the Company’s website. A printed copy of the Code of Ethics and the Code of Ethics for Senior Financial Officers will be provided to any Shareholder upon request to the Company at 6467 Main Street, Williamsville, New York 14221, or by telephone (716) 633-1850.

 

 

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Policies and Procedures Regarding Related Party Transactions.

The Company has established written conflict of interest policies, which are included in the Company’s Code of Ethics, to which all directors, Executive Officers and key employees are subject. These persons are required to disclose to the Company’s Chief Compliance Officer (or, in the event such person with the conflict is a director or Executive Officer, to the Chair of the Audit and Risk Management Committee) in writing each outside relationship, activity and interest that creates a potential conflict of interest, including transactions or arrangements potentially disclosable pursuant to applicable rules of the SEC. The Audit and Risk Management Committee will review any transaction involving a director or officer that may create a conflict of interest and either approve or reject the transaction or refer the transaction to the full Board or other appropriate committee in its discretion. All directors, Executive Officers and other key employees are required to disclose in writing each year whether they are personally in compliance with such policy. In addition, each director and Executive Officer is required to complete an annual questionnaire which calls for disclosure of any transactions in which the Company is or is to be a participant, on the one hand, and in which such director or Executive Officer or any member of his or her family has a direct or indirect material interest, on the other. The Board of Directors is of the opinion that these procedures are sufficient to allow for the review, approval or ratification of any transactions with related persons that would be required to be disclosed under applicable SEC rules.

The Role of the Board of Directors in the Company’s Risk Oversight Process.

The Company’s Board of Directors is responsible for overseeing the Company’s risk management processes and enterprise risk management. Certain areas of this responsibility have been delegated by the Board of Directors to the Audit and Risk Management Committee, the Compensation and Human Capital Committee and Nominating, Governance and Corporate Responsibility Committee, each with respect to the assessment of the Company’s risks and risk management in its respective areas of oversight. The Audit and Risk Management Committee oversees risks related to internal controls and procedures, and oversees risks related to conflicts of interest and code of ethics matters. The Compensation and Human Capital Committee oversees risks related to compensation practices. The Nominating, Governance and Corporate Responsibility Committee oversees risks related to governance matters. The full Board of Directors has primary responsibility for evaluating strategic and operational risk management, succession planning and cybersecurity risks. The Board receives regular updates from management on operational, cybersecurity and other risks facing the Company. The Board committees and the full Board of Directors focus on the most significant risks facing the Company and the Company’s general risk management strategy, and also ensure that risks undertaken by the Company are consistent with the Board of Directors’ objectives. While the Board of Directors oversees the Company’s risk management, Company management is responsible for day-to-day risk management processes. The Company believes this division of responsibilities is the most effective approach for addressing the risks facing the Company.

Compensation Risk Assessment.

With respect to compensation risk, the Compensation and Human Capital Committee has considered the Company’s compensation policies and practices and has concluded that they are not reasonably likely to have a material adverse effect on the Company.

 

 

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HOW TO COMMUNICATE WITH US

Complaint Procedure; Communications with Directors.

The Sarbanes-Oxley Act of 2002 requires public companies to maintain procedures to receive, retain and respond to complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Company has such procedures in place. Any employee of the Company may report concerns regarding these matters in the manner specified in the Company’s Employee Complaint Procedures, which is published on the Company’s web site at www.lifestorage.com. A printed copy of the Company’s Employee Complaint Procedures will be provided to any Shareholder upon request sent to the Company at 6467 Main Street, Williamsville, New York 14221, or requested by telephone (716) 633-1850.

The Board of Directors has also established a process for Shareholders or other interested parties to send communications to the Company’s independent directors. Shareholders or other interested parties may communicate with the Board of Directors by calling (716) 633-1850 ext. 6144 or by writing to the Company’s Secretary. Communications sent to the Company addressed to the Board of Directors by these methods will be screened by the Secretary for appropriateness before either forwarding or notifying the independent directors of receipt of a communication.

HOW WE ARE PAID

Director Compensation

The table below summarizes the compensation paid by the Company to directors who are not officers or employees of the Company (“Outside Directors”) for the year ended December 31, 2019. Directors who are not Outside Directors are not paid any compensation for their service as directors. Mr. Rogers retired as the Company’s Chief Executive Officer on February 28, 2019 and therefore Mr. Rogers’ compensation in the table below represents compensation for his service as a director subsequent to this retirement date.

 

Name		Fees Earned or Paid in Cash ($)				Stock Awards ($) (1)				Option Awards ($) (2)				All Other Compensation ($) (3)				Total ($)
Mark G. Barberio			$174,500				$80,000				-				$16,208				$270,708
Charles E. Lannon			$119,500				$80,000				-				$16,208				$215,708
Stephen R. Rusmisel			$127,000				$80,000				-				$16,208				$223,208
Arthur L. Havener, Jr.			$127,000				$80,000				-				$16,208				$223,208
Dana Hamilton			$119,500				$80,000				-				$16,208				$215,708
Edward J. Pettinella			$117,000				$80,000				-				$16,208				$213,208
David L. Rogers			$102,000				$80,000				-				$12,156				$194,156
Carol Hansell (4)			$90,125				-				-				$12,156				$102,281

 

(1)

On May 30, 2019, each Outside Director was granted 836 shares of restricted stock. Upon Ms. Hansell’s resignation from the Board effective November 26, 2019, the 836 shares of restricted stock granted to her on May 30, 2019 did

 

 

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not vest. The remaining shares of restricted stock issued to the Outside Directors will vest in full on May 30, 2020 provided the director remains in office. As of his retirement, Mr. Rogers is now an Outside Director and thus received this grant with all other Outside Directors. The amount disclosed in the “Stock Awards” column represents the aggregate grant date fair value of such shares computed in accordance with FASB ASC Topic 718, less any shares that did not vest. See Notes 2 and 9 to the Company’s financial statements included in the 2019 Annual Report for a discussion of assumptions used to value the restricted stock awards.

 

(2)

In 2016, the Board of Directors eliminated stock option grants as a component of Board compensation. Thus, stock option grants have not been made to the Outside Directors since 2015. All Outside Directors’ stock options issued in previous years are currently exercisable. During 2019, Mr. Lannon exercised his options on 2,000 shares of the Company’s stock. Information regarding the stock option awards outstanding as of December 31, 2019 are shown below:

 

Name

Grant Date

Expiration Date

Number of Shares

Stephen R. Rusmisel

5/23/2012

5/23/2022

3,500

5/22/2013

5/22/2023

2,000

5/22/2014

5/22/2024

2,000

5/21/2015

5/21/2025

2,000

Arthur L. Havener, Jr.

5/21/2015

5/21/2025

3,500

Mark G. Barberio

5/21/2015

5/21/2025

3,500

 

(3)

Represents the portion of health insurance premiums paid by the Company and amounts paid to certain directors in lieu of such premiums.

 

(4)

Ms. Hansell resigned from the Board effective November 26, 2019.

The Company pays annual directors’ fees quarterly. This base annual director’s fee to each Outside Director is $100,000 ($25,000 quarterly). An annual fee of $50,000 ($12,500 quarterly) is payable to the non-executive Chair of the Board; an annual fee of $20,000 ($5,000 quarterly) is payable to the chair of the Audit and Risk Management Committee and $10,000 ($2,500 quarterly) is payable to each of the other members of such committee; an annual fee of $15,000 ($3,750 quarterly) is payable to the chair of the Compensation and Human Capital Committee and $7,500 ($1,875 quarterly) is payable to each of the other members of such committee; an annual fee of $10,000 ($2,500 quarterly) is payable to the chair of the Nominating, Governance and Corporate Responsibility Committee and $5,000 ($1,250 quarterly) is payable to each of the other members of such committee. Outside Directors are also paid a meeting fee of $1,000 for each special meeting of the Board of Directors attended. Meeting fees are not paid for regular meetings and committee meetings. In addition, the Company will reimburse all directors for reasonable expenses incurred in attending meetings. In 2019, Mr. Barberio was paid a fee of $10,000 for the substantial amount of time he spent assisting executive management during the year. Also, certain Outside Directors are provided health insurance coverage on the same terms and conditions as home office employees of the Company. Those Outside Directors who are not provided such health insurance coverage are provided a cash payment in lieu of health insurance coverage.

 

 

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Under the Company’s Deferred Compensation Plan for Directors, an Outside Director may elect to have all or part of his or her director fees credited to a deferred compensation account in the form of units equivalent to shares of the Company’s Common Stock (“Units”). The number of Units credited is equal to the number of shares of Common Stock that could have been purchased using the closing price of Common Stock on the day immediately preceding the date on which the fees were payable. When the Company declares cash dividends on its Common Stock, additional Units are credited to the deferred compensation accounts based on the reinvestment of the dividend on the dividend record dates. Amounts credited to the deferred compensation accounts will be paid to directors in the form of shares of Common Stock, the number of which shares will equal the number of Units credited to the accounts.

The Company’s 2009 Outside Directors’ Stock Option and Award Plan (the “2009 Directors’ Plan”) expires as of May 21, 2020. Under the 2009 Directors’ Plan, each Outside Director was, at the close of the 2019 annual Shareholders’ meeting, granted 836 shares of restricted stock, which number equals the base annual fee paid to such Outside Director multiplied by 0.8 and divided by the fair market value of a share of Common Stock on the date of grant. The restricted stock granted vests one year following the date of grant based on continued service. Until 2016, stock options had also been granted to Outside Director’s under the 2009 Directors Plan. In 2016, the Board of Directors amended the 2009 Directors’ Plan to eliminate stock option grants as a component of Board compensation.

Due to the expiration of the 2009 Directors’ Plan prior to the date of the 2020 Annual Meeting, the Company is proposing to adopt the 2020 Outside Directors’ Stock Award Plan described in Proposal 3 below. Provided such plan is adopted, each Outside Director will be issued, at close of the 2020 Annual Meeting, a number of shares of restricted stock equal to $100,000 divided by the fair market value of a share of Common Stock on the date of grant. In the event such plan is not adopted, all Outside Director compensation shall be paid in cash.

Stock Ownership Guidelines for Directors

The Company has adopted stock ownership guidelines for its Outside Directors which require each of the Company’s Outside Directors to hold shares of Company Common Stock and deferred compensation units having an aggregate market value equal to three times the base annual fee paid to the Outside Directors. Directors have five years to meet this goal. The Company adopted these stock ownership guidelines as a means of requiring directors to hold equity and tie their interests to Shareholders’ interests. All Outside Directors have either met these guidelines or are still within the five-year period allowed to meet this guideline.

 

 

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Stock Ownership by Directors and Executive Officers

The following table sets forth information concerning beneficial ownership of Common Stock as of March 30, 2020 for each current director, each of our named executive officers and for all current directors and Executive Officers as a group. Percentages are based on 46,902,030 shares of Common Stock outstanding as of March 30, 2020. Unless otherwise noted, to the best of the Company’s knowledge, each person has sole voting and investment power with respect to the shares listed.

 

Name

Shares of Common Stock Beneficially Owned at March 30, 2020 (1)(2)(3)

Percent of Common Stock Owned

Charles E. Lannon

137,478

*

David L. Rogers

125,514

*

Stephen R. Rusmisel

16,610

*

Mark G. Barberio

12,863

*

Edward J. Pettinella

12,200

*

Arthur L. Havener, Jr

11,385

*

Dana Hamilton

1,520

*

Joseph V. Saffire

23,538

*

Andrew J. Gregoire

64,181

*

Edward F. Killeen

38,955

*

Directors and Executive Officers As a Group (10 persons)

444,244

0.9%

 

*

Represents beneficial ownership of less than 1% of outstanding Common Stock on March 30, 2020.

 

(1)

Includes 9,500, 3,500 and 3,500 shares of Common Stock that may be acquired by Messrs. Rusmisel, Havener and Barberio, respectively, through the exercise, within 60 days, of options granted under the 2009 Outside Directors’ Stock Option and Award Plan.

 

(2)

Includes 23,676 shares of Common Stock issuable to Mr. Lannon in payment of amounts credited to his account under the Company’s Deferred Compensation Plan for Directors, within 60 days of his separation from service as a director of the Company.

 

(3)

Includes 18,553, 8,950, and 8,950 shares of restricted stock as to which Messrs. Saffire, Gregoire, and Killeen, respectively, have voting power but no investment power.

 

 

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Equity Compensation Plan Information

The following table sets forth certain information as of December 31, 2019 (except as set forth in footnote 1 below), with respect to equity compensation plans under which shares of the Company’s Common Stock may be issued.

 

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance

Equity compensation plans approved by Shareholders:

2015 Award and Option Plan (1)

146,031

$ ---

239,659

2009 Outside Directors’ Stock Option and Award Plan

16,500

$78.13

3,312

Deferred Compensation Plan for Directors (2)

23,450

N/A

20,688

Equity compensation plans not approved by Shareholders:

N/A

N/A

N/A

(1)     Includes the actual number of shares issued in January 2020 as part of the 2016 performance-based awards (24,148) and the maximum number of shares (121,883) that could be issued as part of 2017, 2018 and 2019 performance-based awards. The actual number of shares to be issued will be determined at the end of the three-year performance periods in 2020, 2021 and 2022, respectively. See Note 9 to the Company’s financial statements included in the 2019 Annual Report.

(2)     Under the Deferred Compensation Plan for Directors, non-employee directors may defer all or part of their directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under the plan will be credited to each director’s account under the plan in the form of Units. The number of Units credited is determined by dividing the amount of directors fees deferred by the closing price of the Company’s Common Stock on the New York Stock Exchange on the day immediately preceding the day upon which directors fees otherwise would be paid by the Company. A director is credited with additional Units for dividends on the shares of Common Stock represented by Units in such director’s account. A director may elect to receive the shares in a lump sum on a date specified by the director or in quarterly or annual installments over a specified period and commencing on a specified date.

 

 

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Security Ownership of Certain Beneficial Owners

The following table sets forth information as to all persons or groups known to the Company to be beneficial owners of more than five percent of the outstanding Common Stock of the Company as of March 30, 2020 based on 46,902,030 shares of Common Stock outstanding as of such date.

 

Title of Class		Name and Address of Beneficial Owners		Amount of Common Stock Beneficially Owned as of March 30, 2020		Percent of Common Stock Owned
Common		The Vanguard Group, Inc. (1)   100 Vanguard Boulevard   Malvern, PA 19355		7,285,929		15.5%
Common		BlackRock, Inc. (2)   55 East 52nd Street   New York, NY 10055		5,880,484		12.5%
Common		Wellington Management Group LLP   Wellington Group Holdings LLP   Wellington Investment Advisors Holdings LLP (3)   c/o Wellington Management Company LLP   280 Congress Street   Boston, MA 02210		2,555,797		5.4%

 

(1)

All information relating to The Vanguard Group, Inc. (“Vanguard”) is as of December 31, 2019 and is derived from Schedule 13G/A filed by it and other entities on February 11, 2020. According to Vanguard, of the 7,285,929 shares of the Company’s Common Stock owned by Vanguard, Vanguard has the sole power to vote or direct the vote with respect to 72,815 shares and shares voting power with respect to 51,996 shares. Vanguard has the sole power to dispose or direct the disposition of 7,216,154 shares of the Company’s Common Stock owned by Vanguard and shares disposition power with respect to 69,775 shares. The Company has not independently verified this information.

 

(2)

All information relating to BlackRock, Inc. (“BlackRock”) is as of December 31, 2019 and is derived from Schedule 13G/A filed by it and other entities on February 4, 2020. According to BlackRock, of the 5,880,484 shares of the Company’s Common Stock owned by BlackRock, BlackRock has the sole power to vote or direct the vote with respect to 5,608,144 shares and does not share voting power with respect to any other shares. BlackRock has the sole power to dispose or direct the disposition of all 5,880,484 shares of the Company’s Common Stock owned by BlackRock. The Company has not independently verified this information.

 

 

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(3)

All information relating to Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP (“Wellington”) is as of December 31, 2019 and is derived from Schedule 13G filed by it and other entities on January 28, 2020. According to Wellington, of the 2,555,797 shares of the Company’s Common Stock owned by Wellington, Wellington shares the voting power with respect to 2,321,758 shares and does not have the sole voting power with respect to any other shares. Wellington shares disposition power with respect to all 2,555,797 shares of the Company’s Common Stock owned by Wellington. The Company has not independently verified this information.

 

 

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OUR AUDITORS

PROPOSAL 2. APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Based upon the recommendation of the Audit and Risk Management Committee, the Board of Directors has reappointed Ernst & Young LLP as its independent registered public accounting firm for the year ending December 31, 2020. At the Annual Meeting, Shareholders will be asked to ratify this appointment. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting (via webcast), will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Fees billed to the Company for fiscal years 2019 and 2018 by Ernst & Young LLP were as follows:

 

				2019				2018
		Audit Fees		$	1,072,674			$	648,248
		Audit-Related Fees			–				–
		Tax Fees			541,888				456,258
		All Other Fees			1,725				2,175
		TOTAL FEES		$	1,616,287			$	1,106,681

Audit fees include fees for the audit of the Company’s consolidated financial statements, interim reviews of the Company’s quarterly financial statements, and the audit of the Company’s internal controls over financial reporting. Included in audit fees for 2019 and 2018 are $220,000 and $70,896, respectively, related to the Company’s public bond offerings, common stock offerings and SEC comment letter responses. Tax fees include fees for services relating to tax return preparation, tax compliance, transaction tax due diligence, tax planning and tax advice.

The Audit and Risk Management Committee has adopted a policy that requires its advance approval for all audit, audit-related, tax and other services to be provided by the independent registered public accounting firm to the Company. The Audit and Risk Management Committee has delegated to its Chair authority to approve permitted services, provided that the Chair reports any decisions to the Audit and Risk Management Committee at its next scheduled meeting. During 2019, all fees for audit services, all fees for audit-related services and all fees for tax services were approved under this policy.

Ratification of the appointment of the independent registered public accounting firm requires the affirmative vote of a majority of the votes cast, provided a quorum is present at the meeting. For purposes of the vote on this proposal, abstentions and brokers non-votes will not be counted as votes cast and will have no effect on the results of the vote, although they will be considered present for the purpose of determining the presence of a quorum. Although Shareholder approval is not required, the Company

 

 

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desires to obtain from its Shareholders an indication of their approval of the Audit and Risk Management Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2020. Even if the appointment of Ernst & Young LLP is ratified, the Audit and Risk Management Committee may, in its discretion, change the appointment at any time during the year should it determine that such a change would be in the best interests of the Company and its Shareholders. If the Company’s Shareholders do not ratify this appointment, the Audit and Risk Management Committee may consider the appointment of another independent registered public accounting firm, but will not be required to appoint a different firm.

THE AUDIT AND RISK MANAGEMENT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

 

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REPORT OF THE AUDIT AND RISK MANAGEMENT COMMITTEE

Management has the primary responsibility for the integrity of the Company’s financial information and the financial reporting process, including the system of internal control over financial reporting. Ernst & Young LLP, the Company’s independent registered public accounting firm, is responsible for conducting independent audits of the Company’s financial statements and the effectiveness of internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and expressing an opinion on the financial statements and the effectiveness of internal controls over financial reporting based upon those audits. The Audit and Risk Management Committee is responsible for overseeing the conduct of these activities by management and Ernst & Young LLP.

As part of its oversight responsibility, the Audit and Risk Management Committee has reviewed and discussed the audited financial statements, the adequacy of internal controls and the effectiveness of the Company’s internal controls over financial reporting with management and Ernst & Young LLP. The Audit and Risk Management Committee also has discussed with Ernst & Young LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board. The Audit and Risk Management Committee met with Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit and Risk Management Committee has also discussed with Ernst & Young LLP matters required to be discussed by applicable auditing standards. The Audit and Risk Management Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit and Risk Management Committee concerning independence and has discussed with Ernst & Young LLP that firm’s independence.

Based upon these reviews and discussions, the Audit and Risk Management Committee recommended to the Board of Directors that the audited financial statements for the year ended December 31, 2019 be included in Life Storage Inc.’s 2019 Annual Report for filing with the Securities and Exchange Commission.

Members of the Audit and Risk Management Committee

ARTHUR L. HAVENER, JR., CHAIR

CHARLES E. LANNON

STEPHEN R. RUSMISEL

DANA HAMILTON

EDWARD J. PETTINELLA

THE FOREGOING REPORT SHALL NOT BE DEEMED TO BE “SOLICITING MATERIAL” OR TO BE “FILED” WITH THE SECURITIES AND EXCHANGE COMMISSION AND SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.

 

 

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PROPOSAL 3. ADOPTION OF THE 2020 OUTSIDE DIRECTORS’ STOCK AWARD PLAN

The Board of Directors has adopted a resolution recommending that Shareholders consider and approve a proposal to adopt the Company’s 2020 Outside Directors’ Stock Award Plan (the “2020 Directors’ Plan”), which would replace the Company’s Amended and Restated 2009 Outside Directors’ Stock Option and Award Plan (the “2009 Directors’ Plan”), which expires on May 21, 2020. If the 2020 Directors’ Plan is not approved, the Outside Director’s compensation will be paid solely in cash.

The purpose of the 2020 Directors’ Plan, as with the 2009 Directors’ Plan, is to promote the long-term financial success of the Company and thereby increase Shareholder value by enabling the Company to attract and retain outstanding Outside Directors whose judgment, interest and special efforts are essential to the conduct of the Company’s operations. The Board of Directors believes that the 2009 Directors’ Plan has been effective in achieving these objectives and that the Company continues to need a plan of this type.

The 2020 Directors’ Plan differs from the 2009 Directors’ Plan in various respects. Most significantly, the 2020 Directors’ Plan provides the Board with greater flexibility in determining the value and number of shares of restricted stock to grant annually. Under the 2009 Directors’ Plan, the value of the shares of restricted stock to be issued each year was based upon a percentage of each Director’s base annual cash fee. This formula unduly restricted the ability of the Board to revise the mix of cash and equity components of Director compensation on an annual basis. Thus, the 2020 Directors’ Plan provides that any annual grant of restricted stock will be determined by the Board in its discretion. This will allow the Board to review and change the cash and equity components of Director compensation annually. Also, the 2020 Directors’ Plan allows Outside Directors’ to enter into a deferred compensation agreement with respect to an annual award, which will provide Outside Directors, if they so elect the ability to receive compensation on a tax deferred basis. In the event an Outside Director enters into a deferred compensation agreement, such Outside Director will be issued deferred stock units representing a right to receive shares of Common Stock at a future time.

Under the 2020 Directors’ Plan, the number of shares of Common Stock available for issuance will be 100,000, subject to adjustments for stock dividends, stock splits, and other events as set forth therein.

The full text of the 2020 Directors’ Plan is attached hereto as Exhibit A to this Proxy Statement. The following is a summary of the principal provisions of the 2020 Directors’ Plan, but the summary is qualified in its entirety by reference to the full text to the 2020 Directors’ Plan.

Under the 2020 Directors’ Plan, as of the close of each annual Shareholders’ meeting, each Outside Director may be granted a number of shares of restricted stock as determined by the Board in its discretion. The restricted stock granted vests one year following the date of grant if the applicable Outside Director is a member of the Board of Directors as of the vesting date; provided, however, that the restricted stock immediately

 

 

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vests upon either (i) the Outside Director’s death or disability while serving on the Board of Directors, or (ii) a Significant Corporate Event. A “Significant Corporate Event” is defined as (i) the dissolution or liquidation of the Company, (ii) a merger, reorganization or consolidation in which the Company is acquired by another person or in which the Company is not the surviving corporation, or (iii) the sale of all or substantially all of the outstanding Common Stock or assets of the Company to another entity. An Outside Director will not have taxable income at the time restricted stock is granted (unless the Outside Director elects to be taxed at that time), but will have taxable income at the time of vesting of the restricted stock in an amount equal the fair market value of the restricted stock on the date of vesting. Dividends payable with respect to the restricted stock shall be accumulated during the one-year vesting period and paid to the Outside Director only upon vesting of the restricted stock. In the event any shares of restricted stock are forfeited, the accumulated dividends shall also be forfeited. Any shares of restricted stock that do not vest shall be automatically cancelled and shall not again be available for awards under the 2020 Directors’ Plan.

The 2020 Directors’ Plan allows an Outside Director to enter into a deferred compensation agreement with respect to any annual award of restricted stock made after 2020, in which event such Outside Director will be credited with deferred stock units with respect to any award to be deferred. Deferred stock units will be subject to forfeiture to the same extent as the restricted stock so deferred. Each deferred stock unit that has ceased to be subject to forfeiture shall be converted into one share of Common Stock at such time and in such manner as elected by the Outside Director in the relevant deferred compensation agreement. After the vesting of the applicable deferred stock unit, the Company will pay the Outside Director a cash dividend equivalent in an amount equal to the applicable dividend whenever the Company declares cash dividends on its Common Stock, including dividends accumulated during the one-year vesting period.

Only a director who is an Outside Director is eligible to receive awards under the 2020 Directors’ Plan. The number of persons eligible to participate in the 2020 Directors’ Plan will be seven assuming the election of the directors nominated herein.

The 2020 Directors’ Plan shall be effective upon its adoption by the Shareholders of the Company.

NEW PLAN BENEFITS

2020 Outside Directors’ Stock Award Plan

 

 

(1)

The number of total shares and deferred stock units available for issuance under the 2020 Directors’ Plan would be 100,000 shares. The 2020 Directors’ Plan provides for grants of restricted stock, with the number of shares being determined each year by the Board, in its discretion. Each Outside Director may elect to enter into a deferred compensation agreement with respect to such

 

 

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restricted stock, in which event such Outside Director shall be issued deferred stock units. The dollar value of any grant will be fair market value of the restricted stock on date of the grant. The Board has determined that, provided the 2020 Directors’ Plan is adopted, the value of the annual award issuable upon close of the 2020 Annual Meeting will be $100,000 to each Outside Director, with the number of shares of restricted stock to be issued being determined based upon dividing such value by the fair market value of a share of Common Stock on the date of grant. The number of persons eligible to participate in the 2020 Directors’ Plan following the Annual Meeting will be seven, assuming the adoption of the 2020 Directors’ Plan and the election of the directors nominated herein. The total value of all future grants cannot be determined.

Adoption of the 2020 Directors’ Plan requires the affirmative vote of a majority of the shares of Common Stock cast on the proposal, provided a quorum is present at the meeting. For purposes of the vote, abstentions will have the same effect as votes against the proposal and broker non-votes will not have any effect on the results of the vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO ADOPT THE 2020 OUTSIDE DIRECTORS’ STOCK AWARD PLAN

 

 

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OUR COMPANY

EXECUTIVE OFFICERS OF THE COMPANY

The Company’s corporate responsibility is deeply rooted in our core values: teamwork, respect, accountability, integrity and innovation. The Company approaches initiatives, programs, practices and policies with a view toward risk management and with consideration of the impact on its customers, team members, communities and shareholders. We therefore share with you in this section some information about our leadership and our management of the human capital, environmental, safety, customer and other stakeholder matters that we believe support our long-term sustainability financially and more generally.

The following persons are the current executive officers of the Company:

 

Name		Age				Title and experience
Joseph V. Saffire			50			Chief Executive Officer since March 1, 2019. Member of the Board of Directors since March 14, 2019. Chief Investment Officer of the Company from November 1, 2017 to February 28, 2019.
Andrew J. Gregoire			52			Chief Financial Officer since March 1, 2012 and Secretary since April 2, 2012. Vice President of Finance of the Company from 1998 to February 29, 2012.
Edward F. Killeen			56			Chief Operating Officer since January 19, 2015. Executive Vice President of Real Estate Management of the Company from March 1, 2012 to January 19, 2015. Vice President of Operations of the Company from 1997 to February 29, 2012.

David L. Rogers retired from his position as Chief Executive Officer of the Company on February 28, 2019. His retirement did not affect his status as a member of the Company’s Board of Directors.

Driving sustainability throughout our organization

Life Storage is committed to fostering a sustainable company to support the success and satisfaction of its employees, customers, communities, shareholders and other stakeholders. We focus on delivering long-term value by proactively integrating environmental, social and governance factors into our decision making. We strive to reduce our environmental impact, enhance the positive impact we have on our stakeholders, and govern transparently.

Minimizing environmental impact by design

As a REIT and a facility owner and operator, we are responsible for monitoring and minimizing our environmental impact. Environmental efficiency in our building design and operations is important to our company, our stakeholders and our customers.

 

 

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All facilities must meet a rigorous set of internally developed energy efficiency guidelines.

 

•

Green buildings: Silver member of the U.S. Green Building Council (USGBC®)

 

•

As examples, two certified-sustainable buildings in Deer Park, NY (LEED Silver) and Chamblee, GA (One Green Globe).

 

•

Renewable energy: We are constantly assessing our portfolio for opportunities to expand our renewable energy program as a part of our strategy to reduce our carbon footprint.

 

•

Since 2011, we have invested over $10,000,000 in solar array installations and upgrades.

 

•

We have over 40 solar arrays in total, which are located on more than 30 properties.

 

•

Lighting: Since 2017, LED lights are mandatory for all new buildings and light fixture replacements.

 

•

In 2019, we upgraded over 22,000 light fixtures to LED, resulting in an estimated savings of 1,600 MWh annually.

 

•

Since 2012, we have invested more than $5,000,000 in energy efficient lighting.

 

•

Heating and cooling: We continue to upgrade HVAC units at our facilities to high efficiency models.

 

•

In 2019, more than 350 units were replaced with high efficiency models.

 

•

Since 2012, we have invested more than $16,000,000 in energy efficient HVAC upgrades.

 

•

Cool Roofs: All roofing projects use cool roof technologies that reduce energy consumption by minimizing air conditioning needs.

 

•

In 2019, Life Storage completed over 50 cool roofing projects (covering nearly 1,500,000 square feet).

 

•

Water: Self-storage facilities typically have low rates of water consumption and production of wastewater. However, many facilities utilize native planting or xeriscape landscaping, reducing the need for water and minimizing the use of pesticides and fertilizers.

Promoting social benefit and opportunity

To be successful, we must deliver value for our customers, employees and community. Life Storage employs nearly 2,000 people and serves over 450,000 customers in hundreds of markets. We believe that considering all stakeholders in our business

 

 

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decisions helps us deliver strong growth and add value to our Company. We treat our fellow team members, our customers, our shareholders, and our communities with the highest degree of dignity, trust, and honesty.

 

•

Occupier satisfaction: Average customer satisfaction score of approximately 93% over the past five years

We have a robust, multi-step process to ensure customer satisfaction including customer satisfaction surveys, a feedback web portal, internal 56-question Store Visit Report assessments, and third-party secret shopper service that conducts 15-point assessments.

 

•

Employee engagement and development

We strive to attract and retain the highest quality team members with competitive compensation and benefits, opportunities for personal growth and development, safe working conditions, and a culture that emphasizes fair and equitable treatment.

Training:

 

•

All employees have access to comprehensive online training tools that cover everything from job specific training to compliance and soft skill training.

 

•

Multiple weeks of formal training for new store team members, plus access for all to online training and professional development courses.

 

•

Emerging Leaders Development program to identify, mentor, train and promote store team members who show leadership potential.

Competitive benefits package: Our benefits package is open to all eligible employees and includes health insurance, paid time off, 401(k) retirement plan and matching, a robust Employee Assistance Program, extensive employee health and wellbeing programs, and bonus opportunities based on individual, store and corporate performance.

Diversity: Nearly 60% of our employees and managers are female.

Employee engagement: An 80% engagement score by our team members in our latest anonymous employee engagement survey, with an 80% response rate.

 

•

Service and safety commitment

We are committed to providing a safe environment for our customers and their goods, as well as our employees. Our rigorous safety program includes oversight, evaluation, testing, training and continuous improvement of our operations.

COVID-19 has presented an unprecedented challenge to ensure the health and safety of people everywhere. While we continue to follow all federal, state, and local directives, we have taken additional extensive measures to minimize and

 

 

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eliminate, where possible, potential impacts to our employees and customers. Consistent with our core values, we’ve focused on doing the right thing for our employees, our customers and each other.

 

•

The right thing for employees:

 

•

Increased paid time off for COVID-19 related reasons; instituted enhanced health plan changes to cover certain COVID-19 related costs.

 

•

Minimized employee contact by mobilizing support teams in the home office to work from home and implemented social distancing and precautionary measures in all of our stores.

 

•

The right thing for customers:

 

•

Leveraged innovative technology platforms to enable customers to self-serve through their lifecycle as a customer with us. Our digital rental platform, Rent Now, is a contact-free channel to allow customers to complete the rental process online and “skip the counter” to access their storage unit. After move-in, customers can manage their account from our website at www.lifestorage.com and make online payments.

 

•

Community engagement

We aim to make meaningful and lasting impacts on our communities through volunteer efforts, charitable giving and community-centric employee engagement.

 

•

Frequent promotion of community volunteerism.

 

•

In 2019, we sponsored more than 450 community and school youth athletics organizations.

Governing responsibly

We take our reputation and integrity seriously. Maintaining high standards of governance is important to us. In order to ensure ongoing focus and execution of our environmental, social and governance priorities, we have established an Environmental, Social and Governance Committee that consists of various functional leaders throughout the organization and reports to our Chief Executive Officer.

Compliance Programs

The Life Storage Code of Ethics sets forth our policies and procedures. Our Compliance Officer and the Board of Directors’ Audit and Risk Management Committee Chair oversee and enforce our anti-bribery, business ethics and whistleblower programs.

 

•

We have robust accounting systems to monitor and flag potential financial irregularities.

 

•

All employees annually must read and sign-off on our Code of Ethics.

 

 

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•

Control Assessment Survey—As part of our enhanced risk assessments, an extensive ethical risk survey is administered annually to all employees at the corporate managerial level or above. The survey is also administered to a sample population of employees at other levels.

 

•

We have a robust whistleblower program that offers anonymous, 24/7 reporting of any ethical concern with information and contact details provided on our Company intranet. All reported incidents are investigated until resolved.

Hedging Policy

The Company’s insider trading policy prohibits, among other things, its directors, officers and employees from entering into hedging or monetization transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans.

Other Governance Practices

Some of our other governance best practices include, but are not limited to:

 

•

Separate chair and CEO roles

 

•

Stockholder ability to call special meetings

 

•

Simple majority vote to amend by-laws

 

•

Stock ownership requirements for executives and Directors

 

•

One share, one vote

 

•

External and internal executive pay parity

 

•

Annual director elections

 

•

Risk oversight by full Board and Committees

 

•

Anti-hedging, anti-short-sale and anti-pledging policies

 

•

Regular executive sessions of non-employee Directors

 

•

Annual Board and Committee self-evaluations

 

•

Compensation recovery/clawback policies

 

•

Annual advisory approval of executive compensation

 

•

Corporate governance principles

 

•

No poison pill.

 

 

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OUR PAY

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation and Human Capital Committee of our Board oversees our compensation programs for executive officers and other employees. This Compensation Discussion and Analysis (“CD&A”) explains the Compensation and Human Capital Committee’s compensation philosophy, summarizes our executive compensation program, and describes compensation decisions for Life Storage’s named executive officers (the “Named Executive Officers”) during 2019.

Executive Summary

Our Company

Life Storage, Inc. is a fully integrated, self-administered and self-managed REIT that acquires and manages self-storage properties throughout the United States. Headquartered in Buffalo, New York, the Company employs nearly 2,000 people and operates approximately 850 self-storage facilities encompassing over 55 million square feet in 29 states and Ontario, Canada.

Our Named Executive Officers

The Company’s four Named Executive Officers, known as the “NEOs,” for 2019 are:

 

Name		Title
David L. Rogers		Former Chief Executive Officer
Joseph V. Saffire		Chief Executive Officer
Andrew J. Gregoire		Chief Financial Officer and Secretary
Edward F. Killeen		Chief Operating Officer

2019 Leadership Transition

On February 28, 2019, David L. Rogers retired as Chief Executive Officer of the Company and in connection therewith, the Company and Mr. Rogers entered into a separation agreement. The separation agreement provided that Mr. Rogers vested in certain restricted shares and performance shares as of his retirement date. Notwithstanding his retirement, Mr. Rogers continues to serve on the Board of Directors.

The Company appointed Joseph V. Saffire as Chief Executive Officer of the Company effective March 1, 2019.

 

 

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Our Compensation Program

Our compensation program consists of three basic elements: base salary, annual cash incentive (bonus), and long-term incentive awards which include both time-based and performance-based equity awards. Below is a summary of the program’s elements.

 

Compensation Element     (CEO/Other NEOs Allocation at Target)		Structure/Attributes
Base Salary and All Other (15% CEO / 25% Other NEOs)		•  Competitively benchmarked
		•  Limited perquisites amounting to less than 1% of total target compensation
Annual Cash Incentive (15% CEO / 25% Other NEOs)		•  1/3 based on Funds from Operations
		•  1/3 based on Relative Funds from Operations
		•  1/3 based on Discretionary Performance Evaluation
Long-Term Restricted Stock Awards (35% CEO / 25% Other NEOs)		•  Designed for the long-term retention and shareholder value alignment
		•  Vesting is pro-rata annually over five years; no shares vest prior to the first grant anniversary
Long-Term Performance Based Stock Awards (35% CEO / 25% Other NEOs)		•  All based on Relative Shareholder Appreciation

 

 

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Governance of Executive Compensation.

 

What We Do:

✓   Alignment with Shareholders. Long-term incentive awards vest over periods of several years to reward sustained Company performance over time.

✓   Mix of Awards. Our executive compensation program contains both cash and equity components and is weighted heavily toward long-term equity-based incentives, with a mix of these incentives among performance-based stock awards and restricted stock or restricted stock awards.

✓   Share Ownership Guidelines. Our NEOs must hold equity of a value equivalent to three times their respective base salaries.

✓   Clawbacks. If we restate our financial statements, other than as a result of changes to accounting rules or regulations, we may recover incentive compensation that was paid or granted in the three- year period prior to the restatement, regardless of whether misconduct caused the restatement.

✓   Double-Trigger Severance. Cash severance in connection with a change in control is paid only if an actual or constructive termination of employment also occurs.

✓   Annual Risk Assessments. The Compensation Committee analyzes risk in setting executive compensation each year.

✓   Peer Group Comparison. With the help of independent compensation consultants, we annually analyze executive compensation relative to peer companies and published survey data for peer companies.

✓   Decisions by Independent Compensation Committee. Executive compensation is determined by committee of the Board comprised solely of independent directors.

✓   Independent Compensation Consultant. The Compensation Committee retains its own independent consultant to advise on compensation matters.

What We Do Not Do:

 

 

×    No Tax Gross-Ups in Change in Control Agreements. Our severance agreements apply only in the event of a termination following a change in control and contain no tax gross-ups for NEOs.

×    No Automatic Base Salary Increases. Our NEOs’ base salaries are reviewed annually and the decisions are based on market data provided by our independent compensation consultants.

×    No Hedging and Pledging Company Stock. Our policies prohibit the pledging and hedging of our stock by our executives and directors.

×    No Repricing of Stock Options. We do not permit the repricing of stock options without shareholder approval.

 

 

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Compensation Philosophy

Our key goal in designing our executive compensation programs is to incentivize decisions and behavior that build long-term shareholder value. The following principles help guide us in designing our pay programs toward this end:

 

•

Reward performance that correlates to long-term shareholder value over time by shifting the vast majority of compensation to long-term incentive awards

 

•

Incentivize behaviors and performance that closely align with the Company’s strategic objectives and short- and long-range business plans and also tie to results

 

•

Promote responsible risk taking in line with balance sheet and core value drivers

 

•

Utilize financial and operational quantitative metrics that are transparent and easily understood

 

•

Differentiate individual compensation based on current and prospective contributions and demonstrated leadership behaviors

 

•

Reference competitive market compensation information to appropriately compensate executives based on experience, skills and performance.

Compensation Components and Allocation of CEO 2019 Target Compensation

Our executive compensation program consists of three main components: base salary, annual cash incentive (bonus), and long-term incentive awards which include both time-based and performance-based equity awards. The Compensation and Human Capital Committee has also adopted guidelines for the structure and administration of these programs. Below are the components of our compensation program along with the relative weight of each component for our CEO:

 

 

 

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2019 Components of Executive Compensation

Base Salary

The Compensation and Human Capital Committee annually reviews executive officer base salary levels, typically at the beginning of the year, with a goal of providing competitive, fixed cash compensation. The Compensation and Human Capital Committee generally seeks to maintain executive base salaries near the median level of salaries for comparable positions in the Compensation Peer Group (as defined below). Due to Life Storage’s continuing strong operating results, the comparison to external and internal pay levels, and expected increases in base pay of executives at the Compensation Peer Group companies and the rate of pay increases for our non-executive officers, the 2018 and 2019 base salaries for our NEOs serving as of December 31, 2019 were as follows:

 

Name		2018 Base Salary				2019 Base Salary				Difference
Joseph V. Saffire		$	420,000			$	525,000	(1)		$	105,000
Andrew J. Gregoire		$	400,000			$	420,000			$	20,000
Edward F. Killeen		$	400,000			$	420,000			$	20,000

 

(1)

Reflects Mr. Saffire’s annualized base salary as the Company’s Chief Executive Officer effective March 1, 2019.

Annual Incentive Award

For 2019, our NEOs were eligible to earn annual incentive awards under Life Storage’s Annual Incentive Compensation Plan (the “Plan”). These annual awards are primarily based upon the level of achievement across a defined set of Company performance measures aligned with stockholder value creation and advancement of strategic goals, but individual awards may be modified (up or down) based on the NEO’s particular performance.

Under the Plan, the NEOs are entitled to annual bonuses based upon certain performance metrics set by the Compensation and Human Capital Committee. The three performance metrics under the Plan are based upon (i) achieving a percentage growth in “targeted” FFO (the “FFO Award Percentage”); (ii) achieving percentage increases in FFO per share that compare favorably to the growth achieved by publicly traded competitors of the Company (Public Storage, Extra Space Storage, Inc., and CubeSmart) (the “Peer Companies Award Percentage”); and (iii) the participant’s overall performance for the year based upon factors determined by the Compensation and Human Capital Committee (the “Performance Award Percentage”). The maximum potential payout under these awards is 180% of each NEO’s respective base salary.

FFO is computed in accordance with the National Association of Real Estate Investment Trusts guidelines and is used by industry analysts and investors as a supplemental operating performance measure of an equity REIT. FFO excludes historical cost depreciation, among other items, from net income determined in accordance with generally accepted accounting principles, or GAAP. The most comparable GAAP measure is net income (loss). Under the Plan, the Compensation and Human Capital Committee may make adjustments to FFO to eliminate the impact of unusual and unforeseen factors. For an explanation of how the Company calculates FFO, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC.

 

 

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FFO Award Percentage

The first metric pursuant to the Plan allows each NEO to earn a bonus of up to 60% of base salary based upon the FFO per share for the Company for the bonus year compared to the FFO Target for the Company for such year. The FFO Target for a bonus year is the midpoint of the FFO per share range initially publicly announced by the Company as its earnings guidance for such year. No bonus is earned unless at least 97.5% of the FFO Target is achieved and, in order for the maximum bonus to be earned, 102.5% of the FFO Target must be achieved. The award percentage for each level of FFO per share is as follows:

 

Company’s FFO per Share		Award Percentage
Less than 97.5% of FFO Target			0%
97.5% or more but less than 98.75% of FFO Target			15%
98.75% or more but less than 100% of FFO Target			30%
100% of FFO Target			40%
More than 100% but less than 101.125% of FFO Target			45%
101.125% or more but less than 102.5% of FFO Target			50%
102.5% or more of FFO Target			60%

The FFO Target established at the beginning of 2019 was $5.58. Actual achievement was at 100.7% of target, yielding a payout on this award of 45% of each NEO’s respective base salary.

Peer Companies Award Percentage

The second metric pursuant to the Plan allows each NEO to earn a bonus of up to 60% of base salary based upon the percentage increase of FFO per share for the Company for the 12-months ending September 30 of the current year over the FFO per share for the Company for the same period of the previous year as compared with that of certain publicly traded competitors (Public Storage, Extra Space Storage Inc., and CubeSmart). Under this metric, the following award percentages are earned based on the number of peer companies’ FFO Growth per share exceeded by the Company:

 

Number of Peer Companies’ FFO Growth per Share Exceeded by the Company		Award Percentage
Zero			0%
One			20%
Two			40%
Three			60%

In 2019, our FFO Growth did not exceed any of our peers’ FFO Growth per Share; therefore, there was no payout on this award.

Performance Award Percentage

The third metric pursuant to the Plan allows each NEO to earn a bonus of up to 60% of base salary based upon the Compensation and Human Capital Committee’s review of the

 

 

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participant’s overall performance for the year based upon factors determined by the Compensation and Human Capital Committee in its discretion. These factors, which are not subject to pre-determined targets or measures, include considerations based upon the participant’s performance related to improvements in same store revenues, expenses and net operating income; results of expansions and enhancements; marketing innovations; monitoring and improving enterprise risk management and legal compliance programs; the use of funds from property dispositions; maintenance of cost control programs; financing growth including joint venture initiatives and improvements to short- and long-term debt structures; succession planning; results related to acquisition and disposition of properties; and such other matters as the Compensation and Human Capital Committee deems appropriate.

For 2019, the Compensation and Human Capital Committee awarded a bonus of 60% of base salary under this metric to Messrs. Saffire and Gregoire and 50% to Mr. Killeen. This award was based on a number of factors and accomplishments, including wholly owned and joint venture acquisitions completed by the Company in 2019, dispositions completed, executive transition, the expansion of the Company’s third-party management business in 2019, and the increase in same store sales and net operating income.

2019 Compensation Program Outcomes

For 2019, Mr. Saffire received a cash bonus of $551,250, Mr. Gregoire received a cash bonus of $441,000, and Mr. Killeen received a cash bonus of $399,000. Mr. Rogers did not receive a cash bonus for 2019 due his retirement in February of 2019. Such bonuses are comprised of:

 

•

Each of Messrs. Saffire, Gregoire and Killeen were paid a bonus equal to 45% of their base salaries with respect to the FFO metric based upon the Company’s actual adjusted FFO per share of $5.62 in 2019 compared to the FFO Target.

 

•

Based on discretionary performance evaluation, the Compensation and Human Capital Committee awarded Messrs. Saffire and Gregoire a bonus of 60% of their respective base salaries and Mr. Killeen 50% of his base salary for reasons further discussed above.

 

•

The Company’s FFO growth per share from 2018 to 2019 as defined by the Plan was approximately 1.6% which did not exceed the FFO growth per share of any of the Peer Companies as defined in the Plan. Accordingly, the NEOs were not paid a bonus with respect to relative FFO.

The following table shows the annual incentive bonus, including the respective formulaic and individual components, paid to each NEO serving as of December 31, 2019:

 

Name		Base Salary				Formulaic Component				Individual Component				Total Cash Compensation
Joseph V. Saffire		$	525,000	(1)		$	236,250			$	315,000			$	1,076,250
Andrew J. Gregoire		$	420,000			$	189,000			$	252,000			$	861,000
Edward F. Killeen		$	420,000			$	189,000			$	210,000			$	819,000

 

(1)	Reflects Mr. Saffire’s annualized base salary as the Company’s Chief Executive Officer effective March 1, 2019.

 

 

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Long-Term Incentive Award

Each year, we grant our NEOs long-term equity-based incentive awards. The Compensation and Human Capital Committee determines the amount of these awards, as well as the mix of time- and performance-based awards. The Compensation and Human Capital Committee seeks to balance time-based awards, which have an inherent retention incentive, with performance-based awards, which tie compensation to relative long-term Total Shareholder Return (”TSR”). Currently, our long-term equity-based incentive awards are in the form of restricted stock awards or performance-based awards. The Compensation and Human Capital Committee decided to evenly split the long-term grants (considering performance-based awards at target) between time-based restricted stock awards and performance-based awards. The following illustrates Life Storage’s 2019 long-term incentive award structure:

 

When considering the total long-term equity-based incentive award amount granted to each NEO, the Compensation and Human Capital Committee generally reviews the comparison to the Compensation Peer Group, the relative value of each compensation element, the expense of such awards, and the impact on dilution. The Compensation and Human Capital Committee intends that long-term equity-based incentive award amounts approximate the median total direct compensation of the 2019 Compensation Peer Group if Life Storage’s performance falls at the median of its peers, with the ability to achieve above-median pay for superior performance. Accordingly, for 2019, the Compensation and Human Capital Committee evaluated competitive compensation data, Life Storage’s recent performance, and the role of each NEO in achieving Company objectives for long-term equity-based incentive award amounts for the other NEOs. Based on its evaluations and considering the market 50th percentile, the Compensation and Human Capital Committee approved the following time-based restricted stock and performance-based awards for the NEOs serving as of December 31, 2019:

 

Name		Restricted Stock #				Target Performance-Based #
Joseph V. Saffire			11,832				11,832
Andrew J. Gregoire			4,023				4,023
Edward F. Killeen			4,023				4,023

 

 

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Time-Based Restricted Stock Awards

The time-based restricted stock awards granted on December 19, 2019 vest in five equal installments on December 19, 2020, December 19, 2021, December 19, 2022, December 19, 2023, and December 19, 2024, subject to continuous employment.

Performance-Based Awards

The performance-based awards granted on December 19, 2019 are subject to both continued service and relative TSR considerations. In order to better align executive officer compensation with stockholder interests and motivate management to increase Company performance, our performance-based awards (1) include a single three-year performance period and a single award opportunity at the end of the three-year performance period, and (2) provide for a target number of performance-based awards, with the final number of shares earned ranging between 0% and 200% of the target level. Specifically, the TSR metric measures our total cumulative stockholder return for the three-year performance period relative to a performance peer group (the “Performance Peer Group”). For purposes of the awards, TSR is determined for the Company and each company in the Performance Peer Group by dividing (a) the sum of common stock price appreciation and dividends of the respective company during the performance period by (b) the common stock price of such company at the beginning of the performance period. The Compensation and Human Capital Committee believes that relative TSR is an appropriate long-term performance metric because it generally reflects all elements of a company’s performance, provides a reliable means to measure relative performance, and ensures the best alignment of the interests of management and stockholders. For 2019, the Performance Peer Group remained unchanged from 2018 and includes Life Storage and the following companies:

 

2019 Performance Peer Group
Brandywine Realty Trust		EastGroup Properties Inc.		Mack-Cali Realty Corporation
Camden Property Trust		Extra Space Storage, Inc.		National Storage Affiliates Trust
Cousins Properties Incorporated		Lexington Realty Trust		PS Business Parks, Inc.
CubeSmart		Liberty Property Trust		STAG Industrial, Inc.

The 2019 performance-based awards will be determined based on the TSR of each company in the 2019 Performance Peer Group as outlined above for the performance period beginning December 20, 2019, and ending December 19, 2022, with a single award opportunity at the end of the performance period. Specifically, payment of awards will be made in shares of Life Storage stock based on Life Storage’s relative TSR rank on December 19, 2022, as follows:

 

Payout Level		Performance Percentile Rank				Payout Factor
Maximum			100	%			200	%
			92	%			183	%
			84	%			166	%
			76	%			150	%
			69	%			133	%
			61	%			116	%

 

 

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Payout Level		Performance Percentile Rank				Payout Factor
Target			50	%			100	%
			45	%			75	%
			35	%			50	%
Threshold			30	%			25	%
			<30	%			0	%

Outcome of 2016 Long-term Performance Awards

In January 2020, the Compensation and Human Capital Committee determined the outcome of the long-term performance-based awards made to the NEOs on December 22, 2016 under the Company’s 2015 Award and Option Plan. These awards had a measurement period beginning on December 23, 2016 and ending on December 22, 2019, utilizing relative TSR as the performance criterion. Based on Life Storage’s relative performance ranking to the performance peer group described in the awards, Life Storage earned a performance factor of 140%. As such, Mr. Rogers received 9,670 shares of the Company’s stock and each of Messrs. Gregoire and Killeen received 5,429 shares of the Company’s stock based upon these awards. Mr. Saffire did not receive an award in 2016 since he was not employed by the Company at such time. The following table illustrates Life Storage’s relative ranking and performance payout for the 2016 long-term performance-based awards:

 

Rank		Company		Vesting Percentage
1		EastGroup Properties, Inc.			200%
2		First Industrial Realty Trust, Inc.			188%
3		PS Business Parks, Inc.			176%
4		Extra Space Storage Inc.			165%
5		Mid-America Apartment Communities, Inc.			153%
6		Life Storage, Inc.			140%
7		National Retail Properties, Inc.			125%
8		CubeSmart			110%
9		Cousins Properties Incorporated			100%
10		Lexington Realty Trust			90%
11		Dow Jones Equity REIT Index			80%
12		Public Storage			70%
13		Highwoods Properties, Inc.			60%
14		Washington Real Estate Investment Trust			50%
15		Acadia Realty Trust			0%
16		Pennsylvania Real Estate Investment Trust			0%
17		Equity One, Inc.			0%

 

 

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Other Compensation

In addition to the components of total direct compensation described above, our executive compensation program includes other elements of compensation that are designed primarily to attract, motivate and retain executives critical to our long-term success and to provide a competitive compensation structure.

Severance Benefits

The Company has entered into employment agreements with each of the NEOs with severance benefits. A description of the terms of the agreements can be found under the heading “Employment Agreements” within this Proxy Statement. In entering into these agreements, the Compensation and Human Capital Committee desired to assure that the Company would have the continued dedication of the NEOs, notwithstanding the possibility of a change in control, and to retain such NEOs in its employ. The Compensation and Human Capital Committee believes that, should the possibility of a change in control arise, the Company should be able to receive and rely upon the NEOs’ advice as to the best interests of the Company and without the concern that such NEO might be distracted by the personal uncertainties and risks created by a potential change in control. The actual benefits and payments to be made to the NEO, as set forth in the employment agreements, were determined based on the Compensation and Human Capital Committee’s business judgment, advice received by the Compensation and Human Capital Committee from its compensation consultant, and negotiations with each officer at the time of entering into the agreements.

Compensation Alignment, Strategy, and Execution

As a real estate investment and management company, the Company’s long- term success depends on its ability to acquire, improve, operate, manage and finance self-storage properties in a manner that will enhance shareholder value, market presence, and operational efficiency. Competitive and marketplace pressures require constant improvements to productivity, innovation in providing customer service, and optimal allocation of capital resources. To achieve these goals, it is critical that the Company be able to attract, motivate, and retain highly talented individuals at all levels of the organization with appropriate skill sets who are committed to the Company’s core values of teamwork, respect, accountability, innovation, and integrity.

The Company’s compensation philosophy is to provide compensation programs that reward its executive officers for improving operating results and profitability and align management’s interests with those of shareholders. Compensation is designed to reward achievement of short- term goals and motivate the executive officers and other employees to create long- term shareholder value and increase total shareholder return. The Company’s incentive compensation program also promotes growth through selective acquisitions and improvements and enhancements to existing properties, obtaining a low cost of funds, improving operating efficiencies through technical innovation and developing additional revenue contributions through management of properties owned by third parties, and by expanding value-added services to individual and commercial customers.

The Compensation and Human Capital Committee has oversight responsibility in administering the Company’s executive compensation programs, determines compensation of the executive officers on an annual basis, and provides guidance regarding the Company’s overall executive compensation programs.

 

 

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The Compensation and Human Capital Committee uses a consistent approach to determine the compensation of each NEO. Despite their different roles, the Compensation and Human Capital Committee considers the NEOs to be a team with complementary skill sets and expects them to work together to achieve Company objectives. Accordingly, the Company uses the same suite of compensation components for each of the NEOs in order to maintain executive alignment amongst the executive team. In making decisions on the individual compensation for each officer, the Compensation and Human Capital Committee also considers, among other items, specific job responsibility, title, performance and contributions made to the Company, competitive conditions and relationship of compensation to other officers. Overall, the compensation reflects the Compensation and Human Capital Committee’s team approach and reflects the Compensation and Human Capital Committee’s desire to have the NEOs work together to achieve common goals.

The Compensation and Human Capital Committee believes the Company’s compensation programs provide an effective blend of components necessary to reward the achievement of short-term goals and to create long-term shareholder value. The program includes objective performance metrics based primarily upon FFO, one of the key drivers in the real estate investment trust industry, long-term incentives through the use of restricted shares with reasonably long vesting periods, long-term performance-based awards, and a subjective element which provides the Compensation and Human Capital Committee with flexibility to meet changing needs and demands while accounting for cyclicality in the Company’s core business. In addition to rewarding current returns, the programs incentivize long-term growth, emphasizing a strong balance sheet and investment grade credit ratings. The Compensation and Human Capital Committee adjusts the compensation policies from time to time to meet changing conditions. Over the last several years, the Company’s compensation programs for the NEOs have been modified to more directly reflect pay for performance. Two-thirds of the potential annual incentive bonus for the NEOs is based upon targeted FFO per share and comparative FFO, and one-third of such bonus is based upon other performance factors. The bonus is subject to a clawback in certain cases. Also, recent long- term incentive compensation grants have been made in a manner that directly links executive payouts with relative TSR.

In the Compensation and Human Capital Committee’s judgment, the Company’s compensation programs are directly related to the performance of executives. At the Company’s 2019 Annual Meeting, the Company held a non-binding Shareholder advisory vote on executive compensation (“say-on-pay”). The Company’s Shareholders approved the compensation of the Company’s executive officers with approximately 98% of voted shares cast in favor of the say-on-pay resolution. As part of its executive compensation discussions, the Compensation and Human Capital Committee has reviewed the results of the 2019 say-on-pay vote and considered it to be supportive of the Company’s compensation practices. In light of such strong Shareholder support and recent modifications the Compensation and Human Capital Committee made in compensation programs to directly reflect pay for performance, the Compensation and Human Capital Committee determined that fundamental changes in the Company’s compensation policies were not necessary in 2019. The Company has held an advisory vote on executive compensation every year since 2011. At the Company’s 2017 Annual Meeting, the Company’s Shareholders expressed a preference that advisory votes on executive compensation continue to occur every year. Consistent with this preference, the Board of Directors has determined to continue the practice of having such an advisory vote every

 

 

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year. The Company does not plan to time, and has not timed, its release of material non-public information for the purpose of affecting the value of executive compensation.

Process for Determining Executive Compensation

The Compensation and Human Capital Committee generally reviews and makes its decisions regarding the annual compensation of our NEOs at its regular meetings each February. These decisions include determining annual incentive plan award payouts for the prior year’s performance and adjustments to base salary, establishing target incentive opportunities and applicable performance objectives for the current year’s annual incentive plan awards and granting long-term equity-based incentive awards for the current year. The Compensation and Human Capital Committee also adjusts compensation as necessary at other times during the year, such as in the case of promotions, other changes in employment status, significant corporate events, or for competitive purposes. The Compensation and Human Capital Committee assesses each NEO’s impact during the year and overall value to Life Storage, specifically considering:

 

•

The NEO’s leadership skills;

 

•

Recommendations from our CEO (discussed in the following paragraphs) and the independent compensation consultant;

 

•

Impact on strategic initiatives;

 

•

Performance in the NEO’s primary area of responsibility;

 

•

The NEO’s role and trajectory in succession planning and development; and

 

•

Other intangible qualities that contribute to corporate and individual success.

Annually, our CEO provides the Compensation and Human Capital Committee with an evaluation of his own performance that is based, in large part, upon the Company’s performance, as well as his broad leadership roles as CEO and our lead representative to the investment community. The Compensation and Human Capital Committee evaluates our CEO on these and other criteria, and his total compensation package is determined entirely by the Compensation and Human Capital Committee, based on its evaluation and input from the compensation consultant, and reflects his performance, Life Storage’s performance and competitive industry practices. Each year, our CEO evaluates each of the other NEOs and makes compensation recommendations to the Compensation and Human Capital Committee. In developing his recommendations, the CEO considers input from internal compensation experts, as well as performance against the Company’s performance metrics and each NEO’s performance against his or her individualized goals. The compensation consultant reviews and provides comments to the Compensation and Human Capital Committee on our CEO’s recommendations.

2019 Compensation Peer Group

The Compensation and Human Capital Committee refers to data regarding compensation awarded to similarly situated officers by companies in the Compensation Peer Group (as defined below) to ensure that our NEOs’ base salaries, target annual incentive award

 

 

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opportunities and equity grants are competitive and reasonably aligned to the external market. This Peer Group is intended to reflect North American based REITs that compete with Life Storage for executive talent and have comparable activity/scope of operations (the “Compensation Peer Group”). This group was developed taking into consideration metrics including revenue, market capitalization, enterprise value, investment strategy, earnings before interest, taxes, depreciation and amortization (“EBITDA”), comparability of asset portfolio, optical perspectives and the availability of compensation data. The composition of the Compensation Peer Group is reviewed annually to ensure competitive alignment and comparability. For 2019, in order for Life Storage to rank at or close to the median of the Compensation Peer Group with respect to the key metrics of revenue, market capitalization and enterprise value, the Compensation and Human Capital Committee, in consultation with its independent compensation consultant, maintained the existing 2018 Compensation Peer Group. The 2019 Compensation Peer Group is as follows:

 

2019 Compensation Peer Group
Cousins Properties Incorporated		Extra Space Storage Inc.		National Storage Affiliates Trust
Cubes mart		Lexington Realty Trust		PS Business Parks, Inc.

EastGroup Properties, Inc

2020 Named Executive Officer Compensation Changes

2020 Compensation Peer Group

The Compensation and Human Capital Committee and Longnecker & Associates (“Longnecker” or our “Independent Consultant”) reviewed the construct of the 2019 Compensation Peer Group in the fall of 2019 in order to prepare forward-looking compensation programs for 2020. Based upon this review and market conditions, Longnecker recommended adjustments be made to the 2019 Compensation Peer Group. The following illustrates Longnecker’s recommendations for Life Storage’s 2020 Compensation Peer Group:

 

Company		2019 Peer Group				2020 Peer Group
Brandywine Realty Trust						●
Camden Property Trust						●
Cousins Properties Incorporated		●				●
CubeSmart		●				●
EastGroup Properties, Inc.		●				●
Extra Space Storage Inc.		●				●
Lexington Realty Trust		●				●
Liberty Property Trust						●
Mack-Cali Realty Corporation						●
National Storage Affiliates Trust		●				●
PS Business Parks, Inc.		●				●
STAG Industrial, Inc.						●

 

 

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2020 Base Salary

The Compensation and Human Capital Committee, with advice from Longnecker, determined that modest merit-based increases to our NEOs’ base salary rates for 2020 were warranted. In determining the amount of the base salary increases for 2020, the Compensation and Human Capital Committee considered the current 2020 organizational outlook, the relative nature of internal and external pay levels, and expected increases in base pay of executives within the 2019 Compensation Peer Group companies in order to determine 2020 levels. The following outlines the approved base salary levels for Life Storage’s NEO’s for 2020:

 

Name		2019 Base Salary				2020 Base Salary				Difference
Joseph V. Saffire		$	525,000	(1)		$	600,000			$	75,000
Andrew J. Gregoire		$	420,000			$	435,000			$	15,000
Edward F. Killeen		$	420,000			$	435,000			$	15,000

 

(1)	Reflects Mr. Saffire’s annualized base salary as the Company’s Chief Executive Officer effective March 1, 2019.

Independent Compensation Consultant

Under its charter, the Compensation and Human Capital Committee has the authority, in its sole discretion, to retain or obtain the advice of a compensation consultant. After an extensive review of proposals from several leading compensation consultants, such committee determined to retain Longnecker as its independent compensation consultant. The Compensation and Human Capital Committee did not engage any other consultants to provide executive compensation consulting services on its behalf during the 2019 fiscal year. Our Independent Consultant assists the Compensation and Human Capital Committee in developing a competitive total compensation program that is consistent with our philosophy of goal-oriented pay for performance and that allows us to attract, retain and motivate talented executives. For 2019, Longnecker’s services included providing an annual analysis of the compensation of our officers and directors, and their counterparts at peer companies. The analysis compares each element of compensation and total direct compensation awarded by Life Storage and by our peers to our respective executive officers and directors. In addition, for 2019, Longnecker helped the Compensation and Human Capital Committee consider the allocation between annual incentive pay and long-term equity-based compensation and between the types of long-term equity-based incentive awards. Longnecker reports exclusively to the Compensation and Human Capital Committee. The Compensation and Human Capital Committee reviews Longnecker’s independence on an annual basis. In 2019, as in previous years, the Compensation and Human Capital Committee determined that there were no conflicts of interest involving Longnecker as a result of any current, historical, or pending engagement. Specifically, the Compensation and Human Capital Committee determined that Longnecker was an independent adviser based on the following considerations:

 

•

Our Independent Consultant supplies no services to Life Storage other than those as advisor to the Compensation and Human Capital Committee.

 

 

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•

Our Independent Consultant has implemented a stock trading policy to prevent its consultants from trading client stock inside of client black-out trading periods. Additionally, if any consultants purchase Life Storage stock, the owners of Longnecker must be notified as well as Life Storage.

 

•

Neither Longnecker nor its representatives to Life Storage maintains any business or personal relationship with any Life Storage executive officer or Compensation and Human Capital Committee member that would adversely impact our Independent Consultant’s independence or that would create any conflict of interest.

 

•

Neither our Independent Consultant nor its representatives to Life Storage (including their immediate family members) owns any Life Storage stock.

 

•

Life Storage’s fees to its Independent Consultant in 2019 amounted to less than 1% of Longnecker’s total 2019 annual revenue.

The Compensation and Human Capital Committee continues to monitor the independence of its compensation consultant on a periodic basis.

Stock Ownership Guidelines

The Compensation and Human Capital Committee believes that meaningful stock ownership by our officers is important in aligning management’s interests with the interests of our stockholders. We have implemented stock ownership guidelines that require NEOs to maintain consistent ownership of Life Storage stock based on three times the executive’s annual base salary. Each NEO has met these guidelines.

Policies and Practices Related to Risk Management

The Compensation and Human Capital Committee has discussed and analyzed the concept of risk as it relates to our compensation programs and believes that our compensation programs do not encourage excessive and unnecessary risk-taking. The Compensation and Human Capital Committee, with the assistance of Longnecker, arrived at this conclusion for the following reasons:

 

•

Although the majority of the compensation provided to our executives is variable and linked to performance, we believe an appropriate portion of their total compensation is fixed. The fixed (salary) portion provides a steady income regardless of Life Storage’s stock performance and allows executives to focus on our business without an excessive emphasis on our stock price performance.

 

•

Our annual incentive plan awards are determined based on Company and individual performance measures, both operational and strategic, which mitigates excessive risk-taking that could produce unsustainable gains in one area of performance at the expense of our overall long-term interests. The Company goals are designed to ensure a proper balance between stock performance, operational measures and strategic goals. In addition, the Compensation and Human Capital Committee sets performance goals that it believes are reasonable in light of our past performance, then-current business projections, and market conditions.

 

 

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Moreover, our annual incentive plan awards are subject to maximum payout caps that limit the amount an executive may earn for certain of the operational measures.

 

•

A portion of our long-term equity-based incentive awards consists of time-based restricted stock awards, which vest over three to five years and retain value even in a depressed market, so executives are less likely to take unreasonable risks. Another portion (50% of the total award value in the case of our NEOs for 2019) consists of performance-based awards that measure our TSR over a specified period relative to the TSR performance of certain peer companies over the same period, which encourages a longer-term focus.

 

•

Our stock ownership guidelines reduce the likelihood of unnecessary risk-taking because our executive officers are required to own a meaningful amount of Life Storage stock.

In light of the above, the Compensation and Human Capital Committee believes the various elements of our executive compensation programs sufficiently motivate our executives to act in the interests of Life Storage’s sustained long-term growth and performance.

 

 

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Summary Compensation Table

 

Name and Principal Position		Year		Salary ($)				Bonus ($)				Stock Awards ($)(1)				Non-Equity Incentive Plan Compensation ($)(2)				All Other Compensation ($)(3)				Total ($)
David L. Rogers (4)		2019			$115,385				-				-				-				$7,055				$122,440
Former Chief Executive Officer		2018			$600,000				-				-				$660,000				$83,073				$1,343,073
		2017			$570,000				-				$1,807,355				$228,000				$98,852				$2,704,207
Joseph V. Saffire (5)		2019			$508,846				-				$2,438,457				$551,250				$4,620				$3,503,173
Chief Executive Officer		2018			$342,467				-				$1,646,280				$440,000				$4,455				$2,433,202
		2017			$55,386				-				$101,131				-				-				$156,517
Andrew J. Gregoire		2019			$420,000				-				$829,100				$441,000				$4,620				$1,694,720
Chief Financial Officer and Secretary		2018			$400,000				-				$812,790				$440,000				$32,765				$1,685,555
		2017			$340,000				-				$1,019,135				$136,000				$45,157				$1,540,292
Edward F. Killeen		2019			$420,000				-				$829,100				$399,000				$4,620				$1,652,720
Chief Operating Officer		2018			$400,000				-				$812,790				$440,000				$32,765				$1,685,555
		2017			$340,000				-				$1,019,135				$136,000				$45,157				$1,540,292

 

(1)	The amounts disclosed in the “Stock Awards” column represent the aggregate grant date fair value of all shares or awards granted to the named executive officers for the applicable fiscal year, calculated in accordance with FASB ASC Topic 718.

 

The amounts shown in this column for 2019 relate to (i) a long-term incentive award of 11,832 restricted shares awarded to Mr. Saffire and a long-term incentive award of 4,023 restricted shares awarded to each Messrs. Gregoire and Killeen on December 19, 2019, and (ii) the target award of 11,832 performance-based awards issued to Mr. Saffire and the target award of 4,023 performance-based awards issued to each Messrs. Gregoire and Killeen on December 19, 2019. Mr. Rogers did not receive any such awards as his retirement occurred prior to the award date.

 

The amounts shown in this column for 2018 relate to (i) a long-term incentive award of 3,866 restricted shares awarded to Mr. Saffire on May 7, 2018, (ii) the target award of 3,866 performance-based awards issued to Mr. Saffire on May 7, 2018, (iii) a long-term incentive award of 5,090 shares awarded to Mr. Saffire and 4,212 restricted shares awarded to each Messrs. Gregoire and Killeen on December 18, 2018, and (iv) the target award of 5,090 performance-based awards issued to Mr. Saffire and the target award of 4,212 performance-based awards issued to each Messrs. Gregoire and Killeen on December 18, 2018. Mr. Rogers did not receive any awards in 2018.

 

 

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The amounts shown in this column for 2017 relate to (i) a long-term incentive award of 3,577 restricted shares awarded to Mr. Rogers and 1,789 restricted shares awarded to each Messrs. Gregoire and Killeen on February 22, 2017, (ii) the target award of 3,577 performance-based awards issued to Mr. Rogers and the target award of 1,789 performance-based awards issued to each Messrs. Gregoire and Killeen on February 22, 2017, (iii) a long-term incentive award of 7,039 restricted shares awarded to Mr. Rogers and 4,199 restricted shares awarded to each Messrs. Gregoire and Killeen on December 29, 2017, (iv) the target award of 7,039 performance-based awards issued to Mr. Rogers and the target award of 4,199 performance-based awards issued to each Messrs. Gregoire and Killeen on December 29, 2017, and (v) a long-term incentive award of 1,250 restricted shares awarded to Mr. Saffire on November 1, 2017.

 

For more information on these awards, see “Compensation Discussion and Analysis-2019 Components of Executive Compensation” and the “Grants of Plan-Based Awards for 2019” table below. The assumptions used to compute the grant date fair value of these awards for each named executive officer are set forth in Notes 2 and 9 to our 2019 consolidated financial statements contained in our 2019 Annual Report. The value of the performance-based awards issued in 2019 to each of the executive officers at the grant date assuming that the highest level of performance will be achieved is as follows: Mr. Saffire—$2,376,812, Messrs. Gregoire and Killeen each—$808,140. The value of the performance-based awards issued in 2018 to each of the executive officers at the grant date assuming that the highest level of performance will be achieved is as follows: Mr. Saffire—$1,573,514, Messrs. Gregoire and Killeen each—$785,622. The value of the performance-based awards issued in 2017 to each of the executive officers at the grant date assuming that the highest level of performance will be achieved is as follows: Mr. Rogers—$1,739,958, Messrs. Gregoire and Killeen each—$979,762. The value of the performance-based awards is dependent on the Company’s performance over a three-year period.

 

(2)

The amounts disclosed in the “Non-Equity Incentive Plan Compensation” for 2019 represent cash payments for 2019 performance made in March 2020 to the named executive officers serving as of December 31, 2019 under the Company’s annual incentive compensation plan. The amounts disclosed in the “Non-Equity Incentive Plan Compensation” for 2018 represent cash payments for 2018 performance made in March 2019 to the named executive officers serving as of December 31, 2018 under the Company’s annual incentive compensation plan. The amounts disclosed in the “Non-Equity Incentive Plan Compensation” for 2017 represent cash payments for 2017 performance made in March 2018 to the named executive officers serving as of December 31, 2017 under the Company’s annual incentive compensation plan. For more information on these 2019, 2018, and 2017 awards, see “Compensation Discussion and Analysis-2019 Components of Executive Compensation.”

 

 

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(3)	“All Other Compensation” includes the following:

 

Name				Allowances*				401(k) Match				Dividends on Restricted Stock				Total “All Other Compensation”
David L. Rogers		2019			$2,600				$4,455				-				$7,055
		2018			$15,600				$4,455				$63,018				$83,073
		2017			$15,600				$4,455				$78,797				$98,852
Joseph V. Saffire		2019			-				$4,620				-				$4,620
		2018			-				$4,455				-				$4,455
		2017			-				-				-				-
Andrew J. Gregoire		2019			-				$4,620				-				$4,620
		2018			-				$4,455				$28,310				$32,765
		2017			-				$4,455				$40,702				$45,157
Edward F. Killeen		2019			-				$4,620				-				$4,620
		2018			-				$4,455				$28,310				$32,765
		2017			-				$4,455				$40,702				$45,157

 

*  Includes an annual allowance for an automobile and club dues.

 

(4)

Mr. Rogers retired from his position as Chief Executive Officer on February 28, 2019. Subsequent to his retirement, Mr. Rogers continued as a member of the Board. The fees earned by Mr. Rogers as a Director are set forth in the “Director Compensation Table” above. The amounts included here represent compensation for Mr. Rogers during the portion of 2019 that he served as Chief Executive Officer.

 

(5)	On March 1, 2019, Mr. Saffire succeeded Mr. Rogers as Chief Executive Officer upon Mr. Rogers’ retirement. Prior to his appointment as Chief Executive Officer, Mr. Saffire served as the Company’s Chief Investment Officer.

Grant of Plan-Based Awards for 2019

 

Name		Grant Date				Estimated Possible Payouts Under Non-Equity Incentive Plan Awards												Estimated Future Payouts Under Equity Incentive Plan Awards												All Other Stock Awards: Units (#) (2)				Grant Date Fair Value of Stock and Option Awards ($) (5)
						Threshold ($)				Target ($)				Maximum ($)(1)				Threshold (#)				Target (#)				Maximum (#)
Joseph V. Saffire			12/19/19				-				-				-				-				-				-				11,832 (3)			$	1,250,051
			12/19/19 (4)				-				-				-				2,958				11,832				23,664				-			$	1,188,406
			N/A				-				-				$945,000				-				-				-				-				-
Andrew J. Gregoire			12/19/19				-				-				-				-				-				-				4,023 (3)			$	425,030
			12/19/19 (4)				-				-				-				1,006				4,023				8,046				-			$	404,070
			N/A				-				-				$756,000				-				-				-				-				-
Edward F. Killeen			12/19/19				-				-				-				-				-				-				4,023 (3)			$	425,030
			12/19/19 (4)				-				-				-				1,006				4,023				8,046				-			$	404,070
			N/A				-				-				$756,000				-				-				-				-				-

 

 

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