Terreno Realty Corp

Risk Considerations in our Compensation Programs. The compensation committee monitors our compensation policies and practices for our employees to determine whether they encourage unnecessary or excessive risk-taking. The compensation committee has reviewed our compensation structures and policies as they pertain to risk and has determined that our compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on the Company.

Pay Ratio Disclosure Rule. Pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (“PEO”). Our PEOs for purposes of determining such ratio is Mr. Baird, our chief executive officer, and Mr. Coke, our president. The purpose of the required disclosure is to provide a measure of the equitability of pay within the organization. As set forth in the table below, our 2023 PEO to median employee pay ratio was 24.3 to 1.

As permitted by SEC rules, we used the same median employee selected for the year ended December 31, 2022 because we believe there has been no change in our employee population or compensation arrangements that would result in a significant change to our pay ratio disclosure. That employee was initially identified using the annual base salary and bonus paid during the year ended December 31, 2022, plus any stock awards granted in 2022 for all individuals who were employed by us on December 31, 2022. Total compensation was annualized for all those employees that were not employed for the full year of 2022.

What We Do and Do Not Do. In summary, we do not: grant stock options or partnership units as compensation, allow pledging or hedging of our stock by employees or directors, allow new investment in member companies of the FTSE Nareit Equity Industrial Index, allow excise tax gross ups or pay annual cash bonuses to Messrs. Baird or Coke. We do: align pay with performance heavily weighted to beat-risk, high degree of difficulty performance-based equity, require significant stock ownership and have double-trigger change of control provisions.