We believe that our executive compensation program strikes an appropriate balance between attracting and retaining executives with the expertise and talent required to execute on our active portfolio management strategy, and linking compensation with the performance of the Company. Below is a summary of some of the key design features of our 2025 executive compensation program.
| • | Majority of NEO Target TDC is “At Risk.” Approximately 87.4% of Ms. Aman’s target TDC and approximately 78.8% of our other NEOs’ target TDC for 2025 was not guaranteed but rather had a value dependent upon our stock price and/or was tied directly to the performance of the Company relative to pre-established goals, the Company’s relative TSR, and/or individual performance, as shown below. |
| • | Annual Short-Term Incentives Based on Performance Measurement Framework. Annual short-term incentives (annual cash bonuses) are “at risk” because the amount awarded could range from 0% to 150% of the NEO’s target short-term incentive depending on Company performance. The Compensation Committee determined the 2025 annual short-term incentives for our NEOs based on a rigorous performance measurement framework, assessing the Company’s actual performance against pre-established operational and financial goals (including corporate social responsibility and sustainability goals). We also applied specific weightings to each performance measurement category, and used objective threshold and maximum payout levels, to reduce the degree of qualitative judgment applied in determining final payouts. Based on the Company’s performance (as reflected on pages 63-66), the Compensation Committee determined that the 2025 short-term incentives for our NEOs would be approximately 119.6% to 125.6% of their target payout levels. See “Short-Term Incentives—Decisions for 2025; 2025 Key Operating and Financial Goal Setting and Performance” on page 64 for more information about how the goals are set and the Company’s performance. |
| • | Majority of Target TDC is in the Form of Long-Term Incentives. The most significant component of each NEO’s total compensation opportunity is in the form of equity-based long-term incentives that vest over a three-year period. In 2025, approximately 65.3% of Ms. Aman’s (and approximately 55.7% of our other NEOs’) target TDC was in the form of equity-based long-term incentives. We believe equity compensation helps to align the interests of our NEOs with those of our stockholders. Annual long-term equity awards are “at risk” because the final award value depends on our stock price as well as continued service over the three-year vesting period, with three-quarters of our NEOs’ 2025 annual equity award values also being dependent upon our FFO per share performance, relative total shareholder return, and net debt to EBITDAre performance during a three-year performance period. Specifically, shares available to be earned were contingent on achievement of a threshold level of FFO per share for 2025. If that goal was achieved, vesting levels would be determined based on (i) the extent to which the threshold level of FFO per share for 2025 was exceeded, (ii) our TSR compared to other office-focused REITs over a three-year period (for 50% of the performance-based awards), and (iii) our average annual ratio of net debt to EBITDAre relative to pre-established goals over the three-year period (for the remaining 50% of the performance-based awards). |
| • | Target TDC Set Taking into Account Market Pay Levels and Payouts are Linked to Performance. The Compensation Committee did not set 2025 target TDC levels at any specific percentile against our peer group. Rather, the Compensation Committee considered peer group compensation data for 2024, as well as the other factors noted below under “2025 Named Executive Officer Compensation”, to inform its decision-making process for 2025. In setting the 2025 compensation levels, the Compensation Committee also considered the following factors: |
| — | Active Portfolio Management Strategy in Highly Competitive Markets. Our business model requires an active portfolio management strategy (see “2025 Company Performance” beginning on page 59 for a summary of our 2025 activities). We believe implementing this strategy requires a broader skill set than those of companies whose executives focus primarily on managing cash flows of a more static portfolio. |
| — | Target TDC Realized Only if Goals Achieved. In 2025, approximately 71.1% of Ms. Aman’s (and approximately 64.8% of our other NEOs’) target TDC was performance-based. As noted above, the payout of our short-term incentives and performance-based equity awards depends on our actual performance and may be forfeited if threshold levels of performance are not achieved. |
| KILROY REALTY | PROXY STATEMENT | 61 |
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