OMEGA HEALTHCARE INVESTORS INC
For the period ended Jun 6, 2025. Filed Apr 22, 2025.
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What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
Jun 6, 2025 · Filed Apr 22, 2025
Contents
Section 5 - Components of Our Executive Compensation Program
Our NEOs’ compensation currently has three primary components, which are discussed in more detail below:
| ● | annual base salary; |
| ● | annual cash incentive awards; and |
| ● | annual long-term equity incentive awards. |
Variable pay constitutes the majority of our executives’ compensation, which allows the Committee to reward superior performance and penalize underperformance, while the long-term equity incentive portions of our compensation programs serve to align the interests of our NEOs with the interests of our stockholders.
Objectives and Important Features of Our Executive Compensation Program
| Base Salary(Cash) | | ●Fixed level of cash compensation to attract and retain key executives in a competitive marketplace●Preserves an executive’s commitment during downturns | | ●Determined based on evaluation of individual executives, compensation, internal pay equity and a comparison to the peer group | ||
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| AnnualIncentive(Cash) | | ●Target cash incentive opportunity (set as a percentage of base salary) to encourage achievement of annual Company financial and operational goals●Assists in attracting, retaining and motivating executives in the near term | | ●Majority (70% for 2024) of incentive opportunity based on objective performance measures, which includes FAD per share, Tenant Quality and Leverage●A portion (30% for 2024) of the payout is also based on performance against individual-specific subjective goals | ||
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| Long-TermIncentive(EQUITY) | | ●Focuses executives on achievement of long-term financial and strategic goals and TSR, thereby creating long-term stockholder value●Assists in maintaining a stable, continuous management team in a competitive market●Maintains stockholder management alignment●Easy to understand and track performance●Limits dilution to existing stockholders relative to utilizing stock options | RSUs & Profits Interest Units (Time-based) | | ●40% of target annual long-term incentive awards in 2024●Provides upside incentive in up-market, with some down-market protection; supports retention●Three-year cliff vest (subject to certain exceptions) | |
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| | | PRSUs & Profits Interest Units (Performance-based) | | ●60% of target annual long-term incentive award in 2024, requiring significant outperformance to achieve target●Three-year performance periods with the actual payout based on TSR and Relative TSR performance●Provides some upside in up-or down-market based on relative performance●Direct alignment with stockholders●Additional vesting once earned (25% per calendar quarter, subject to certain exceptions) for enhanced retention | ||
Long-Term Equity Incentive Program
Total Shareholder Return and Relative Total Shareholder Return Drive Actual Realized Pay
Our Absolute TSR and Relative TSR drive a significant portion of what Omega’s NEOs actually earn over time while management’s performance against strategic, operational, capital allocation and management goals drives the Committee’s annual compensation decisions. The Committee believes that the long-term equity incentive program’s design reflects a high degree of rigor, aligns management’s focus on achieving the Company’s strategy with the Absolute TSR and Relative TSR expectations of our stockholders and provides executives with quantifiable incentives and an opportunity to acquire meaningful levels of ownership of our common stock. Based on advice from FPC, the Committee also believes that the long-term equity incentive program’s design is competitive as compared with current market practice in the REIT industry for similar plans and provides an appropriate risk-reward trade-off.
Importantly, in line with the rigor of our program and strong practice of aligning pay with performance, we did not adjust our long-term incentive plans, modify performance hurdles, substitute performance metrics or delay approval of goals due to impacts of the pandemic and post-pandemic challenges on our business, notwithstanding reduced earning of long-term incentive awards in recent years.
Overview of Long-Term Equity Incentives
The Committee makes annual grants of equity awards to each NEO that are earned over a three-year period running from January 1 of the year of grant.
A percentage of each NEO’s annual grant is earned based on the Company’s performance over the three-year period (the “Performance-based Award”) (based on objective metrics), and a percentage is earned based on the officer’s continuing employment (subject to certain
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exceptions) over the three-year period (the “Time-based Award”). In 2024, the Performance-based Award was 60% (expressed as a dollar amount at the target performance level) of the equity award, and the Time-based Award was 40% of the equity award.
| Long-term incentive compensation | ||
|---|---|---|
| performance-based EQUITY award (60%) | Time-Based EQUITY AWARD (40%) | |
| (3-Year Performance Period)3-year Relative TSR vs. FTSE Nareit Equity Health Care IndexAbsolute TSR | Cliff vests after three years | |
| Of the Performance-based Awards granted in January 2024:●55% of the value (at the target level) is earned based on the Company’s Relative TSR over the three-year performance period (“Relative TSR-based Awards”) and●the other 45% of the value (at the target level) is earned based on the Company’s Absolute TSR over the three-year performance period (“Absolute TSR-based Awards”). | ||
Form of Long-Term Equity Incentive Awards
Each of our NEOs is given the option to elect to receive Absolute TSR-based Awards and Relative TSR-based Awards in the form of performance-based restricted stock units (“PRSUs”) or “Profits Interest Units” (defined below), which are potentially convertible into our common stock, and the option to elect to receive the Time-based Awards in the form of restricted stock units (“RSUs”) or Profits Interest Units.
The Profits Interest Units have the substantially same value from an accounting perspective and have substantially similar terms and conditions as the PRSUs or RSUs that they replace. “Profits Interest Units” are limited partnership units structured as profits interests of Omega OP. Pursuant to Omega OP’s partnership agreement, Profits Interest Units are convertible into OP Units, at the election of the holder or Omega OP, on a one-to-one basis, subject to the satisfaction of certain tax-driven economic requirements, including conditions on minimum allocation to the capital accounts of the holders of Profits Interest Units for federal income tax purposes. Each OP Unit is redeemable at the election of the holder for cash equal to the then fair market value of one share of Omega common stock, subject to the Company’s right to apply an administrative charge of up to 1% of the cash amount otherwise payable upon a redemption, as well as the Company’s election to exchange the OP Units tendered for redemption for shares of Omega common stock on a one-for-one basis, and further subject to adjustment as set forth in the partnership agreement. Profits Interest Units can provide tax advantages to the NEOs as compared to RSUs or PRSUs. Many REITs that have similar structures as Omega grant limited partnership interests in an operating partnership similar to the Profits Interest Units.
Additional details of the 2024 annual equity award grants for our NEOs are discussed under the heading “Our Compensation Decisions and Results for 2024 — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2024*.*”
Year-over-Year Changes
The Committee annually reviews the structure of the Company’s long-term equity incentive program to ensure its competitiveness externally as well as effectiveness internally in supporting the Company’s compensation philosophy. The Committee receives input from FPC and also considers evolving best practices and stockholder feedback. As a result, despite the historically high level of stockholder support with the Company’s executive compensation program, the Committee has proactively made enhancements to the long-term incentive program, as outlined in the table below.** **
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PROGRAM ENHANCEMENTS AND HIGHLIGHTS
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| PRIOR TO 2020 | | ●Increased the emphasis on Performance-based Awards by moving from a mix of 50% / 50% of Performance- and Time-based Awards, respectively, to a mix of 60% / 40% of Performance- and Time-based Awards, respectively●Increased the rigor of the Relative TSR comparison by adding an additional 50 bps of required performance at target●Based equity award values on grant date fair value in comparison to the peer group to align with SEC disclosure requirements rather than on the basis of projected estimated economic value●Changed Relative TSR comparator from MSCI U.S. REIT Index to the FTSE Nareit Equity Health Care Index to better compare our performance with that of our direct peers●Voluntarily adopted a clawback policy allowing the Company, in the event of a financial restatement, to recover certain incentive compensation paid to executive officers | |
| 2020 | | ●Adopted a retirement policy providing for prorated retirement-based vesting of long-term equity incentive awards granted on or after January 1, 2020 for employees who have reached the age of 62 and provided at least ten years of service to the Company●Delayed vesting of equity awards upon certain termination events, allowing the Company to reduce the earned or vested amount of the award in the event of covenant breaches by the officers, including breach of non-competition, non-solicitation and intellectual property covenants●Used a wider range of payout levels for 2020 LTI awards than in prior years to better align payout with market practices and peer compensation plans, so that the aggregate long-term equity incentive opportunity would be 0.50x, 1.0x and 2.0x at threshold, target and high, respectively, as compared to 0.75x, 1.0x and 1.5x, respectively, for 2019 awards | |
| 2021 | | ●Did not increase salaries or bonus opportunities for four out of five NEOs, instead incorporating such increase into a 5-7% LTI increase for such NEOs; did not otherwise make any changes to compensation plans in response to the COVID-19 pandemic | |
| 2022 | | ●No performance-based equity awards of NEOs vested in 2022 given Absolute and Relative TSR performance for the three-year period ending December 31, 2021, reflecting strong alignment between pay and performance●Did not otherwise make any changes to compensation plans in response to continuing effects of the pandemic, consistent with our approach in 2021 | |
| 2023 | | ●No Absolute TSR-based equity awards of NEOs vested in 2023 given Absolute TSR performance for the three-year period ending December 31, 2022 while Relative TSR-based equity awards for the period vested at the high level, reflecting strong alignment between pay and performance●Capped salary increases for NEOs to 2.6% notwithstanding inflation increases of 6-8% in the period; did not otherwise make any changes to compensation plans ●Adopted revised clawback policy in compliance with SEC and NYSE requirements | |
| 2024 | | ●No Absolute TSR-based equity awards of NEOs vested in 2024 given Absolute TSR performance for the three-year period ending December 31, 2023 while Relative TSR-based equity awards for the period were eligible for vesting at the high level, reflecting strong alignment between pay and performance | |
| 2025 | | ●Strong alignment of pay for performance given earning of three-year performance awards at the high level due to three-year Absolute TSR and Relative TSR performance |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.