2022 Equity Grants
On January 27, 2022, the Compensation Committee approved the grant of an aggregate amount of 492,107 restricted stock units to employees of the Advisor and its affiliates who provide services to the Company under the Advisory Agreement. The aggregate amount approved included a grant of 81,198 restricted stock units to Mr. Byrne and 59,053 restricted stock units to Mr. Baglien. The restricted stock units, which were granted under the Company’s 2021 Equity Incentive Plan, vest in equal annual installments beginning on the anniversary of the date of grant over a period of three years subject to continuing service. To the extent that ordinary cash dividends are paid to holders of shares of our Common Stock, outstanding restricted stock units are entitled to a corresponding cash dividend equivalent payment.
In determining the equity-based awards for 2022, the Compensation Committee did not apply any fixed metrics. Rather, the Compensation Committee took into consideration a range of factors, including financial performance measures such as absolute and relative total shareholder return and economic return, and operational performance measures such as our origination volumes and efforts to transition the assets acquired in the merger with Capstead Mortgage Corporation merger into our traditional business lines, as well as the performance of each of our NEOs.
Our Advisor’s Compensation of Our NEOs
Our Advisor is an investment advisor registered with the SEC that is a wholly-owned subsidiary of Franklin Resources, Inc. The Advisor manages our affairs on a day-to-day basis and receives fees and expense reimbursements pursuant to the terms of the Advisory Agreement. As of March 1, 2023, the Advisor had 405 employees. Mr. Byrne, who serves as our Chief Executive Officer, also serves as President of the Advisor. Mr. Baglien, who serves as our Chief Operating Officer and Chief Financial Officer, also serves in the same capacity for the real estate division of the Advisor.
The Advisory Agreement does not require our non-employee executive officers to dedicate a specific amount of time to fulfilling our Advisor’s obligations to us under the Advisory Agreement and does not require a specified amount or percentage of the fees paid to the Advisor to be allocated to our NEOs. Our Advisor does not compensate its employees specifically for such services because these individuals also provide investment management and other services to other investment vehicles that are sponsored, managed or advised by the Advisor and its affiliates. As a result, our Advisor has informed us that it cannot identify the portion of the compensation awarded to our NEOs by our Advisor that relates solely to their services to us. Accordingly, we are unable to provide complete compensation information for any of our NEOs, as the total compensation of our NEOs reflects the performance of all the Advisor’s investment vehicles for which these individuals provide services, including, but not limited to, us.
Our Advisor determines the compensation it pays and benefits it offers to its employees that also serve as our executive officers and we do not have any role in those decisions. We do not have employment agreements with our executive officers, we do not provide pension or retirement benefits, perquisites or other personal benefits to our executive officers and we do not have arrangements to make payments to our executive officers upon their termination or in the event of a change in control of the Company.
Our Advisor and its affiliates compensate their employees, including our NEOs, in accordance with the Advisor’s compensation policies and practices. The compensation of senior employees at the Advisor, including our NEOs, consists of all or substantially all of the following components: a fixed annual base salary and several variable performance-based compensation elements including: (i) an annual cash bonus payment based on the performance of the Advisor and of the NEO, (ii) an allocation of carried interest, the payment of which is based on the performance of investment funds managed by the Advisor, (iii) equity awards representing shares of Franklin Resources, Inc. common stock, and (iv) various employee benefit plans and programs. For 2022, our NEOs’ compensation paid by the Advisor, in the aggregate, was apportioned 14% to fixed compensation and 86% to variable performance-based compensation. Our Advisor did not utilize any fixed performance metrics to determine the amount of variable compensation payable to our NEOs in 2022, but rather considered a range of various factors, including but not limited to the performance of the NEOs, the performance of the applicable business functions for which the NEOs are primarily responsible, the performance of our Common Stock, market conditions, growth in our business and the credit quality of our investment portfolio.
Executive Officer Stock Ownership Policy
In November 2022, the Nominating and Corporate Governance Committee adopted stock ownership guidelines applicable to the Company’s executive officers in order to further align the long-term interests of our executive officers with those of our stockholders. In each case, Common Stock owned directly and indirectly (if the participant has an economic interest in the shares), and shares underlying unvested time-based restricted stock and/or restricted stock units count towards satisfaction of the ownership requirements.
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FRANKLIN BSP REALTY TRUST |
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29 |
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2023 PROXY STATEMENT |