DEF 14A of Dynex Capital Inc
Filed Mar 28, 2024 · FY20230000826675-24-000044
DIRECTOR NOMINEES
DIRECTOR NOMINEES Pursuant to Virginia law and our Restated Articles of Incorporation (the “Articles of Incorporation”), directors of the Company are to be elected by the holders of shares of common stock at the Annual Meeting to serve until the next annual meeting and until their successors are elected and duly qualified. Director David H. Stevens passed away in January 2024. During his time with the company, he leveraged his extensive industry experience and deep knowledge of mortgage finance, capital markets, and housing policy to shape and advance the Company’s strategy and ensure that the Company continued to thrive in an increasingly complex market. On September 8, 2023, the Board appointed Smriti L. Popenoe to the Board. On March 6, 2024, the Board appointed Alexander I. Crawford and Andrew I. Gray to the Board. The appointees to the Board were recommended by executive officers of Dynex. On March 11, 2024, Robert A. Salcetti and Michael R. Hughes stepped down as members of the Board. On the recommendation of the Nominating & Corporate Governance Committee (the “Nominating Committee”), the Board nominated Byron L. Boston, Julia L. Coronado, Alexander I. Crawford, Andrew I. Gray, Joy D. Palmer, and Smriti L. Popenoe for election by the holders of shares of common stock to the Board at the Annual Meeting. Unless otherwise indicated, a proxy will be voted FOR the election of Messrs. Boston, Crawford, and Gray, Dr. Coronado, and Mses. Palmer and Popenoe to the Board. Each director nominee has agreed to serve if elected. Selected biographical information regarding each director nominee is set forth below. Although it is anticipated that each director nominee will be able to serve, should any nominee become unavailable to serve, the shares represented by each proxy may be voted for another person or persons designated by the Board. In no event will a proxy be voted for more than six directors.
DIRECTOR SKILLS AND QUALIFICATIONS
DIRECTOR SKILLS AND QUALIFICATIONS The Board believes that its directors collectively have the level and balance of skills, experience, diversity, and character to execute the Board’s responsibilities. The table below reflects some of the key skills that our Board has identified as particularly valuable to the effective oversight of the Company and the execution of our corporate strategy, along with the number of directors that have these skills. This director skills matrix is not intended to be an exhaustive list of each of our director’s skills or contributions to our Board. All of our directors also exhibit high integrity, an appreciation for diversity of background and thought, innovative thinking, a proven record of success, and deep knowledge of corporate governance requirements and best practices. Additional information on each director, including some of their specific experience, qualifications, attributes and skills, is set forth below under “Proposal One – Election of Directors”. Indicates a relevant skill, knowledge and/or experience identified by that director.
DIRECTOR SKILLS AND QUALIFICATIONS
| | Boston | Coronado | Crawford | Gray | Palmer | Popenoe | | Senior Leadership | | | | | | | | Financial Services Industry | | | | | | | | M&A | | | | | | | | Capital Markets | | | | | | | | Business Operations | | | | | | | | Cybersecurity and Technology | | | | | | | | Risk Management | | | | | | | | Government Policy and Regulatory | | | | | | | | Accounting/Audit | | | | | | | | Mortgage Industry | | | | | | | | Investment Management | | | | | | | | Corporate Governance | | | | | | | | Public Company Experience | | | | | | | | Business Development and Strategy | | | | | | | | Social Responsibility/ ESG | | | | | | | | Artificial Intelligence | | | | | | | | Finance | | | | | | | | Independent Audit Committee Financial Expert | | | | | | | | Managing Climate Change | | | | | | | | Human Capital Management | | | | | | | | Executive Compensation | | | | | | |
DIRECTOR SKILLS AND QUALIFICATIONS
| 8 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
DIRECTOR SKILLS AND QUALIFICATIONS
| DIRECTOR NOMINEE BIOGRAPHIES | | | | | BYRON L. BOSTON | Chairman of the Board and Chief Executive Officer | | | Byron L. Boston joined the Board in 2012 and was appointed to the role of Chairman in December 2023. Byron has served as the Chief Executive Officer since January 2014, and previously served as the President of Dynex from March 2012 to December 2020, and as Chief/Co-Chief Investment Officer from April 2008 until December 2023. Byron leads the strategic operations that have resulted in long term net gains and significant economic return for investors. Business Leadership: Byron brings more than 20 years of leadership experience and has an extensive background in U.S. real estate finance, asset management/investment banking, and fixed-income capital markets. Byron was successful in building Sunset Financial Resources, a mortgage REIT specializing in high-quality residential and commercial loans and securities, and instrumental in growing Dynex Capital's business after he joined the Company in 2008. Byron leverages this extensive experience and deep understanding of Dynex’s growth and strategy to guide the Company’s business operations and disciplined investment approach. As CEO and Chairman of Dynex’s Board of Directors, he also helps drive continued collaboration between the Company’s executive leadership team and Board. Mortgage-Backed Security Experience: Over the course of his career, Byron has gained significant experience in the debt and equity capital markets. During his six years at Freddie Mac, he developed and led the initial investment plan to grow the company’s retained portfolio. Previously, Byron spent over a decade at Credit Suisse First Boston as a fixed income bond trader specializing in mortgage backed securities and over two years at Lehman Brothers as a mortgage-backed securities bond trader. Background: Byron currently serves on multiple boards in advisory and leadership capacities including Mortgage Bankers Association and National Association of Real Estate Investment Trusts (“NAREIT”) Advisory Board of Governors representing the industry on a national level. He also serves on the board of the Salzburg Global Seminar where he has served as the Chair of the Investment Committee and the Chair of the Finance Committee. He received an A.B. in Economics and Government from Dartmouth College and a MBA with emphasis in Accounting and Finance from the University of Chicago Booth School of Business, where he was also a member of the Director’s Consortium. | | | Age: 65 Director Since: 2012 Chairman Since: 2023 Committee: Investment (Chair) Key Skills: •Senior Leadership & Business Operations •Financial Services Industry •Capital Markets •Mortgage Industry •Investment Management •Corporate Governance Other Current Boards: NAREIT Advisory Board of Governors, Salzburg Global Seminar | | |
DIRECTOR SKILLS AND QUALIFICATIONS
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 9 |
DIRECTOR SKILLS AND QUALIFICATIONS
| | JULIA L. CORONADO, Ph.D. | Lead Independent Director of the Board | | | Julia L. Coronado, Ph.D. joined the Board in October 2020 and was appointed as Lead Independent Director in December 2023. Financial Experience: Since 2017, Julia has served as the President and Founder of MacroPolicy Perspectives, LLC (MPP) a research advisory firm with deep expertise in macroeconomics, regulatory policy, financial and global markets that helps inform client decisions in financial services and other industries. Since 2018, she has served as Clinical Associate Professor of Finance at the University of Texas at Austin. From 2014 to 2017, Julia was the Chief Economist at Graham Capital Management where she managed a global economic forecast, advised portfolio managers, and participated in risk and investment committees. Additionally, she spent 10 years in the banking industry, first as a Senior US Economist at BNP Paribas and then at Barclays as Senior US Economist. Julia also served as a staff economist for the Federal Reserve Board of Governors in Washington, D.C. and contributed to the Federal Open Market Committee forecasts from 1997 to 2006. Financial Advisory Experience: Julia brings over 30 years of experience in international and domestic market economics, fiscal and monetary policy, and global economic forecasting. She is a regular commentator in financial media, (including CNBC, Bloomberg, Marketplace, and the Wall Street Journal). Julia has also represented the U.S. at the Organization for Economic Cooperation & Development and testified before Congress on Social Security reform and digital currency developments. Her experience across these areas, as well as her service on other public company and advisory boards, allows her to provide significant insight to help guide the Company’s business strategy and enable it to thrive in a complex macroeconomic environment. Background: Julia is an Independent Director on the Board of Robert Half, an international staffing and consulting firm, where she serves on the nominating & governance committee. Julia is a member of the Economic Studies Council at the Brookings Institution and member of the Advisory Boards of the Bureau of Economic Analysis, the Pension Research Council at the Wharton School, and the Cleveland Federal Reserve Center for Inflation Research. She received a B.A. in Economics from the University of Illinois and a Ph.D. in Economics from the University of Texas at Austin. | | | Age: 55 Director Since: 2020 Committees: •Compensation (Chair) •Nominating & Corporate Governance •Investment Key Skills: • Senior Leadership & Business Operations • Financial Services Industry • Capital Markets • Government Policy and Regulatory • Academia Other Current Public Boards: Robert Half | | |
DIRECTOR SKILLS AND QUALIFICATIONS
| 10 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
DIRECTOR SKILLS AND QUALIFICATIONS
| | ALEXANDER I. CRAWFORD | | | Alexander I. Crawford joined the board in March 2024. Business Leadership, Financial Services, and Technology Experience: Alexander brings extensive financial knowledge and expertise across the broad financial ecosystem, including global multi-asset risk management, public and private equity, credit, and tail-risk hedging. He is also recognized as a thought leader in the risk management of artificial intelligence. As the founder, Chairman, and CEO of Artificial Intelligence Risk, Inc., Alexander created a governance, risk, compliance, and cybersecurity platform for corporate artificial intelligence ("AI") and developed incisive data-driven analytics and quantitative tools to analyze and mitigate risks through innovative strategies. Alexander is a thought leader on making AI effective, safe, and ethical and has written extensively on the topic. His background and expertise will help strengthen Dynex’s technology capabilities and position in an evolving financial services industry. Additional Professional Experience: Alexander also brings to our Board extensive experience and expertise in risk management and compliance. He served in a number of senior risk management roles, including most recently as Partner and Chief Investment Risk Officer at Lord, Abbett & Co. LLC from 2012 to 2022, and is now a Limited Partner there. As the Chief Investment Risk Officer, Alexander engaged with global regulators on various topics. He is well-respected by his peers and regulators and sat on numerous industry working groups during his tenure, such as leading the LIBOR transition effort at Lord Abbett. He was responsible for writing detailed regulatory policies and procedures for the U.S. and Europe and continues to engage globally on complying with existing and creating new policies regarding AI with governments, regulators, companies, and NGOs. In addition, Alexander was a charter member of Lord Abbett's ESG committee and has written extensively on the intersection of sustainability, ESG, and AI. He is the lead author of a forthcoming white paper using a data-driven approach that focuses on broadening sustainability to look at important sustainability metrics beyond simply greenhouse gases. Background: Alexander earned a B.S. in Computer Science from Harvard University. He has been a senior executive at major financial institutions, including Goldman Sachs, Morgan Stanley, Deutsche Bank, and RBS, for over 10 years. He has focused extensively on MBS throughout his career, and his MBS research has appeared in numerous publications. His 35-year career will offer significant insights for the Company’s business and make him a valuable member of the Board. | | Age: 57 Director Since: March 2024 Committees: •Audit •Compensation •Investment Key Skills: •Financial Services Industry •Risk Management •Government Policy and Regulatory •Artificial Intelligence and Technology •Investment Management | |
DIRECTOR SKILLS AND QUALIFICATIONS
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 11 |
DIRECTOR SKILLS AND QUALIFICATIONS
| | ANDREW I. GRAY | | | Andrew I. Gray joined the board in March 2024. Andrew is currently an Executive Advisor at MyNextSeason and serves on the Board of Trustees of the Global Association of Risk Professionals (GARP). Andrew has over 30 years of leadership experience across the financial services industry, including profit and loss management, strategy, finance, risk, and technology. He has a strong track record in guiding leadership teams and advising boards on business growth, operational improvement and risk, and regulatory compliance. Risk Professional Experience: Most recently, Andrew served as the Group Chief Risk Officer ("CRO") and Management Committee member for The Depository Trust and Clearing Corporation (the “DTCC”). Over his tenure he transformed the global risk function and drove significant improvements in market, liquidity, credit, and non-financial risk capabilities, including cybersecurity, business continuity, data management, and operational risk. With his extensive background in the financial services and risk management industries, he will play a crucial role in helping guide Dynex’s operational and growth strategy. Business Leadership Experience: Prior to his CRO role, Andrew led DTCC’s core businesses, including Clearance and Settlement of Equities and Fixed Income products, Asset Services, Wealth Management Services, Insurance & Retirement Services, Institutional Trade Processing and Data Services. He had responsibility for P&L management, strategy development and execution, rollout of new business and industry initiatives, M&A transactions, and implementation of enhanced processes for business risk management. Previously, Andrew spent over a decade at Merrill Lynch in senior leadership roles, including COO of the firm’s Latin America and Canada business, Managing Director of Strategy and Business Development, and the Head of Corporate Planning for the enterprise. In these roles, he gained valuable experience in business restructuring and management, strategy development and execution, new business development, financial reporting, planning and analysis, technology transformation, and crisis management. Technology Experience: Andrew started his career at Booz Allen & Hamilton, where, as a member of the Information Technology Group, he led consultant teams supporting financial services clients around the world. In his industry roles, he has led technology transformation projects and, as CRO for DTCC, drove major investments in resilience and cybersecurity. Background: In addition to his current service as a GARP Board Trustee, Andrew chaired and served on DTCC subsidiary boards and was a Board Member of the International Securities Services Association ("ISSA"). He received a Bachelor of Science in Mechanical Engineering from the Massachusetts Institute of Technology and also has a Master of Government Administration from the University of Pennsylvania. | | Age: 58 Director Since: March 2024 Committees: •Audit •Compensation •Investment Key Skills: •Senior Leadership & Business Operations •Financial Services Industry •Government Policy and Regulatory •Risk Management •Corporate Governance •Capital Markets •Technology | |
DIRECTOR SKILLS AND QUALIFICATIONS
| 12 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
DIRECTOR SKILLS AND QUALIFICATIONS
| | JOY D. PALMER | | | Joy D. Palmer joined the Board in October 2020. Finance and Accounting Experience: Over the course of Joy’s 34-year career, she has served in a variety of accounting, finance, and investor relations roles. Joy is an expert in Generally Accepted Accounting Principles (“GAAP”), regulatory policies, the mortgage finance industry, including mortgage investing and origination, as well as how market trends impact financial institutions, including national banks. Banking and Treasury Experience: From 2002 to 2020 she held a variety of roles at the the Comptroller of the Currency ("OCC"), Office of the Chief Accountant, including as the Deputy Chief Accountant, Accounting Policy Advisor to Large Banks and Policy Accountant of Community and Midsize Banks, where she helped oversee the regulation and supervision of national and foreign banks which operate in the U.S. During this time, Joy also contributed to the drafting of advisories, bulletins, risk tips, and other publications to provide examiners with readily accessible resources on evolving issues including mortgage banking guidelines. She also led extensive work on accounting topics such as Current Expected Credit losses ("CECL") and Troubled Debt Restructuring ("TDRs"). Prior to the OCC, Joy worked at Merrill Lynch as a Director of Equity Research focusing on specialty finance companies, banks, and the GSE's. Joy started her career at Beneficial Corporation with responsibilities for Investor Relations and Treasury Management focusing on liquidity and cash management monitoring, derivatives, capital markets activity as well as sell-side analyst communications and presentations to the board of directors. Background: Joy earned a Bachelor’s in Accounting from Montclair State University and a MBA from NYU Stern School of Business with emphasis in finance. Over her career and currently, Joy has been an adjunct professor teaching classes on financial statement reporting and analysis, accounting, asset management and tax topics. | | Age: 66 Director Since: 2020 Committees: •Audit (Chair) •Nominating and Corporate Governance (Chair) •Investment Key Skills: •Financial Services Industry •Government Policy and Regulatory •Mortgage Industry •Investment Management | |
DIRECTOR SKILLS AND QUALIFICATIONS
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 13 |
DIRECTOR SKILLS AND QUALIFICATIONS
| | SMRITI L. POPENOE | | | Smriti L. Popenoe joined the Board in September 2023. Smriti first joined Dynex as Chief Investment Officer in 2014 and also took on the role of President in 2020. As President of Dynex, Smriti is accountable for the raising, deployment, and management of the company’s capital. As Chief Investment Officer, she leads the team that oversees the Company’s investment portfolio, associated hedges, and financing arrangements. Leadership Experience: Smriti brings over 13 years of C-Suite experience and expertise in risk management, investment leadership, and best practices in portfolio optimization. In addition to her 10 years serving on Dynex’s leadership team, she previously served as Chief Risk Officer at PHH Corporation, a leading provider of mortgage banking and fleet management outsourcing services. Financial Services and Portfolio Management Experience: Smriti has almost three decades of experience in the financial services and risk management industries. From 2006 to 2009, Smriti was Senior Vice President at Wells Fargo (then known as Wachovia Bank), where she managed its more than $100 billion investment portfolio and led the team through the financial crisis of 2009. From 2003 to 2006, she served as Senior Vice President, Investments with Sunset Financial Resources, a startup REIT. She managed an investment portfolio of $400B fixed-rate MBS and whole loans while with Freddie Mac at the beginning of her career. Background: Smriti received the Chartered Financial Analyst (CFA) designation in 1997 and holds three degrees: a B.S. in Chemistry and Environmental Science from St. Joseph’s College in Bangalore, India, a MBA from the University of Rochester and a Master’s-level French diploma from the Alliance Française. She is a Founding Member of the Washington D.C. chapter of Chief, the only organization designed for senior women leaders to strengthen their leadership journey, cross-pollinate ideas across industries, and effect change from the top down. She is passionate about the environment, mentoring women, personal growth, and lifelong learning. She is also a Board member of Industrial Indicators. | | Age: 55 Director Since: 2023 Committee: Investment Key Skills: •Senior Leadership & Business Operations •Financial Services Industry •Investment Management •Mortgage Industry Other Current Boards: Industrial Indicators | |
DIRECTOR SKILLS AND QUALIFICATIONS
We are not aware of any family relationship among any director or executive officer; nor are we aware of any involvement of any director or executive officer, currently or in the past ten years, in any legal proceedings that would be material to an evaluation of the ability or integrity of any director or executive officer. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE DIRECTOR NOMINEES LISTED ABOVE.
DIRECTOR SKILLS AND QUALIFICATIONS
| 14 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
DIRECTOR SKILLS AND QUALIFICATIONS
| CORPORATE GOVERNANCE |
DIRECTOR COMPENSATION FOR 2023*
DIRECTOR COMPENSATION FOR 2023*
DIRECTOR COMPENSATION FOR 2023*
| Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards(2) ($) | All Other Compensation(3) ($) | Total ($) | | Julia L. Coronado, Ph.D. | 104,130 | 100,004 | 12,420 | 216,554 | | Michael R. Hughes | 155,652 | 100,004 | 12,420 | 268,076 | | Joy D. Palmer | 115,326 | 100,004 | 12,420 | 227,750 | | Robert A. Salcetti | 102,174 | 100,004 | 12,420 | 214,598 | | David H. Stevens | 95,326 | 100,004 | 12,420 | 207,750 |
DIRECTOR COMPENSATION FOR 2023*
* Columns for “Option Awards,” “Non-Equity Incentive Plan Compensation” and “Change in Pension Value and Non-qualified Deferred Compensation Earnings” have been omitted because they are not applicable. (1)Mr. Boston, Chief Executive Officer and Chairman, and Ms. Popenoe, Chief Investment Officer, are not included in this table because they are executive officers of the Company. Mr. Boston’s and Ms. Popenoe's compensation for service as executive officers is included in the Summary Compensation Table on page 45. (2)The amounts in this column reflect the grant date fair value of grants of restricted stock to each listed director on May 19, 2023, under the Company’s 2020 Plan, calculated in accordance with ASC Topic 718. The grant date fair value of the restricted stock is based on the closing price of the Company’s common stock on the grant date. As of December 31, 2023, each of Messrs. Hughes, Salcetti, and Stevens, Dr. Coronado and Ms. Palmer held 9,217 shares of restricted stock. (3)The amounts in this column reflect dividends paid in 2023 on unvested restricted stock held by the directors.
DIRECTOR COMPENSATION FOR 2023*
| 26 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
COMPENSATION OBJECTIVES AND PHILOSOPHY
We incorporate a pay-for-performance philosophy in our compensation programs by linking incentive compensation to our operating performance and the attainment of financial, operational, and strategic objectives. We also actively promote the ownership of Company stock by our executive officers, including formal stock ownership guidelines and maintaining a compensation program focused on time-based, and performance-based, vesting equity awards. The Compensation Committee understands that the specialized nature and complexities of the Company’s business, and in particular its investment, financing, capital and risk management activities and REIT structure, require individuals with unique experience and skills. The Compensation Committee also understands the potential volatility in the Company’s performance given its use of leverage in its business model and the Company’s exposure to macroeconomic conditions, interest rates, monetary policy (globally but especially in the U.S.), regulatory policy, fiscal policy, and global geopolitics. The Company is also exposed to general market conditions for our investments which may impact their value and performance. Many factors affecting Company performance are beyond our control, and the Compensation Committee has established a compensation program and performance criteria that accounts for the potential volatility of the Company’s results on a year-to-year basis. Executive Compensation Practices. The following highlights certain of the Company’s executive compensation and governance practices that we use to drive performance and serve our shareholders’ long-term interests: Our pay practices include: ☑Performance-Based Pay— Our compensation program is structured to align the interests of our executive officers with the interests of our shareholders and, as a result, the majority of total compensation is tied to Company performance including absolute and relative economic return over both short- and long-term time horizons, except in the case of separation benefits. ☑Meaningful Stock Ownership Requirements— All of our executive officers are subject to meaningful stock ownership requirements that require the retention of a dollar value of the Company’s stock based on a multiple of base salary. ☑Annual Risk Assessment—Our Compensation Committee conducts an annual risk assessment of our compensation programs. ☑Independent Compensation Consultant—Our Compensation Committee periodically engages with an independent compensation consultant. Our pay practices do not include: xTax Gross-Ups— We provide no tax gross-ups. xPledging of Owned Shares—We prohibit our employees and directors from pledging their owned shares. xDerivatives Trading and Hedging—We prohibit our employees and directors from engaging in any derivatives trading or hedging transactions associated with their holdings of Company stock. Program Design. Our compensation program is designed to provide levels of compensation that are competitive and also reflective of both the Company’s and the individual’s performance in achieving our goals and objectives. The Compensation Committee seeks to establish competitive compensation practices that provide a mix of short-term and long-term incentive compensation that strikes a balance between recognition of recent performance and aligning the interests of management on a longer-term basis with that of the Company’s shareholders. Further, it is the intent of the Compensation Committee, and executive management, that this compensation philosophy be applied throughout the organization and that the types of compensation and benefits described herein provided to the executive officers generally be provided to substantially all employees of the Company, with the exception of RSUs and PSUs (generally time-based restricted stock awards vesting over three years are awarded to non-executives). The Compensation Committee also believes that it is important to pay a meaningful amount of incentive compensation in equity in order to align executive compensation with shareholder performance, as reflected in the 2023 grants under the Long-Term EIP. Pay-for-Performance. The primary elements of our compensation program are base salary, annual performance-based cash incentive compensation, long-term time-based and performance-based equity compensation, and to a lesser extent, other benefits or agreements. These components of executive compensation are used together in an attempt to strike an appropriate balance between cash and stock-based
HOW EXECUTIVE PAY LEVELS ARE DETERMINED
comparable companies in a designated peer group recommended by FPC. The peer group used for comparison purposes may change from year to year but focuses principally on internally managed public mortgage REITs that have a similar market capitalization and/or have a similar business to ours or that are similar to the Company in asset management and investment complexity. During 2023, the Compensation Committee engaged FPC to examine market compensation practices among comparably sized companies and real estate financed-focused REITs to assist in updating the compensation program for the Company’s executive officers. The Compensation Committee with input from FPC developed a peer group that includes real estate finance companies, that are similar to us based on business strategy, asset class focus, and size and the executives of which are required to have similar skills and experience as our executives. The Compensation Committee focused on developing a peer group comprised of between 5 and 10 companies that have comparable market capitalization within a range and are either direct competitors with us or who otherwise are industry-relevant. The Compensation Committee determined to exclude externally-managed mortgage REITs from our peer group due to the limited publicly available comparative compensation data for their executives. In advance of undertaking the compensation review, FPC worked with the Compensation Committee and the Company to arrive at a set of peer mortgage REITs, both commercial and residential, which have been used for compensation comparison purposes. The peer group consisted of Chimera Investment Corporation, Granite Point Mortgage Trust, Hannon Armstrong, MFA Financial Inc, New York Mortgage Trust, Pennymac Mortgage Investment Trust, Redwood Trust, and Two Harbors Investment Corporation. The results of FPC’s review were provided to the Compensation Committee in June 2023, and the Compensation Committee incorporated certain of the recommendations in considering base salary adjustments for executive officers and in designing executive compensation programs for 2023. FPC used information available from proxy statements filed in 2023 which covered executive compensation for the three years ended December 31, 2022. The peer group data is intended to provide the Compensation Committee with insight into market pay levels, market trends, governance practices, and industry performance. The compensation analysis for each peer group combined to provide an overview of typical compensation components (e.g., base salaries, annual bonuses and long-term equity incentives), as well as the range of compensation levels by position, in each case, generally found within the relevant peer group. The Compensation Committee continues to use the peer group for evaluating market compensation practices, updated, as necessary, to exclude companies that were acquired. The Compensation Committee uses peer group data for informational purposes and to assess the competitiveness of each NEO’s overall compensation, which is one aspect of the Compensation Committee’s decision-making process.
COMPENSATION DECISIONS MADE IN 2023
COMPENSATION DECISIONS MADE IN 2023 The elements of our compensation program for 2023 included base salary, annual incentive compensation paid in cash and RSUs and PSUs granted under our Long-Term EIP and 2020 Plan. As a result of FPC's review conducted in June 2023, Mr. Boston and Ms. Popenoe received salary increases, and each were each granted RSUs with a market value of $1.5 million in September 2023. Mr. Boston's, Ms. Popenoe and Mr. Colligan's equity targets were increased which will impact grants made in 2024. These changes were made to bring their total compensation package in line with current market pay levels at peer companies. We also provide certain retirement benefits through our 401(k) Savings Plan and health and welfare benefits, including participation in our health, dental and vision plans
COMPENSATION DECISIONS MADE IN 2023
and various insurance plans, such as disability and life insurance, as well as certain other benefits. Each of the principal components of executive compensation is designed to reward and provide incentives to the executive officers consistent with our overall policies and principles on executive compensation. These components and the rationale and methodology for each are described below. Specific information on the amounts and types of compensation earned by each of the NEOs during 2023 can be found in the Summary Compensation Table and other tables and narrative disclosures following this discussion. Base Salary. Our base salary philosophy is to provide reasonable current income to our executive officers in amounts that will attract and retain individuals with a broad, proven track record of performance. The Compensation Committee establishes the annual salary for executive officers other than our Chief Executive Officer, and recommends our Chief Executive Officer’s base salary to the independent directors for approval. In determining salaries, the Compensation Committee balances the need to offer salaries that are competitive with peer companies with the need to maintain careful control of salary and benefits expense, particularly relative to our size and market capitalization. Ms. Popenoe’s base salary was increased to $800,000, effective July 1, 2023. The independent directors determined Mr. Boston's base salary would increase to $900,000 effective July 1, 2023. The Compensation Committee concluded the increases were warranted based on a review completed by FPC at the request of the Compensation Committee of 2022 compensation data available for the peer group. The adjustments were made to move Ms. Popenoe and Mr. Boston closer to the median salary for the peer group based on the analysis reviewed by the Compensation Committee. Mr. Colligan’s base salary was set at an annualized rate of $500,000 when he joined the Company in July 2022 and remained the same for 2023. The following table presents the actual base salary earned for each of our NEOs for 2023 and 2022 and the annual salary in effect as of January 1, 2024 for each of our NEOs:
COMPENSATION DECISIONS MADE IN 2023
Annual Cash Incentive Compensation. The Cash Incentive Plan, which became effective as of January 1, 2020, begins each January 1 and is an annual bonus plan, paid solely in cash, with a target incentive opportunity for the executive officers set forth in the table below. The plan uses a mix of quantitative and qualitative objectives with a combination of fixed and variable weightings for the metrics selected. The Compensation Committee views the Cash Incentive Plan as a clearly established cash incentive compensation framework for executive officers that is appropriately aligned with the interests of shareholders. The Compensation Committee believes that the Cash Incentive Plan’s inclusion of performance metrics that incent management to create shareholder value, including absolute and relative book value per common share, capital growth, expense management and other qualitative and strategic metrics are important to the Company’s incentive compensation objectives. Incentive compensation under the Cash Incentive Plan is designed to be performance based and is not guaranteed to be paid in any year. Individuals serving as executive officers each year are eligible to participate in the Cash Incentive Plan. For 2023, the participants were Messrs. Boston and Colligan and Ms. Popenoe, each of whom is a NEO.
COMPENSATION DECISIONS MADE IN 2023
| Annual Cash Incentive Plan for 2023 | | | | | | | | | | | Performance Target | | | | | | | Performance Metric/Objective | Weighting | Minimum | Target | Maximum | Value Achieved | Percentage of Target Achieved | Weighted Average Percentage Achieved | | Absolute book value per common share | 27.5% | (10.0)% | —% | 10.0% | (9.6)% | 4.0% | 1.1% | | Relative book value per common share | 27.5% | 30% | 55% | 80% | 86% | 200.0% | 55.0% | | Corporate/Individual Objectives: | | | | | | | | | Capital raising | 10.0% | $50,000 | $100,000 | $150,000 | $42,626 | —% | —% | | Expense Management | 5.0% | $(500) | $(1,000) | $(1,500) | $(1,746) | 200.0% | 10.0% | | Strategic objectives(1) | 30.0% | —% | 100.0% | 200.0% | N/A | 200.0% | 60.0% | | TOTALS | 100.0% | | | | | | 126.1% |
COMPENSATION DECISIONS MADE IN 2023
| Annual Cash Incentive Plan for 2023 | | | | | | | | | Metric | Weighted Average Percentage of Target Achieved | Byron L. Boston | | Smriti L. Popenoe | | Robert S. Colligan | | | Base Salary as of December 31, 2023 | | | 900,000 | | 800,000 | | 500,000 | | Target incentive bonus % | | 200% | | 200% | | 150% | | | Target incentive bonus | | | 1,800,000 | | 1,600,000 | | 750,000 | | Maximum incentive bonus % | | 400% | | 400% | | 300% | | | Maximum incentive bonus | | | 3,600,000 | | 3,200,000 | | 1,500,000 | | Annual Cash Bonus Earned | 126.1% | | 2,269,800 | | 2,017,600 | | 945,750 |
COMPENSATION DECISIONS MADE IN 2023
The actual amounts earned by Messrs. Boston and Colligan and Ms. Popenoe were paid in 2024 and are reported as “Non-Equity Incentive Plan Compensation” for 2023 in the Summary Compensation Table on page 45. LONG-TERM EQUITY INCENTIVE COMPENSATION. Long-Term EIP. The Long-Term EIP for 2023 consists of grants of time-based RSUs and grants of performance-based PSUs with a three-year performance period. Following FPC’s recommendation that the target Long-Term EIP value should approximate the Cash Incentive Plan targets each year, the Compensation Committee determined the following values for the 2023 Long-Term EIP awards for each executive officer, allocating 60% to PSUs and 40% to RSUs:
COMPENSATION DECISIONS MADE IN 2023
| | 2023 Long-Term EIP Value(1) | % of 2023 Base Salary | Target # of PSUs(2) | # of RSUs(2) | | Byron L. Boston | $1,600,000 | 200% | 71,732 | 47,821 | | Smriti L. Popenoe | 1,225,000 | 175% | 54,920 | 36,613 | | Robert S. Colligan | 750,000 | 150% | 33,625 | 22,416 |
COMPENSATION DECISIONS MADE IN 2023
The RSUs are time-based awards that vest in equal installments over three years. Any RSUs that vest will be paid in shares of the Company’s common stock. Dividend equivalents will accrue on the RSUs and will be paid in cash to the executive officer only if and to the extent the RSUs vest. The PSUs cliff vest at the end of a three-year performance period based on the achievement of absolute and relative total economic return (“TER”) as noted in the table below:
COMPENSATION DECISIONS MADE IN 2023
| Metric | Weighting | | Absolute TER | 50% | | Relative TER compared to peer group | 50% | | Absolute TSR/Absolute TER | Vesting cap |
COMPENSATION DECISIONS MADE IN 2023
The Compensation Committee established these metrics as the most critical performance metrics for the Company over the long-term and in accordance with the Company’s compensation philosophy regarding shareholder alignment as described above. The Compensation Committee selected a peer group consisting of AGNC Investment Corp., Annaly Mortgage Corporation, Inc., Arlington Asset Investment Corp., Armour Residential REIT, Inc., Ellington Residential Mortgage REIT, Invesco Mortgage Capital, Inc., Orchid Island Capital, Inc., and Two Harbors Investment Corp., mortgage REITs with business models similar to the Company’s current or anticipated business model, and excluded certain credit-risk oriented mortgage REITs. The peer group used to measure performance is different than the peer group used to establish compensation levels, since the companies listed directly above have very similar portfolios but range in size from much larger than Dynex to much smaller. In addition, several of the companies listed directly above are externally managed and do not have disclosed compensation for their executives, while still being a performance peer and invest in similar assets. The Compensation Committee also established threshold, target and maximum performance levels for each performance metric, as well as a vesting cap limiting the vesting of the applicable portion of the PSUs to target level if the Company’s TER for the performance period is negative. For the absolute TER performance, the Committee considered multiple factors including the macroeconomic environment, the Company’s outlook with respect to its earnings profile, investment opportunities, the mortgage market, and expectation for U.S. and global monetary policy. The Committee then established an annualized TER target of 9% with a threshold of 4% annually and a maximum of 14% annually. For the relative TER performance measure, the Committee, based on FPC’s 2023 recommendation, established minimum, target, and maximum peer rankings of the 30th percentile, 55th percentile and 80th percentile, respectively. To determine the level of PSUs earned, after the end of the three-year performance period, the Compensation Committee will determine the level of performance achieved with respect to each of the performance metrics. Performance for each metric can range from 0-200% of the target number of PSUs, based on the achievement over the three-year performance period ending December 31, 2024 for the PSUs granted in 2022 and ending December 31, 2025 for the PSUs granted in 2023. Any PSUs earned based on the achievement with respect to such goals will vest on December 31, 2024 and December 31, 2025, respectively, and be paid in shares of the Company’s common stock by February 28, 2025 and March 15, 2026, respectively. For 2023, relative Total Stockholder Return ("TSR") was removed as a performance measure for PSU's given the high correlation between TSR and TER as well as the extra administrative cost to use a third-party based Monte Carlo simulation to value market-based compensation for TSR based PSUs. In addition, dividend equivalents will accrue on the PSUs and will be paid in cash to the executive officer only if and to the extent the PSUs vest.
COMPENSATION DECISIONS MADE IN 2023
| Absolute TER (Weighting: 50%) | | | | | Performance Level | TER Performance (per common share) | TER Performance as a Percentage Increase | Absolute TER Vesting Percentage | | Maximum | $6.19 | 42% | 200% | | Target | $3.98 | 27% | 100% | | Threshold | $1.77 | 12% | 1% | | Below Threshold | Below $1.77 | —% | —% |
COMPENSATION DECISIONS MADE IN 2023
| Relative TER (Weighting: 50%) | | | | Performance Level | Relative TER | Relative TER Vesting Percentage | | Maximum | 80th Percentile or above | 200% | | Target | 55th Percentile | 100% | | Threshold | 30th Percentile | 50% | | Below Threshold | Below 30th Percentile | —% |
COMPENSATION DECISIONS MADE IN 2023
2020 Stock and Incentive Plan. At the 2020 Annual Meeting of Shareholders, the Company’s shareholders approved the 2020 Plan to replace the Company’s 2018 Stock and Incentive Plan (“2018 Plan”). Under the 2020 Plan, the Compensation Committee has the ability to award equity compensation in the form of stock options, restricted stock, restricted stock units, stock appreciation rights (“SARs”), performance units and performance cash awards to key employees, non-employee directors, consultants and advisors in its discretion. The Board of Directors believes a competitive equity incentive program is essential to offering compensation that aligns participants’ interests with those of our shareholders, based on a pay-for-performance philosophy that is consistent with prudent risk management and emphasizing an owner-operator mentality by placing a meaningful portion of an executive officer’s total compensation variable, tied to our annual and long-term performance as well as to the creation and protection of shareholder value. Some of the key features of the 2020 Plan that are intended to maintain sound governance practices in granting awards include: • No “Evergreen” Provision: Shares authorized for issuance under the 2020 Plan are not automatically replenished. • Annual Limits: The 2020 Plan imposes an annual limit on equity awards of 400,000 shares per participant and on cash awards of $5,000,000 per participant. • No Discounted Stock Options or SARs: The 2020 Plan prohibits the grant of stock options or SARs with an exercise price less than the fair market value of the Company’s common stock on the grant date. • No Repricing of Stock Options or SARs: The 2020 Plan generally prohibits the repricing of stock options or SARs without shareholder approval. • No Liberal Share Recycling: Under the 2020 Plan, shares of the Company’s common stock used to pay the exercise price of a stock option or SAR or to satisfy tax withholding obligations in connection with an award will not be added back (recycled) to the aggregate plan limit. In addition, the gross number of shares associated with a stock option or SAR exercise, and not just the net shares issued upon exercise, will count against the aggregate plan limit. • Minimum Vesting Periods: Subject to accelerated vesting under certain circumstances, the 2020 Plan requires a minimum vesting period of one year for awards subject to time-based conditions and a minimum performance period of one year for awards subject to achievement or satisfaction
COMPENSATION DECISIONS MADE IN 2023
of performance goals, with the exception of up to 5% of the aggregate shares authorized for grant under the 2020 Plan and certain other limited exceptions such as retirement eligibility, death or disability. • Protective Provisions and Clawback: The 2020 Plan provides for the forfeiture of outstanding awards upon a participant’s termination for cause and subjects all awards under the 2020 Plan to repayment as may be required by the terms of any recoupment or clawback policy of the Company or as required by applicable law, regulation or stock exchange requirement. • Independent Committee Administration: Awards to executive officers and directors under the 2020 Plan are granted by the Committee, which is composed entirely of independent directors. • Term of the 2020 Plan: No awards may be granted under the 2020 Plan more than ten years after the date of shareholder approval. The goal of the Compensation Committee in granting equity incentives is to link an executive’s compensation opportunities with creating and protecting shareholder value. The Company uses performance stock units (with performance-based vesting provisions) and restricted stock units (with time-based vesting provisions) in its executive compensation program. The Compensation Committee views equity incentive awards as a strong alignment of interests by making employees direct (or in the case of units, indirect) owners of the Company while providing performance incentive for employees as well as incentives to remain with the Company as their awards vest. The Compensation Committee uses multi-year vesting of equity incentive awards. Multi-year vesting focuses executive officers on consistent long-term growth in shareholder value and requires executive officers to remain employed with us for extended periods to receive the full benefit of the awards unless they are eligible for retirement as defined within the terms of each award agreement. Most of the Company’s equity incentive awards have three-year vesting periods. Timing of Equity Awards. We are aware that the release of our quarterly financial results may have an impact on the market price of our common stock, and therefore the value of the equity awards to our executive officers, as well as stock grants awarded to directors, depending on whether the information is favorable or unfavorable. Our historical practice with respect to the timing of equity awards, including payments under the Executive Incentive Plan, has been to approve such grants once each year in the first quarter of the year following the year to which the award pertains. We anticipate that future grants generally will be awarded in the first quarter after the Company has released its fourth quarter results for the prior year, other than any one-time or off cycle grants such as the grants on September 8, 2023 that were granted as part of the Compensation Committee's review of contracts and peer company compensation methods and levels. Non-employee directors receive annual grants of restricted stock on the first Friday following the annual meeting of shareholders, generally in May or June of each year, which shares generally vest at the end of one year. In the case of grants to our non-employee directors, we believe that the annual meeting of shareholders is an appropriate time during the year to make equity grants and that a consistent application of our equity granting practices from year to year regardless of the content of the first quarter earnings release is also appropriate. The equity awards granted by the Compensation Committee are designed to incent creation of long-term shareholder value and contain delayed vesting provisions that prevent recipients from taking advantage of short-term fluctuations in the market price of our common stock. We have not planned in the past, nor do we plan in the future, to time the release of material non-public information for the purpose of affecting the value of executive or director compensation. Clawback Policy. In 2023, the Company adopted a new clawback policy as required by the requirements of Rule 10D-1 (which was adopted by the SEC to implement a mandate of Dodd-Frank Wall Street Reform and Consumer Protection Act) and the requirement of the New York Stock Exchange Listed Company Manual listing standards adopted pursuant to Rule 10D-1. The new clawback policy requires clawback of erroneously awarded incentive compensation paid to current and former executive officers in the event of a restatement of the Company’s financial statements (without regard to the fault of the executive). Restatements that trigger such recoupment are restatements due to material noncompliance with any financial reporting requirement applicable to the Company under the federal securities laws, including restatements to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected
COMPENSATION DECISIONS MADE IN 2023
The employment agreements contain a “double trigger” provision for severance in a Change in Control context. Under this “double trigger” provision, if the executive resigns for Good Reason or the executive’s employment is terminated by the Company without Cause on or within two years after a Change in Control, the executive will be entitled to receive a lump sum severance payment equal to 2.99 times the sum of (i) the executive’s annual base salary at the time of termination and (ii) the average of the executive’s annual incentive awards paid for the prior three years. Additionally, each executive will be entitled to receive (a) his or her Accrued Obligations; (b) continued medical, dental, life and disability insurance coverage (or payment in lieu) for 36 months; (c) a Prorated Annual Incentive Award for the year of termination; and (d) full vesting of any unvested equity awards, with performance for any performance-based equity awards determined based on the terms of the applicable grant agreement. If the executive’s employment terminates due to death, the employment agreements provide for a lump sum payment to the executive’s estate. The executive’s estate will also be entitled to (a) the applicable Accrued Obligations; (b) a Prorated Annual Incentive Award for the year of death and (c) full vesting of the executive’s unvested equity awards. If the executive’s employment terminates due to disability, the executive will be entitled to receive (x) his or her Accrued Obligations; (y) an annual cash incentive award for the year of termination and (z) full vesting of any unvested equity awards, with performance for any performance-based equity awards determined based on the terms of the applicable grant agreement. Mr. Boston and Ms. Popenoe's employment agreements provide that if the Company determines not to renew the agreement at the end of any term and terminates the executive’s employment for any reason other than for Cause at the end of the term or if the executive resigns for Good Reason on account of such non-renewal of the agreement, the executive will be entitled to receive the same severance payments described above for termination by the Company without Cause or resignation for Good Reason, whether or not in connection with a Change in Control depending on when the non-renewal or termination occurs. Except for the Accrued Obligations, payment of all of the severance payments discussed above (other than in the event of death) is contingent on the executive signing a release in favor of the Company and its affiliates. The employment agreements provide for Change in Control severance benefits on a “best net” approach, under which the Change in Control severance benefits will be reduced to avoid the golden parachute excise tax under Section 280G of the Internal Revenue Code only if such a reduction would cause the executive to receive more after-tax compensation than without a reduction. In certain cases, some or all of the payments and benefits provided on termination of employment under these agreements may be delayed for six months following termination to comply with the requirements of Section 409A of the Internal Revenue Code. Any payment required to be delayed would be paid at the end of the six-month period in a lump sum, with any payments due after the six-month period being paid at the normal payment date provided for under the agreement. The employment agreements also provide for a clawback of any incentive compensation by the Company, including both equity and cash compensation, to the extent required by federal or state law or regulation or stock exchange requirement. Under the employment agreements, the executives are subject to certain restrictive covenants in favor of the Company, including (i) a confidentiality covenant that applies during and following the executive’s employment for five years (or longer if the confidential information is a trade secret or is required in an employment agreement), (ii) a non-solicitation covenant that applies during and for 12 months following the executive’s employment, and (iii) a non-competition covenant that applies during the executive’s employment and for 90 days following the executive’s employment if the executive does not receive severance benefits and for six months following the executive’s employment if he or she receives severance benefits. Non-competition covenants are longer for Change in Control. See further discussion under “Potential Payments upon Termination or Change in Control” below.
LIMITATIONS ON CERTAIN SHORT-TERM OR SPECULATIVE TRANSACTIONS IN THE COMPANY’S SECURITIES
LIMITATIONS ON CERTAIN SHORT-TERM OR SPECULATIVE TRANSACTIONS IN THE COMPANY’S SECURITIES The Board of Directors has approved a Statement of Policy Regarding Trading in Company Securities reasonably designed to promote compliance with insider trading laws, rules and regulations (the “Insider Trading Policy”). The Insider Trading Policy applies to all directors, officers and employees of the Company and helps ensure that the Company’s personnel bear the full risks and benefits of stock ownership. The Insider Trading Policy prohibits directors and executive officers, among others, from engaging in short-term or speculative transactions in the Company’s securities, such as short sales, trading in publicly traded derivative securities, and hedging transactions. The Insider Trading Policy also prohibits directors and executive officers, among others, from holding the Company’s securities in margin accounts and from pledging the Company’s securities.
COMPENSATION OF EXECUTIVE OFFICERS
| Summary Compensation Table | | | | | | | | | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Non-Equity Incentive Plan Compensation(2) ($) | All Other Compensation(3) ($) | Total ($) | | Byron L. Boston | 2023 | 850,000 | — | 2,931,062 | 2,269,800 | 126,377 | 6,177,239 | | Chief Executive Officer and Chairman | 2022 | 800,000 | — | 1,480,618 | 1,824,444 | 125,621 | 4,230,683 | | | 2021 | 750,000 | — | 1,456,957 | 2,095,847 | 173,334 | 4,476,138 | | Smriti L. Popenoe | 2023 | 750,000 | — | 2,595,663 | 2,017,600 | 142,863 | 5,506,126 | | President and Chief Investment Officer | 2022 | 700,000 | — | 1,133,592 | 1,396,840 | 73,292 | 3,303,724 | | | 2021 | 575,000 | — | 977,379 | 1,337,879 | 90,060 | 2,980,318 | | Robert S. Colligan (4) | 2023 | 500,000 | — | 670,811 | 945,750 | 21,800 | 2,138,361 | | Executive Vice President, Chief Financial Officer and Secretary | 2022 | 229,167 | — | — | 427,604 | 333 | 657,104 | | | 2021 | — | — | — | — | — | — |
COMPENSATION OF EXECUTIVE OFFICERS
| Grants of Plan-Based Awards for 2023 | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | Grant Date Fair Value of Stock and Option Awards(4) ($) | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Byron L. Boston | | — | 1,800,000 | 3,600,000 | — | — | — | — | — | | | 3/10/23 | — | — | — | 18,292 | 71,732 | 143,464 | — | 858,632 | | | 3/10/23 | — | — | — | — | — | — | 47,821 | 572,417 | | | 9/08/23 | — | — | — | — | — | — | 117,097 | 1,500,013 | | Smriti L. Popenoe | | — | 1,600,000 | 3,200,000 | — | — | — | — | — | | | 3/10/23 | — | — | — | 14,005 | 54,920 | 109,840 | — | 657,392 | | | 3/10/23 | — | — | — | — | — | — | 36,613 | 438,258 | | | 9/08/23 | — | — | — | — | — | — | 117,097 | 1,500,013 | | Robert S. Colligan | | — | 750,000 | 1,500,000 | — | — | — | — | — | | | 3/10/23 | — | — | — | 8,574 | 33,625 | 67,250 | — | 402,491 | | | 3/10/23 | — | — | — | — | — | — | 22,416 | 268,320 |
HOLDINGS OF STOCK-BASED AWARDS
| Outstanding Equity Awards at 2023 Fiscal Year End | | | | | | | | Grant Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(5) | | Name | | (#) | ($) | (#) | ($) | | Byron L. Boston | 5/26/21 | 8,617(1) | 107,885 | — | — | | | 5/26/21 | — | — | 50,690(6) | 634,639 | | | 2/23/22 | 28,914(2) | 362,003 | — | — | | | 2/23/22 | — | — | 66,033(7) | 826,733 | | | 3/10/23 | 47,821(3) | 598,719 | — | — | | | 3/10/23 | — | — | 71,732(8) | 898,085 | | | 9/8/23 | 117,097(4) | 1,466,054 | — | — | | Smriti L. Popenoe | 5/26/21 | 5,780(1) | 72,366 | — | — | | | 5/26/21 | — | — | 34,005(6) | 425,743 | | | 2/23/22 | 19,047(2) | 238,468 | — | — | | | 2/23/22 | — | — | 50,556(7) | 632,961 | | | 3/10/23 | 36,613(3) | 458,395 | — | — | | | 3/10/23 | — | — | 54,920(8) | 687,598 | | | 9/8/23 | 117,097(4) | 1,466,054 | — | — | | Robert S. Colligan | 3/10/23 | 22,416(3) | 280,648 | — | — | | | 3/10/23 | — | — | 33,625(8) | 420,985 |
OPTION EXERCISES AND STOCK VESTED
OPTION EXERCISES AND STOCK VESTED The table below presents information regarding restricted stock held by our executive officers that vested during 2023.
OPTION EXERCISES AND STOCK VESTED
| Option Exercises and Stock Vested for 2023(1) | | | | | | | Stock Awards | | | | | Name | Vesting Date | Vesting Date Stock Price per Share(2) ($) | Number of Shares Acquired On Vesting(3) (#) | Value Realized on Vesting(2) ($) | | Byron L. Boston | | | | — | | | 2/23/23 | 13.69 | 14,292 | 195,657 | | | 2/28/23 | 13.23 | 20,070 | 265,526 | | | 5/14/23 | 11.04 | 24,062 | 265,644 | | Total | | | 58,424 | 726,827 | | Smriti L. Popenoe | | | | — | | | 2/23/23 | 13.69 | 9,397 | 128,645 | | | 2/28/23 | 13.23 | 9,249 | 122,364 | | | 5/14/23 | 11.04 | 12,031 | 132,822 | | Total | | | 30,677 | 383,831 | | Robert S. Colligan (4) | | | — | — | | Total | | | — | — |
OPTION EXERCISES AND STOCK VESTED
(1)None of the executive officers exercised any stock options or SARs during 2023. (2)Value realized is the number of shares multiplied by the closing stock price of the Company’s common stock on the date of vesting. For purposes of this table, where a vesting date was a non-business day, the Company’s common stock closing stock price on the business day prior to the vesting date was used. (3)Represents the total number of restricted shares or units that vested during 2023, without taking into account any shares or units that were withheld for applicable tax obligations. (4)Mr. Colligan joined the Company in 2022 and did not have any awards vest in 2023.
NON-QUALIFIED DEFERRED COMPENSATION FOR 2023
NON-QUALIFIED DEFERRED COMPENSATION FOR 2023 The Company does not have a non-qualified deferred compensation plan.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL Employment Agreements, the 2020 Stock and Incentive Plan and other applicable employee benefit plans may provide for potential payments to our NEOs in connection with a termination of employment or upon a change in control of the Company. The following table shows the estimated payments to or benefits to be received by each of the NEOs upon the following termination events or upon a change in control of the Company, in each case assuming that the termination event or the change in control occurred on December 31, 2023, and assuming a stock price of $12.52, which was the closing stock price of the Company’s common stock on December 29, 2023, which was the last business day of the year. The amounts reflected in the following table are estimates, as the actual amounts to be paid to or received by a NEO can only be determined at the time of termination or change in control. The following table reports only amounts that are increased, accelerated or otherwise paid or payable as a result of the applicable termination or change in control event and, as a result, excludes amounts accrued through December 31, 2023, such as accrued but unpaid salary, amounts for completed performance periods, already vested
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| 48 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
equity awards, and vested account balances under the 401(k) Savings Plan. The table also excludes any amounts that are available generally to all salaried employees and in a manner that does not discriminate in favor of our executive officers. All references to employment agreements in the following table and footnotes are to the employment agreements in place as of December 31, 2023.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| | Death(1) | Termination Due to Disability | Termination Without Cause or for Good Reason Not in Connection with Change in Control(2) | Termination Without Cause or for Good Reason in Connection with a Change in Control(3)(4)(5) | Termination For Cause or Without Good Reason | Change in Control with no Related Termination | | Payments and Benefits | ($) | ($) | ($) | ($) | ($) | ($) | | Byron L. Boston | | | | | | | | Severance(6) | 2,963,364 | — | 5,926,727 | 8,860,457 | — | — | | Stock Awards - Accelerated Vesting(7) | 4,576,811 | 4,576,811 | 4,576,811 | 4,576,811 | — | 4,576,811 | | Health & Welfare Benefits(6)(8) | — | 34,517 | 46,023 | 69,034 | — | — | | Total | 7,540,175 | 4,611,328 | 10,549,561 | 13,506,302 | — | 4,576,811 | | Smriti L. Popenoe | | | | | | | | Severance(6) | 2,384,106 | — | 4,768,213 | 7,128,478 | — | — | | Stock Awards - Accelerated Vesting(7) | 3,768,708 | 3,768,708 | 3,768,708 | 3,768,708 | — | 3,768,708 | | Health & Welfare Benefits(6)(8) | — | 44,791 | 59,721 | 89,582 | — | — | | Total | 6,152,814 | 3,813,499 | 8,596,642 | 10,986,768 | — | 3,768,708 | | Robert S. Colligan | | | | | | | | Severance(6) | — | — | 500,000 | 2,863,776 | — | — | | Stock Awards - Accelerated Vesting(7) | 701,633 | 701,633 | 701,633 | 701,633 | — | 701,633 | | Health & Welfare Benefits(6)(8) | — | — | 26,265 | 78,796 | — | — | | Total | 701,633 | 701,633 | 1,227,898 | 3,644,205 | — | 701,633 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
(1)Under their employment agreements, if Mr. Boston’s or Ms. Popenoe’s employment terminates due to death, his or her estate will be entitled to receive a lump sum payment of an amount equal to the sum of (i) his or her annual base salary at the time of his or her death and (ii) the average of his or her annual incentive award paid for the prior three years. (2)Under their employment agreements, if Mr. Boston or Ms. Popenoe resigns for good reason or his or her employment is terminated without cause not in connection with a change in control, he or she will be entitled to receive a lump sum severance payment equal to two times the sum of (i) his or her annual base salary at the time of termination and (ii) the average of his or her annual incentive award paid for the prior three years. Under his employment agreements, if Mr. Colligan resigns for good reason or his employment is terminated without cause not in connection with a change in control, he will be entitled to receive a lump sum severance payment equal to one times the sum of (i) his annual base salary at the time of termination and (ii) his annual incentive award. (3)Under their employment agreements, if Mr. Boston or Ms. Popenoe resigns for good reason or his or her employment is terminated without cause within six months prior to or on or within two years after a change in control, he or she will be entitled to receive a lump sum severance payment equal to 2.99 times the sum of (i) his or her annual base salary at the time of termination and (ii) the average of his or her annual incentive award paid for the prior three years. (4)Under his employment agreement, if Mr. Colligan resigns for good reason or his employment is terminated without cause on or within two years after a change in control, he will be entitled to receive a lump sum severance payment
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 49 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
equal to 2.99 times the sum of (i) his annual base salary at the time of termination and (ii) the average of his annual incentive award paid for the prior three years (subject to such adjustment as the Compensation Committee deems appropriate if Mr. Colligan has worked less than three calendar years and taking into account the partial year 2022, the year in which his employment began). (5)Messrs. Boston’s and Colligan's and Ms. Popenoe’s employment agreements provide for change in control benefits on a “best net” approach, under which the executive’s change in control benefits will be reduced to avoid the golden parachute excise tax under Section 280G of the Internal Revenue Code only if such a reduction would cause him or her to receive more after-tax compensation than without a reduction. The amounts shown in this column do not reflect any reductions that might be made pursuant to these provisions. (6)Messrs. Boston and Colligan and Ms. Popenoe must sign and not revoke a general release (other than in the event of death) in order to be entitled to receive these amounts. (7)Restricted shares granted to the executive officers become fully vested upon (a) a change of control or (b) termination of the executive officer’s employment due to disability or death and (c) the Compensation Committee has authority to waive forfeiture in the event of termination of the executive officer’s employment for good reason (as defined in their employment agreements) or termination of the executive officer’s employment without cause (as defined in their employment agreements). RSUs granted to the executive officers become fully vested upon (a) termination of the executive officer’s employment due to disability or death or retirement at or after age sixty-five where there is no cause for termination or (b) termination of the executive officer’s employment for good reason (as defined in their employment agreements) or termination of the executive officer’s employment without cause (as defined in their employment agreements), in each case whether before or after a change in control. PSUs granted to the executive officers become vested based on actual performance through the date of termination or change in control, as applicable, upon (a) termination of the executive officer’s employment due to disability or death or retirement at or after age sixty-five where there is no cause for termination or (b) termination of the executive officer’s employment for good reason (as defined in their employment agreements) or termination of the executive officer’s employment without cause (as defined in their employment agreements) outside of a change in control scenario or during the 6 months prior to a change in control or 18 months following a change in control. The PSUs in the chart equal the number of PSUs already granted multiplied by the performance percentage determined based on the actual performance during the period determined with December 31, 2023 as the last day of the performance period. The RSUs and PSUs require the executive officer to sign and not revoke a general release (other than in the event of death or in the event of a change in control in the case of the PSUs) in order to be entitled to accelerated vesting of the awards. Mr. Boston was eligible for retirement under these provisions as of November 5, 2023. (8)Under their employment agreements, if Mr. Boston or Ms. Popenoe resigns for good reason or his or her employment is terminated without cause, he or she will be entitled to receive continued medical, dental, life and disability insurance coverage for 24 months in the case of termination not in connection with a change in control and for 36 months in the case of termination within six months of or on or within two years after a change in control. If the Company terminates Mr. Boston or Ms. Popenoe due to disability, he or she will be entitled to receive continued medical, dental, life and disability insurance coverage for 18 months. Under his employment agreement, if Mr. Colligan resigns for good reason or his employment is terminated without cause, he will be entitled to receive an amount equal to the monthly cost of continued medical, dental, life and disability insurance coverage for 12 months in the case of termination not in connection with a change in control and for 36 months in the case of termination on or within two years after a change in control. The amounts shown in this row represent the net present value of the estimated benefits costs in each case.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| 50 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE The following table provides information about the relationship between compensation actually paid (as determined under SEC rules) to our principal executive officer (“PEO”) and the average our non-PEO NEOs and certain financial performance measures of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to “Executive Compensation - Compensation Discussion and Analysis.”
Pay Versus Performance Table
Pay Versus Performance Table
Pay Versus Performance Table
| Year | Summary Comp- ensation Table Total for PEO (1) | Compen- sation Actually Paid to PEO | Average Summary Compen- sation Table Total for non-PEO NEOs(1) | Average Compen- sation Actually Paid to non-PEO NEOs(1) | Value of Initial Fixed $100 Investment Based on: | | Net Income (loss) ($ in thousands) | | | | | | | | Total Shareholder Return(2) | Peer Group Total Shareholder Return(2) (3) | | Total Economic Return Percentage(4) | | 2023 | $6,177,239 | $5,889,056 | $3,822,244 | $3,733,285 | 113.47 | 79.78 | $(6,130) | 1.0% | | 2022 | 4,230,683 | 3,702,486 | 3,084,333 | 2,907,635 | 101.29 | 69.26 | 143,161 | (9.4)% | | 2021 | 4,476,138 | 4,089,845 | 2,665,564 | 2,504,410 | 119.67 | 94.04 | 102,261 | 2.5% | | 2020 | 3,875,179 | 4,813,278 | 1,976,652 | 2,327,810 | 117.01 | 81.38 | 177,529 | 15.2% |
Pay Versus Performance Table
(1)For 2020-2023, Mr. Boston served as our Chief Executive Officer or PEO. During 2023, our non-PEO NEOs were Mr.Colligan and Ms. Popenoe. For 2022, our non-PEO NEOs were Messrs. Benedetti and Colligan and Ms. Popenoe. For 2020-2021, our non-PEO NEOs were Mr. Benedetti and Ms. Popenoe. (2)Total Shareholder Return for the Company and the Peer Group assume $100 invested at December 31, 2019. (3)The Peer Group Total Shareholder Return is calculated based on the FTSE NAREIT Mortgage REIT Index. (4)Total economic return (TER) percentage is the sum of dividends declared per common share during the year plus the change in book value per common share for the year divided by the beginning book value per common share. While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance, the Company has determined that TER is the financial measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to Company performance. TER is a performance measure for our executives' PSU awards.
Pay Versus Performance Table
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 51 |
Pay Versus Performance Table
Compensation actually paid represents the Summary Compensation Table Total adjusted for the following items:
Pay Versus Performance Table
| | Year 2023 | | | Adjustments to Summary Compensation Table Total to Calculate Compensation Actually Paid | PEO | Average for non-PEO NEOs | | Decrease for amounts reported under the "Stock Awards" column in the Summary Compensation Table | $(2,931,062) | $(1,633,237) | | Increase for fair value at year-end of awards granted during year that remain outstanding and unvested as of year-end | 2,962,858 | 1,656,840 | | Increase for fair value at vesting date of awards that were granted and vested during the year | — | — | | Decrease for change in fair value from prior year-end to current year-end of awards granted in prior years that were outstanding and unvested as of year-end | (303,654) | (109,372) | | Decrease for change in fair value from prior year-end to vesting date of awards granted in prior years that vested during year | (16,325) | (3,190) | | Total adjustments | $(288,183) | $(88,959) |
Pay Versus Performance Table
| | Year 2022 | | | Adjustments to Summary Compensation Table Total to Calculate Compensation Actually Paid | PEO | Average for non-PEO NEOs | | Decrease for amounts reported under the "Stock Awards" column in the Summary Compensation Table | $(1,480,618) | $(609,194) | | Increase for fair value at year-end of awards granted during year that remain outstanding and unvested as of year-end | 1,398,422 | 337,235 | | Increase for fair value at vesting date of awards that were granted and vested during the year | — | 261,096 | | Decrease for change in fair value from prior year-end to current year-end of awards granted in prior years that were outstanding and unvested as of year-end | (401,858) | (78,797) | | Decrease for change in fair value from prior year-end to vesting date of awards granted in prior years that vested during year | (44,143) | (87,038) | | Total adjustments | $(528,197) | $(176,698) |
Pay Versus Performance Table
| 52 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
Pay Versus Performance Table
| | Year 2021 | | | Adjustments to Summary Compensation Table Total to Calculate Compensation Actually Paid | PEO | Average for non-PEO NEOs | | Decrease for amounts reported under the "Stock Awards" column in the Summary Compensation Table as well as amounts reported under the "Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table for the portion of the long-term incentive component of the Executive Incentive Plan earned for performance during the three-year performance period ended December 31, 2021 that was paid in shares of the Company's common stock | $(1,623,209) | $(887,360) | | Increase for fair value at year-end of awards granted during year that remain outstanding and unvested as of year-end | 1,255,337 | 734,894 | | Decrease for change in fair value from prior year-end to current year-end of awards granted in prior years that were outstanding and unvested as of year-end | (87,125) | (36,999) | | Increase for change in fair value from prior year-end to vesting date of awards granted in prior years that vested during year | 68,704 | 28,311 | | Total adjustments | $(386,293) | $(161,154) |
Pay Versus Performance Table
| | Year 2020 | | | Adjustments to Summary Compensation Table Total to Calculate Compensation Actually Paid | PEO | Average for non-PEO NEOs | | Decrease for amounts reported under the "Stock Awards" column in the Summary Compensation Table | $(890,775) | $(445,388) | | Increase for fair value at year-end of awards granted during year that remain outstanding and unvested as of year-end | 1,793,016 | 785,420 | | Decrease for change in fair value from prior year-end to current year-end of awards granted in prior years that were outstanding and unvested as of year-end | (6,117) | (1,927) | | Increase for change in fair value from prior year-end to vesting date of awards granted in prior years that vested during year | 41,975 | 13,053 | | Total adjustments | $938,099 | $351,158 |
Pay Versus Performance Table
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 53 |
Analysis of the Information Presented in the Pay versus Performance Table
Analysis of the Information Presented in the Pay versus Performance Table The following graph illustrates the relationship between compensation actually paid to our NEOs and our TSR as well as TSR for the FTSE NAREIT Mortgage REIT Index on a cumulative basis assuming investment of $100 on December 31, 2019: The following graph compares our net income to compensation actually paid to our NEOs on an annual basis: The Company accounts for its investments purchased prior to January 1, 2021 as available-for-sale with changes in fair value recorded in "other comprehensive income (loss)." Effective January 1, 2021, the
Analysis of the Information Presented in the Pay versus Performance Table
| 54 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
Analysis of the Information Presented in the Pay versus Performance Table
Company elected the fair value option for its investments purchased on or after that date with changes in fair value reported in "net income." As a result, net income for the years presented above in the Pay versus Performance Table and in the graph above does not include other comprehensive income (loss) of $(93.5) million, $(73.5) million, $(188.1) million, and $22.8 million, respectively. The following graph illustrates the relationship between compensation actually paid to our NEOs and our total economic return:
CEO PAY RATIO
CEO PAY RATIO We determined that the 2023 annual total compensation of the median compensated employee, from all our employees who were employed as of December 31, 2023, other than our Chief Executive Officer, was $204,119; our Chief Executive Officer’s 2023 annual total compensation was $6,177,239 and the ratio of these amounts was 1 to 30.3. As of December 31, 2023, our total population consisted of 22 employees, all located in the United States. This population consisted of all of our full-time and part-time employees. To identify the median compensated employee, we used Medicare wages and tips for the period from January 1, 2023 to December 31, 2023 as reported to the Internal Revenue Service on Box 5 of Form W-2. We did not annualize pay for those individuals not employed for a full year in 2023 or make any cost-of-living adjustments in identifying the median compensated employee. Once we identified our median compensated employee, we calculated the median compensated employee’s and our Chief Executive Officer’s 2023 annual total compensation in accordance with the requirements of the Summary Compensation Table. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
CEO PAY RATIO
| 56 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
CEO PAY RATIO
| PROPOSAL TWO ADVISORY AND NON-BINDING VOTE TO APPROVE EXECUTIVE COMPENSATION |
CEO PAY RATIO
As required under Section 14A of the Exchange Act, we are providing our shareholders the opportunity to vote to approve, on an advisory and non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s rules. As described in detail under the heading “Executive Compensation - Compensation Discussion and Analysis,” our executive compensation program is designed to attract and retain highly skilled and motivated officers who will manage the Company in a manner to promote our growth and profitability, prudently preserve our capital, and advance the interests of our shareholders. Under this program, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of shareholder value. Please read the “Compensation Discussion and Analysis” for additional details about our executive compensation program, including information about the 2023 fiscal year compensation of our named executive officers. The Compensation Committee annually reviews the compensation programs for our named executive officers to ensure they achieve the desired goal of striking a balance between recognition of recent achievements and aligning the interests of management on a longer-term basis with that of the Company’s shareholders. We are asking our shareholders to indicate their support for our named executive officer compensation as described in this Proxy Statement by voting for this proposal. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our shareholders to vote “FOR” the following resolution at the Annual Meeting: “RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2024 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related disclosure.” This say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. The Board and the Compensation Committee value the opinions of our shareholders and we will consider our shareholders’ concerns and the outcome of this vote when making future compensation decisions regarding our executive officers. We anticipate that the next vote on a say-on-pay proposal will occur at the 2025 Annual Meeting of Shareholders. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.
CEO PAY RATIO
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 57 |
CEO PAY RATIO
| RELATED PERSON TRANSACTIONS |
CEO PAY RATIO
We recognize that maintaining the independence in fact and appearance for our directors and officers is critical. Therefore, we have certain policies and procedures in place to critically evaluate each transaction that could impact the independence of directors and officers. Our Code of Conduct provides that the Company’s personnel, including directors and officers, are expected to avoid any situation in which their personal interests conflict, or have the appearance of conflicting, with those of the Company. Our Corporate Governance Guidelines also provide that the Company will generally refrain from entering into contracts with Board members and their immediate family members or providing support directly or indirectly to organizations with which a Board member may be affiliated. In the event that we deem it appropriate to enter into transactions with a Board member or a member of his or her immediate family, the terms of the transaction must be made in the ordinary course of business and on substantially the same terms as those prevailing at the time of a comparable transaction with a non-related person. The Board will also evaluate these transactions, in accordance with our Corporate Governance Guidelines, when the independence of the director is determined. Our Board has adopted certain written policies and procedures, included within our Code of Conduct, for the review, approval and ratification of related person transactions, which we refer to here as our Related Person Policy. Among other things, our Related Person Policy provides that, a related person transaction shall be subject to reasonable prior review and oversight by the Audit Committee. A “related person transaction” is any transaction, arrangement or relationship (or any series of transactions, arrangements or relationships) in which we were, are or will be a participant, in which the amount involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest. A “related person,” as defined in our Related Person Policy, means any person who is an executive officer, director or nominee for director of the Company since the beginning of the Company’s last fiscal year, even if the person does not presently serve in that role, any person who is the owner of more than 5% of any class of the Company’s outstanding equity securities, any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or any person (other than a tenant or employee) sharing the house-hold of the executive officer, director, nominee or more than 5% owner, and any entity which is owned or controlled by any of the foregoing persons or in which one of the foregoing persons has a substantial ownership interest or control of such entity. Under the Related Person Policy, proposed related person transactions must be reported to the Chairperson of the Audit Committee. The Chairperson will assess, with the assistance of counsel, if appropriate, whether the proposed transaction would be a related person transaction and, if so, unless the transaction is subject to a pre-approved exemption, the proposed related person transaction shall be submitted to the Audit Committee for consideration. The Audit Committee will then conduct a reasonable prior review and oversight of the related person transaction for potential conflicts of interest. In determining whether to approve or ratify a proposed related person transaction, the Audit Committee will consider, among other things, whether the related person transaction is in, or is not inconsistent with, the best interests of the Company and its shareholders, and, where applicable, whether the terms of such transaction are comparable to those that could be obtained in arms-length dealings with an unrelated third party. The Audit Committee will prohibit a related person transaction if it determines such transaction to be inconsistent with the interests of the Company and its shareholders. The Audit Committee notifies the related person of its determination. No director who is a related person with respect to a transaction under review may participate in any discussion or approval, except that the director shall provide all material information concerning the transaction to the Audit Committee. We do not have any related person transactions to report under relevant SEC rules and regulations or our Related Person Policy.
CEO PAY RATIO
| 58 | 2024 PROXY STATEMENT | DYNEX CAPITAL, INC. |
CEO PAY RATIO
| PROPOSAL THREE RATIFICATION OF THE SELECTION OF THE COMPANY’S AUDITORS |
CEO PAY RATIO
The Audit Committee has selected the firm of BDO USA, PC (“BDO”) as independent certified public accountants to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 2024. BDO has audited the financial statements of the Company since 2005, including for the fiscal year ended December 31, 2023. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of BDO as the Company’s independent auditor. The Audit Committee is aware that a long-tenured auditor may be believed by some to pose an independence risk. To address these concerns, the Audit Committee: • reviews all non-audit services and engagements provided by BDO, if any, specifically with regard to the impact on the firm’s independence; • conducts an annual assessment of BDO’s service quality, and its working relationship with our management; • conducts periodic private meetings separately with each of BDO and our management; • approves the selection of BDO’s new lead engagement partner with each rotation; • at least annually obtains and reviews a report from BDO describing all relationships between the independent auditor and the Company; and • periodically considers whether there should be regular rotation of the independent auditor. Based on the above, the members of the Audit Committee and the Board believe that continued retention of BDO to serve as the Company’s independent auditor is in the best interests of the Company and its shareholders. Although ratification is not required, the Board is submitting the selection of BDO to our shareholders for ratification because we value our shareholders’ views on the Company’s independent certified public accountants, and as a matter of good governance practice. In the event that shareholders do not ratify the selection of BDO, the Audit Committee will consider making a change in auditors for the Company for the fiscal year ending December 31, 2024. Representatives of BDO are expected to attend the Annual Meeting, will have an opportunity to make a statement, if they desire to do so, and are expected to be available to respond to appropriate questions from shareholders. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF BDO USA, PC, AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, AS AUDITORS FOR THE 2024 FISCAL YEAR ENDING DECEMBER 31, 2024.
CEO PAY RATIO
| DYNEX CAPITAL, INC. | 2024 PROXY STATEMENT | 59 |