DEF 14A of Franklin Street Properties Corp /Ma/
Filed Apr 4, 2024 · FY20230001104659-24-043643
The Proxy Statement and 2023 Annual Report to Stockholders are available electronically at www.proxyvote.com
| | Page | | Potential Payments Upon Termination or Change in Control | 45 | | Pay Versus Performance | 46 | | Pay Ratio Disclosure | 48 | | Security Ownership of Certain Beneficial Owners and Management | 49 | | Securities Authorized for Issuance Under Equity Compensation Plans | 51 | | Transactions with Related Persons | 52 | | Other Information | 54 | | Matters to be Considered at the Meeting | 54 | | Solicitation of Proxies | 54 | | Stockholder Proposals | 54 | | Important Notice Regarding Delivery of Security Holder Documents | 54 | | Appendix A: Reconciliation of Non-GAAP Financial Measures | 55 |
Board Nominees (Proposal 1)
Board Nominees (Proposal 1) On February 27, 2024, Kathryn P. O’Neil, a member of our Board, notified us of her decision not to stand for re-election at the Annual Meeting. Consequently, Ms. O’Neil’s term as a director will expire at the Annual Meeting, and the size of our Board will decrease to seven members immediately after the conclusion of the Annual Meeting. Our Nominating and Corporate Governance Committee has recommended, and our Board has determined, to nominate all other current members of our Board for re-election at the Annual Meeting. We are asking our stockholders to vote “FOR” our nominees, George J. Carter, Georgia Murray, Brian N. Hansen, John N. Burke, Dennis J. McGillicuddy, Kenneth A. Hoxsie and Milton P. Wilkins, Jr., as directors for a one-year term expiring at our 2025 Annual Meeting of Stockholders. We understand the importance of having a Board comprised of the right people, with the highest integrity and the necessary skills and qualifications to oversee our business. The following table provides summary information about each of the director nominees, who have a diverse and balanced skill set including extensive real estate, financial, investment, corporate, securities, management, and investor relations experience. We encourage you to review the qualifications, skills and experience of our directors on pages 17-23. In addition, the graphs below the table show the composition of our Board by tenure, independence, and diversity (gender and ethnicity).
Board Nominees (Proposal 1)
| Name | Age | Director Since | Principal Occupation | Independent | Committee Memberships | | | Other Public Co. Boards | | | | | | | AC | CC | NG | | | George J. Carter (Chairman of the Board) | 75 | 2002 | Chief Executive Officer, Franklin Street Properties Corp. | No | | | | — | | Georgia Murray (Lead Independent Director) | 73 | 2005 | Director (Retired commercial real estate executive) | Yes | x | x | | — | | Brian N. Hansen | 52 | 2012 | President and Chief Operating Officer, Confluence Investment Management LLC | Yes | | | x | — | | John N. Burke | 62 | 2004 | Managing Director, BA, Inc. | Yes | | x | x | — | | Dennis J. McGillicuddy | 82 | 2002 | Director (Retired private investor) | Yes | x | | | — | | Kenneth A. Hoxsie | 73 | 2016 | Director (Retired corporate and securities lawyer) | Yes | x | | | — | | Milton P. Wilkins, Jr. | 76 | 2022 | Investment Advisor, RBF Wealth Advisors | Yes | x | | | — |
Board Nominees (Proposal 1)
| | Chair | AC | Audit Committee | | x | Member | CC | Compensation Committee | | | | NG | Nominating and Corporate Governance Committee |
Director Nominee Highlights
Director Nominee Highlights
PROPOSAL ONE — ELECTION OF DIRECTORS
PROPOSAL ONE — ELECTION OF DIRECTORS All members of our Board are elected annually by our shareholders. Our Board currently consists of eight directors. On February 27, 2024, Kathryn P. O’Neil, a member of our Board, notified us of her decision not to stand for re-election at the Annual Meeting. Consequently, Ms. O’Neil’s term as a director will expire at the Annual Meeting, and the size of our Board will decrease to seven members immediately after the conclusion of the Annual Meeting. At the Annual Meeting, seven directors will be elected to serve for a one-year term expiring at our 2025 Annual Meeting and until their respective successors are duly elected and qualified. As such, at the Annual Meeting, our shareholders will have an opportunity to vote for each of the seven nominees listed below. Following the recommendation of the Nominating and Corporate Governance Committee, our Board has nominated Mr. George J. Carter, Ms. Georgia Murray, Mr. Brian N. Hansen, Mr. John N. Burke, Mr. Dennis J. McGillicuddy, Mr. Kenneth A. Hoxsie and Mr. Milton P. Wilkins, Jr. for election as directors. Each nominee is currently serving as a director of Franklin Street Properties. Our Board anticipates that, if elected, the nominees will serve as directors. However, if any person nominated by our Board is unable to serve or for good cause will not serve, the proxies will be voted for the election of such other person(s) as our Board may recommend.
Nominees for Director
Nominees for Director The following table provides certain information about each nominee for director.
Nominees for Director
| Name | Age | Position(s) with the Company | Director Since | | George J. Carter | 75 | Chair of the Board, Chief Executive Officer | 2002 | | Georgia Murray | 73 | Lead Independent Director | 2005 | | Brian N. Hansen | 52 | Chair of the Compensation Committee | 2012 | | John N. Burke | 62 | Chair of the Audit Committee | 2004 | | Dennis J. McGillicuddy | 82 | Member of the Board | 2002 | | Kenneth A. Hoxsie | 73 | Chair of the Nominating and Corporate Governance Committee | 2016 | | Milton P. Wilkins, Jr. | 76 | Member of the Board | 2022 |
Nominees for Director
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF ITS NOMINEES, GEORGE J. CARTER, GEORGIA MURRAY, BRIAN N. HANSEN, JOHN N. BURKE, DENNIS J. MCGILLICUDDY, KENNETH A. HOXSIE AND MILTON P. WILKINS, JR., TO SERVE UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN. PROXIES MAY NOT BE VOTED FOR A GREATER NUMBER OF PERSONS THAN THE NUMBER OF NOMINEES CONTAINED HEREIN.
Director Qualifications and Biographical Information
Director Qualifications and Biographical Information Our Board includes individuals with expertise in executive leadership and management, real estate, accounting and finance, private investing, corporate and securities law, and investor relations. Our directors have a diversity of backgrounds and experiences. We believe that, as a group, they work effectively together in overseeing our business, hold themselves to the highest standards of integrity, and are committed to representing the long-term best interests of Franklin Street Properties and our stockholders. Biographical information for each of the director nominees, including the key qualifications, experience, attributes, and skills that led our Board to the conclusion that each of them should serve as a director, is set forth on the pages below. In addition to the business and professional experiences described below, our directors also serve on the boards of various civic and charitable organizations. Nominees for Directors to be elected to hold office for a term expiring at our 2025 Annual Meeting:
Director Qualifications and Biographical Information
| George J. Carter Director Since 2002 George J. Carter, age 75, has served as Chairman of the Board and Chief Executive Officer of Franklin Street Properties since 2002. Mr. Carter also served as President of Franklin Street Properties from 2002 to May 2016. He is responsible for all aspects of the business of Franklin Street Properties and its affiliates, with special emphasis on the evaluation, acquisition and structuring of real estate investments. Prior to the conversion of Franklin Street Partners Limited Partnership, or the Partnership, into the Company in 2002, Mr. Carter was President of the general partner of the Partnership and was responsible for all aspects of the business of the Partnership and its affiliates. From 1992 through 1996 he was President of Boston Financial Securities, Inc. Prior to joining Boston Financial Securities, Inc., Mr. Carter was owner and developer of Gloucester Dry Dock, a commercial shipyard in Gloucester, Massachusetts. From 1979 to 1988, Mr. Carter served as Managing Director in charge of marketing at First Winthrop Corporation, a national real estate and investment banking firm headquartered in Boston, Massachusetts. Prior to that, Mr. Carter held a number of positions in the brokerage industry, including positions with Merrill Lynch & Co. and Loeb Rhodes & Co. Mr. Carter is a graduate of the University of Miami (B.S.). Mr. Carter’s son, Scott H. Carter, serves as Executive Vice President, General Counsel and Secretary of the Company and Mr. Carter’s other son, Jeffrey B. Carter, serves as President and Chief Investment Officer of the Company. | Qualifications: • We believe Mr. Carter’s qualifications to sit on our Board include his more than 30 years of experience in the commercial real estate and investment banking industries, including as our founder, Chairman and Chief Executive Officer. |
Director Qualifications and Biographical Information
| Georgia Murray Director Since 2005 Georgia Murray, age 73, has been Lead Independent Director since 2014. Ms. Murray is retired from Lend Lease Real Estate Investments, Inc., where she served as a Principal from November 1999 until May 2000. From 1973 through October 1999, Ms. Murray worked at the Boston Financial Group, Inc., serving as Senior Vice President and a Director at times during her tenure. Boston Financial Securities, Inc. was an affiliate of the Boston Financial Group, Inc. She is a past Trustee of the Urban Land Institute and a past President of the Multifamily Housing Institute. Ms. Murray previously served on the Board of Directors of Capital Crossing Bank. She also serves on the boards of numerous non-profit entities. Ms. Murray is a graduate of Newton College. | Qualifications: • We believe Ms. Murray’s qualifications to serve on our Board include her more than 29 years of experience in the commercial real estate industry, board experience in the banking industry and general expertise in corporate strategy development and organizational acumen. |
Director Qualifications and Biographical Information
| Brian N. Hansen Director Since 2012 Brian N. Hansen, age 52, has been Chair of the Compensation Committee since February 2021. Since 2007, Mr. Hansen has served as President and Chief Operating Officer of Confluence Investment Management LLC, a St. Louis based Registered Investment Advisor. Prior to founding Confluence in 2007, Mr. Hansen served as a Managing Director in A.G. Edwards’ Financial Institutions & Real Estate Investment Banking practice. While at A.G. Edwards, Mr. Hansen advised a wide variety of real estate investment trusts with numerous capital markets transactions, including public and private offerings of debt and equity securities as well as the analysis of various merger and acquisition opportunities. Prior to joining A.G. Edwards, Mr. Hansen served as a Manager in Arthur Andersen LLP’s Audit & Business Advisory practice. Mr. Hansen has served on the boards of a number of non-profit entities and currently serves on the Finance Council and as the Investment Committee Chair of the Archdiocese of St. Louis and as a member of the St. Louis County Retirement Board. Mr. Hansen earned his M.B.A. from the Kellogg School of Management at Northwestern University and his Bachelor of Science in Commerce from DePaul University. Mr. Hansen is a Certified Public Accountant. | Qualifications: • We believe Mr. Hansen’s qualifications to serve on our Board include his investment banking and public accounting experience. |
Director Qualifications and Biographical Information
| John N. Burke Director Since 2004 John N. Burke, age 62, has been Chair of the Audit Committee since 2004. Mr. Burke is a certified public accountant with over 35 years of experience in the practice of public accounting working with both private and publicly traded companies and extensive experience serving clients in the real estate and REIT industry. His experience includes analysis and evaluation of financial reporting, accounting systems, internal controls and audit matters. Mr. Burke has been involved as an advisor on several public offerings, private equity and debt financings and merger and acquisition transactions. Mr. Burke’s consulting experience includes a wide range of accounting, tax and business planning matters. Prior to starting his own firm, BA, Inc., in 2003, where he currently practices, Mr. Burke was an Audit Partner in the Boston office of BDO USA, LLP. Mr. Burke is a member of the American Institute of Certified Public Accountants and the Massachusetts Society of CPAs. Mr. Burke earned an M.S. in Taxation and studied undergraduate accounting at Bentley University. | Qualifications: • We believe Mr. Burke’s qualifications to serve on our Board include his more than 35 years of experience in the practice of public accounting with extensive experience in the real estate and REIT industry. |
Director Qualifications and Biographical Information
| Dennis J. McGillicuddy Director Since 2002 Dennis J. McGillicuddy, age 82, graduated from the University of Florida with a B.A. degree and from the University of Florida Law School with a J.D. degree. In 1968, Mr. McGillicuddy co-founded Coaxial Communications, a cable television company. In 1998 and 1999, Coaxial sold its cable systems. Mr. McGillicuddy has served on the boards of various charitable organizations. He is currently President of the Board of Trustees of Florida Studio Theater, a professional non-profit theater organization, and is a Director of All-Star Children’s Foundation, an organization engaged in creating a new paradigm for foster care. | Qualifications: • We believe Mr. McGillicuddy’s qualifications to serve on our Board include his entrepreneurial and investment acumen and experience. |
Director Qualifications and Biographical Information
| Kenneth A. Hoxsie Director Since 2016 Kenneth A. Hoxsie, age 73, has been Chair of the Nominating and Corporate Governance Committee since February 2021. Mr. Hoxsie was a Partner at the international law firm of Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) until his retirement on December 31, 2015. He joined Hale and Dorr (the predecessor of WilmerHale) in 1981, subsequently worked at Copley Real Estate Advisors, an institutional real estate investment advisory firm, and rejoined Hale and Dorr in 1994. Mr. Hoxsie has over 30 years’ experience in real estate capital markets transactions, fund formation, public company counselling and mergers and acquisitions and has advised the Company since its formation in 1997. Mr. Hoxsie earned his J.D. (Cum Laude) from Harvard Law School, his M.A. from Harvard University and his B.A. (Summa Cum Laude) from Amherst College, where he was elected to Phi Beta Kappa. | Qualifications: • We believe Mr. Hoxsie’s qualifications to serve on our Board include his significant legal and real estate capital markets expertise from his extensive experience in corporate and securities laws as well as public company counselling. In addition, as a long-time legal advisor to the Company, Mr. Hoxsie brings in-depth knowledge about the Company’s history to the Board. |
Director Qualifications and Biographical Information
| Milton P. Wilkins, Jr. Director Since 2022 Milton P. Wilkins, Jr., age 76, has served as an investment advisor with RBF Wealth Advisors in St. Louis, Missouri, since 1997. Concurrently, from 2003 to 2015, Mr. Wilkins served with Hammond Associates/ Mercer Investment Consulting as an institutional investment consultant. From 1976 to 1986 and from 1989 to 1997, Mr. Wilkins served in various positions at Monsanto Corporation, including as Vice President of Corporate Development in the corporate mergers and acquisition group. Mr. Wilkins currently serves as Chairman of the St. Louis County Employees Retirement Board (pension plan), a member of the Investment Committee of the Archdiocese of St. Louis, and a member of the Board of Directors of the Nine PBS public television station in St. Louis. Mr. Wilkins holds a M.B.A. degree from the Harvard Graduate School of Business Administration and a Bachelor of Arts degree from Morehouse College. | Qualifications: • We believe Mr. Wilkin’s qualifications to serve on our Board include his extensive investment and corporate strategy development experience. |
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE We operate within a comprehensive corporate governance structure that includes the highest standards of professional and personal conduct. Our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, the charters of our Audit, Compensation, and Nominating and Corporate Governance Committees, and other corporate governance information, are available on our website at http://www.fspreit.com under the heading “Investor Relations” and then under the subheading “Governance Documents” under “Corporate Information.” The information on our website is not a part of this Proxy Statement and is not incorporated into any of our filings made with the SEC.
Introduction
Introduction Our Common Stock trades on NYSE American under the symbol “FSP”. We began trading on the American Stock Exchange in June 2005. The exchange’s name was changed to NYSE Amex after it was acquired by NYSE Euronext on October 1, 2008, was later known as NYSE MKT and is now NYSE American.
Board of Directors
Board of Directors Franklin Street Properties is currently managed by an eight member Board. The size of our Board will decrease to seven members immediately after conclusion of the Annual Meeting. All directors are elected to serve one-year terms (in all cases subject to the election and qualification of their successors or to their earlier death, resignation or removal).
DIRECTOR COMPENSATION AND STOCK OWNERSHIP REQUIREMENTS
DIRECTOR COMPENSATION AND STOCK OWNERSHIP REQUIREMENTS The Compensation Committee of the Board is responsible for reviewing and recommending to the Board the form and amount of compensation for our non-employee directors. Since October 2019, we have had the following compensation program for non-employee directors:
DIRECTOR COMPENSATION AND STOCK OWNERSHIP REQUIREMENTS
| Non-employee Director Compensation | | | Annual Cash Retainer | $56,250 | | Additional Annual Cash Retainer — Lead Independent Director | $15,000 | | Additional Annual Cash Retainer — Chair of the Audit Committee | $15,000 | | Additional Annual Cash Retainer — Chair of the Compensation Committee | $10,000 | | Annual Grant of FSP Common Stock(1) | $56,250 |
DIRECTOR COMPENSATION AND STOCK OWNERSHIP REQUIREMENTS
(1) Reflects the grant date fair value. Fair value is the closing price of FSP Common Stock on the date of the grant. Our Annual and Additional Cash Retainers are paid to our non-employee directors in four equal installments each year. We also reimburse our non-employee directors for expenses incurred by them in connection with attendance at Board meetings.
2023 Non-Employee Director Compensation
2023 Non-Employee Director Compensation In May 2023, the Compensation Committee recommended, and the Board agreed, that a one-time reduction in the amount of their annual grant of FSP Common Stock from $56,250 to $45,000 in 2023 was advisable. The Compensation Committee and the Board determined that such a reduction was appropriate in light of the broad macroeconomic factors that negatively impacted the business operations, operating results and stock performance of Franklin Street Properties. The following table provides information regarding non-employee director compensation during 2023:
2023 Non-Employee Director Compensation
| Name(1) | Fees earned or paid in cash ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | | John N. Burke | $71,250.00 | $45,000 | N/A | N/A | N/A | N/A | $116,250.00 | | Brian N. Hansen | $66,250.00 | $45,000 | N/A | N/A | N/A | N/A | $111,250.00 | | Kenneth A. Hoxsie | $56,250.00 | $45,000 | N/A | N/A | N/A | N/A | $101,250.00 | | Dennis J. McGillicuddy | $56,250.00 | $45,000 | N/A | N/A | N/A | N/A | $101,250.00 | | Georgia Murray | $71,250.00 | $45,000 | N/A | N/A | N/A | N/A | $116,250.00 | | Kathryn P. O’Neil | $56,250.00 | $45,000 | N/A | N/A | N/A | N/A | $101,250.00 | | Milton P. Wilkins, Jr. | $56,250.00 | $45,000 | N/A | N/A | N/A | N/A | $101,250.00 |
2023 Non-Employee Director Compensation
(1) Reflects the grant date fair value. Fair value is the closing price of FSP Common Stock on the date of the grant.
Overview
Overview It is critical that we be able to attract, motivate and retain highly talented individuals at all levels of the organization. We believe that compensation levels should be competitive enough to attract and retain experienced and capable leaders and motivate those individuals to achieve exceptional results and reward them for being instrumental in reaching our strategic goals. At the same time, we believe in simplicity and maintaining compensation at responsible levels. For 2023, the compensation of executives consisted of the same four components as were provided to all of our employees: (1) base salary; (2) the potential for a cash bonus; (3) matching for individual 401(k) plan contributions; and (4) the potential for a payment or payments under our change-in-control program. Although our executives are eligible to be granted awards of Common Stock under our 2002 stock incentive plan, we have not made any awards to executives under the plan since our initial listing on the American Stock Exchange (now NYSE American) in June 2005. In addition, we do not offer stock options, restricted stock awards, deferred compensation, non-equity incentive plan compensation or perquisites. None of our employees have employment agreements and, except for the Chief Executive Officer, we do not have any policies that require any of our employees to own our Common Stock. Pursuant to our Corporate Governance Guidelines, the Chief Executive Officer is required to own shares of Common Stock valued at six times his base salary. Our executive officers consist of the Chief Executive Officer, the Chief Financial Officer, the President and Chief Investment Officer, the General Counsel, the President of FSP Property Management LLC and the Chief Operating Officer. For the fiscal year ended December 31, 2023, our Named Executive Officers were George J. Carter, our Chief Executive Officer; John G. Demeritt, our Executive Vice President, Chief Financial Officer and Treasurer; Jeffrey B. Carter, our President and Chief Investment Officer; John F. Donahue, Executive Vice President and President of FSP Property Management LLC; and Scott H. Carter, our Executive Vice President, General Counsel and Secretary. We have reviewed our compensation policies and practices for all employees and concluded that any risks arising from our policies and programs are not reasonably likely to have a material adverse effect on Franklin Street Properties.
The objectives of our executive compensation programs
The objectives of our executive compensation programs Our Compensation Committee bases our executive compensation programs on the same core objectives that guide us in establishing all of our compensation programs: • Compensation should promote the achievement of our business goals and maximize corporate performance and shareholder returns. • Compensation should be based on the principles of competitive and fair compensation and sustained performance. • Compensation should be based on the level of job responsibility, individual performance and corporate performance. As employees advance to higher levels within the organization, an increasing proportion of their compensation should be linked to corporate performance and enhancing shareholder value. • Compensation should reflect the value of the job in the marketplace. Compensation should be competitive with other employers that compete with us for talent so that we continue to be able to attract and retain highly talented employees. • Compensation should reward performance. Our compensation programs should deliver competitive compensation for excellent individual and corporate performance. Similarly, our compensation programs should deliver less compensation, including the possibility of no cash bonus, in the event that individual and/or corporate performance fall short of expectations. • Compensation should be equitable. We strive to achieve equitable distributions both for compensation of individual officers and between officers and other employees throughout the organization. Compensation and benefit programs should be designed to attract, motivate and retain highly talented employees who are interested in building a career with us. What our executive compensation programs are designed to reward and how we determine the amount (and, where applicable, the formula) for each element to pay Decisions regarding executive compensation are based on various subjective performance criteria, including corporate and individual performance. Our Compensation Committee has established a number of processes to assist it in ensuring that our executive compensation program achieves its objectives. Among those are: • In 2019, the Compensation Committee retained FPL Associates L.P., an independent compensation consulting firm, to review and evaluate our executive and non-employee director compensation programs. The review and evaluation included defining a peer group of companies, benchmarking our compensation programs against the peer group, and providing market data and advice regarding executive and director compensation plan design. • Consideration of various measures of corporate performance, including without limitation, the extent to which strategic and business plan goals are met, net debt, the amount of debt repaid, gross proceeds from property dispositions, the amount (and terms) of space leased, performance of properties in our portfolio, gains or losses on property dispositions, levels of earnings, funds from operations, or FFO, dividends paid, total stockholder return and estimated net asset value. Our Compensation Committee does not apply a formula or assign these performance measures relative weights. Instead, it makes a subjective determination after considering such measures collectively. • Consideration of individual performance. The members of the Compensation Committee meet with the Chief Executive Officer annually at the beginning of the year to discuss both individual and corporate priorities for the current year. At that same meeting, the members of the Compensation Committee meet to conduct a review of the Chief Executive Officer’s performance over the past year based on various subjective performance criteria, including his contributions to individual and corporate priorities, his contribution to corporate performance, the degree to which teamwork and corporate values are fostered and other leadership accomplishments. This evaluation is shared with the Chief Executive Officer and is considered by the Compensation Committee in establishing the Chief Executive Officer’s compensation. With respect to the other Named Executive Officers, the members of the Compensation Committee receive a performance assessment and compensation recommendation from the Chief Executive Officer. In reviewing and approving the compensation for each of the other Named Executive Officers, the Compensation Committee is not required to give specific weight to any particular criterion or performance metric. The Compensation Committee considers the performance assessment and compensation recommendation from the Chief Executive Officer and also exercises its own judgment based on various subjective performance criteria, including contributions to corporate performance, the degree to which teamwork and corporate values were fostered and other leadership accomplishments. • Comparison of our executive compensation programs as a whole and also a comparison of total executive compensation for each individual with the compensation practices of other companies in the real estate industry. Historically, the Compensation Committee has used the National Association of Real Estate Investment Trusts (NAREIT) Annual Compensation Survey for comparison purposes. To ensure that total compensation is competitive, the Compensation Committee uses the results of the comparison to establish general compensation guidelines. Our Compensation Committee does not apply a formula or assign the survey data relative weight. Instead, it makes a subjective determination for that individual after considering such results collectively. • Our stockholders approved each of the say-on-pay proposals in 2020, 2021 and 2022 by over 95% of votes cast. The Compensation Committee considered this support level in its determination to maintain similar compensation policies and elements of compensation in 2023.
Cash Bonus
Cash Bonus Executive officers are eligible for a cash bonus based on various subjective performance criteria, including corporate and individual performance. The payment of a cash bonus is purely discretionary based upon overall performance and in some years there could be no cash bonus payments. We believe that the opportunity to earn a competitive cash bonus provides a monetary incentive that encourages both corporate and individual performance. We also believe that the payment of a competitive cash bonus is consistent with the compensation practices of other comparable companies.
Change-in-Control Program
Change-in-Control Program Except in the case of a change-in-control of Franklin Street Properties, we are not obligated to pay severance or other enhanced benefits to Named Executive Officers upon termination of their employment. In February 2006, we adopted a change-in-control program for all our employees, including our executive officers. The program was adopted in response to merger and consolidation activity within the real estate/real estate investment trust industry and is intended to preserve employee morale and productivity and encourage retention in the event of an actual or rumored change-in-control of Franklin Street Properties. The program is also intended to align employee and shareholder interests by enabling employees to consider corporate transactions that are in the best interests of the shareholders and other constituents of Franklin Street Properties without undue concern over whether the transaction or transactions may jeopardize the employee’s own employment. Although there are some differences in payment amounts depending on the employee’s job level, the basic elements of the program are comparable for all employees: • The program consists of two components: a fixed payment pursuant to a retention agreement between the employee and Franklin Street Properties and the potential for an additional discretionary payment pursuant to a discretionary plan. • The triggering event for both components is a change-in-control of Franklin Street Properties. A change-in-control of Franklin Street Properties, as defined in the plan, generally refers to a change in ownership or effective control of Franklin Street Properties or a change in ownership of a substantial portion of the assets of Franklin Street Properties. • Under the retention agreement component of the program, employees would receive a payment as soon as practicable following the closing of the change-in-control, but in no event more than thirty days following the closing of the change-in-control. Executive officers would receive payments equal to three years of their base salaries plus a bonus opportunity payment equal to three years of their base salaries. For purposes of the retention agreement component of the program, base salary refers to the base salary of the employee in effect at the time of the closing of the change-in-control. Payments under the retention agreements are subject to a possible reduction, if any, after the tax consequences of the payment are determined. Under the discretionary plan component of the program, immediately prior to the closing of the change-in-control, our Board of Directors may (but is not obligated to) establish a discretionary pool of funds equal to 1% of the market capitalization of Franklin Street Properties immediately prior to the closing of the change-in-control less the total amount of payments to all employees under the retention agreement component of the program. Our Board of Directors would have complete discretion to award all, a portion or none of the discretionary plan pool of funds to any employees of Franklin Street Properties, including the executive officers. Payments under the discretionary plan component are subject to a possible reduction, if any, after the tax consequences of the payment are determined. Prior to adopting our change-in-control program, management reviewed plans similar to our retention agreement component offered by approximately ten other publicly-traded real estate investment trusts and concluded that our triggering event was generally consistent with the peer group. Management did not review any plans that were comparable to our discretionary plan but concluded that, on balance, the total potential payout amounts under our change-in-control program are generally consistent with the range offered by the peer group. Our Chief Executive Officer has voluntarily elected not to participate in the retention agreement component of our change-in-control program.
Awards of Common Stock under our 2002 Stock Incentive Plan
Awards of Common Stock under our 2002 Stock Incentive Plan Executive officers are eligible for awards of Common Stock under our 2002 stock incentive plan. The 2002 stock incentive plan permits our Board of Directors to award up to 2,000,000 shares of our Common Stock to eligible participants. Prior to our listing on the American Stock Exchange (now the NYSE American) in June 2005, our employees were not able to purchase our Common Stock, and we determined that it was necessary and appropriate to be able to compensate our employees with stock awards as a means of attracting, retaining and motivating key personnel and to align the interests of management and all personnel with those of our stockholders. All of our employees, officers and directors are eligible to participate in the plan. There have been no awards of Common Stock to executive officers under the 2002 stock incentive plan since we started listing our Common Stock on a stock exchange in June 2005, as employees are now able to purchase Common Stock in the open market. As of March 5, 2024, 1,502,248 shares of our Common Stock were available under the plan. Although we have not made any awards to executive officers under the 2002 stock incentive plan since 2005, we may determine in the future to grant stock awards to executive officers under the 2002 stock incentive plan or a new stock plan in order to attract, retain, or motivate our executives.
Cash Bonus
Cash Bonus In awarding cash bonuses for 2023, the members of the Compensation Committee applied the principles described above under “What our executive compensation programs are designed to reward and how we determine the amount (and, where applicable, the formula) for each element to pay.” Based upon the recommendation of the Chief Executive Officer, the Compensation Committee approved cash bonuses for each of the executive officers other than the Chief Executive Officer in the amounts recommended by the Chief Executive Officer. In making his recommendations, the Chief Executive Officer noted, and the Compensation Committee made a subjective determination, that each officer’s area of responsibility and accountability (i.e., business unit) contributed to the Company’s performance during 2023, as a result of each person’s leadership and direction. It was further noted that each of these individuals was considered to be integral to the daily operations of Franklin Street Properties and of great value to Franklin Street Properties and firmly committed to doing what is in the best interests of our stockholders. The cash bonus amounts paid to executive officers other than the Chief Executive Officer for 2023 are approximately 1.2% lower than those paid for 2022. The Chief Executive Officer, in consultation with the Compensation Committee, recommended lower cash bonus amounts due to a variety of subjective factors, including without limitation, the price of our Common Stock, the level of property dispositions, net debt, the amount of debt repaid and leasing. While the Chief Executive Officer and the Compensation Committee recognize that broad macroeconomic factors negatively impacted both the business operations and the stock performance of many office REITs during 2023, they determined that a downward adjustment to the cash bonus amounts for each of the executive officers other than the Chief Executive Officer was appropriate in light of the various adverse impacts that all FSP stakeholders experienced during 2023. The Compensation Committee believes that the reduced cash bonus amounts are within the range of total compensation paid to executive officers with comparable qualifications, experience and responsibilities in the same or similar businesses and of comparable size and success as the Company. The Compensation Committee also reviewed and evaluated the performance of the Chief Executive Officer during 2023 by applying the principles described above under “What our executive compensation programs are designed to reward and how we determine the amount (and, where applicable, the formula) for each element to pay.” Within the relative context of the broad macroeconomic factors that negatively impacted both the business operations and stock performance of many office REITS during 2023, including FSP, the Compensation Committee made a subjective determination that the combined business units performed well under the leadership, focus and discipline of the Chief Executive Officer. However, at the request of the Chief Executive Officer, the Compensation Committee did not make a recommendation for a bonus for our Chief Executive Officer.
Change-in-Control Program
Change-in-Control Program Because we determined that our change-in-control program continues to satisfy its original intended purpose, there were no proposals made to modify the program in 2023.
Awards of Common Stock under our 2002 Stock Incentive Plan
Awards of Common Stock under our 2002 Stock Incentive Plan Because we determined that we were able to adequately compensate the executive officers who make up the corporate management team with salary and cash bonuses in 2023, no Common Stock awards were made to executive officers in 2023.
Awards of Common Stock under our 2002 Stock Incentive Plan
| SUMMARY COMPENSATION TABLE |
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE The following table sets forth information concerning total compensation for services to Franklin Street Properties for the 2021, 2022 and 2023 fiscal years, of (1) our principal executive officer, (2) our principal financial officer and (3) our other three most highly compensated executive officers who were serving as executive officers as of December 31, 2023 (collectively, our “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation(1) ($) | Total ($) | | George J. Carter, Chief Executive Officer (PEO) | 2023 | $300,000 | $0 | N/A | N/A | N/A | N/A | $6,000 | $306,000 | | | 2022 | $300,000 | $0 | N/A | N/A | N/A | N/A | $6,000 | $306,000 | | | 2021 | $300,000 | $500,000 | N/A | N/A | N/A | N/A | $6,000 | $806,000 | | John G. Demeritt, Executive Vice President, Chief Financial Officer and Treasurer (PFO) | 2023 | $304,074 | $404,400 | N/A | N/A | N/A | N/A | $6,000 | $714,474 | | | 2022 | $292,442 | $409,427 | N/A | N/A | N/A | N/A | $6,000 | $707,869 | | | 2021 | $283,876 | $494,000 | N/A | N/A | N/A | N/A | $6,000 | $783,876 | | Jeffrey B. Carter, President and Chief Investment Officer | 2023 | $304,569 | $401,900 | N/A | N/A | N/A | N/A | $6,000 | $712,469 | | | 2022 | $292,918 | $406,941 | N/A | N/A | N/A | N/A | $6,000 | $705,859 | | | 2021 | $284,339 | $491,000 | N/A | N/A | N/A | N/A | $6,000 | $781,339 | | Scott H. Carter, Executive Vice President, General Counsel and Secretary | 2023 | $264,486 | $399,500 | N/A | N/A | N/A | N/A | $6,000 | $669,986 | | | 2022 | $254,368 | $404,454 | N/A | N/A | N/A | N/A | $6,000 | $664,822 | | | 2021 | $246,918 | $488,000 | N/A | N/A | N/A | N/A | $6,000 | $740,918 | | John F. Donahue, Executive Vice President and President of FSP Property Management LLC | 2023 | $256,882 | $397,800 | N/A | N/A | N/A | N/A | $6,000 | $660,682 | | | 2022 | $247,056 | $402,797 | N/A | N/A | N/A | N/A | $6,000 | $655,853 | | | 2021 | $239,820 | $486,000 | N/A | N/A | N/A | N/A | $6,000 | $731,820 |
SUMMARY COMPENSATION TABLE
NOTE Consists of a 401(k) match from Franklin Street Properties. For additional information, please refer to the discussion included above under the heading — “Compensation Discussion and Analysis — Each element of compensation and why we choose to pay each element — (c) 401(k) Matching.”
SUMMARY COMPENSATION TABLE
| COMPENSATION COMMITTEE REPORT |
COMPENSATION COMMITTEE REPORT
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL In February 2006, we adopted a change-in-control program for all our employees, including our executive officers. We adopted the program in response to merger and consolidation activity within the real estate/real estate investment trust industry, to preserve employee morale and productivity and to encourage retention in the event of an actual or rumored change-in-control of the Company. The program is also intended to align employee and shareholder interests by enabling employees to consider corporate transactions that are in the best interests of the shareholders and other constituents of the Company without undue concern over whether the transaction or transactions may jeopardize the employee’s own employment. For an overview of our change-in-control program, please refer to the discussion included under the heading “Compensation Discussion and Analysis — Each element of compensation and why we choose to pay each element — (d) Change-in-Control Program.” Assuming that the closing of a change-in-control occurred on December 31, 2023, our Named Executive Officers would be entitled to payment of the following amounts under the retention agreement component of our change-in-control program:
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
| Name and Principal Position | Potential Payment due under the Retention Agreement | | George J. Carter, Chief Executive Officer (PEO) | N/A(1) | | John G. Demeritt, Executive Vice President, Chief Financial Officer and Treasurer (PFO) | $1,824,444(2) | | Jeffrey B. Carter, President and Chief Investment Officer | $1,827,414(2) | | Scott H. Carter, Executive Vice President, General Counsel and Secretary | $1,586,916(2) | | John F. Donahue, Executive Vice President and President of FSP Property Management LLC | $1,541,292(2) | | TOTAL | $6,780,066 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
NOTES (1) George J. Carter has voluntarily elected not to participate in the retention agreement component of our change-in-control program. (2) These are lump-sum payments equal to three years of base salaries plus a bonus opportunity payment equal to three years of base salaries. The payment amounts are subject to a possible reduction, if any, after the tax consequences are determined. Under the discretionary plan component of our change-in-control program, our Board of Directors has the right, but not the obligation, to establish a discretionary pool of funds equal to 1% of our market capitalization immediately prior to the closing of the change-in-control. On December 31, 2023, there were 103,430,353 shares of our Common Stock outstanding, and on December 29, 2023 (the last trading day of 2023), the closing price per share of our Common Stock was $2.56. Accordingly, on December 31, 2023, our market capitalization was $264,781,704, and 1% of our market capitalization equaled $2,647,817. Because the total amount of payments due and payable to all of our employees (including our Named Executive Officers) under the retention agreement component of our change-in-control program at December 31, 2023 exceeded 1% of our market capitalization at December 31, 2023, no funds would have been available for our Board of Directors to award under the discretionary plan component of our change-in-control program at December 31, 2023. As is the case with the retention agreement component of our change-in-control program, any payments under the discretionary plan component are subject to a possible reduction, if any, after the tax consequences are determined.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE The following table reports the compensation of our Principal Executive Officer (PEO) and the average compensation of the other Named Executive Officers (Other NEOs) as reported in the Summary Compensation Table for the past three fiscal years, as well as their “compensation actually paid” as calculated pursuant to the SEC’s pay versus performance rules and certain performance measures required by such rules.
PAY VERSUS PERFORMANCE
| | | | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | Value of Initial Fixed $100 Investment Based on: | | | | | Year(1) | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO | | | FSP’s Total Stockholder Return | Peer Group Total Stockholder Return(2) | Net Income | Net Debt(3) | | 2023 | $306,000 | $306,000 | $689,403 | $689,403 | $38.59 | $63.34 | $(48,110,000) | $277,120,000 | | 2022 | $306,000 | $306,000 | $683,601 | $683,601 | $40.20 | $62.07 | $1,094,000 | $406,368,000 | | 2021 | $806,000 | $806,000 | $759,488 | $759,488 | $84.25 | $99.51 | $92,717,000 | $434,249,000 | | 2020 | $306,000 | $306,000 | $730,884 | $730,884 | $54.63 | $81.56 | $32,615,000 | $919,350,000 |
PAY VERSUS PERFORMANCE
(1) For all years, Mr. George J. Carter served as our PEO and Mr. John G. Demeritt, Mr. Jeffrey B. Carter, Mr. Scott H. Carter and Mr. John F. Donahue served as the Other NEOs. (2) For all years, the peer group is the FTSE NAREIT Equity Office Index. (3) While our Compensation Committee employs a subjective approach to the consideration of various measures of corporate performance, for 2023, the Company identified net debt as the most important financial performance measure used to link the compensation actually paid to the PEO and the Other NEOs for 2023 to the Company’s performance. Net debt is a non-GAAP financial measure. See Appendix A for additional information regarding net debt and a reconciliation of net debt to its most directly comparable GAAP financial measure. (4) The following table lists the seven most important financial performance measures used by the Company to link compensation actually paid to the PEO and the Other NEOs in 2023 to the Company’s performance:
PAY VERSUS PERFORMANCE
| Net debt | | Debt repaid | | Gross proceeds from property dispositions | | Amount (and terms) of space leased | | Funds from operations (FFO) | | Total stockholder return | | Estimated net asset value |
PAY VERSUS PERFORMANCE
In the “Compensation Discussion and Analysis” section of this Proxy Statement, we provide greater detail on the elements of our executive compensation program and our compensation philosophy. We believe the Company’s executive compensation program and the executive compensation decisions included in the 2023 Summary Compensation Table and related disclosures appropriately reward our PEO and the Other NEOs for Company and individual performance, assist the Company in retaining our senior leadership team and support long-term value creation for our stockholders.
Relationship Between Compensation Actually Paid and Performance Measures
Relationship Between Compensation Actually Paid and Performance Measures The following charts demonstrate the relationship between compensation actually paid to our PEO and average compensation paid to the Other NEOs as compared to our cumulative total stockholder return (“TSR”), net income and net debt, as well as the relationship between TSR and peer group TSR, for the fiscal years ended December 31, 2023, 2022, 2021 and 2020.
Relationship Between Compensation Actually Paid and Performance Measures
| PAY RATIO DISCLOSURE |
PAY RATIO DISCLOSURE
PAY RATIO DISCLOSURE Pursuant to applicable SEC rules, presented below is a reasonable estimate of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. We determined our median employee based on annual total compensation, consisting of salary, bonus and 401(k) match, actually paid for 2023 performance(1) to each of our 27 employees (excluding the Chief Executive Officer) as of December 31, 2023. The annual total compensation of our median employee (excluding the Chief Executive Officer) for 2023(1) was $230,179. As disclosed in the Summary Compensation Table appearing on page 43, our Chief Executive Officer’s annual total compensation for 2023 was $306,000. Based on the foregoing, our estimate of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all other employees was approximately 1.33 to 1. NOTE For certain employees, bonuses for 2023 performance were paid in January or February 2024.