Filed by the Registrant ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

 

1100 Park Place, Suite 200

San Mateo, California 94403

March 26, 2021

Dear Stockholder:

Sincerely,

 

Michael J. Schall

Chief Executive Officer and President

 

 

Due to the continuing public health impact of the COVID-19 pandemic and to support the health and well-being of our stockholders, employees and their families, the Company will hold the Annual Meeting in a virtual-only meeting format again this year.

At the Annual Meeting, we are asking our stockholders to consider and vote on the following matters:

The Company’s Board of Directors (the “Board”) recommends a vote FOR the election of each of the following nominees to serve as directors until the 2022 annual meeting of stockholders and until their respective successors are duly elected and qualified: Keith R. Guericke, Maria R. Hawthorne, Amal M. Johnson, Mary Kasaris, Irving F. Lyons, III, George M. Marcus, Thomas E. Robinson, Michael J. Schall, and Byron A. Scordelis.

The Board recommends a vote FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021.

The Board recommends a vote FOR the approval, on an advisory basis, of the Company’s named executive officer compensation.

 

 

 

The Company believes in establishing and maintaining high standards of corporate governance, and it looks to improve and implement additional corporate governance measures designed to best serve the interests of the Company and stockholders and further align the interests of the Board and management with those of our stockholders. A summary of certain of our most important corporate governance policies and practices is detailed below:

Code of Business Conduct and Ethics - Our Board adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), which governs business decisions made and actions taken by our directors, officers and employees. All employees receive training on the Code of Ethics.

Corporate Governance Guidelines - Our Board adopted Corporate Governance Guidelines to monitor policy and decision making at the Board and management levels and to provide the Company’s stockholders and other interested parties with insight into the Company’s corporate governance practices.

Policy on Political Contributions - Our Board adopted a policy on Political Contributions, which governs Company and key employees’ contributions to political action committees, officeholders and candidates.

Policy on Hedging and Pledging Essex Equity Securities - Our Board adopted a policy governing the hedging and pledging of Essex equity securities by our officers and directors, prohibiting the hedging of Essex equity securities and strictly limiting the pledging of Essex equity securities. The Company and all officers and directors are in compliance with this policy.

Stock Ownership Guidelines - Our Board adopted Stock Ownership Guidelines to align the interests of the Board and key executives with the interests of stockholders.

Copies of these documents are available on our website at http://www.essex.com under the heading “Investors” and subheading “Corporate Governance” and copies will be provided to any stockholder upon written request to Ms. Anne Morrison, Secretary, Essex Property Trust, Inc., 1100 Park Place, Suite 200, San Mateo, California 94403. The Company will post all amendments to, and with respect to the Code of Ethics, waivers from any provision of, these documents on its website.

We are committed to environmental, social and governance (“ESG”) matters and have undertaken corporate social responsibility (“CSR”) initiatives for many years and plan to continue expanding our CSR initiatives going forward. We published our inaugural CSR Report in 2019 in order to summarize our significant past accomplishments with respect to ESG matters. We continue to publish our CSR Report annually to communicate our ESG accomplishments, ongoing initiatives and our goals for the future. We believe these initiatives will benefit our Company and stakeholders for many years to come by making our communities sustainable places where our residents want to live and making our Company a positive and attractive place to work.

In 2020, we formalized our reporting and oversight structure for the Company’s long-term CSR/ESG strategy and goals. Our corporate social responsibility committee (“CSR Committee”) is composed of key members from different departments and chaired by our CEO in order to send a clear message about our Company’s dedication to achieving ESG goals. The CSR Committee meets once every two months and is responsible for setting strategy and long-term CSR/ESG targets, and monitoring environmental and social performance across the Company. The CSR Committee’s targets and strategy are reported to the Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”), which formally oversees ESG goals and initiatives, including Diversity, Equity and Inclusion (“D&I”) efforts and CSR strategy. Our management team regularly reports to the Nominating Committee and Board on ESG matters.

A few highlights of our social and sustainability efforts are below. More information can be found in the 2019 CSR Report available on our website at www.essex.com and in our 2020 CSR Report, which we expect to make available on our website in May 2021.

The location of housing and type of housing are two of the most significant determinants of energy consumption with respect to housing’s environmental impact. The Company is dedicated to multi-family housing developments and is focused on owning and developing communities in proximity to major employment and public transit centers. Multi-family housing is one of the most environmentally sustainable housing options and housing near transit centers further helps to reduce energy consumption by offering effective public transit options for residents to access their workplaces.

In addition to owning and developing multi-family communities near transit centers, the Company operates our communities with a goal to create sustainable returns for our stockholders by reducing our environmental footprint and creating spaces that encourage our residents to reduce their environmental footprint. Below are a few of our ongoing environmental initiatives that encourage sustainability and make our communities more attractive places to live.

We are committed to our residents’ and employees’ well-being and to creating a positive environment in the communities where our residents live and our employees work. The Company encourages its employees to participate in local communities through fundraising and volunteer work. The Essex Volunteer Program is aimed at supporting and encouraging eligible associates to become actively involved in their communities through the Company's support of charity initiatives and offering paid hours for volunteer time. On March 23, 2020, the Company proactively announced a wide range of policies to protect and support our residents and employees shortly after the COVID-19 pandemic was recognized as a serious threat. The Company also established the Essex Cares program for the purpose of supporting the Company’s residents and communities that are experiencing financial hardships caused by the COVID-19 pandemic and additionally established an Employee Emergency Relief Program, which is designed to provide contributions to the Company’s employees and their families experiencing hardships such as a death or disability. Details regarding the Company’s response to the COVID-19 pandemic are below in the section “Our Response to the COVID-19 Pandemic.” As the pandemic intensified and corporate office closures were mandated, the Company expanded its corporate communications program in response to the extraordinary disruption and confusion caused by the pandemic, including a weekly video conference available to all employees, facilitating over 100,000 virtual meetings with the Company’s employees, totaling over 11 million minutes.

The Company is able to attract and retain a diverse, healthy and motivated workforce through various initiatives including workforce training that supports long-term professional development, prioritizing work-life balance, and promoting diversity and inclusion on our teams and in our hiring practices. The Company is proud to have one of the most diverse workforces among its peers in the real estate industry and continued to focus on improving our D&I efforts. In 2019, the Company formed the Diversity and Inclusion Committee, whose chairperson reports

directly to the CEO on the Committee’s activities, and further expanded the initiatives and members in 2020. In 2020, we implemented additional training programs, expanded the role of the Nominating Committee to formally oversee D&I efforts, as well as formed employee committees to strengthen and further promote diversity, equal opportunity, and fair treatment for all Company associates. In 2020, the Company formed Women at Essex, an employee-led affinity group, fostering a sense of community and inclusion for a diverse mix of women and men at the Company through discussions and activities that are intended to engage, educate, enable, and empower the Company's employees. All associates are offered training aimed at preventing workplace harassment, including harassment based on age, gender or ethnicity. In 2020, the Company provided 2,850 hours of training covering the foundations of D&I and awareness of unconscious bias in the workplace. Additionally, the Company implemented D&I listening sessions where associates were invited to engage with one another through sharing personal and professional experiences involving diversity, equity, and inclusion, fostering a more positive and inclusive environment throughout the Company.

Below are some highlights of our D&I efforts and our social initiatives:

As an essential business operating in 2020, the Company's on-site teams supported our residents by providing administrative, operational and maintenance assistance during the COVID-19 pandemic. In order to best protect and support the Company's associates working on-site, as well as to safeguard the health and safety of our residents, the Company spent over $4.1 million on new COVID-19 related cleaning protocols, protective equipment and other costs. The Company undertook various COVID-19 safety measures, including implementing work from home where possible, purchasing personal protective equipment and establishing physical distancing and other health safety procedures for its on-site employees, requiring daily mandatory health screening for all on-site workers, providing paid leave to employees affected by COVID-19, increasing cleaning protocols at its sites, offices and common areas, closing down and/or limiting use of its properties’ spas, pools, fitness centers and other common areas in accordance with applicable laws, prohibiting all non-essential work-related travel, providing mandatory COVID-19 safety training for all new hires, requiring masks to be worn at all offices and when entering resident homes, and providing regular communication about COVID-19 impacts and protocols to its associates and residents.

While many of our amenities remained closed throughout 2020, we launched Home with Essex, an online virtual amenity resource, to support our residents. Home with Essex helps residents find comfort in their homes by offering virtual resources from fitness and cooking classes to museum tours and concerts. Additionally, in 2020 the Company established the Essex Cares program to provide direct aid to the Company’s residents, employees and communities. Programs created within Essex Cares will assist segments of the community that are in need including those that are experiencing financial hardships caused by the COVID-19 pandemic. Essex Cares raised over $400,000 through employee and director contributions, with the Company committing an additional $3.0 million, raising a total fund of $3.4 million in 2020. With this funding, Essex Cares began making grants to our residents and communities in need. Additionally, in 2020, Essex Cares established an Employee Emergency Relief Program, which is designed to provide contributions to employees and families experiencing hardships such as a death or disability.

Keeping the Company's associates and residents healthy and safe continues to be critical, and the Company hopes its actions contributed toward minimizing the impact of the COVID-19 pandemic.

PROXY STATEMENT

2021 Annual Meeting of Stockholders

Tuesday, May 11, 2021

ESSEX PROPERTY TRUST, INC.

1100 Park Place, Suite 200

San Mateo, California 94403

This proxy statement is furnished to the holders of the outstanding shares of common stock, par value $.0001 per share (the “Common Stock”), of Essex Property Trust, Inc., a Maryland corporation (the “Company” or “Essex”), in connection with the solicitation by the Company’s Board of Directors (the “Board”) of proxies in the accompanying form for exercise at the virtual 2021 annual meeting of stockholders of the Company (the “Annual Meeting”) to be held online on May 11, 2021 at 1:00 p.m., Pacific Time, at www.virtualshareholdermeeting.com/ESS2021, and any postponement or adjournment thereof. Due to the continuing public health impact of the COVID-19 pandemic and to support the health and well-being of our stockholders, employees and their families, the Company will hold the Annual Meeting in a virtual-only meeting format again this year.

This proxy statement and the accompanying notice of annual meeting, proxy card and 2020 Annual Report to Stockholders are first being made available to stockholders on or about March 26, 2021.

The proxy statement, notice of annual meeting, proxy card, and 2020 Annual Report to Stockholders are available electronically at http://materials.proxyvote.com/29717.

Pursuant to the rules of the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet, instead of mailing paper copies to each stockholder. Accordingly, on or about March 26, 2021, we are mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”), while brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar notice, containing instructions on how to access our proxy materials and 2020 Annual Report to Stockholders and how to vote. The Notice is not itself a proxy and cannot itself be used to vote your shares. If you received only a Notice this year, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions on the Notice or on the website referred to in the Notice. Some stockholders may, if they have so requested previously, receive these materials via email or receive paper copies by mail.

The Annual Meeting will again be a completely virtual meeting of stockholders, which will be conducted via live webcast. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on February 26, 2021 (the “Record Date”) or if you hold a valid proxy for the Annual Meeting.

You will be able to participate in the Annual Meeting online and all verified stockholders will be able to submit questions during the meeting by visiting www.virtualshareholdermeeting.com/ESS2021. To participate in and/or ask questions at the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability of the Proxy Materials, on your proxy card, or on the instructions from your broker that accompanied your proxy materials. Questions may be submitted throughout the Annual Meeting via the question box provided on the webpage and may be addressed by the Company prior to the conclusion of voting. The Company will answer stockholder questions directly related to the business conducted at the Annual Meeting, as determined by the Chairman of the Board.

You may access copies of the Company’s proxy statement and annual report, by visiting www.proxyvote.com.

The meeting will begin promptly at 1:00 p.m., Pacific Time, on May 11, 2021. Online access will begin at 12:45 p.m., Pacific Time, and we encourage you to access the meeting prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the VSM Shareholder Meeting Basic Support Line - TFN: 844-986-0822 / International: 303-562-9302.

You are entitled to vote if you were a holder of record of Common Stock as of the close of business on February 26, 2021 (the “Record Date”). Your shares may be voted at the Annual Meeting only if you are present during the virtual meeting or represented by a valid proxy. Even if you plan to attend the Annual Meeting online, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to attend the Annual Meeting.

Stockholders of record as of the Record Date are entitled to one vote for each share of Common Stock held on all matters to be voted upon at the Annual Meeting. If you choose not to attend the Annual Meeting, you may still authorize your proxy via the Internet or by telephone until 11:59 p.m. Eastern Time, on May 10, 2021, or by completing, signing, dating and returning a proxy card. The instructions for how to authorize your proxy are located on your Notice of Internet Availability of the Proxy Materials, on your proxy card, or on the instructions from your broker that accompanied your proxy materials.

The presence at the Annual Meeting, either in person or by proxy, of stockholders holding a majority of the shares of Common Stock outstanding on the Record Date will constitute a quorum for purposes of the Annual Meeting. Each share of Common Stock outstanding on the Record Date entitles the holder thereof to one vote on each proposal. As of the Record Date, there were 64,994,503 shares of Common Stock outstanding.

If your shares are held in the name of a broker, you should receive a voting instruction form from your broker. Your broker will vote your shares in the manner you timely indicate pursuant to the voting instruction form. If you do not timely indicate your voting instructions to your broker, the broker will not be permitted to vote your shares at the Annual Meeting on Proposal No. 1 (election of directors) or Proposal No. 3 (advisory vote to approve the Company’s named executive officer compensation) because such proposals are not routine matters under the New York Stock Exchange (“NYSE”) rules. However, your broker may in its discretion vote your shares on Proposal No. 2 (ratification of KPMG LLP) if you do not timely indicate voting instructions on that proposal because the proposal is a routine matter under the NYSE rules.

Shares of Common Stock represented by proxies that reflect abstentions or “broker non-votes” (i.e., a vote that is not cast on a non-routine manner by a broker that is present (in person or by proxy) at the Annual Meeting because the shares entitled to cast the vote are held in street name, the broker lacks discretionary authority to vote the shares and the broker has not received voting instructions from the beneficial owner) will be counted as shares that are present for purposes of determining the presence of a quorum.

With respect to Proposal No. 1 (election of directors), our Sixth Amended and Restated Bylaws, as amended (the “Bylaws”), include a majority voting standard for the election of directors in uncontested elections, which are generally defined as elections in which the number of nominees does not exceed the number of directors to be elected at the meeting. In the election of directors, you may either vote “FOR” or “WITHHOLD” as to each nominee. Cumulative voting is not permitted. Under the majority voting standard, in uncontested elections of directors such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote, assuming a quorum is present at the Annual Meeting. A majority of the votes cast means that the number of votes cast “FOR” a candidate for director exceeds the number of votes “WITHHELD” as to that candidate for director. Brokers do not have discretionary authority to vote for directors. Abstentions and broker non-votes, if any, will not count as votes cast “FOR” or “WITHHELD” as to a nominee’s election and thus will have no effect in determining whether a director nominee has received a majority of the votes cast.

In accordance with our Bylaws, in this election, an incumbent candidate for director who does not receive the required votes for re-election is expected to offer his or her resignation to the Board. The Nominating Committee will then make a determination as to whether to accept or reject the offer of resignation and will submit such recommendation for consideration by the Board. Generally within 90 days after certification of the election results of the stockholder vote, we will publicly disclose the decision regarding any offer of resignation in a filing of a Current Report on Form 8-K with the SEC or by other public announcement. If a director’s offer to resign is not accepted by the Board, such director will continue to serve until his or her successor is duly elected, or his or her earlier death, resignation, retirement or removal.

Approval of each of Proposals No. 2 (ratification of KPMG LLP) and No. 3 (advisory vote to approve the Company’s named executive officer compensation) requires the affirmative vote of a majority of all the votes cast on the matter at the Annual Meeting, assuming a quorum is present at the Annual Meeting. For purposes of the votes on Proposals No. 2 and No. 3, abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote on such proposals.

Stockholder votes will be tabulated by the persons appointed by the Board to act as inspectors of election for the Annual Meeting. The shares of Common Stock represented by properly executed proxy cards will be voted at the Annual Meeting as indicated or, if no instruction is given on a properly executed proxy card, in accordance with the recommendation of the Board, as set forth below.

The Board recommends that stockholders vote:

The Company does not presently know of any other business that may come before the Annual Meeting. If any other business is properly brought before the Annual Meeting, the persons named in the enclosed proxy will act thereon in their discretion.

No person is authorized to make any representation with respect to the matters described in this proxy statement other than those contained herein and, if given or made, such information or representation must not be relied upon as having been authorized by us or any other person.

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is exercised by delivering to the Company, to the attention of Ms. Anne Morrison, Secretary, Essex Property Trust, Inc., 1100 Park Place, Suite 200, San Mateo, California 94403, a written notice of revocation or a properly executed proxy bearing a later date, or by attending the Annual Meeting and voting during the meeting. Attendance at the Annual Meeting will not by itself revoke a proxy.

The Company will bear all costs of soliciting proxies for the Annual Meeting. These costs include the expense of preparing and furnishing proxy materials for the Annual Meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation material regarding the Annual Meeting to stockholders. The Company may conduct solicitation of proxies personally, telephonically or by facsimile through its officers, directors and regular employees, none of whom will receive additional compensation for assisting with the solicitation.

Stockholders who previously elected to receive the proxy statement and the 2020 Annual Report to Stockholders over the Internet will be receiving an email on or about March 26, 2021, with information on how to access stockholder information and instructions for authorizing a proxy over the Internet. The Company encourages its stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of its annual meetings and reduce the cost to the Company associated with the printing and mailing of materials.

Stockholders of record wishing to receive future stockholder materials via email may elect this option by following the instructions provided when voting over the Internet at http://www.proxyvote.com. Upon electing to view future proxy statements and annual reports over the Internet, stockholders will receive an email notification next year with instructions containing the Internet address of those materials. The choice to view future proxy statements and annual reports over the Internet will remain in effect until the stockholder contacts their broker or the Company to rescind such instructions. Internet access does not have to be elected each year. Stockholders who elected to receive the proxy statement electronically over the Internet and who would now like to receive a paper copy of the proxy statement so that they may submit a paper proxy in lieu of an electronic proxy should contact either their broker or the Company.

Some brokers and other nominee record holders may be participating in the practice of “householding” Notices of Internet Availability of Proxy Materials or proxy statements and annual reports, as applicable. This means that only one copy of the Notice of Internet Availability of Proxy Materials or proxy statement and annual report may have been sent to multiple stockholders in a stockholder’s household. The Company will promptly deliver a separate copy of each applicable document to any stockholder who contacts the Company’s investor relations department by written request to the Company at Attn: Investor Relations, 1100 Park Place, Suite 200, San Mateo, California 94403 or by telephone at (650) 655-7800 requesting such copies. If a stockholder is receiving multiple copies at the stockholder’s household and would like to receive a single copy for a stockholder’s household in the future, stockholders should contact their broker, other nominee record holder, or the Company’s investor relations department to request mailing of a single copy of the applicable document.

 

The following Experience and Diversity Matrix summarizes the qualifications and experience of our nine director nominees. For additional information on our nominees, see “Proposal 1: Election of Directors” beginning on page 15.

The charts presented below represent a snapshot of diversity information regarding the proposed composition of the Board following the Annual Meeting, assuming the election of the nine director nominees.

 

Certain biographical information about the director nominees is furnished below, highlighting each director nominee’s specific experience, qualifications, attributes and skills that led the Board to the conclusion that each should serve as a director.

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During 2020, the Board held six formal meetings. Each director attended (whether in person, virtually, or telephonically) at least 75% of the total number of the meetings of the Board and meetings of each committee of the Board on which he or she served. In 2020, the Board had three key standing committees: the Audit Committee, the Compensation Committee, and the Nominating Committee. From time to time, the Board also utilizes an Executive Committee.

The Company encourages, but does not require, its Board members to attend the annual meeting of stockholders. All of the Company’s incumbent directors who were members of the Board at the time of the 2020 annual meeting of stockholders attended the 2020 annual meeting of stockholders.

The Audit Committee recommends the appointment of an independent registered public accounting firm to audit the financial statements of the Company for the fiscal year for which they are appointed, reviews audit reports and takes such action as may be deemed appropriate with respect to such audit reports. The Audit Committee also monitors the effectiveness of the audit effort, the Company’s financial and accounting organization and its system of internal controls over financial reporting, and it reviews any complaints received by the Company regarding accounting, internal accounting controls or auditing matters. Additionally, the Audit Committee oversees enterprise level risk management with a goal of monitoring financial risk exposures as well as cyber-related risks faced by the Company.

The Audit Committee operates under a written charter, which may be viewed at the Company’s website at http://www.essex.com. The Board has determined that all Audit Committee members have no financial or personal ties to the Company (other than the director compensation and equity ownership as described in this proxy statement) and meet the NYSE standard for independence. In addition, the Board has determined that all members of the Audit Committee are financially literate. The Board has limited the number of audit committees of public companies on which a current member of the Company’s Audit Committee can simultaneously serve to three committees. The Audit Committee met five times during 2020. At least annually, the Audit Committee reviews cyber risks with senior management. The Company has not had any significant cyber breaches nor incurred any significant expenses in connection with cyber breaches since 2016.

The Board has determined that all members of the Audit Committee, which includes Maria R. Hawthorne, Thomas E. Robinson and Mary Kasaris are “audit committee financial experts” as defined by the SEC’s Regulation S-K Item 407(d).

The Compensation Committee establishes and reviews annually the Company’s general compensation policies applicable to the Company’s executive officers, reviews and approves the level of compensation of the CEO and other executive officers of the Company, reviews and advises the Board concerning the performance of the CEO and other employees whose compensation is within the review jurisdiction of the Compensation Committee, reviews and advises the Board concerning regional and industry-wide compensation practices and trends, and recommends benefit plans from time to time. The Compensation Committee also administers the Company’s 2018 Stock Award and Incentive Compensation Plan (the “Incentive Award Plan”).

All members of the Compensation Committee, which includes Irving F. Lyons, III (Chair), Amal M. Johnson, and Mary Kasaris, are independent directors within the meaning of the rules of the NYSE. The Compensation Committee operates under a written charter which may be viewed at http://www.essex.com. The Compensation Committee met three times during 2020.

The Board has delegated authority to the CEO to grant stock options and restricted stock under the Incentive Award Plan to Company employees (other than executive officers) in accordance with guidelines as to the number of options and/or restricted stock to be granted to particular categories of employees. The CEO is to report all grants of stock options and restricted stock made pursuant to this delegation to the Compensation Committee.

The Compensation Committee retained Mercer LLC (“Mercer”) in its capacity as an independent compensation consultant to assist the Compensation Committee with its responsibilities related to the Company’s executive compensation programs in 2020. Additional information concerning Mercer and its services is set forth under “Executive Compensation – Compensation Discussion and Analysis.”

The Nominating and Corporate Governance Committee assists the Board in selecting nominees for election to the Board and monitors the composition of the Board. The Board has determined that all members of the Nominating Committee, which includes Byron A. Scordelis (Chair), Amal M. Johnson, and Irving F. Lyons, III, meet the independence requirements of the rules and regulations of the NYSE. The Nominating Committee met two times during 2020.

The Nominating Committee will consider and make recommendations to the Board regarding any stockholder recommendations for candidates to serve on the Board. While there is no formal process for consideration of stockholder recommendations, the Nominating Committee believes that the informal process allows for sufficient consideration of any proposed nominees. The Nominating Committee periodically reviews whether a more formal policy should be adopted. Stockholders wishing to recommend candidates for consideration by the Nominating Committee may do so by following the procedures set forth below under the heading “Deadline for Receipt of Stockholder Proposals.” The Nominating Committee evaluates nominees for directors using the criteria described below, and it will use the same criteria when evaluating a nominee recommended by a stockholder.

The Nominating Committee operates under a written charter setting forth the functions and responsibilities of the committee, which may be viewed at the Company’s website at http://www.essex.com.

In reviewing potential candidates for the Board, the Nominating Committee considers the individual’s real estate experience, along with experience in business, finance, administration and/or corporate governance, including as a current or former officer, board member or senior executive of a publicly held company, the needs of the Company for an additional or replacement director, the personality of the candidate, the candidate’s interest in the business of the Company, the diversity (including with respect to gender, age, race, culture and skillset) that the candidate would bring to the Board, as well as numerous other subjective criteria. Of greatest importance is the individual’s integrity, willingness to get involved and ability to bring to the Company experience and knowledge in areas that are most beneficial to the Company. The Board intends to continue to evaluate candidates for election to the Board on the basis of the foregoing criteria.

The Nominating Committee further reviews current trends and practices in corporate governance, including regular updates from management on ESG initiatives, including the Company’s D&I efforts and CSR strategy, and recommends to the Board the adoption of programs pertinent to the Company.

The Executive Committee has such authority as is delegated by the Board, including, but not limited to, the power, within certain parameters, to authorize the execution of certain contracts and agreements with unaffiliated parties, including, with respect to the acquisition, development and disposition of certain of the Company’s investments. The current members of the Executive Committee are George M. Marcus (Chair), Keith R. Guericke, Irving F. Lyons, III and Michael J. Schall.

The Board has designated, in accordance with NYSE corporate governance listing standards, Irving F. Lyons, III as the presiding independent director. The Company’s non-management directors meet at regularly scheduled executive sessions, without management, at which Mr. Lyons presides.

The Company has maintained a leadership structure of different individuals serving as Chairman and Chief Executive Officer since its initial public offering in 1994 in recognition of the differences between the two roles. The Chairman is Mr. Marcus, who is a founder of the Company and has a significant ownership interest. Mr. Marcus has extensive knowledge of the Company and the real estate industry, and the Company believes that because of his background and experience, he is able to effectively lead the Board in providing oversight and direction to the Company’s management. Mr. Marcus is involved in many other business and philanthropic activities. Mr. Schall’s responsibility as the Chief Executive Officer is to oversee the day-to-day execution of the

Company’s business strategy. This separation of the roles of Chairman and Chief Executive Officer allows for greater oversight of the Company by the Board. The Board has determined that the Company’s Board leadership structure is the most appropriate at this time, given the specific characteristics and circumstances of the Company, and the unique skills and experience of each of Mr. Marcus and Mr. Schall.

With respect to the Board’s role in the risk oversight of the Company, the Board has promulgated internal Company policies that set forth which transactions may require the prior approval of the Board or a committee of the Board and which transactions may proceed with management authorization and without any such prior Board approval. These Board policies cover transactions in the following areas: financings, property acquisition, property development, property redevelopment, property dispositions, other investments and general corporate activities. Generally, these policies set forth a specified dollar threshold and if a transaction exceeds that threshold, the prior approval of the Board or a committee of the Board is required. By requiring the prior approval of larger transactions, which generally may involve more risk to the Company simply due to the transaction size, the Board seeks to provide risk oversight of the Company. The Board has promulgated a corporate investment policy that establishes guidelines with respect to investment of the Company’s funds; such guidelines cover the required qualifications of outside investment managers and the types and concentration limits of investment securities that are authorized for investment. The Compensation Committee has determined that the pay policies and practices of the Company are not reasonably likely to have a material adverse effect on the Company. Also, related party transactions are generally reviewed by the Audit Committee. See “Certain Relationships and Related Person Transactions – Policies and Procedures with Respect to Related Person Transactions.”

Upon the recommendation of the Nominating Committee, the Board nominated the following incumbent directors for election at the Annual Meeting: Mr. Guericke, Ms. Hawthorne, Ms. Johnson, Ms. Kasaris, Mr. Lyons, Mr. Marcus, Mr. Robinson, Mr. Schall, and Mr. Scordelis.

Under independence standards established by the Board, which reflect the NYSE director independence standards as currently in effect, a director does not qualify as independent unless the Board affirmatively determines that the director has no material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company. The Board considers such facts and circumstances as it deems relevant to the determination of director independence.

The Board has determined that the following directors have no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company), and each is independent within the meaning of independence as set forth in the rules of the NYSE: Maria R. Hawthorne, Amal M. Johnson, Mary Kasaris, Irving F. Lyons, III, George M. Marcus, Thomas E. Robinson and Byron A. Scordelis.

In determining the independence of Mr. Marcus, the Board considered the matters that refer to Mr. Marcus set forth under “Certain Relationships and Related Person Transactions” below. The Board also considered the directors’ ownership of Essex equity securities and determined, in accordance with principles of the NYSE listing standards, that such ownership is not inconsistent with a determination of independence.

Led by our Nominating Committee, our Board seeks to maintain a board that, taken as a whole, has the objectivity, diversity and mix of skills, reputation and experience to provide comprehensive and effective oversight of the Company’s strategic, operational and compliance risks, as well as the knowledge, ability and independence to deliver the high standard of governance expected by our stockholders. The Nominating Committee believes that ongoing board refreshment is important to maintain an appropriate mix of skills and provide fresh perspectives while leveraging the institutional knowledge and historical perspective of the Board’s longer-tenured members. In August 2017, the Nominating Committee initiated a plan focused on board refreshment, with a specific focus on expanding the diversity of the Board based on gender, experience and expertise. Since then, the Company has accomplished the following:

The Board is also mindful that director tenure can be relevant to the Board’s performance. In this regard, the Board consists of longer-serving directors with significant experience and institutional knowledge who bring critical skills to the boardroom. Such longer-serving directors have a deep understanding of the Company’s business and strategy, provide historical context in Board deliberations, and enhance Board dynamics and the Board’s relationship with management.

In particular, the Board believes that Messrs. Marcus, Guericke and Schall, who have held various positions of senior leadership in the Company since its initial public offering in 1994, are a significant strength of the Board. Under their combined leadership, the Company has generated one of the highest total stockholder returns in the REIT industry over that period. Accordingly, while director tenure is taken into consideration when making nomination decisions, the Board believes that imposing limits on director tenure would unnecessarily deprive it of the valuable contributions of its most experienced members.

The Board conducts an annual review consisting of a self-evaluation process, which, in 2020 included both written questionnaires and interviews, to determine whether the Board and its committees are functioning effectively. Comments are provided from all directors with a complete assessment of the Board’s performance, focusing on identifying areas in which the Board or senior management believes a better contribution may be made. The purpose of the review is to increase the effectiveness of the Board, and the results are reviewed with the full Board and its committees.

The Company’s stockholders possess the right to nominate candidates to the Board through proxy access provisions of the Bylaws. The Company’s Bylaws permit a stockholder, or a group of up to 20 stockholders, owning at least 3% of the outstanding shares of Common Stock continuously for at least the prior three years, to nominate for election to the Board, and include in the Company’s proxy materials for its annual meeting of stockholders, director nominees constituting up to the greater of two individuals or 20% of the Board (rounding down to the closest whole number), all subject to additional eligibility, procedural and disclosure requirements set forth in the Bylaws. The foregoing is a summary of Section 2.13 of the Bylaws and is qualified in its entirety by the text of that section. For additional information, see “Deadline for Receipt of Stockholder Proposals – Proxy Access Nominations.”

The Bylaws also permit the stockholders of the Company to amend the Bylaws by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, pursuant to a binding proposal submitted by any stockholder or group of up to five stockholders holding at least one percent of the outstanding shares of Common Stock for at least one year, all subject to certain notice, procedural and disclosure requirements and other limitations set forth in the Bylaws. Before this amendment was adopted, the Bylaws provided that the Board had the exclusive right to amend the Bylaws, as permitted by Maryland law.

The Company has proactive ongoing dialogue with its stockholders with respect to important corporate governance matters. We consider our relationship with our stockholders to be an important part of the Company’s success and we value the perspectives of our investors. During 2020, our management reached out to stockholders who collectively held over 65% of the Company’s outstanding shares of Common Stock for the purpose of discussing the Company’s practices and policies with respect to governance, compensation practices and CSR matters. These discussions addressed governance matters including, among others, board composition and refreshment, the power of stockholders to amend the bylaws, and ESG issues, such as sustainability initiatives and workforce well-being and diversity. The feedback from stockholders was conveyed to and discussed with the Nominating Committee and the full Board. The goal of these discussions was to ensure that management and the Board understood and considered the issues that matter most to our stockholders and to enable the Company to address them effectively. In addition to conversations with our stockholders, the Company receives correspondence throughout the year from stockholders and stockholder advocacy groups and, if appropriate,

responds and/or shares such correspondence with the Nominating Committee and the full Board whenever requested or otherwise appropriate. The Company plans to take a similar approach in 2021 by maintaining a dialogue with its stockholders with respect to such matters.

The Company endeavors to ensure that the views of stockholders and other interested parties are heard by the Board or individual directors, as applicable. Our corporate governance guidelines (which may be accessed at http://www.essex.com) provide that the identity of the presiding independent director will be set forth in the annual meeting proxy statement, together with a method for interested parties to communicate directly with the presiding independent director or with the non-management directors as a group. Stockholders or any other interested parties wishing to formally communicate with the Board, the presiding independent director, non-management directors, or any individual directors may send communications directly to the presiding independent director of the Board: Irving F. Lyons, III, Presiding Independent Director, c/o Essex Property Trust, Inc., 1100 Park Place, Suite 200, San Mateo, California 94403.

During the year ended December 31, 2020, Messrs. Lyons and Scordelis, Ms. Johnson and Ms. Kasaris served as members of our Compensation Committee for a least a portion of the year. None of the members of our Compensation Committee is currently, or has been, an officer or employee of the Company. There were no insider participations or compensation committee interlocks among the members of our Compensation Committee during fiscal year 2020. Certain transactions and relationships between the Company and certain of its officers and directors are set forth below in the section titled “Certain Relationships and Related Person Transactions.”

There are no family relationships among any of the directors or executive officers of the Company.

The Company encourages its independent directors to own shares of the Company’s stock. In furtherance of this policy, the Company adopted guidelines setting a goal for each independent director to own a number of shares of the Company’s stock equal in value to five times such director’s annual cash retainer, in each case, as in effect as of, and based on the Company’s stock price as of, January 1, 2010, or such later date that a director joined the Board. Directors are expected to achieve this goal within four years of January 1, 2010 or, with respect to new directors, within four years of joining the Board. The Board or the Nominating Committee may waive this requirement or modify this guideline under certain circumstances. As of December 31, 2020, all independent directors were in compliance with the stock ownership guidelines or had additional time within which to come into compliance with such guidelines.

The Company encourages its executive officers to own shares of the Company’s stock. In furtherance of this policy, the Company has set goals for executive officers to own a number of shares of the Company’s stock equal in value to, with respect to the Chief Executive Officer, five times such individual’s annual base salary, and, with respect to the Company’s other executive officers, four times such individual’s annual base salary, in each case, as in effect as of, and based on the Company’s stock price as of, February 10, 2011, or such later date that an individual becomes an executive officer. Executive officers are expected to achieve this stock ownership goal no later than five years after becoming an executive officer. The Board or the Nominating Committee may waive this requirement or modify this guideline under certain circumstances. As of December 31, 2020, all executive officers were in compliance with the stock ownership guidelines or had additional time within which to come into compliance with such guidelines.

Director Compensation Table. The table below summarizes the compensation the Company paid to directors for the year ended December 31, 2020. Mr. Schall, who served in 2020 as the Company’s Chief Executive Officer, is not included in the table below because he did not receive any additional compensation for services provided as a director in 2020. Mr. Guericke, who served as a part-time employee in 2020, received a salary, bonus and perquisites shown below under “All Other Compensation,” but he did not receive any additional compensation for services provided as a director.

The Compensation Committee, with the assistance of Company management, regularly considers the Company’s compensation policies and practices to assess whether they encourage unnecessary or excessive risk taking. In 2020, the Compensation Committee considered, among other factors, the following risk-mitigating features of the Company’s compensation programs: (i) a balanced mix of short- and long-term compensation (including equity-based compensation); (ii) performance goals and objectives that avoid excessive weight on a single performance measure; (iii) minimum stock ownership guidelines, which ensure that executive officers have a meaningful direct ownership stake in the Company and align executive officers with long-term stockholder interests; and (iv) restrictions on engaging in hedging transactions in the Company’s securities.

Based on this assessment, the Company believes that its compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on the Company.

Biographical information concerning the executive officers of the Company is set forth below, other than Mr. Schall, whose biographical information appears above under “Proposal No. 1: Election of Directors.”

The primary objectives of the Company’s named executive officer compensation program are to (i) attract, motivate and retain experienced, effective executives, (ii) direct the performance of those executives with clearly defined goals and measures of achievement, and (iii) align the interests of management with the interests of the Company’s stockholders. With regard to absolute levels of executive compensation and the Company’s named executive officer compensation program, the Compensation Committee periodically reviews relevant information about competitive pay levels and structures but also considers a number of other factors, as described in further detail in this Compensation Discussion and Analysis.

The ongoing COVID-19 global pandemic had unforeseeable and widespread impacts on the Company and the entire apartment industry. Governmental authorities at the federal, state and local levels adopted various legislative and policy actions throughout 2020 in an effort to slow COVID-19’s spread ranging from numerous variations of “Shelter-in-Place” orders, restrictions on public gatherings, and mandated limitations or closures of certain types of businesses, which resulted in extraordinary job losses and related financial impacts in many Essex markets and especially in urban centers. Eviction moratoriums and, laws that limited rent increases during times of emergency and prohibited the ability to collect unpaid rent during certain timeframes, were enacted in regions in which Essex's communities are located, further impacting Essex properties and significantly increasing “Same-Property” rent delinquencies. Primarily as a result of the impact of the COVID-19 pandemic, the Company's cash delinquencies as a percentage of scheduled rental income for the Company’s stabilized apartment communities or "Same-Property" (stabilized properties consolidated by the Company for the years ended December 31, 2020 and 2019) increased from 0.3% for 2019 to 2.5% for 2020. Additionally, the Company significantly increased cash concessions in order to compete for new leases to maintain occupancy levels, which negatively affected FFO. Governmental authorities required the Company, and other organizations considered to be “essential services”, to adopt new protocols for hygiene and safety in order to remain open for business during the pandemic, resulting in increased operating expenses necessary to protect its employees and residents from COVID-19, including costs attributed to the purchase of personal protective equipment and establishing a resident response team to assist its residents during the COVID-19 pandemic. The Company and its executive officers worked throughout the year to ensure an appropriate response to the short-term operating challenges as well as to implement practices to support and protect its employees and residents. At the onset of the pandemic, the Company halted evictions for residents and financially impacted commercial tenants, avoided rent increases, created payment plans and waived late fees for impacted residents, identified and shared government and community resources to help residents secure food, financial assistance and healthcare, and protected and supported the Company’s employees by implementing additional paid leave.

The Company continued to enact certain measures throughout the year including:

During 2020, the Company’s executive officers, working with the Board, adopted changes to its business plan to focus on maintaining a strong liquidity position and limit reductions in Core FFO per share by maintaining high portfolio occupancy and implementing cost reduction programs. Management also adjusted the Company’s 2020 investment strategy to focus on funding new investments through property dispositions, targeting preferred equity and mezzanine loan investments and stock repurchases. Highlights on the Company’s 2020 Performance are below.

Operating and Core FFO growth: Severe economic and market disruption brought on by the COVID-19 pandemic, resulted in same-property revenue and NOI declines of 3.9% and 6.8%, respectively. The Company’s same-property revenue decline is largely attributed to an additional $31.8 million of cash concessions and $23.5 million of delinquencies compared to the prior year period. For the year, Core FFO per diluted share declined by 4.2%.

Stock Repurchases: Repurchased 1,197,190 shares of common stock totaling $269.3 million at an average price of $224.96 per share.

Investments: Committed $352.1 million in structured finance investments at a weighted average return of 10.5%.

Dispositions: Sold four apartment communities with an aggregate contract price of $343.5 million.

Technology. The Company accelerated the implementation of various technology initiatives that enable touchless and efficient interactions, including SmartRent Tour Locks and online content to showcase available apartments, Funnel, to allow the Company’s employees to remotely facilitate and track prospective tenant interaction, Sightplan, to allow residents to submit online maintenance requests, and Zoom, to enable seamless communication among the Company’s employees and power virtual property tours. The implementation of these technologies served both to address customer preferences and to proactively protect and communicate with our employees during the COVID-19 pandemic.

Balance Sheet Management: Improved the balance sheet by issuing $1.5 billion of unsecured debt at record low yields for the Company, to prepay near-term maturities which mitigated refinancing risks through the end of 2022 and reduced interest expense.

Dividend Growth: In February 2020, prior to the onset of the pandemic, we announced a dividend increase of 6.5%, representing 26 years of consecutive dividend growth, continuing a long history of strong dividend growth during our 20+ year history as a public company.

For a discussion of the calculation of Core FFO and NOI and reconciliations to the most directly comparable measures under U.S. generally accepted accounting principles (U.S. GAAP), see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” (pages 55-58) in our 2020 Form 10-K.

The Compensation Committee views pay for performance as an important component of the Company’s named executive officer compensation philosophy. The Compensation Committee considered the Company’s performance in 2020 in determining levels of named executive officer compensation, including short-term and long-term incentive compensation.

In furtherance of the Company’s pay for performance philosophy, each year, the Board sets annual corporate goals that are generally designed to promote stockholder value creation over a multiple year period. These corporate goals are used as the basis for measuring management performance, a key consideration in granting both short-term cash bonuses and long-term equity-linked or equity-based incentive awards. These goals, which include measures of performance on both an absolute basis as well as relative to peers, are described in more detail in the discussion below.

Goals for purposes of executive compensation for 2020 included:

The Compensation Committee and Board recognized the extraordinary challenges presented by the COVID-19 pandemic. Following the onset of the pandemic, the Board held a special meeting on April 2, 2020 to discuss the expected impacts of shelter-in-place mandates, unprecedented delinquency in rent collections, and the Company’s plan for assisting employees and residents in the pandemic. The Board also received periodic updates from management with respect to the impact of COVID-19 on its 2020 business plan. Following are highlights of the Compensation Committee’s approach to executive compensation in 2020 in response to the challenges the Company faced due to the effects of the COVID-19 pandemic:

Consistent with our commitment to strong corporate governance and responsiveness to our stockholders, in 2020 the Board maintained the following compensation policies and practices to drive performance and serve our stockholders’ long-term interests:

We currently submit an advisory vote to approve our named executive officer compensation to our stockholders on an annual basis. At our 2020 annual meeting, holders of approximately 96% of the votes cast voted “for” the advisory proposal. Over the past three years, on average, holders of approximately 96% of the votes cast voted “for” this advisory proposal. We believe the continued support for our compensation program in 2020 and in past years reflects the strong alignment between our named executive officer compensation and performance.

In addition to considering the results of the stockholder vote, the Compensation Committee also considered the positive views on our compensation structure expressed by our stockholders during our investor relations outreach throughout the year, as discussed in our Stockholder Engagement section on page 26, in continuing to apply the same principles in determining the amounts and types of executive compensation and did not implement substantial changes.

Peer Group. In 2020, the Compensation Committee reviewed the peer group of REITs that had been chosen by Mercer and confirmed the group without any changes. The peer group includes the following 14 REITs (all are equity REITs, five are headquartered or have a significant presence in California, five are reasonably similar to Essex in revenue and market capitalization and six invest primarily in apartments).

 

In fiscal year 2020, the Compensation Committee considered the peer group information prepared by Mercer pursuant to an August 2020 benchmarking analysis (the “2020 Mercer Analysis”) in determining overall compensation levels in light of the Compensation Committee’s view of appropriate, market-based compensation levels and pay-for-performance, including the Company’s performance during the COVID-19 pandemic benchmarked against its peers. Based on the 2020 Mercer Analysis, and due to the Company’s performance in 2020, the Compensation Committee did not increase the target value of the long-term incentives granted to the named executive officers in December 2020 and awarded the named executive officers lower annual bonus cash compensation in 2020 than in 2019.

Key Elements of Named Executive Officer Compensation. The key elements of Essex’s current compensation program for the named executive officers are summarized in the table below:

Base Salaries. None of the Company’s executive officers has an employment agreement. Base salaries are viewed as a customary element necessary to hire and retain named executive officers. Base salary and any changes in base salary are based on views of individual retention and/or performance factors and market data at peer companies, without benchmarking. For 2020, the Compensation Committee established base salaries in light of these considerations as well as subjective assessments of individual performance, scope of responsibilities, expertise and experience, and the Company’s financial performance and condition. The Compensation Committee increased base salaries for our named executive officers at the beginning of 2020 in order to better align the Company’s total executive compensation with the Company’s peer group. The 2019 Mercer Analysis of the Company’s executive compensation program concluded that the overall compensation level of the CEO was well-below the median compensation of our peer companies, and that the compensation for the other named executive officers, other than the COO, was at or below the median compensation for the peer group. In response, effective January 1, 2020, the Compensation Committee increased the named executive officers’ base salaries to align more closely with the Company’s peer group. The total compensation for the CEO continues to be below the median of the peer group. Also effective January 1, 2020, the Compensation Committee increased the COO’s base salary in order to reflect that the COO’s role and management responsibility had expanded beyond that of a traditional COO.

Annual Bonuses. Each named executive officer is eligible to earn an annual cash bonus based on the achievement of the annual business plan approved by our Board and the meeting of performance goals during the year. The performance goals used for determining an officer’s annual bonus include individual performance, business unit and corporate performance as determined by the Compensation Committee and by the CEO in his recommendations to the Compensation Committee.

Each year, a target bonus amount is established for each named executive officer and is reviewed by the Compensation Committee. A portion of each named executive officer’s annual bonus is tied to achieving corporate performance goals. Each named executive officer is paid based on meeting objective corporate performance goals with a maximum opportunity of 200% of the portion of the annual bonus tied to corporate performance goals if specific performance levels exceeded the objective corporate performance goals at levels above the midpoint of the Company’s 2020 guidance.

In 2020, annual bonus targets were set based on the results of the 2019 Mercer Analysis to align named executive officer short-term incentives with those at peer companies for purposes of attracting and retaining talent.

The Company’s primary corporate performance measures for purposes of the Targeted Non-Discretionary Incentive Bonus are Core FFO per share and the growth in same-property NOI relative to its peers that have portfolios in the same markets. The Board reviews the operating plans that include annual Core FFO per share targets and expected NOI results. The Compensation Committee monitors management’s achievement of the targets and whether the Company ranks in the top three in Core FFO per share growth out of apartment REITs with an equity market cap greater than $5.0 billion at year end. The target levels for the increase in Core FFO per share from year to year are dependent on a number of factors, including expectations surrounding internal and external growth opportunities, general economic conditions, real estate fundamentals and other specific circumstances facing the Company in the coming year. The Compensation Committee also establishes Core FFO goals that are consistent with the operating plan. For 2020, specific goals for corporate performance and achievements were as follows:

For a discussion of the calculation of Core FFO and NOI, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, respectively, in our 2020 Form 10-K.

A portion of each named executive officer’s bonus for 2020 also related to achievement of both objective and subjective individual factors, including the evaluation of the officer’s handling of his or her day-to-day responsibilities, and individual performance goals and, in some cases, business unit goals. For 2020, the primary individual-based bonus criteria were as follows:

As discussed above, the Company and each named executive officer did not meet two of the Non-Discretionary corporate goals for 2020, primarily as a result of the impacts of COVID-19. The Compensation Committee believes that short-term incentive pay should appropriately reward management under the pay-for-performance philosophy. While the Compensation Committee believes that management responded prudently and aggressively to the challenges the Company faced due to the pandemic, the Compensation Committee chose not to modify the Company’s targets or compensation structure mid-year in response to the COVID-19 pandemic. As a result, the Company did not meet its 2020 target goals and the Compensation Committee did not award the executive officers their total target annual bonuses.

Payments for bonuses compared to targets in 2020 were as follows:

Long-Term Equity Incentives. In fiscal year 2020, the Company’s equity compensation package for its named executive officers consisted of one or more of three different types of awards: stock options, restricted stock units (“RSUs”) subject to both service-based vesting and performance-based vesting, and RSUs subject to only performance-based vesting, in each case, granted under the Company’s stockholder-approved Incentive Award Plan.

The Company utilizes a combination of these components to accomplish the following objectives:

Stock options have value only to the extent that there is appreciation in the Company’s stock and, as such, are inherently performance-based compensation. Stock options granted to our named executive officers in fiscal year 2020 vest over a three-year horizon, at the rate of one-third each year on the anniversaries of the date of grant, subject to continued employment through the applicable vesting date.

Stock options receive a high perception of value and are a significant factor in long-term retention of senior executives. Therefore, we believe options are the most effective compensation component in terms of value perception versus accounting cost.

However, the Company limits the maximum realizable value of such stock options at the time of exercise to $100 per share. This limit was intended to discourage excessive risk-taking while reducing the accounting cost of the award to the Company.

The Company has reduced the number of options awarded to NEOs as a percentage of total long-term equity incentive compensation over the last four years from 35% in 2017 to 25% in 2018 to 23% in 2019 to 20% in 2020.

RSUs granted to our named executive officers are subject to performance-based vesting or, with respect to certain RSUs, both performance-based and time-based vesting. RSUs are settled in shares of our Common Stock.

We have historically granted RSUs to our named executive officers consisting of one or more of the following three types of awards:

During 2020, our named executive officers were granted Performance and Service RSUs and DIP RSUs.

Performance against the TSR Goal for the performance RSUs granted during 2020 is determined by the Compensation Committee, using the following matrix:

In the event that the percentile rank of the Company’s total stockholder return is between the 25^th and 50^th percentile, the percentage of RSUs that is earned will be based on linear interpolation between the amounts set forth above. In the event that the percentile rank of the Company’s total stockholder return upon completion of the performance period is below the 5^th percentile, no RSUs will be earned.

In addition to the three-year TSR Goal, DIP RSUs vest based on the gain or purchase price for the disposition of certain assets of the Company’s real estate portfolio during the calendar year following the year of grant (the “DIP Performance Metric”). Once the number of DIP RSUs that is deemed to satisfy the DIP Performance Metric is determined, such DIP RSUs are then subject to performance vesting based on achievement of the three-year TSR Goal. In addition to the performance-based vesting conditions applicable to the DIP RSUs, the DIP RSUs are generally subject to continued service through December 31 of the year following the year of grant (with accelerated vesting in the event of certain qualifying terminations of employment in connection with a change of control of Essex, as described below under “Severance and Other Benefits Upon Termination of Employment or Change of Control”).

In fiscal year 2020, the Compensation Committee granted awards in respect of the following number of stock options and RSUs (shown assuming maximum performance of the TSR Goal at the 50^th percentile or higher), to the Company’s named executive officers.

Nonqualified Deferred Compensation. Named executive officers are currently permitted to make elections to defer up to 100% of their base salaries and bonuses under the Company’s Deferred Compensation Plan. The Company believes that providing the named executive officers and other eligible employees with nonqualified deferred compensation opportunities is a cost-effective supplemental benefit that enables named executive officers to defer income tax on deferred salary and bonus payments, even though the Company also defers the related tax deduction. The Company makes no matching or other employer contributions to the plan. Additional information concerning this deferred compensation plan is set forth in the Nonqualified Deferred Compensation table and related text below.

Retirement Benefits. Named executive officers are eligible to participate in the Essex tax-qualified 401(k) plan. The Company does not maintain any defined benefit, pension, or supplemental or “excess” retirement plans for the named executive officers.

Severance and Other Benefits Upon Termination of Employment or Change of Control. Under the Essex Property Trust, Inc. Executive Severance Plan, which was amended and restated March 12, 2013 (the “Severance Plan”), each of the Company’s named executive officers would be entitled to the following benefits under the Severance Plan if, within the period commencing two months prior to a change of control of Essex (as defined in the section titled “Potential Payments upon Termination or Change of Control”) and ending 24 months after a change of control of Essex, the employment of such named executive officer is terminated in connection with the change of control and without “cause” (excluding any termination of employment due to the named executive officer’s death or disability), or if the named executive officer resigns from employment for “good reason”:

In addition, pursuant to the terms of the Severance Plan, any equity-based awards held by the named executive officers that are outstanding immediately prior to a change of control of Essex but that are not assumed in connection with such change of control will vest in full effective immediately prior to such change of control. Since, pursuant to the terms of the Company’s Incentive Award Plan and the applicable award agreements, any LTIP Units and RSUs that are held by the named executive officers and that are subject to performance-based vesting will be earned based on actual performance through a change of control of the Company, any performance-based LTIP Units and RSUs that have been so earned, and any other equity-based incentive awards outstanding immediately prior to a change of control of Essex, will vest in full unless assumed in connection with the change of control.

The Compensation Committee believes that these provisions in the Severance Plan and the terms of the equity-based awards described above provide a reasonable level of continued economic benefit to the named executive officers if a change of control and/or related termination event were to occur, are a reasonable balance to the at will nature (and lack of fixed terms) of employment for the officers, and provide a reasonable level of incentive for the covered individuals to remain with the Company prior to any proposal or contemplation of, and during any negotiations for, a change of control. The Compensation Committee also believes that the two years’ cash severance payment, the accelerated vesting of equity awards and other reasonable severance benefits, together with the absence of a tax “gross up” provision, are in line with or provides lesser benefits than the scope of change of control benefits offered by many companies the Compensation Committee considers to be comparable. Generally, the existence of the Severance Plan, and the potential benefits to executive officers under it, does not affect the annual determination of an executive officer’s base salary, cash bonus or long-term incentive award grants.

Life Insurance and Perquisites. Named executive officers receive automobile allowances or leased automobiles, automobile insurance, annual DMV renewals, health and dental insurance and payment of life insurance premiums and are eligible to receive discounts on rental housing at Company properties and reimbursable education-related benefits on the same terms as other Company employees. The Compensation Committee believes that the perquisites are comparable to those provided by comparable companies.

Section 162(m). Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally disallows a tax deduction for annual compensation paid to specified executive officers in excess of $1 million. Prior to the effectiveness of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), the deduction limit included an exception for “qualified performance-based compensation.” However, the Tax Act amended certain aspects of Section 162(m) of the Code, including eliminating the exception for “qualified performance-based compensation,” and expanding the scope of employees to whom the deduction limit applies. The Tax Act provides for a grandfathering provision, pursuant to which remuneration that was intended to be “qualified performance-based compensation,” and that was provided pursuant to a written binding contract in effect on November 2, 2017 which has not been modified in any material respect on or after that date, will continue to be eligible for the “qualified performance-based compensation” exception.

We believe that we qualify as a REIT under the Code and generally are not subject to federal income taxes. As a result, we do not expect that the payment of compensation that is subject to the prohibition of Section 162(m) of the Code on deduction of annual compensation over $1 million will have a material adverse federal income tax consequence to us, provided we continue to distribute at least 90% of our taxable income each year. Consequently, the Compensation Committee reserves the right to design programs that incorporate a full range of both performance and service-based criteria important to the Company’s success, even where compensation payable under such programs may not be deductible.

ASC Topic 718. Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC Topic 718”) requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock-based compensation are accounted for under ASC Topic 718. The Compensation Committee regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to equity-based compensation awards. As accounting standards change, we may revise certain programs to appropriately align the cost of our equity-based compensation awards with our overall executive compensation philosophy and objectives.

Stock Ownership Guidelines. The Company has stock ownership guidelines that require executives to acquire and hold a certain amount of Company shares, as described in more detail above under the heading “Board and Corporate Governance Matters—Executive Officer Ownership Guidelines.” All named executive officers were in compliance with the guidelines as of December 31, 2020 or had additional time within which to come into compliance with such guidelines.

The table below sets forth the minimum amount of stock, including indirectly held shares, vested and unvested full-value equity awards (LTIP Units and RSUs), and vested stock options, assuming net settlement, that each named executive officers is required to hold pursuant to the Executive Stock Ownership guidelines. Executive officers are expected to achieve this goal within five years of its effective date or, with respect to new executive officers, within five years of attaining their position.

Directors and executive officers are not permitted to own financial instruments or participate in investment strategies that represent a direct hedge of the economic risk of owning our Common Stock or voting preferred stock, equity interests issued by our operating partnership, or securities that give the holder any rights to acquire any such stock or equity interests (collectively, “Essex equity securities”).

Directors and executive officers are not permitted to pledge or otherwise use any Essex equity securities as collateral to secure any loan (collectively, a “pledge”) unless: (1) that transaction is first approved by the Board (not

counting the vote of any director with a personal interest in the transaction) based on the committee’s determination that the pledge is not significant from a corporate governance standpoint, or (2) that transaction involves a pledge of Essex equity securities that results in such individual having pledged (counting pledged securities that are not Common Stock on an as exercised or converted basis, as the case may be) an amount of Essex equity securities not exceeding the greater of (x) 0.002 times the number of the issued and outstanding shares of Common Stock, or (y) 20% of such individual’s ownership of Essex equity securities.

As more fully set forth in the policy, directors and executive officers are not permitted to pledge any equity compensation awards prior to the awards’ respective exercise, delivery or conversion into equity securities free of restriction under the applicable equity compensation plan.

Compensation Recovery Policy. The Board will, to the extent permitted by applicable law, have the authority to make retroactive adjustments to any bonus or other incentive-based or equity-based compensation paid to an executive officer of the Company, where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, where such restatement was due to the material non-compliance by the Company, as a result of misconduct, with any financial reporting requirement. Where applicable, an officer will be required to reimburse the Company for any bonus or other incentive-based or equity-based compensation received during the 12-month period following the filing with the SEC of the financial statement that was later restated.