What is the primary objective of these new compensation plans?

The primary objective is to align the interests of key executives and employees more closely with those of Prologis' stockholders and to reward outstanding performance. The plans are designed to incentivize superior total shareholder returns and the generation of incentive fees from private capital funds.

How is performance measured under the Outperformance Plan?

Performance is measured over three-year periods based on Prologis' compound total shareholder return (stock appreciation plus reinvested dividends) compared to the MSCI US REIT Index plus an additional 1%. If Prologis' total return does not exceed this benchmark, or if its absolute cumulative shareholder return is not positive, awards will have no value.

How are awards paid out under the Private Capital Plan?

Awards under the Private Capital Plan are a share of a bonus pool, which is 40% of the incentive fees paid to Prologis' private capital funds. These bonuses are typically paid in cash, but for senior executives after 2012, 50% will be paid in restricted stock/units and 50% in cash. Participants must remain employed through the payment date to receive their bonus.

What happens to an employee's compensation if they leave the company?

For the Outperformance Plan, participants retain their eligibility for awards if they retire, die, or become disabled. However, they forfeit all participation points if they leave for any other reason. Under the Private Capital Plan, termination of employment for any reason prior to the bonus payment date results in forfeiture of all outstanding units and rights to the bonus.

PLD/PLDGP 8-K: Leadership Changes

Summary

This 8-K filing from Prologis, Inc., dated December 22, 2011, announces the implementation of two new outperformance compensation plans designed to align executive and employee interests with shareholder value and company performance. The "Outperformance Plan" rewards participants based on Prologis' total shareholder return exceeding a benchmark (MSCI US REIT Index plus 1%) over three-year performance periods, with payouts capped and contingent on positive absolute shareholder returns. The "Private Capital Plan" aims to incentivize participants by sharing in incentive fees generated by Prologis' private capital funds, with payouts tied to specific fund performance hurdles and subject to bonus limits based on prior compensation. These plans represent a strategic shift towards a "pay for performance" structure, directly linking compensation to market-based performance metrics and fund profitability.

Key Highlights

1Prologis established two new outperformance compensation plans: the "Outperformance Plan" and the "Private Capital Plan."
2The Outperformance Plan incentivizes approximately 100 executives and employees based on exceeding industry benchmarks (MSCI US REIT Index + 1%) in total shareholder return over three-year periods.
3Awards under the Outperformance Plan are contingent on positive absolute shareholder returns and are capped at $75 million or 0.5% of market capitalization per period.
4The Private Capital Plan rewards participants with a bonus pool equal to 40% of incentive fees earned by Prologis' private capital funds, subject to fund performance and individual compensation limits.
5Awards under both plans may be paid in cash or stock, with the Private Capital Plan shifting to a 50/50 cash/restricted stock split for senior executives after 2012.
6Specific conditions for vesting and payout in cases of retirement, death, disability, or change in control are detailed for both plans.
7The company also filed an opinion from Mayer Brown LLP related to a prospectus supplement.

Prologis, Inc. 8-K Report, Executive Changes (Dec 22, 2011)

Summary

Key Highlights

Frequently Asked Questions