PRE 14A 1 d848425dpre14a.htm PRE 14A PRE 14A
Table of Contents

United States

Securities and Exchange Commission

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant To Section 14(a) of

the Securities Exchange Act of 1934

 

    x Filed by the Registrant                                 o Filed by a Party other than the Registrant

 

 

Check the appropriate box:

 

x

 

 

 

      Preliminary Proxy Statement

 

o

 

 

      Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

o

 

 

      Definitive Proxy Statement

 

o

 

 

      Definitive Additional Materials

 

o

 

      Soliciting Material under § 240.14a-12

 

PUBLIC STORAGE

 

 

LOGO

(Name of Registrant as Specified in Its Charter)

 

Payment of Filing Fee (Check the appropriate box):

 

x

 

 

No fee required.

 

o

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

   

 

(1)

 

 

Title of each class of securities to which the transaction applies:

   

 

(2)

 

 

Aggregate number of securities to which the transaction applies:

   

 

(3)

 

 

Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

   

 

(4)

 

 

Proposed maximum aggregate value of the transaction:

   

 

(5)

 

 

Total fee paid:

 

o

 

 

Fee paid previously with preliminary materials.

 

o

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

   

 

(1)

 

 

Amount Previously Paid:

   

 

(2)

 

 

Form, Schedule or Registration Statement No.:

   

 

(3)

 

 

Filing Party:

   

 

(4)

 

 

 

Date Filed:

 


Table of Contents

LOGO

Public Storage 4370 PROXY STATEMENT 2021


Table of Contents

LOGO

 

701 Western Avenue

Glendale, CA 91201

[            ], 2021

 

Dear fellow shareholders:

In the past year, we faced unprecedented challenges, including the global COVID-19 pandemic and social and political unrest in some of the cities where we operate. Throughout these crises, we have remained focused on protecting and supporting our employees, serving the needs of our customers and communities, and creating long-term value for our shareholders. Amidst these challenges, we are proud to have helped our customers meet their storage needs, taken care of the wellbeing and safety of our employees, expanded our portfolio, delivered strong results for our shareholders, and implemented our strategy for long-term growth and value creation.

Against this backdrop, we are pleased to invite you to attend our 2021 Annual Meeting of Shareholders on Monday, April 26, 2021. Due to the COVID-19 pandemic, we will hold the Annual Meeting virtually on an online platform to provide a safe experience for our shareholders and employees. To attend, vote, or submit questions during the Annual Meeting, please visit www.virtualshareholdermeeting.com/PSA2021 and enter the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, voting instruction form, or proxy card.

We furnish our proxy materials to shareholders primarily over the Internet. We believe this process expedites shareholders’ receipt of the materials, lowers the costs of the Annual Meeting, and conserves natural resources. The Notice of Meeting, Proxy Statement, and Annual Report on Form 10-K are available free of charge at http://materials.proxyvote.com/74460D.

Thank you for your continued support of Public Storage, especially during these uncertain and challenging times. We look forward to seeing you at our Annual Meeting.

Sincerely,

 

 

LOGO

Joseph D. Russell, Jr.

President and

Chief Executive Officer


Table of Contents

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

[    ], 2021

To our shareholders:

On behalf of the Board of Trustees, I invite you to attend the 2021 Annual Meeting of Shareholders (Annual Meeting) of Public Storage at 1:00 p.m. Pacific Time on April 26, 2021, to be held virtually on an online platform accessible here: www.virtualshareholdermeeting.com/PSA2021.

Due to the COVID-19 pandemic, the Annual Meeting will be held in a virtual format only to provide a safe experience for our shareholders and employees. To attend, vote, and submit questions during the Annual Meeting, please visit www.virtualshareholdermeeting.com/PSA2021 and enter the control number included in your Notice of Internet Availability of Proxy Materials, voting instruction form, or proxy card. Online access to the webcast will open approximately fifteen (15) minutes prior to the start of the Annual Meeting. Attendance at the Annual Meeting is subject to capacity limits set by the virtual meeting platform provider.

 

  Items of Business

 

  1.

To elect fourteen Trustees to our Board of Trustees;

 

  2.

To vote on an advisory resolution to approve the compensation of our named executive officers;

 

  3.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021;

 

  4.

To approve our 2021 Equity and Performance-Based Incentive Compensation Plan (2021 Stock Plan);

 

  5.

To approve an amendment to our Declaration of Trust to eliminate cumulative voting; and

 

  6.

To transact such other business as may properly come before the Annual Meeting and any postponements or adjournments thereof.

 

  Record Date

Close of business on February 23, 2021.

 

  Proxy Materials

The Notice of Meeting, Proxy Statement, and Annual Report on Form 10-K are available free of charge at http://materials.proxyvote.com/74460D

Sincerely,

 

 

LOGO

Nathaniel A. Vitan

Senior Vice President,

Chief Legal Officer and Corporate Secretary

Important Notice Regarding Availability of Proxy Materials for the 2021 Annual Meeting: This Proxy Statement and our 2020 Annual Report on Form 10-K are available at the Investor Relations section of our website, publicstorage.com.


Table of Contents
Table of Contents

 

PROXY STATEMENT SUMMARY     1  

Proxy Summary And Business, Compensation, And Governance Highlights

    2  

2020 Business Highlights

    4  

2020 Compensation Highlights

    5  

Sustainability Framework

    6  
PROPOSAL 1: ELECTION OF TRUSTEES     14  
Executive Summary     15  

Board Composition Highlights

    16  

Board Evaluations And Nominations

    16  

Board Qualifications

    17  

Board Refreshment

    17  

Board Focus On Diversity

    17  

Nominee Qualifications

    19  

Trustee Nominees Skills Summary

    20  
Vote Required and Recommendation     28  
Corporate Governance     29  

Board Engagement And Oversight

    29  

Governance Structure

    29  

Proxy Access

    29  

Political And Charitable Contributions

    29  

Board Leadership Structure

    30  

Board’s Role In Risk Oversight

    30  

Board Orientation And Education

    32  

Trustee Independence

    32  

Communications With The Board

    33  

Trustee Attendance

    33  

Board Committees

    33  

Compensation Of Trustees

    35  

Trustee And Executive Officer Stock Ownership Guidelines

    36  

2020 Trustee Compensation

    37  
PROPOSAL 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION     39  
Executive Summary     40  
Vote Required and Recommendation     40  
Our Named Executive Officers     41  
Compensation Discussion and Analysis (CD&A)     42  

We Delivered Strong Performance Despite Unprecedented Challenges From The COVID-19 Pandemic

    42  

Our Compensation Philosophy And Practices Align Executive Pay With Performance And Creation Of Long-Term Value

    45  

Various Compensation Elements Incentivize And Reward Performance

    46  

Our Compensation Process Is Disciplined, Balanced, And Responsive To Our Shareholders

    47  

 

Public Storage  |  2021 Proxy Statement  |  i


Table of Contents

Table of Contents

 

The Compensation Committee Designed Our Original 2020 NEO Compensation Framework To Be Consistent With Our Pay-For-Performance Philosophy

 

 

50

 

Changes In 2020 Company Strategy And Outlook Due To The COVID-19 Pandemic

 

 

53

 

Successful Execution Of Revised Strategic And Operational Priorities

 

 

55

 

Compensation Committee’s Approach To 2020 Incentive Compensation Program

 

 

55

 

2020 Incentive Compensation Awards

 

 

56

 

2021 Compensation Outlook And Enhancements

 

 

57

 

2022 Compensation Outlook

 

 

59

 

Tax Deductibility Of Executive Compensation – Section 162(m)

 

 

59

 

Compensation Committee Report

 

 

60

 

Executive Compensation Tables

 

 

61

 

Potential Payments Upon Termination Or Change In Control

 

 

65

 

Additional Information About Trustees, Executive Officers, And Management

 

 

69

 

PROPOSAL 3: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

72

 

Executive Summary

 

 

73

 

Audit Committee Report

 

 

75

 

Vote Required and Recommendation     75  

PROPOSAL 4: APPROVAL OF PUBLIC STORAGE 2021 EQUITY AND PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN

 

 

76

 

2021 Plan: Key Facts

 

 

77

 

Shareholder Approval

 

 

77

 

Protection Of Shareholder Interests And Alignment With Compensation Principles

 

 

77

 

Importance Of The 2021 Plan

 

 

77

 

Historical Burn Rate And Potential Dilution

 

 

78

 

Effectiveness Of 2021 Plan

 

 

78

 

Equity Compensation Plan Information

 

 

79

 

Summary Of The Material Terms Of The 2021 Plan

 

 

79

 

Purpose

 

 

80

 

Types Of Awards

 

 

80

 

Eligibility

 

 

81

 

Term

 

 

81

 

Administration

 

 

81

 

Shares Subject To The 2021 Plan; Other Limitations Of Awards

 

 

81

 

Amendment

 

 

82

 

Change Of Control

 

 

82

 

Mandatory Repayment And Clawback

 

 

83

 

Performance-Based Compensation

 

 

83

 

 

ii  |  Public Storage  |  2021 Proxy Statement


Table of Contents
Table of Contents

 

Other Terms Of Awards

    84  

New Awards

    84  

Summary Of U.S. Federal Income Tax Consequences

    85  
Vote Required and Recommendation     86  
PROPOSAL 5: APPROVAL OF AMENDMENT TO DECLARATION OF TRUST TO ELIMINATE CUMULATIVE VOTING     87  
Executive Summary     88  

Reasons For Amendment

    89  
Vote Required And Recommendation     90  
GENERAL INFORMATION ABOUT THE MEETING     91  

Purpose Of Proxy Solicitation

    91  

Important Notice Regarding Delivery Of Security Holder Documents

    91  

Availability Of Proxy Statement And Annual Report

    91  

Date, Time And Place Of The Annual Meeting

    91  

Who Can Vote

    91  

Quorum For The Annual Meeting

    91  

How Votes Are Counted

    92  

Trustee Nominees Who Do Not Receive A Majority Of The Votes Cast

    92  

How Proxies Will Be Voted

    92  

How To Cast A Vote

    93  

How to Vote As A Participant In The Company’s 401(K) Plan

    93  

Changing Your Vote

    93  

Cost Of This Proxy Solicitation

    94  

Contacting Our Transfer Agent

    94  

Consideration Of Candidates For Trustee

    94  

Deadlines For Receipt Of Shareholder Proposals

    95  
Householding     96  
Virtual Meeting Matters     96  
Accessing The Meeting     96  
Casting Your Vote     96  
Live, Online Q&A     96  
Technical Assistance     97  

Your Vote Is Important

    97  
APPENDIX A – 2021 EQUITY AND PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN     98  
APPENDIX B – NON-GAAP MEASURES     117  

 

Public Storage  |  2021 Proxy Statement  |  iii


Table of Contents

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this proxy statement and does not contain all the information that you should consider. You should read the entire proxy statement carefully before voting. We intend to mail proxy materials to our shareholders on or about [    ], 2021.

ANNUAL MEETING OF SHAREHOLDERS

 

  Meeting Logistics     

  Meeting Date:

  Monday, April 26, 2021

  Time:

  1:00 p.m. Pacific Time

  Place:

 

The Annual Meeting will be held virtually at

www.virtualshareholdermeeting.com/PSA2021.

  Record Date:

  February 23, 2021

  Voting:

  Public Storage shareholders as of the record date are entitled to vote on the matters presented at the meeting. Each share of Common Stock of the Company is entitled to one vote for each trustee nominee and one vote on each of the other matters presented.

VOTING MATTERS

 

       

Proposal

Number

  Item   Board
Recommendation
  Vote Required   Page
Reference
       

1

 

Election of Trustees

 

FOR

each nominee

 

Majority of votes

cast

  14
       

2

  Advisory Vote to Approve
Compensation of Named
Executive Officers (NEOs)
  FOR   Non-binding vote   39
       

3

  Ratify Appointment of Ernst &
Young LLP (EY) as our
Independent Registered
Public Accounting Firm
  FOR  

Majority of votes

cast

  72
       

4

  Approval of 2021 Equity and
Performance-Based Incentive
Compensation Plan
  FOR  

Majority of votes

cast

  76
       

5

  Approval of Amendment to
Declaration of Trust to
Eliminate Cumulative Voting
  FOR   Majority of outstanding shares   87

 

Public Storage  |  2021 Proxy Statement  |  1


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

2020 Highlights

The COVID-19 pandemic has been one of the most formidable challenges our Company has ever faced, and it has shown that our sustainable operations, focus on long-term value creation, and financial fortitude are essential to our Company’s ability to withstand disruptions and crises. Our long-term strategy, engaged and agile employees, and fortress balance sheet allowed us to continue safely serving our customers and position the Company for continued growth in one of the most difficult operating environments in the Company’s history.

We are proud of the way the Public Storage team rallied together during the crisis. The transformation of our industry-leading operations as we navigated the pandemic has resulted in a safer and more efficient experience for our customers and employees. Our leadership team also delivered against our long-term strategic priorities by advancing the technological transformation of our Company, accelerating organic and external growth, and further strengthening and optimizing our balance sheet. And, most importantly, we were focused on protecting the safety and wellbeing of our employees, including through our PS Cares Emergency Fund, as they continued to serve our customers and communities while navigating through the pandemic.

RESPONSE TO COVID-19

Serving our Customers

As an essential business, our properties remained open and operational throughout the pandemic with enhanced protocols focused on the health and safety of our employees and service and assistance to our customers.

 

Contactless Service   Temporary Financial Accommodations

•  Deployed eRental® to all properties. This contactless online leasing platform allows customers to rent online and move in without needing to interact with a property manager

 

•  Enhanced full online payment capabilities through texting and maintained customer service support

 

•  Added payment drop boxes to properties

 

•  Halted rent increases for existing customers during the immediate onset of the pandemic in the U.S.

 

•  Halted delinquent tenant lien sales when appropriate

 

•  Provided rent and fee relief to help customers affected by the pandemic

Protecting and Supporting our Employees

Our commitment to our employees was paramount in our approach to navigating the COVID-19 pandemic. We quickly adjusted our operating procedures to keep our employees safe and established a PS Cares Emergency Fund of over $10 million to support our employees with enhanced benefits focused on our employees and their families, which has allowed us to continue to serve our customers safely.

The PS Cares Emergency Fund included:

 

   

Additional incentive pay

 

   

Childcare assistance

 

   

Extended paid time off

 

   

COVID-19 testing coverage

 

   

Mental wellness support

 

2  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

Additional safety protocols and employee support we deployed included:

 

Field Operations   Corporate Operations

•  One customer at a time in sales office

 

•  Mandatory face coverings and gloves

 

•  Acrylic shields and other protective equipment

 

•  Additional cleaning protocols

 

•  Regular safety training

 

•  “Thank you” incentive pay

 

•  Work-from-home implemented utilizing new operating and call center technology platforms

 

•  Optional return to office policy for corporate employees under strict safety protocols

 

•  Call center employees operate in new virtual call center environment

 

•  Employees will retain work-from-home capabilities that may be used in the event of future pandemics or other emergencies

Our Focus on Value Preservation and Long-Term Value Creation

The COVID-19 pandemic directly affected the Company’s business and operations in 2020. Importantly, the Company faced unprecedented operational challenges due to, among other causes, the pandemic’s adverse economic effects and government restrictions on commercial activity, which had a material negative effect on demand.

In response, under the leadership of our senior management team, the Company took significant steps to expand its strategic and operational priorities to include a focus on value preservation in the short-term—including employee safety and engagement and customer acquisition, retention, and issue resolution. At the same time, our senior leadership team advanced initiatives to build long-term capabilities and value for our shareholders, including accelerating the Company’s digital transformation, opportunistically taking advantage of organic and external growth opportunities, and optimizing our balance sheet. These efforts allowed the Company to take advantage of a rebound in customer demand and increased growth opportunities through acquisitions in the second half of 2020 and put the Company in a good position as we head into 2021 and beyond.

 

Public Storage  |  2021 Proxy Statement  |  3


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

2020 BUSINESS HIGHLIGHTS

Despite the severe disruption and the difficult challenges we faced due to the COVID-19 pandemic, the Company was able to deliver strong performance across several key metrics, execute on its operational objectives, and advance its long-term strategy.

Under the leadership of our Chief Executive Officer (CEO), Joseph D. Russell, Jr., and the Company’s senior management team, we achieved 2020 GAAP net income of $1.36 billion and the following business performance highlights, which align with our priorities of preserving value, optimizing business performance, and creating long-term value:

 

 

LOGO

Record Revenues of $2.9 billion 6.2 million sq. ft. added through acquisitions, developments, and redevelopments eRental(R) online lease rolled out at 100% of our over 2,500 properties Highest Gross Operating Margin among self-storage REITs Record Net Operating Income(1) of $2 billion $1+ billion Est. market value of properties added Highest Revenue per Available Square Foot among self-storage REITs Highest Return on Assets among self-storage REITs(2)

 

(1) 

Net operating income (NOI) is a non-GAAP measure. Refer to pages 31 and F-30 of our Form 10-K filed on February 24, 2021 for information regarding NOI, including a reconciliation to GAAP net income.

(2) 

Return on assets is determined by taking the ratio of NOI over the average of total assets for the period, as presented on our Balance Sheet.

 

4  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

2020 COMPENSATION HIGHLIGHTS

The Company succeeded during these extraordinarily difficult times due in large part to the stewardship and leadership of our senior management team, who protected the safety and wellbeing of our employees, steered the Company through the challenges posed by the COVID-19 pandemic, adopted and executed successful strategies to drive strong performance and increase shareholder value, and advanced the Company’s transformation to create long-term growth despite the unprecedented headwinds facing the Company.

Starting in March 2020, the Board and senior management met regularly to discuss the Company’s strategy for mitigating the impact of the pandemic, protecting the well-being of the Company’s employees and customers, and enhancing the Company’s long-term capabilities. The Company and the Board recognized that the pandemic and the Company’s responsive measures to support its customers, employees, and long-term shareholder value would disrupt business operations and adversely affect 2020 results. Accordingly, the 2020 financial performance metrics and targets that the Compensation Committee had established prior to the onset of the pandemic’s economic effects in the U.S. were no longer appropriate indicators of our management team and the Company’s performance or aligned with the Company’s compensation philosophy.

Beginning in June 2020, the Compensation Committee commenced a comprehensive process to review the Company’s 2020 incentive compensation program in light of these concerns. After regular and ongoing discussions amongst the Compensation Committee, the Board, and management—which included defining revised strategic and operational priorities—the Compensation Committee determined appropriate 2020 incentive-based awards considering, among other factors, the actions taken by our senior management team to mitigate the effects of the pandemic and drive long-term operational capabilities and financial performance.

The following is a summary of the Compensation Committee’s decisions with respect to the key components of the 2020 compensation program for our NEOs:

 

   

Base Salaries. The Compensation Committee did not change base salaries for 2020, except for Natalia N. Johnson, whose base salary increased in August 2020 in connection with Ms. Johnson’s promotion to Chief Administrative Officer.

 

   

2020 Annual Cash Incentives. In recognition of the Company’s strong results and our senior management team’s extraordinary performance in a very difficult operating environment, the Compensation Committee awarded our NEOs their 2020 annual cash incentive at 90% of target.

 

   

2020 Performance-Based RSUs. In determining awards of performance-based RSUs for 2020, the Compensation Committee considered the strong performance of the Company across several operational and financial metrics in light of the COVID-19 pandemic. Due to the exemplary execution by our NEOs of strategic and operational priorities (defined in consultation with the Compensation Committee and the Board), the Compensation Committee granted RSUs at 90% of target to the NEOs for the 2020 performance-based RSU award program.

 

   

Multiyear Performance-Based Options. In early 2020, the Compensation Committee also approved a multiyear performance-based option program based on growth in NAV per share and growth in Total Shareholder Value over a three-year performance period. The Compensation Committee did not make any changes to the program as applied to the 2020-2022 performance period.

The Compensation Committee believes that the foregoing 2020 compensation decisions strike the appropriate balance—consistent with our compensation philosophy—between rewarding management

 

Public Storage  |  2021 Proxy Statement  |  5


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

for their exemplary performance under difficult circumstances, incentivizing our leaders to continue creating long-term value, and attracting and retaining exceptional executives in a competitive labor market. Moreover, the Compensation Committee continued to enhance the Company’s compensation programs with the 2021 incentive performance compensation plan, as described in more detail on page 57.

SUSTAINABILITY FRAMEWORK

Overview and Alignment with Company Strategy

We recognize our responsibility as a global citizen to operate in a responsible and sustainable manner that is aligned with the Company’s long-term strategy and promotes the best interests of our Company and its stakeholders. For nearly 50 years, the Company’s corporate strategy has centered on one core philosophy: create value by operating our properties and the Company for the long term. Through this strategy, we have achieved:

 

   

a geographically diversified property portfolio with low environmental impact;

 

   

a high-integrity corporate culture, fortress balance sheet, and unparalleled brand and operating platform that produce strong free cash flow with sustained growth; and

 

   

significant value creation for our stakeholders, while managing risk.

In an effort to be transparent and to communicate better with our stakeholders regarding the Company’s ongoing sustainability strategies and commitments, the Company issued its first annual Sustainability Report in July 2020, which is accessible on our website at publicstorage.com. Looking forward, we will continue to keep sustainable value creation at the forefront of our strategy and communicate our efforts to mitigate environmental, social, economic, political, data security, reputational, and other risks.

Our Strategic Focus on Long-Term Value Creation

We operate our business for the long haul, and our strategy focuses on the Company’s resilience and performance in the decades to come. The COVID-19 pandemic highlighted the benefits of our long-term strategic focus and sustainable operating model, which were key to the successes the Company achieved in 2020 and set us apart from other companies within and outside the real estate industry.

 

6  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

Certain aspects of our strategy promote long-term value creation and are not intended to maximize short-term financial performance, especially in light of the COVID-19 pandemic and measures the Company took to ensure the long-term viability of the business, even at the expense of short-term financial results. We believe shareholders should consider the following strategy elements and considerations:

 

   
  Strategy Element   Long-Term Considerations   Short-Term Considerations
     

  Low Leverage

  Financial stability and

  flexibility over full

  economic cycles

  Odds of financial distress are minimized, and we are poised for external growth when valuations are most attractive (e.g., down cycles).   Leverage impact on earnings growth is less negative during economic down cycles, but also less positive during upcycles.
   

  Use of Preferred Equity

  Perpetual capital with

  attractive attributes

  Equity capital that can be refinanced at no extra cost in falling interest rate environments and need not be repaid in rising interest rate environments. For example, we refinanced $4.3 billion of preferred equity over the past five years at par value. Refinancing comparable 30-year unsecured bonds would have entailed additional, make-whole costs of approximately $1.6 billion.   Interest paid on preferred equity tends to be higher than unsecured bonds, providing a relative drag on earnings.
   

  Development Platform

  Largest national self-

  storage development

  platform and only in-house

  platform amongst self-

  storage REITs

  Our development platform is a significant competitive advantage and source of long-term value creation. We develop new properties at costs significantly below the values at which existing occupied properties and newly developed properties trade in the marketplace. Since 2013, we have invested $1.2 billion into new property development. We estimate the market value of these properties to be approximately $2.2 billion, equating to $1 billion of value creation that does not show up in our earnings.   Our development program is expensive, creating approximately $65 million of cumulative dilution since 2013.
   

  Same-Store Definition

  Allows true “apples-to-

  apples” financial   performance reporting

  We define our same-store pool to reflect long-term stabilized revenue, expense, and net operating income growth within our portfolio. We believe shareholders and analysts should do the same.   Our self-storage REIT competitors have different definitions that include unstabilized properties in their same-store pools and a significant portion of their property operating expenses in G&A rather than cost of operations. This may enhance reported performance under metrics frequently used by investors and analysts, including same-store NOI growth, operating margin, and company net asset value (NAV).
   

  No Guidance

  Aligning management

  focus with long-term

  value creation

  We do not provide earnings guidance as we believe this would detract from management’s long-term focus and decision-making.   We provide robust discussion of important components of our business in our regular reports to shareholders on our Form 10-Qs and Form 10-K. The Company also announced its inaugural Investor Day to be held on May 3, 2021, to provide our stakeholders with a business update, including a discussion of our long-term strategy, growth initiatives, capital allocation priorities, and focus on sustainability and diversity.

 

Public Storage  |  2021 Proxy Statement  |  7


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

Oversight and Leadership

Our Sustainability Committee, comprising our CEO and other senior executives, directs, supports, and reports on the Company’s ongoing commitment to environmental, health and safety, social responsibility, governance, and other related matters. The Sustainability Committee Charter is available on our website at publicstorage.com.

In addition, the Board and the Nominating, Governance, and Sustainability Committee (NGS Committee) oversees management’s efforts and activities on sustainability initiatives. This ensures a focused and appropriate level of oversight by the Board and demonstrates the Board’s commitment to ensuring the Company’s progress across our sustainability initiatives.

Environmental

Public Storage considers potential environmental impacts—both positive and negative—into our decision-making across the business. The following initiatives reflect the Company’s commitment to responsible environmental stewardship:

 

   

LOW ENVIRONMENTAL IMPACT I Our property portfolio has an inherently light footprint that we further reduce through environmentally friendly capital initiatives.

 

   

LOW OBSOLESCENCE I Properties have retained functional and physical usefulness over many decades. In fact, many customers favor our single-story, drive-up properties built in the 1970s and 1980s due to their central locations and accessibility. This contrasts with other real estate types that require frequent reinvestment (i.e., capital expenditures) to stay current with consumer preference, remain competitive with newer competition, offset heavier wear-and-tear by users, and maintain structural operating efficiency.

 

   

HIGH STRUCTURAL RESILIENCE I We build and operate our properties to withstand the test of time, including general aging and acute and chronic risks from rising water levels, changing temperatures, and natural disasters.

 

8  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

We are pleased to present the following highlights from our environmental stewardship efforts in 2020:

 

 

LOGO

Benchmarking " Our GRESB Real Estate Assessment score is in the top tier among self-storage REITs, and our GRESB Public Disclosure score is well above peer average "We scored well above North American and self-storage REIT scores in our inaugural Carbon Disclosure Project (CDP) survey We issued our inaugural Annual Sustainability Report in 2020 Solar power systems added to 11 properties, with more on the way Water efficient landscaping added to 62 properties LED lighting conversions completed at 264 properties Recycling Use of packaging materials from 100% recycled paper resulted in saving 37,424 trees, over 15 million gallons of water, and 8.8 million kilowatt hours of power | preventing 2,201 tons of CO2 emissions | diverting 7,265 cubic yards of waste from landfills

We will continue to utilize our unique competitive advantages in furthering our environmental stewardship. Moreover, we are committed to improving our climate initiatives and long-term sustainability strategies, including:

 

   

Expediting our understanding of the Paris Climate Agreement and how we can align our strategies and operations with its goal of achieving net-zero emissions globally by mid-century;

 

   

Evaluating the feasibility of instituting short, medium, and/or long-term greenhouse gas emissions reduction targets or other climate-focus targets to encourage or increase adoption of renewable energy or energy efficiency measures; and

 

   

Updating our stakeholders on our ongoing efforts through our Sustainability Report.

In analyzing our potential risk impacts, we will identify and act upon opportunities, including initiatives that make sense from both sustainability and economic return on invested capital perspectives.

 

Public Storage  |  2021 Proxy Statement  |  9


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

Social

Underpinning our long-term successes is a commitment to stakeholders—including employees, customers, communities, investors, and suppliers. We actively engage with stakeholders and incorporate their views into our decision-making. In a world that is increasingly interconnected with faster information dissemination, rapid innovation, quicker decisions, and rising risk, stakeholder focus is a critical strategy element for Public Storage.

We engage with our stakeholders in numerous ways:

 

EMPLOYEES

•  Direct engagement (group and individual)

 

•  Dedicated Learning and Development team

 

•  Development and upward mobility focus

 

•  New hire training programs and job aids

 

•  Ongoing training and job aids

 

•  Sustainability training (88% of employees in 2020)

 

•  Active succession planning at all levels

  

•  Satisfaction surveys (100% of employees in 2020)

 

•  Monthly employee newsletter

 

•  Wellness programs, including mental wellness support

 

•  Monthly safety training at all properties

 

•  Annual safety training at company headquarters

 

•  24-hour anonymous compliance hotline

 

CUSTOMERS    COMMUNITIES

•  Direct engagement at properties

 

•  Direct engagement in customer service functions

 

•  Satisfaction surveys (92% of customers in 2020)

 

•  Environmental clause in lease agreement

 

•  Environmental best practice postings at properties

 

  

•  Employee volunteering

 

•  Cleanliness and safety surrounding properties

 

•  Industry trade group memberships

 

•  Conference and event participation

INVESTORS    SUPPLIERS AND VENDORS

•  Public disclosures

 

•  Quarterly earnings calls

 

•  Direct engagement with management team

 

•  Direct engagement with lead independent trustee, including outreach to beneficial owners of more than 60% of outstanding common shares

 

•  Conference and event participation

 

•  Dedicated investor relations team

  

•  Direct engagement

 

•  Enterprise Risk Management (ERM) and compliance programs addressing anti-boycott, anti-bribery, export restriction, and trade sanction issue

 

•  Supplier code of conduct agreement focused on:

 

o  Prohibiting corrupt or unfair business practices

 

o  Antitrust and fair competition agreements

 

o  Employment law agreements, including involuntary, anti-discriminatory, and child labor

 

10  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

Diversity and Inclusion

Public Storage hires based on personality, skills, and experience without regard to age, gender, race, ethnicity, religion, sexual orientation, or other protected characteristic. We are proud to have a diverse and inclusive workforce that reflects the diversity of customers we serve. Our workforce is:

 

 

LOGO

69% Female 39% Female Managers 52% People of Color Age Distributed Baby Boomer = 10% Gen X = 35% Millennial =40% Gen Z = 15%

We maintain policies regarding diversity, equal opportunity, pay-for-performance, discrimination, harassment, and labor (e.g., child, forced, and compulsory). We celebrate inclusion and value the diversity each employee and customer brings. We believe everyone has the right to be treated fairly, with dignity and respect. We stand with our employees, customers, and communities in the fight against racism and injustice.

Governance

Public Storage’s commitment to the highest ethical standards is the foundation of a governance structure that provides oversight and accountability, promotes fairness and compliance, and proactively manages risk. Governance is critical to our operational, financial, and reputational resilience.

Our Board oversees senior management to ensure the long-term interests of the Company and our stakeholders are best served. Our trustees take a proactive, focused approach to their oversight responsibilities. Our corporate governance is structured to foster principled actions, informed and effective decision making, and appropriate monitoring of performance, risk, and compliance. Trustee decisions are governed by the Corporate Governance Guidelines and Trustees’ Code of Ethics, in addition to individual committee charters.

Key aspects of our governance include:

 

Company-Wide    Board Structure and Composition

•  Strong accountability and oversight

 

•  Pay-for-performance

 

•  Focus on legal and regulatory compliance

 

•  ERM program

  

•  Declassified (annual elections)

 

•  Majority independent trustees

 

•  Lead independent trustee

 

•  Separate Chairman and CEO positions

 

•  Mandatory trustee retirement at age 75

 

•  Ongoing Board refreshment

 

•  All Audit Committee members are financial experts

 

 

Public Storage  |  2021 Proxy Statement  |  11


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

Shareholder Rights    Additional Practices

•  No poison pill

 

•  Right to call special meetings

 

•  Proxy access

 

•  Majority shareholder vote to amend bylaws and approve M&A transactions

 

•  Majority vote requirements for trustee elections

  

•  Stock ownership guidelines

 

•  Clawback policy covering all compensation

 

•  Anti-hedging policy

 

•  No employment or severance agreements

 

•  Double-trigger equity vesting upon change of control

 

•  Political and charitable contributions policy

Code of Conduct

Employees, executive management, and trustees must adhere and annually attest to our Code of Conduct, which includes policies and standards around personal, professional, and marketplace integrity; anonymous reporting of concerns; and protecting company assets, records, and information. The Code of Conduct also covers the Foreign Corrupt Practices Act, antitrust and competition laws, anti-boycott laws, export control laws, insider trading laws, and equal opportunity, diversity, and anti-harassment standards. Executive management and trustees must also adhere to additional Codes of Conduct and Governance Guidelines. In 2020, 100% of employees, executive management, and trustees attested to the Code of Conduct.

Ongoing Board Refreshment

Our Board has continued to advance board refreshment initiatives, appointing six independent trustees since the 2020 Annual Meeting: Kristy Pipes, Shankh Mitra, David Neithercut, Paul Williams, Michelle Millstone-Shroff, and Rebecca Owen.1 In addition, our Board has named Mr. Neithercut as the new Lead Independent Trustee of the Board.

Our Commitment

We are committed to a forward-looking and integrated approach to sustainability across our organization. Our integrated approach to sustainability is based on the following framework:

 

ENVIRONMENTAL    SOCIAL    GOVERNANCE
OPERATIONS

•  Low environmental impact at property and corporate levels

 

•  Initiatives with diverse and interrelated environmental, social, governance, and economic benefits

 

•  Low property obsolescence

  

•  Focus on people including employees, customers, communities, and investors

 

•  Corporate culture built on integrity, accountability, entrepreneurship, employee development, and diversity

 

•  Cultural alignment with corporate strategy

 

  

•  Comprehensive ERM framework

 

•  Robust risk management practices including oversight, succession planning, legal, and regulatory compliance

 

•  Pay-for-performance for all employees

 

1 

Mses. Millstone-Shroff and Owen were appointed in collaboration with Elliott Investment Management, L.P. and its affiliates.

 

12  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proxy Summary and Business, Compensation, and Governance Highlights

 

CAPITAL ALLOCATION

•  Low capital expenditures needed to maintain properties

 

•  Efficient-system initiatives to reduce energy and water use, carbon emission, and waste production

 

•  Redevelopment and adaptive reuse of older, less-efficient properties

 

  

•  Address underserved consumer storage needs

 

•  Help mitigate high costs of housing

 

•  Serve essential-business customers including health professionals, charities, and tradespeople

 

•  Promote job creation and upward mobility

 

  

•  Risk reduction via portfolio geographic diversity, cloud-based operating systems, cyber security, and data privacy initiatives

 

•  Time and capital allocation towards sustainability analysis and reporting

BALANCE SHEET
Low leverage, high permanent capital balance sheet that supports adaptation to the evolving risk environment, provides stability for our employees and customers, and enables execution of Public Storage’s long-term corporate strategy

We strive to reduce the Company’s environmental footprint further, while bolstering our resilience in the face of environmental, economic, political, data security, reputational, and other risks. We will continually strengthen our unique competitive advantages in order to manage risk, create and act upon opportunity, and generate sustained long-term value for our stakeholders. Please refer to our Sustainability Report on our website at publicstorage.com for additional information regarding our sustainability program, efforts, and commitment to our stakeholders.

 

Public Storage  |  2021 Proxy Statement  |  13


Table of Contents

Proposal 1: Election of Trustees

 

 

Proposal 1:

Election of Trustees

 

 

 

   

Our Board has nominated fourteen trustees, who, if elected by shareholders at our Annual Meeting, have agreed to serve until next year’s annual meeting of shareholders.

 

   

 

RECOMMENDATION:

 

Vote FOR each nominee

 

 

14  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

PROPOSAL 1

ELECTION OF TRUSTEES

 

 

EXECUTIVE SUMMARY

Our Board has nominated fourteen trustees for election at this year’s Annual Meeting to hold office until the next annual meeting of shareholders. Of the fourteen trustee nominees, seven independent trustees have been appointed since July 2019, including five newly appointed as of the beginning of 2021:

 

   

Tariq M. Shaukat was appointed effective July 30, 2019;

 

   

Kristy M. Pipes was appointed effective October 26, 2020;

 

   

David J. Neithercut, Shankh S. Mitra, and Paul S. Williams were appointed effective January 1, 2021; and

 

   

Michelle Millstone-Shroff and Rebecca Owen were appointed effective January 5, 2021.

Each of the fourteen nominees has agreed to be named in this proxy statement and to serve on the Board if elected. We expect all nominees to attend the Annual Meeting.

If any of our nominees becomes unavailable to stand for election, the proxies named on the proxy card intend to vote your Common Stock for the election of any substitute nominee proposed by the Board.

We believe that each nominee has the skills, experience, and personal qualities the Board seeks and that the combination of these nominees creates an effective, well-functioning Board that serves the best interests of Public Storage and our shareholders.

The Board is responsible for overseeing management and providing sound governance on behalf of our shareholders. The Board and each of its committees have an active role in overseeing management of the Company’s risks, a responsibility that the Board believes is one of its most important areas of oversight.

The Board carries out its responsibilities through (1) the effective collaboration of our highly capable and experienced trustees; (2) a well-crafted Board structure, which includes separate individuals holding the positions of the Chief Executive Officer, the Chairman of the Board, and the Lead Independent Trustee; (3) a strong committee structure that enables trustees to provide the appropriate level of focused oversight and subject-matter expertise; and (4) adherence to our Corporate Governance Guidelines and Trustees’ Code of Ethics.

 

Public Storage  |  2021 Proxy Statement  |  15


Table of Contents

Proposal 1: Election of Trustees

 

BOARD COMPOSITION HIGHLIGHTS

Trustee diversity is important because having a variety of points of view improves the quality of dialogue, contributes to a more effective decision-making process, and enhances overall culture in the boardroom. Our trustees represent a diversity of professional experience, race, ethnicity, gender, age, and cultural background, including:

 

Gender and Racial Diversity   Age Diversity

LOGO

Racially Diverse Non-Racially Diverse Men Women 5 4 9 10

 

LOGO

40s 50s 60s 70s 3 2 8 1

Independence   Tenure

LOGO

Independent Trustees Non-Independent Trustees 4 10

 

LOGO

0-1 Years -5 Years 5 Years+ 5 5 4

BOARD EVALUATIONS AND NOMINATIONS

In our annual Board evaluation and nomination process, the Nominating, Governance, and Sustainability (NGS) Committee evaluates our trustees in light of the current needs of the Board and the Company. In addition, during the course of the year, the NGS Committee discusses Board succession and reviews potential trustee candidates. The NGS Committee has in the past retained third parties to assist in identifying potential nominees.

Our annual evaluation process involves assessments at the Board, Board committee, and individual trustee levels under the direction of the NGS Committee Chair and the Chairman of the Board. This process assists the Board in determining the appropriate nominees for election based on current Company and Board needs. In addition, the NGS Committee takes into consideration its ongoing evaluation of potential new trustee candidates when recommending a slate of nominees for election to the Board at each annual meeting of shareholders.

 

16  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

BOARD QUALIFICATIONS

The NGS Committee has developed a matrix of skills to assess the qualifications of trustee candidates, including:

 

   

diversity enhancing qualities—age, remaining time until mandatory retirement age, gender, and diverse background, including coming from underrepresented communities;

 

   

core trustee attributes—independence, high integrity and ethical standards, public company service, risk management experience, understanding or experience with complex public companies or like organizations, and ability to work collegially and collaboratively with other trustees and management; and

 

   

additional skills such as financial literacy, industry experience, operational management experience, capital markets/banking expertise, corporate governance, real estate, technology, marketing, tax, senior executive experience, and other expertise that may be important to the Company’s strategic objectives.

The NGS Committee considers all these relevant attributes of each Board candidate, including professional skills, experience and knowledge, and gender, race, ethnicity, nationality, and background, with the goal of putting forth a diverse slate of candidates with a combination of skills, experience, and personal qualities that will best serve the Board and its committees, our Company, and our shareholders.

BOARD REFRESHMENT

Our Board and the NGS Committee regularly consider the long-term make up of our Board and how the members of our Board change over time. Our Board and the NGS Committee also understand the importance of Board refreshment and aim to strike a balance between the knowledge that comes from longer-term service on the Board with the new experience, ideas, and energy that can come from adding trustees to the Board.

In December 2020, our Board appointed three new independent trustees to the Board, and in connection with our entry into a cooperation agreement with Elliott Investment Management L.P., Elliott Associates, L.P. and Elliott International, L.P. (the Cooperation Agreement), our Board appointed an additional two independent trustees to the Board who were initially identified and recommended by affiliates of Elliott but were otherwise unaffiliated with Elliott. These five trustees have been nominated by our Board for election at the Annual Meeting to the Board at the 2021 Annual Meeting.

Assuming the election of this year’s proposed trustee nominees, we believe we will have a good balance between tenured trustees with significant experience with the Company and new trustees with fresh perspectives, constituting a strong, independent Board that will be well-positioned to navigate the current challenging business environment and accelerate the Company’s growth and accomplishment of key corporate objectives for the benefit of all of our stakeholders.

BOARD FOCUS ON DIVERSITY

Board succession and ensuring an appropriate balance of experience and diversity are key focus areas for the NGS Committee and the Board. Our Board reflects diverse perspectives, including a complementary mix of skills, experience, and backgrounds, that we believe are paramount to our ability to represent the interests of all stakeholders. Our Board recognizes the importance of diversity and supports management’s efforts to enhance all aspects of diversity throughout the Company.

 

Public Storage  |  2021 Proxy Statement  |  17


Table of Contents

Proposal 1: Election of Trustees

 

Our trustees, over 71% of whom are independent, have a broad range of experience in varying fields, including finance, real estate, financial reporting, banking, international affairs, governance, marketing, retail, operations, legal, and technology. A majority of our trustees hold or have held directorships at other U.S. public companies. Five of our trustees, in addition to our Chairman and our CEO, have served as chief executive officers, and all have demonstrated superb leadership and analytical skills gained from deep experience in management, finance, and corporate governance.

Five of our trustees are females and four trustees are racially diverse and self-identify as being from an underrepresented community. Additionally, our Chairman and our CEO have provided meaningful in-person opportunities for the Board to interact with key members of management beyond our executive officers on a quarterly basis. Half of our current executive officers are diverse (including our Chief Legal Officer and our Chief Administrative Officer). Similarly, 52% of our over 5,700 employees are people of color and 69% of our employees are female.

 

18  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

NOMINEE QUALIFICATIONS

The Board has nominated fourteen trustees, eight of whom are incumbents elected at our 2020 annual meeting of shareholders, and six of whom were appointed to the Board at the end of 2020 and beginning of 2021, to serve until our 2021 Annual Meeting. Pursuant to the terms of a cooperation agreement between the Company and Elliott Investment Management L.P. and its affiliates, the Company appointed Ms. Millstone-Shroff and Ms. Owen to the Board in January 2021 and agreed to nominate them for election at the Annual Meeting.

We recommend that you vote FOR each nominee.

 

       
  Nominee   Age     Principal Professional Background   Trustee  
Since
  Committee
Membership
         
  Ronald L. Havner, Jr.   63   Chairman of the Board; Retired Chief Executive Officer of Public Storage   2002    
       
  Tamara Hughes Gustavson   59   Real Estate Investor; Philanthropist   2008    
       

  Leslie S. Heisz

  (Independent Trustee)

  60   Retired Managing Director of Lazard Frères   2017   NGS and Long-Term Planning
       

  Michelle Millstone-Shroff

  (Independent Trustee)

  45   Former Chief Customer Experience Officer of Bed Bath & Beyond   2021   Compensation and Long-Term Planning
       

  Shankh S. Mitra

  (Independent Trustee)

  40   Chief Executive Officer and Chief Investment Officer of Welltower, Inc.   2021  

Compensation and

Long-Term Planning

       

  David J. Neithercut

  (Lead Independent Trustee)

  65   Retired President and Chief Executive Officer of Equity Residential   2021   NGS and Long-Term Planning
       

  Rebecca Owen

  (Independent Trustee)

  59   Retired President of CEI Realty, Inc.; Former Chief Legal Officer of Clark Enterprises, Inc.   2021   Audit and Long-Term Planning
       

  Kristy M. Pipes

  (Independent Trustee)

  61   Retired Managing Director and Chief Financial Officer of Deloitte Consulting   2020   Audit (Chair) and NGS
       
  Avedick B. Poladian   (Independent Trustee)   69   Retired Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc. (Lowe Enterprises)   2010   Audit and Compensation (Chair)
       
  John Reyes   60   Retired Chief Financial Officer of Public Storage   2019    
       
  Joseph D. Russell, Jr.   61   President and CEO of Public Storage; Former Chief Executive Officer of PS Business Parks, Inc.   2019    
       

  Tariq M. Shaukat

  (Independent Trustee)

  48   President, Bumble   2019   Audit
       

  Ronald P. Spogli

  (Independent Trustee)

  72   Co-Founder of Freeman Spogli & Co.; Former Ambassador to the Italian Republic and the Republic of San Marino   2010   NGS (Chair) and Compensation
       

  Paul S. Williams

  (Independent Trustee)

  61   Retired Partner as Major, Lindsey & Africa; President of the National Association of Corporate Directors (NACD) Chicago Chapter   2021   Compensation and NGS

 

Public Storage  |  2021 Proxy Statement  |  19


Table of Contents

Proposal 1: Election of Trustees

 

TRUSTEE NOMINEES SKILLS SUMMARY

The Board believes that our trustee nominees provide Public Storage with the combined skills, experience, and personal qualities needed for an effective and engaged Board.

 

                             
     LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
                             
Chief Executive Officer or Executive Experience                                
                             
Public Board Experience                                
                             
Relevant Industry Experience                                      
                             
Financial or Tax Expertise                                    
                             
Corporate Governance Experience                                        
                             
M&A and Capital Allocation/Capital Markets Experience                                
                             
Succession Planning/Management Development Experience                                  
                             
International Executive or Global Company Board Experience                                              
                             
Technology and Data Analytics Experience                                                  
                             
Brand Marketing or Consumer Facing/Retail Experience                                                
                             
Gender Diversity                                              
                             
Racial Diversity (including self-identification as being from an underrepresented community                                                
                             
Major Shareholder                                                                       

 

20  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

Age: 63

 

Trustee since: 2002

 

Trustee Qualification Highlights:

 

Extensive leadership experience and Company and industry knowledge; financial and M&A expertise

  

Ronald L. Havner, Jr.

Chairman

 

Mr. Havner joined the Board in November 2002 and has served as Chairman since August 2011. Mr. Havner served as Chief Executive Officer of Public Storage from November 2002 until his retirement on January 1, 2019. Mr. Havner joined Public Storage in 1986 and held a variety of senior management positions prior to becoming Chief Executive Officer.

 

Mr. Havner has served as Chairman of the Board of Public Storage’s affiliate, PS Business Parks, Inc. (NYSE: PSB) since March 1998, and as Chairman of the Board of another Public Storage affiliate, Shurgard Self Storage SA (EURONEXT: SHUR) since completion of its initial public offering in October 2018. Mr. Havner also serves as a director of AvalonBay Communities, Inc. (NYSE: AVB) and served as director of California Resources Corp. (NYSE: CRC) from December 2014 to May 2018. Mr. Havner was the 2014 Chairman of the Board of Governors of the National Association of Real Estate Investment Trusts, Inc. (NAREIT).

 

Mr. Havner’s qualifications for the Board include his extensive leadership experience and Company and industry knowledge. Having served as Chief Executive Officer for 17 years, Mr. Havner provides an invaluable perspective in Board discussions about the historic operations and strategic direction of the Company.

 

  

Age: 59

 

Trustee since: 2008

 

Trustee Qualification Highlights:

 

Previous experience at the Company; ongoing investment; charitable board experience

  

Tamara Hughes Gustavson

Real Estate Investor; Philanthropist

 

Ms. Gustavson joined the Board in November 2008. She was previously employed by Public Storage from 1983 to 2003, serving most recently as Senior Vice President, Administration. During the past seven years, Ms. Gustavson has supervised her personal business investments and engaged in charitable activities. Ms. Gustavson currently serves as chairperson for the Board of Trustees of American Homes 4 Rent (NYSE: AMH) and also serves on the Board of Trustees of the William Lawrence and Blanche Hughes Foundation and the Board of Trustees of the University of Southern California. Ms. Gustavson is our largest single shareholder and a member of the Hughes family (the Hughes Family) that collectively owns approximately 13.05% of the Company’s Common Stock. She is the daughter of B. Wayne Hughes, Chairman Emeritus and the Company’s Co-Founder.

 

Ms. Gustavson’s qualifications for election to the Board include her previous managerial experience at Public Storage and her ongoing investment and charitable board experience. In addition, as the largest individual shareholder of the Company, Ms. Gustavson provides the Board with a shareholder’s perspective in Board discussions about the operations and strategic direction of the Company.

 

 

 

Public Storage  |  2021 Proxy Statement  |  21


Table of Contents

Proposal 1: Election of Trustees

 

Age: 60

 

Trustee since: 2017

 

Committees:

 

NGS and Long-Term Planning

 

Trustee Qualification Highlights:

 

Business expertise across a number of industries; financial expertise; public company board experience

  

Leslie S. Heisz

Retired Managing Director of Lazard Frères

 

Ms. Heisz joined the Board in February 2017. Ms. Heisz is an experienced investment banking and finance executive. Ms. Heisz joined Lazard Frères, a financial advisory and asset management firm and independent investment bank, in 2003 as a senior advisor and served as a managing director from 2004 through April 2010, providing strategic financial advisory services for clients in a variety of industries. Ms. Heisz was previously a managing director of Dresdner Kleinwort Wasserstein and its predecessor for six years, specializing in mergers and acquisitions, as well as leveraged finance, and leading the Gaming and Leisure Group and the Los Angeles office.

 

Ms. Heisz has been a member of the Board of Directors of Kaiser Permanente since January 2015 and Edwards Lifesciences (NYSE: EW) since July 2016. Ms. Heisz also joined the board of a Capital Group/American Funds mutual fund cluster (CGPCS, EMGF, IVE, and GIF) in January 2019. She previously served on the Boards of Directors of Ingram Micro Inc. (NYSE: IM), Towers Watson (NASDAQ: WLTW), HCC Insurance Holdings, Inc. (HCC), and International Game Technology (NYSE: IGT).

 

Ms. Heisz’s qualifications for election to the Board include her financial expertise and diverse business experiences across a number of industries, including deep finance and strategic advisory skills. She has also had extensive corporate governance experience serving on many public company boards.

 

  

Age: 45

 

Trustee since: 2021

 

Committees:

 

Compensation and Long-Term Planning

 

Trustee Qualification Highlights:

 

Extensive retail
and operations experience 

  

Michelle (Meka) Millstone-Shroff

Former Chief Customer Experience Officer, Bed Bath & Beyond

 

Ms. Millstone-Shroff joined the Board in January 2021. Ms. Millstone-Shroff previously served as the Chief Customer Experience Officer of Bed Bath & Beyond Inc. (NASDAQ: BBBY), a chain of domestic merchandise retail stores, and as the President & Chief Operating Officer of buybuy BABY, a subsidiary of Bed Bath & Beyond and a retailer of items for infants and toddlers. She also served as the Chief Operating Officer of buybuy BABY. Prior to Bed Bath & Beyond, Ms. Millstone-Shroff worked at McKinsey & Company, with a focus on retail- and consumer-oriented companies.

 

Ms. Millstone-Shroff has served on the boards of directors of Neiman Marcus Group Inc. (NYSE: NMG.A) since September 2020, Nanit, a private technology company, since December 2019, and Party City Holdco Inc. (NYSE: PRTY) since February 2019.

 

Ms. Millstone-Shroff’s qualifications for the Board include her significant retail and operations experience and her experience as a strategic operating advisor.

 

  

 

22  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

Age: 40

 

Trustee since: 2021

 

Committees:

 

Compensation and Long-Term Planning

 

Trustee Qualification Highlights:

 

Extensive experience in the real estate industry; financial and capital allocation expertise

  

Shankh S. Mitra

Chief Executive Officer and Chief Investment Officer, Welltower Inc.

 

Mr. Mitra joined the Board in January 2021. Mr. Mitra has served as the Chief Executive Officer and Chief Investment Officer of Welltower Inc. (NASDAQ: WELL), a publicly traded real estate investment trust that invests in leading seniors housing operators, post-acute providers, and health systems since August 2018. Previously, Mr. Mitra served as Welltower’s Senior Vice President—Investments from January 2018 to August 2018. Mr. Mitra served as Welltower’s Senior Vice President—Finance & Investments from January 2016 to January 2018. From July 2013 to December 2015, Mr. Mitra served as Portfolio Manager, Real Estate Securities at Millennium Management. Mr. Mitra served as Senior Analyst at Citadel Investment Group from April 2012 to June 2013 and Fidelity Investments from June 2009 to March 2012.

 

Mr. Mitra has served as a director of Welltower Inc. (NASDAQ: WELL) since October 2020.

 

Mr. Mitra’s qualifications for election to the Board include his extensive experience in the real estate industry and his financial acumen and expertise in capital allocation. 

 

  

Age: 65

 

Trustee since: 2021

 

Committees:

 

NGS and Long-Term Planning

 

Trustee Qualification Highlights:

 

Extensive experience in REITs; financial and leadership expertise

  

David J. Neithercut

Retired President and Chief Executive Officer, Equity Residential

 

Mr. Neithercut joined the Board in January 2021. He served as the Chief Executive Officer of Equity Residential (NYSE: EQR), a publicly traded real estate investment trust that invests in apartments, from January 2006 until retirement in December 2018 and as President from May 2005 to September 2018. Previously, Mr. Neithercut served as Executive Vice President—Corporate Strategy from January 2004 to May 2005, and Executive Vice President and Chief Financial Officer from February 1995 to August 2004.

 

Mr. Neithercut has served on the Board of Trustees of Equity Residential since 2006 and is a member of the Board of Trustees of Americold Realty Trust (NYSE:COLD). Mr. Neithercut was formerly a director of General Growth Properties, Inc., (NYSE:GGP and now a part of Brookfield Realty Partners).

 

Mr. Neithercut’s qualifications for election to the Board include his deep experience in the REIT space, financial expertise, and his long and successful track record in executive leadership positions.

 

  

 

Public Storage  |  2021 Proxy Statement  |  23


Table of Contents

Proposal 1: Election of Trustees

 

Age: 59

 

Trustee since: 2021

 

Committees:

 

Audit and Long-Term Planning

 

Trustee Qualification Highlights:

 

Extensive real estate experience; legal and governance and public company board experience

  

Rebecca Owen

Retired President of CEI Reality, Inc.; Former Chief Legal Officer of

Clark Enterprises, Inc.

 

Ms. Owen joined the Board in January 2021. Ms. Owen has served as the Chairman and founder of Battery Reef, LLC, a commercial real estate investment and management company, since January 2019. From 1995 until January 2019, she served in various roles at Clark Enterprises, Inc., a private investment firm, and its affiliated companies, including Senior Vice President of Clark Enterprises, Inc. from 1995 to 2019, President of CEI Realty, Inc., the real estate investment arm of Clark Enterprises, Inc. from 2015 to 2019, and Chief Legal Officer of Clark Enterprises, Inc. from 1995 to 2017.

 

Ms. Owen has served on the board of directors of Carr Properties, a private real estate investment trust, since 2013, and on the Real Estate Investment Advisory Committee of ASB Capital Management, LLC, an institutional real estate investment firm, since January 2017. Previously, Ms. Owen served on the boards of directors of WillScot Corp. (NASDAQ: WSC) from April 2019 to June 2020 and Jernigan Capital, Inc. (NYSE: JCAP) from December 2018 to November 2020.

 

Ms. Owen’s qualifications for the Board include her significant experience as both an executive and director in the real estate industry.

 

  

Age: 61

 

Trustee since: 2020

 

Committees:

 

Audit (Chair) and NGS

 

Trustee Qualification Highlights:

 

Extensive leadership and financial expertise and other public company board experience

  

Kristy M. Pipes

Former Managing Director and Chief Financial Officer of Deloitte Consulting

 

Ms. Pipes joined the Board in October 2020. Ms. Pipes previously served as Managing Director and Chief Financial Officer of Deloitte Consulting, a management consultancy firm with operations in the United States, India, Germany, and Mexico, where she managed the finance function. Ms. Pipes held various leadership positions, including serving on the firm’s Management Committee and Consulting Operations Committee.

 

Prior to joining Deloitte in 1999, Ms. Pipes was Vice President and Manager, Finance Division, at Transamerica Life Companies and Senior Vice President and Chief of Staff for the President and Chief Executive Officer (among other senior management positions) at First Interstate Bank of California. Ms. Pipes also serves as a director of PS Business Parks, Inc. (NYSE: PSB) and ExlService Holdings, Inc. (NASDAQ:EXLS).

 

Ms. Pipes’s qualifications for election to the Board include her extensive financial analysis and operational expertise. Ms. Pipes also brings deep management and leadership experience to the Board, having held several senior leadership positions during her career.

 

 

24  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

Age: 69

 

Trustee since: 2010

 

Committees:

 

Compensation (Chair)and Audit

 

Trustee Qualification Highlights:

 

Accounting and financial expertise and other public company board experience; extensive knowledge of the real estate industry

  

Avedick B. Poladian

Retired EVP and COO of Lowe Enterprises

 

Mr. Poladian joined the Board in February 2010. From 2007 to the end of 2016, Mr. Poladian held the positions of Executive Vice President and Chief Operating Officer for Lowe Enterprises, a diversified national real estate company that he joined in 2003. Mr. Poladian was with Arthur Andersen from 1974 to 2002 as Managing Partner, Pacific Southwest.

 

He serves as a director of two publicly traded funds managed by Western Asset Management Funds, a director of Occidental Petroleum Corporation (NYSE: OXY), and a director of California Resources Corp. (NYSE: CRC). Mr. Poladian is also a member of the Board of Councilors of the USC Sol Price School of Public Policy, the Board of Advisors of the Ronald Reagan UCLA Medical Center, and the YMCA of Metropolitan LA.

 

Mr. Poladian qualifies as one of the Company’s Audit Committee financial experts and provides the Board expert perspective in financial management and analysis. Mr. Poladian has extensive knowledge of the real estate industry and key business issues by virtue of his service in a senior management position at one of the world’s largest accounting firms and his experience as Chief Operating Officer and Chief Financial Officer of a diversified real estate company. Through his experience with other public companies, Mr. Poladian brings valuable insight into our business and corporate governance.

 

  

Age: 60

 

Trustee since: 2019

 

Trustee Qualification Highlights:

 

Leadership and experience at the Company as former CFO; accounting and financial expertise

  

John Reyes

Retired Senior Vice President and Chief Financial Officer of Public Storage

 

Mr. Reyes joined the Board in January 2019. Mr. Reyes served as Senior Vice President and Chief Financial Officer of Public Storage from 1996 until his retirement effective January 1, 2019. Mr. Reyes joined Public Storage in 1990 and served in various positions until his promotion to Chief Financial Officer in 1996. From 1983 to 1990, Mr. Reyes was employed by EY. Mr. Reyes is a Certified Public Accountant.

 

In considering the nomination of Mr. Reyes for election to the Board, the Board considered Mr. Reyes’s extensive accounting and financial expertise, his experience in having served as the Company’s Senior Vice President and Chief Financial Officer from 1996 to January 1, 2019, as well as Mr. Reyes’s tenure with the Company of almost 30 years. As our former Chief Financial Officer, he is able to provide unique insights into our Company’s financial reporting, controls, and risk management, as well as capital management processes and assessments. Mr. Reyes provides invaluable perspective in Board discussions about the historic operations and strategic direction of the Company.

 

 

Public Storage  |  2021 Proxy Statement  |  25


Table of Contents

Proposal 1: Election of Trustees

 

Age: 61

 

Trustee since: 2019

 

Committees:

 

Long-Term Planning (Chair)

 

Trustee Qualification Highlights:

 

Extensive leadership experience; extensive Company and industry knowledge

  

Joseph D. Russell, Jr.

President and CEO of Public Storage

 

Mr. Russell joined the Board in January 2019. Mr. Russell has been President of Public Storage since July 2016 and has served as its Chief Executive Officer since January 1, 2019. Previously, Mr. Russell was President and Chief Executive Officer of PS Business Parks, Inc. (NYSE: PSB), an affiliate of the Company that acquires, develops, and operates commercial properties, from August 2002 until July 2016. Mr. Russell has served on the Board of Directors of PS Business Parks since August 2003. Mr. Russell also serves on the Board of Governors of NAREIT. Before joining PS Business Parks, Mr. Russell was employed by Spieker Properties, Inc. (Spieker) an owner and operator of office and industrial properties in Northern California, and its predecessor, for more than ten years. Mr. Russell served as an officer of Spieker when it became a publicly traded REIT in 1993.

 

Mr. Russell’s qualifications for election to the Board include his leadership experience and Company and industry knowledge, including his more than 20-year involvement with publicly traded REITs and extensive experience with office and industrial real estate. Mr. Russell provides management’s perspective in Board discussions about the operations and strategic direction of the Company.

 

  

Age: 48

 

Trustee since: 2019

 

Committees: Audit

 

Trustee Qualification Highlights:

 

Extensive experience in marketing, consumer-facing issues, and technology; leadership experience

  

Tariq M. Shaukat

President, Bumble

 

Mr. Shaukat joined the Board in July 2019. He has been President of Bumble Inc. since July 2020. Prior to that, he was President of Google Cloud at Google LLC, where he oversaw operating and customer-based initiatives to accelerate growth across all lines of business, including analytics and machine learning. Prior to joining Google LLC in 2016, Mr. Shaukat was Executive Vice President and Chief Commercial Officer at Caesars Entertainment Corporation, after initially joining the company in 2012 as Executive Vice President and Chief Marketing Officer. His responsibilities included oversight of revenue management, marketing, information technology, and analytics across all business lines. Prior to Caesars Entertainment Corporation, Mr. Shaukat was Partner at McKinsey & Company and held leadership positions at various technology-based companies.

 

Mr. Shaukat’s qualifications for election to the Board include his extensive digital, marketing, and data analytics experience. In addition, Mr. Shaukat brings his proven leadership and unique perspective to the Board.

 

  

 

26  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

Age: 72

 

Trustee since: 2010

 

Committees:

 

NGS (Chair) and Compensation

 

Trustee Qualification Highlights:

 

Broad-ranging investment banking and executive experience; experience in government and international relations

  

Ronald P. Spogli

Co-Founder of Freeman Spogli & Co.

Former Ambassador to the Italian Republic

and the Republic of San Marino

 

Mr. Spogli joined the Board in February 2010. Mr. Spogli co-founded Freeman Spogli & Co. (Freeman Spogli), a private investment firm dedicated to middle-market companies positioned for growth, in 1983. Freeman Spogli has invested over $5 billion of private equity capital in 65 companies over 37 years and currently manages four individual funds total $5 billion in committed capital. He served as the United States Ambassador to the Italian Republic and the Republic of San Marino from August 2005 until February 2009.

 

Mr. Spogli also serves as the Vice Chair of The J. Paul Getty Trust and on the boards of trustees of the W. M. Keck Foundation, the Center for American Studies in Rome, Italy, and White Bridge Investments, an Italian investment company.

 

Mr. Spogli’s qualifications for election to the Board include his broad-ranging board and executive responsibilities for a variety of companies engaged in consumer businesses in which the firm of Freeman Spogli has investments. In addition, Mr. Spogli’s experience in government and international relations provides helpful insight in the European countries where Public Storage has investments.

 

  

Age: 61

 

Trustee since: 2021

 

Committees:

 

Compensation and NGS

 

Trustee Qualification Highlights:

 

Extensive experience in corporate governance; public company board experience

  

Paul S. Williams

Retired Partner, Major, Lindsey & Africa

President, National Association of Corporate Directors (NACD), Chicago Chapter

 

Mr. Williams joined the Board in January 2021. Mr. Williams served as a Partner and Managing Director of Major, Lindsey & Africa, LLC, an executive recruiting firm, from 2005 to 2018. He also served as Director of Global Diversity Search, assisting legal organizations in enhancing their diversity. Mr. Williams is the President of the Chicago Chapter of the National Association of Corporate Directors (NACD).

 

From 2001 through 2005, Mr. Williams served as Executive Vice President, Chief Legal Officer & Corporate Secretary of Cardinal Health, Inc. (CAH), a provider of products and services to healthcare providers and manufacturers. Mr. Williams has served as a director of Compass Minerals (NYSE: CMP), a producer of salt, plant nutrients, and magnesium chloride for distribution primarily in North America, since June 2009. Mr. Williams also joined the Board of Directors of Romeo Power, Inc. (NYSE: RMO), an energy technology company, in December 2020, and Air Transport Services Group (NASDAQ: ATSG), a provider of aircraft leasing and air cargo transportation and related services, in January 2021.

 

Mr. Williams served as a director of Essendant, Inc. (NASDAQ: ESND), a publicly traded national wholesale distributor of business products, from 2014 through 2019 and served as a director of Bob Evans Farms, Inc. (NASDAQ: BOBE), a publicly traded owner and operator of restaurants, from 2007 through 2017. He also served as Lead Independent Director of State Auto Financial Corporation (NASDAQ: STFC), a publicly traded property and casualty insurance company, on whose board he served from 2003 to 2015. Since early 2020, Mr. Williams has served on the board of directors of a large cluster of funds in the American Funds mutual fund family (part of the privately-held Capital Group).

 

Mr. Williams’s qualifications for the Board include his extensive legal, regulatory, and corporate governance experience. In addition, Mr. Williams brings substantial executive management leadership experience and a strong background in human resources and talent development, including with respect to diversity and inclusion.

 

 

Public Storage  |  2021 Proxy Statement  |  27


Table of Contents

Proposal 1: Election of Trustees

 

VOTE REQUIRED AND RECOMMENDATION

For the election of trustees, trustee nominees receiving an affirmative vote of a majority of the votes cast at the Annual Meeting will be elected. For purposes of the vote on this proposal, abstentions and broker non-votes will not affect the vote.

The Board recommends voting FOR all trustee nominees.

 

28  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

CORPORATE GOVERNANCE

BOARD ENGAGEMENT AND OVERSIGHT

Our Board has been a critical resource for senior management and has provided invaluable insight and oversight as senior management assessed and responded to the economic effects and disruption caused by the COVID-19 pandemic. The Board and our senior leadership team engaged regularly and collaborated closely to ensure the Company met its commitments to all stakeholders, including our employees, customers, and our shareholders.

Throughout 2020, our Board and committees not only maintained their regular schedule of quarterly meetings, but also began regular and frequent meetings with management regarding COVID-19, including its impact on employees, operations, financial performance, and legal and regulatory matters. The Board provided valuable oversight, review, and counsel related that helped management respond quickly and appropriately to the unexpected challenges resulting from the COVID-19 pandemic.

While the COVID-19 pandemic has required our senior management team and the Board’s immediate attention, one of the Board’s highest priorities continues to be guiding the development and execution of the Company’s long-term strategy. The Board remains focused on working with management to develop strategies to accelerate growth and create long-term value for our shareholders.

GOVERNANCE STRUCTURE

Our Board oversees the CEO and other senior management to ensure that the long-term interests of the Company and our shareholders are best served. We expect our trustees to take a proactive, focused approach to executing their oversight responsibilities.

Our governance structure is designed to foster principled actions, informed and effective decision-making, and appropriate monitoring of performance, risk, and compliance. Our key governance documents, including our Corporate Governance Guidelines and Trustee’s Code of Ethics, Code of Conduct, Code of Ethics for Senior Financial Officers, and our committee charters, are available at the Investor Relations section of our website, publicstorage.com, or by writing to Public Storage, 701 Western Avenue, Glendale, California 91201, Attention: Corporate Secretary. We will disclose any substantive amendments to or waivers of any of our ethics policies and standards on our website and in accordance with Securities and Exchange Commission (SEC) and New York Stock Exchange (NYSE) requirements.

PROXY ACCESS

Our Bylaws provide for proxy access, thereby giving our shareholders an even greater voice in trustee elections. A shareholder, or a group of up to 20 shareholders, owning at least 3% of the Company’s outstanding Common Stock continuously for at least 3 years may include in our proxy materials trustee nominees constituting up to the greater of two trustees or 20% of the number of trustees on the Board, provided that the shareholder and the nominees satisfy the eligibility requirements in our Amended and Restated Bylaws (Bylaws). There are no qualifying shareholder nominations for inclusion in our proxy statement.

POLITICAL AND CHARITABLE CONTRIBUTIONS

In February 2020, our Board and the NGS Committee approved amendments to the NGS Committee Charter to include oversight responsibilities with respect to the Company’s political and charitable contributions and other public policy matters. In order to facilitate accountability and informed decision-making with respect to the Company’s political contributions, the Governance Committee has adopted

 

Public Storage  |  2021 Proxy Statement  |  29


Table of Contents

Proposal 1: Election of Trustees

 

certain Political and Charitable Contributions Guidelines that apply to contributions or expenditures of corporate funds to various political entities, charitable organizations, and certain causes. Contributions subject to the Guidelines must be approved by a management committee, and/or the NGS Committee. All contributions are required to be reported quarterly to the NGS Committee.

BOARD LEADERSHIP STRUCTURE

One of the Board’s key responsibilities is to determine the optimal leadership structure to provide effective oversight of management. As a result, the Board does not have a policy as to whether the roles of Chairman and CEO should be separated or combined. The Board believes that Public Storage shareholders are best served when the Board has flexibility to consider the relevant facts and circumstances to ensure that the Board leadership structure best reflects the needs of the Company at that time.

Prior to January 1, 2019, when Ronald L. Havner, Jr., retired as CEO, the roles of Chairman and CEO were combined and held by Mr. Havner. Upon his retirement, the Board determined that Mr. Havner would remain Chairman of the Board, and the roles of Chairman and CEO have been separately held by Mr. Havner and Mr. Russell, respectively, since January 1, 2019.

Our Board established the position of Lead Independent Trustee in 2011 to provide for an independent leadership role on the Board when the roles of Chairman and CEO are combined. Notwithstanding that the Chairman and CEO roles were separated on January 1, 2019, we maintain the Lead Independent Trustee role as a matter of good corporate governance and to bolster the independence of the Board.

We describe more fully the role of the Lead Independent Trustee in our Corporate Governance Guidelines. Among other things, the Lead Independent Trustee presides at all executive sessions of the independent trustees. Our Lead Independent Trustee is David Neithercut, who was appointed in January 2021.

BOARD’S ROLE IN RISK OVERSIGHT

Our Board is responsible for overseeing our Company-wide approach to the identification, assessment, and management of key risks facing the Company. The Board recognizes its responsibility for overseeing the assessment and management of risks that may threaten successful execution of our long-term strategies.

Accordingly, in 2020, senior management, under the oversight and direction of the Board, enhanced the processes by which the Board oversees the identification and management of risks. The foundational work we completed in 2020 has better equipped both the senior management team and our Board to tackle the risks associated with the COVID-19 pandemic and other key risks affecting the Company’s ability to execute on its short- and long-term strategies and goals.

The enhanced processes include a comprehensive ERM framework focused on:

 

   

evaluating the risks facing the Company and aligning the Company’s efforts to mitigate those risks with its strategy and risk appetite;

 

   

communicating and improving the Company’s understanding of its key risks and responsive actions; and

 

   

providing the Board with a measurable way to exercise its oversight responsibilities over the Company’s risk assessment and risk management efforts.

 

30  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

Critical components of our risk oversight framework include regular assessments among risk owners to identify and assess key risks facing the Company. Our executive team calibrates risk owner assessments across each of our key risk categories and leads efforts to identify mitigation controls to reduce the Company’s exposure to risks.

Oversight for certain specific risks falls under the responsibilities of our Board committees. The committees regularly advise the full Board of their oversight activities.

The Audit Committee focuses on financial and other risks, including reputational and legal risks, affecting the Company. The Audit Committee also discusses the Company’s policies with respect to risk assessment and risk management.

 

   

Oversight of Financial Risks. The Audit Committee, which comprises entirely independent trustees and financial experts, is responsible for assisting the Board in fulfilling its oversight of the effectiveness of the accounting and financial reporting processes of the Company and audits of its financial statements, including the integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory requirements; the independent registered public accountants’ qualifications, independence, and performance; and the scope and results of internal audits, the Company’s internal controls over financial reporting, and the performance of the Company’s internal audit function.

 

   

Oversight of Information Security Risks. The Audit Committee also oversees cybersecurity and other information technology risks affecting the Company. Management reports quarterly to the Audit Committee regarding information security. Three members of our Board have information security experience from their principal occupation, and we consider each member of our Audit Committee to possess information security experience by way of their oversight responsibilities over this area.

We identify and address information security risks by employing a defense-in-depth methodology that provides multiple, redundant defensive measures in case a security control fails or a vulnerability is exploited. We leverage internal resources, along with strategic external partnerships, to mitigate cybersecurity threats to the Company. We deploy both commercially available solutions and proprietary systems to manage threats to our information technology environment actively. We employ a robust information security and training program for our employees, including mandatory computer-based training, regular internal communications, and ongoing end-user testing to measure the effectiveness of our information security program. We are externally audited and certified by top information security standards, specifically for PCI DSS, to ensure we comply with this rigorous standard. We regularly engage appropriate external resources regarding emerging threats in order to navigate the diverse cybersecurity landscape.

We have experienced no material information security breaches in the last three years. As such, we have not spent any material amount of capital on addressing information security breaches in the last three years, nor have we incurred any material expenses from penalties and settlements related to a material breach during this same time.

We believe we are adequately insured against losses related to a potential information security breach, and do not carry any cybersecurity insurance.

The Compensation Committee focuses on risks related to our compensation program, including evaluating appropriate compensation incentives relating to the compensation of our executives and employees.

 

   

Oversight of Compensation Risks. The Compensation Committee annually considers a report from management on its review of potential risks related to compensation policies and practices

 

Public Storage  |  2021 Proxy Statement  |  31


Table of Contents

Proposal 1: Election of Trustees

 

 

applicable to all employees. Most recently, in February 2021, the Compensation Committee considered the Company’s Annual Report on Form 10-K and also considered and discussed with management its conclusion that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on our Company.

In connection with preparing the report for the Compensation Committee’s consideration, members of our senior management team, including our CEO and Chief Administrative Officer, reviewed the target metrics for all of our employee incentive compensation plans. At the completion of the review, management and the Compensation Committee concluded that our incentive compensation plans did not create undue risks for the Company.

The Nominating, Governance, and Sustainability (NGS) Committee focuses on risks associated with succession planning, corporate governance, Board effectiveness, public policy matters, including political and charitable contributions, and Environmental, Social and Governance (ESG) matters.

Our Board and Board committees regularly receive presentations from management on risks to the business. Additionally, all trustees have access to members of management if a trustee wishes to follow up on items discussed outside of the Board or committee meeting.

BOARD ORIENTATION AND EDUCATION

Each new trustee participates in an orientation program and receives materials and briefings concerning our business, industry, management, and corporate governance policies and practices. We provide continuing education for all trustees through board materials and presentations, discussions with management, and the opportunity to attend external board education programs. In addition, all Board members have access to resources of the National Association of Corporate Directors through a Company membership.

TRUSTEE INDEPENDENCE

We require that a majority of the Board be independent in accordance with NYSE rules. To determine whether a trustee is independent, the Board must affirmatively determine that there is no direct or indirect material relationship between the Company and the trustee.

 

   

A Majority of the Board is Independent. The Board has determined that all of our trustee nominees are independent except for Ronald L. Havner, Jr., Joseph D. Russell, Jr., John Reyes, and Tamara Hughes Gustavson. The Board reached this determination after considering all relevant facts and circumstances, responses to trustee questionnaires, and transactions and relationships, if any, between us, our affiliates, our executive officers, and their affiliates, and each trustee and their affiliates.

 

   

Audit, NGS, and Compensation Committees are 100% Independent. The Audit, NGS, and Compensation Committees are composed exclusively of independent trustees. The Board determined that all members of the Audit Committee satisfied the heightened independence requirements for audit committee members, and all of the members of the Compensation Committee satisfied the heightened independence requirements for compensation committee members, in each case, in accordance with NYSE and SEC rules.

 

   

Compensation Committee Interlocks and Insider Participation. No member of the Compensation Committee (i) was, during the year ended December 31, 2020, or had previously been, an officer or employee of the Company or (ii) had any material interest in a transaction with the Company or a business relationship with, or any indebtedness, to the Company. No interlocking relationships existed during the year ended December 31, 2020, between any member of the Board or the Compensation Committee and an executive officer of the Company.

 

32  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

COMMUNICATIONS WITH THE BOARD

Shareholders and interested parties can communicate with any of the trustees, individually or as a group, by writing to them in care of Corporate Secretary, Public Storage, 701 Western Avenue, Glendale, California 91201. We will forward each communication intended for the Board and received by the Corporate Secretary related to the operation of the Company and not otherwise commercial in nature to the specified party following its clearance through normal security procedures.

TRUSTEE ATTENDANCE

The Board held 18 meetings in 2020, including telephonic meetings. We do not have a policy regarding trustee attendance at the annual meeting of shareholders, but expect trustees to attend. Nine of our twelve trustees serving on the Board at that time attended the 2020 annual meeting. Each trustee attended over 75% of the aggregate number of Board meetings and Committee meetings for the Committees on which they served, if any.

BOARD COMMITTEES

The three standing committees of the Board are Audit, Governance, and Compensation. The Board has determined that each member of the Audit, Governance, and Compensation Committees is independent in accordance with NYSE rules.

Each committee has a charter that generally states the purpose of the committee and outlines the committee’s structure and responsibilities. The committees review the adequacy of their charter annually. The following lists the number of meetings held by each committee in 2020:

 

    Committee   Number of  
Meetings in 2020  
 
    Audit     4    
    Compensation     6    
    Nominating, Governance, and
    Sustainability (NGS)
    15    

The current membership information for our Board committees is as follows:

 

  Audit Committee

Members: Kristy M. Pipes (Chair), Rebecca Owen, Avedick B. Poladian, and Tariq M. Shaukat

 

   

Oversees the financial accounting and reporting processes of the Company

 

   

Oversees our ERM framework and, specifically, financial, technology, and other risks relating to the Company, including steps management has taken to monitor and control financial and cybersecurity risk exposure

 

   

Monitors: (i) the integrity of our financial statements; (ii) our compliance with legal regulatory requirements); (iii) our public accounting firm’s qualifications and independence; and (iv) the performance of our internal audit function and public accountants

 

   

Responsible for the appointment, compensation, and oversight of our independent registered public accounting firm

 

   

All four members of our Audit Committee qualify as financial experts and meet the SEC and NYSE’s heightened independence requirements for audit committee members

 

Public Storage  |  2021 Proxy Statement  |  33


Table of Contents

Proposal 1: Election of Trustees

 

  Compensation Committee

Members: Avedick B. Poladian (Chair), Shankh S. Mitra, Michelle Millstone-Shroff, Ronald P. Spogli, and Paul S. Williams

 

   

Evaluates, either as a committee or together with other independent trustees, our CEO’s performance and sets the CEO’s compensation level based on this evaluation, including incentive and equity-based compensation plans

 

   

Sets the amount and form of compensation for the executive officers who report to the CEO

 

   

Administers the Company’s equity and incentive compensation plans

 

   

Reviews and discusses with management the Compensation Discussion and Analysis (CD&A) to be included in the proxy statement and to recommend to the Board inclusion of the CD&A in the Company’s Annual Report on Form 10-K and annual proxy statement

 

   

Provides a description of the processes and procedures for the consideration and determination of executive compensation for inclusion in the Company’s annual proxy statement

 

   

Produces the Compensation Committee Report for inclusion in the Company’s annual proxy statement.

 

   

Reviews management’s annual assessment of potential risks related to compensation policies and practices applicable to all employees

 

   

Oversees the advisory shareholder votes on the Company’s executive compensation programs and policies and the frequency of such votes, and evaluates the Compensation Committee’s performance annually

 

  Nominating, Governance, and Sustainability (NGS) Committee

Members: Ronald P. Spogli (Chair), Leslie S. Heisz, David J. Neithercut, Kristy M. Pipes, and Paul S. Williams

 

   

Assists the Board in identifying individuals qualified to become Board members, recommending nominees to the Board to fill vacancies and new appointments, and ensuring that the Board reflects diversity of experience, skills, background, gender, race, and/or ethnicity

 

   

Prior to each annual meeting of shareholders, recommends to the Board a slate of nominees for election as trustees

 

   

Reviews and makes recommendations to the Board on Board organization and succession

 

   

Assists the Board in evaluating the performance of the Board and its committees

 

   

Conducts preliminary review of trustee independence

 

   

Reviews and makes recommendations for committee appointments to the Board

 

   

Assesses and makes recommendations to the Board on corporate governance matters

 

   

Develops and assesses the adequacy of the Corporate Governance Guidelines on an ongoing basis and recommends any changes to the Board

 

   

Periodically evaluates trustee compensation and recommends to the Board any changes in trustee compensation

 

34  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

   

Oversees trustee orientation

 

   

Oversees sustainability initiatives, including ESG matters, and related risks

 

   

Oversees political and charitable contributions and other public policy matters

In addition to our standing committees described above, in January 2021, following substantive engagement with the Company’s shareholders, including funds advised by Elliott Investment Management, L.P., the Company established an advisory Long-Term Planning (LTP) Committee. The LTP Committee is focused on the Company’s long-term planning, strategy, growth, capital allocation priorities, and capital structure management. The LTP Committee comprises the following trustees: Joseph D. Russell, Jr. (Chair), Leslie S. Heisz, Michelle Millstone-Shroff, Shankh S. Mitra, David J. Neithercut, and Rebecca Owen.

COMPENSATION OF TRUSTEES

Members of the Board who are not also Public Storage employees (non-management trustees) receive compensation for their service. The Board determines the form and amount of compensation for non-management trustees after consideration of the recommendation of either the Compensation Committee or the Governance Committee. The Board has approved the mix of cash and equity compensation described below.

Cash Retainers. Retainers are paid quarterly in cash and are prorated when a trustee joins the Board (or in the case of the Lead Independent Trustee, when an appointment is made) other than at the beginning of a calendar year. Below are the annual retainers that non-management trustees were entitled to receive during 2020 for Board service:

 

    Compensation    Amount    

    Board member

   $ 120,000  

    Lead Independent Trustee supplemental retainer

   $ 20,000  

    Audit Committee Chair’s supplemental retainer

   $ 10,000  

    Other standing Committee Chairs’ supplemental retainer

   $ 5,000  

    Committee Member

   $ 7,500  

Trustee Deferral Program. Pursuant to the Non-Management Trustee Compensation and Deferral Program (the Trustee Deferral Program), non-management trustees may elect to receive all or a portion of their cash retainers either in cash, in shares of unrestricted Common Stock under the 2016 Plan, or in fully-vested deferred stock units under the 2016 Plan.

Non-management trustees must make the election in writing in advance of the calendar year to which the election relates (or, when a non-management trustee joins the Board, within 30 days of joining the Board). If chosen, the shares of unrestricted stock and/or the deferred stock units will be granted to the non-management trustee at the end of each calendar quarter based on the cash retainer earned for that quarter and converted into a number of shares or units based on the closing price for the Common Stock on the NYSE on such date. If a non-management trustee chooses to receive fully-vested deferred stock units, the trustee’s election must also indicate (1) when the units will be settled, such as the trustee’s separation from service (including retirement), a specified future date, or January 1 of the year following a chosen anniversary of the grant date, and (2) whether the units will be settled in a lump sum or in annual installments (not to exceed 10 years). Notwithstanding a trustee’s election, the

 

Public Storage  |  2021 Proxy Statement  |  35


Table of Contents

Proposal 1: Election of Trustees

 

deferred stock units will be settled in a lump sum upon the trustee’s earlier death or disability or upon an earlier change of control of Public Storage. In any event, the deferred stock units will be settled in shares of Common Stock.

Equity Awards. Each new non-management trustee, upon initial election by the Board or the shareholders to serve as a trustee, is granted a non-qualified stock option to purchase 15,000 shares of Common Stock at an exercise price equal to the closing price for the Common Stock on the NYSE on such date, which vests in three equal annual installments based on continued service.

Annually, each non-management trustee receives a non-qualified stock option to acquire 5,000 shares of Common Stock, which vests in three equal annual installments based on continued service. The annual grants are made immediately following the annual meeting of shareholders at an exercise price equal to the closing price for the Common Stock on the NYSE on such date.

Upon the retirement of a non-management trustee, the vesting of any equity awards granted to the trustee for his/her service on the Board and not otherwise deferred will accelerate effective on his/her retirement date from the Board. Additional terms and conditions may be set forth in the award agreement governing the non-management trustee’s equity awards. Unless otherwise defined in an award agreement, retirement is defined as either a retirement from the Board (i) in accordance with the Company’s mandatory retirement policy or (ii) at a time when the non-management trustee (x) is at least age 55, (y) has provided Services (as defined in the 2016 Plan) for a minimum of 10 years to the Company, PS Business Parks, their subsidiaries or affiliates, and (z) the sum of his or her age and years of Service is at least 80.

In addition, upon the retirement of a non-management trustee, the trustee may exercise his/her vested options during the one-year period following his/her retirement date from the Board, or, if shorter, the period from his/her retirement date from the Board until the expiration of the original term of the options. If not exercised within such period, the vested options will automatically terminate at the end of such period.

Upon the retirement of a non-management trustee, any deferred stock units received under the Trustee Program will be delivered as elected in the trustee’s election form under the Trustee Program.

Unvested equity awards (RSUs and options) held by non-management trustees who are former Public Storage executives will continue to vest under the terms of the Company’s equity incentive plan for so long as the trustee continues to provide service to the Company. Those awards will not qualify for accelerated vesting as described above upon the retirement of the non-management trustee.

TRUSTEE AND EXECUTIVE OFFICER STOCK OWNERSHIP GUIDELINES

Pursuant to the Board’s stock ownership guidelines, we expect each trustee to beneficially own Common Stock equal in market value to three times the amount of the annual retainer for board member service. We expect each executive officer to beneficially own Common Stock equal in market value to five times, in the case of the CEO, and three times, in the case of all other executive officers, his or her base salary.

Each executive officer and non-management trustee shall attain his or her ownership within five years from the date of hire, election, or promotion or, in the event the target is not attained by such date or maintained after such date, shall retain shares of the Common Stock equal in value to 50% of the net after-tax shares received upon any stock option exercise until the applicable ownership target is achieved.

 

36  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 1: Election of Trustees

 

Only shares of Common Stock owned by the non-management trustee or executive officer, the fair market value (as measured by the closing price on the NYSE, less the exercise price) of vested, in-the-money stock options held by the non-management trustee or executive officer, vested deferred stock units held by the non-management trustee, shares of Common Stock owned jointly by him/her and his/her spouse, and shares owned by his/her spouse or beneficially for his/her children or in a 401(k) plan are counted for determining compliance with these guidelines. We do not count unvested time-based RSUs, unvested stock options, or vested, out-of-the-money stock options for determining compliance with these guidelines. Refer to Share Ownership of Trustees and Management on page 67 of this proxy statement for information on beneficial ownership of shares of Common Stock by trustees and management.

The NGS Committee administers these stock ownership guidelines and may modify their terms and grant hardship exceptions in its discretion. As of the date of this proxy statement, all of our non-management trustees who have served for five years or more exceeded his/her stock ownership requirement.

2020 TRUSTEE COMPENSATION

The following table presents the compensation provided by the Company to our trustees for the fiscal year ended December 31, 2020:

 

    Trustee    Fees earned or
paid in cash
  Option
Awards
(1), (2)
  Total

    Ronald L. Havner, Jr.

     $ 120,000 (3)      $ 77,100     $ 197,100   

    Tamara Hughes Gustavson

     $ 120,000     $ 77,100     $ 197,100

    Uri P. Harkham

     $ 127,500 (4)      $ 77,100     $ 204,600

    Leslie S. Heisz

     $ 135,000     $ 77,100     $ 212,100

    B. Wayne Hughes, Jr.

     $ 120,000     $ 77,100     $ 222,100

    Kristy M. Pipes

     $ 23,375     $ 457,950 (10)      $ 481,325

    Avedick B. Poladian

     $ 145,000     $ 77,100     $ 222,100

    Gary E. Pruitt

     $ 155,000     $ 77,100     $ 232,100

    John Reyes

     $ 120,000 (5)      $ 77,100     $ 197,100

    Joseph D. Russell, Jr.(6)

       -       -       -

    Tariq M. Shaukat

     $ 127,500 (7)      $ 77,100     $ 204,600

    Ronald P. Spogli

     $ 140,000 (8)      $ 77,100     $ 217,100

    Daniel C. Staton

     $ 140,000 (9)      $ 77,100     $ 217,100
(1) 

Reflects the fair value of the grant on April 21, 2020, of stock options to acquire 5,000 shares of Common Stock, except for Kristy M. Pipes and Joseph D. Russell, Jr. Ms. Pipes received an initial trustee grant of 15,000 options on October 26, 2020. Mr. Russell did not receive any option award grants for 2020. For a more detailed discussion of the assumptions used in the calculation of these amounts, refer to Note 10 to the Company’s audited financial statements for the fiscal year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K.

(2) 

As of December 31, 2020, each non-management trustee on such date had the following number of options outstanding: Tamara Hughes Gustavson: 40,000, of which 29,999 are fully vested and exercisable; Uri P. Harkham: 43,500, of which 43,500 are fully vested and exercisable; Ronald Havner, Jr.: 610,000, of which 481,666 are fully vested and exercisable; Leslie S. Heisz: 35,000 of which 24,999 are fully vested and exercisable; B. Wayne Hughes, Jr.: 50,000, of which 50,000 are fully vested and exercisable; Kristy M. Pipes: 15,000,

 

Public Storage  |  2021 Proxy Statement  |  37


Table of Contents

Proposal 1: Election of Trustees

 

  none of which are fully vested and exercisable; Avedick B. Poladian: 50,000, of which 39,999 are fully vested and exercisable; Gary E. Pruitt: 50,000, of which 39,999 are fully vested and exercisable; John Reyes: 530,000, of which 441,666 are fully vested and exercisable; Tariq M. Shaukat: 20,000, of which 5,000 are fully vested and exercisable; Ronald P. Spogli: 45,000, of which 34,999 are fully vested and exercisable; and Daniel C. Staton: 46,667, of which 46,667 are fully vested and exercisable. Pursuant to our Non-Employee Trustee Compensation Policy, all unvested options vested at retirement for Messrs. Harkham, Pruitt, Staton, and Hughes, Jr. Retired trustees have until the earlier of the original expiration date of the options or one year from the date of retirement to exercise their options.
(3) 

Pursuant to the Company’s Trustee Deferral Program, Mr. Havner elected to receive his 2020 Board fees in deferred stock units. Each deferred stock unit represents the right to receive one share of the Company’s Common Stock. Mr. Havner received a total of 574 deferred stock units for 2020. The amount of deferred stock units granted represents the quotient of the dollar amount of the cash retainers earned for each quarter divided by the Company’s closing stock price on the grant date, rounded up to the nearest deferred stock unit. The deferred stock units will be settled in shares of unrestricted common stock (i) in a lump sum upon Mr. Havner’s separation from service as a trustee or (ii) in a lump sum upon Mr. Havner’s earlier death or disability or upon a change of control of the Company.

(4) 

Pursuant to the Company’s Trustee Deferral Program, Mr. Harkham elected to receive his 2020 Board fees in unrestricted Common Stock. Mr. Harkham received a total of 611 shares of unrestricted Common Stock for 2020. The number of shares of unrestricted Common Stock granted represents the quotient of the dollar amount of the cash retainers Mr. Harkham as earned for the quarter divided by the Company’s closing stock price on the grant date, rounded up to the nearest share.

(5) 

Pursuant to the Company’s Trustee Deferral Program, Mr. Reyes elected to receive his 2020 Board fees in deferred stock units. Each deferred stock unit represents the right to receive one share of the Company’s Common Stock. Mr. Reyes received a total of 574 deferred stock units for 2020. The amount of deferred stock units granted represents the quotient of the dollar amount of the cash retainers earned for each quarter divided by the Company’s closing stock price on the grant date, rounded up to the nearest deferred stock unit. The deferred stock units will be settled in shares of unrestricted common stock (i) in annual installments over 10 years beginning on January 1 following Mr. Reyes’s separation from services as a trustee or (ii) in a lump sum upon Mr. Reyes’s earlier death or disability or upon a change of control of the Company.

(6) 

Joseph D. Russell, Jr., did not receive any compensation for his service as a trustee in 2020.

(7) 

Pursuant to the Company’s Trustee Deferral Program, Mr. Shaukat elected to receive his 2020 Board fees in deferred stock units. Each deferred stock unit represents the right to receive one share of the Company’s Common Stock. Mr. Shaukat received a total of 611 deferred stock units for 2020. The amount of deferred stock units granted represents the quotient of the dollar amount of the cash retainers earned for each quarter divided by the Company’s closing stock price on the grant date, rounded up to the nearest deferred stock unit. The deferred stock units will be settled in shares of unrestricted common stock (i) in a lump sum upon Mr. Shaukat’s separation from service as a trustee or (ii) in a lump sum upon Mr. Shaukat’s earlier death or disability or upon a change of control of the Company.

(8) 

Pursuant to the Company’s Trustee Deferral Program, Mr. Spogli elected to receive his 2020 Board fees in deferred stock units. Each deferred stock unit represents the right to receive one share of the Company’s Common Stock. Mr. Spogli received a total of 670 deferred stock units for 2020. The amount of deferred stock units granted represents the quotient of the dollar amount of the cash retainers earned for each quarter divided by the Company’s closing stock price on the grant date, rounded up to the nearest deferred stock unit. The deferred stock units will be settled in shares of unrestricted common stock (i) in a lump sum on January 1 of the calendar year following Mr. Spogli’s separation from service as a trustee or (ii) in a lump sum upon Mr. Spogli’s earlier death or disability or upon a change of control of the Company.

(9) 

Pursuant to the Company’s Trustee Deferral Program, Mr. Staton elected to receive his 2020 Board fees in deferred stock units. Each deferred stock unit represents the right to receive one share of the Company’s Common Stock. Mr. Staton received a total of 670 deferred stock units for 2020. The amount of deferred stock units granted represents the quotient of the dollar amount of the cash retainers earned for each quarter divided by the Company’s closing stock price on the grant date, rounded up to the nearest deferred stock unit. The deferred stock units will be settled in shares of unrestricted common stock (i) in a lump sum upon Mr. Staton’s separation from service as a trustee or (ii) in a lump sum upon Mr. Staton’s earlier death or disability or upon a change of control of the Company. Upon Mr. Staton’s retirement at December 31, 2020, all deferred stock units were settled in shares of unrestricted common stock.

(10) 

Kristy M. Pipes received 15,000 stock options upon her appointment to the Board on October 26, 2020, which will vest over three years.

 

38  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

 

Proposal 2:

Advisory Vote to Approve

Executive Compensation

 

 

 

 

Approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers (NEOs) as discussed and disclosed in the CD&A, the compensation tables, and any related material contained in this proxy statement.

 

 

RECOMMENDATION:

 

Vote FOR the approval, on an advisory basis, of the compensation of the Company’s NEOs

 

 

Public Storage  |  2021 Proxy Statement  |  39


Table of Contents

Proposal 2: Approve Executive Compensation

 

PROPOSAL 2

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

 

EXECUTIVE SUMMARY

We provide our shareholders the opportunity to vote on the compensation program for our NEOs through a nonbinding annual advisory vote (known as the “Say-on-Pay” proposal).

We believe our compensation program for NEOs helped Public Storage deliver strong performance in 2020, despite an unprecedented and challenging operating environment due to the COVID-19 pandemic. Our Compensation Committee’s determinations regarding 2020 incentive compensation were grounded in a principled, thoughtful, and comprehensive assessment our management team’s leadership during this crisis and their successful execution of strategic and operational priorities.

Accordingly, we are asking our shareholders to indicate their support for the compensation of our NEOs as disclosed in this proxy statement by voting “FOR” the following resolution:

“RESOLVED, that the shareholders of Public Storage approve, on an advisory basis, the compensation paid to Public Storage’s Named Executive Officers, as disclosed in this proxy statement for the Annual Meeting pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables.”

Although the Say-on-Pay vote is advisory and nonbinding, the Compensation Committee values the opinions of our shareholders and will continue to consider the outcome of the vote when making future compensation decisions.

VOTE REQUIRED AND RECOMMENDATION

The affirmative vote of a majority of the votes cast is necessary for the approval, on an advisory basis, of the compensation of our NEOs. For purposes of the vote on this proposal, abstentions and broker non-votes will not affect the vote.

The Board recommends a vote FOR approval

of our executive compensation

as described in this proxy statement.

 

40  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

OUR NAMED EXECUTIVE OFFICERS

The following executive officers were NEOs in 2020:

 

   

Joseph D. Russell, Jr.—Please see Mr. Russell’s biography on page 26 in the section entitled Proposal 1: Election of Trustees in this proxy statement.

 

   

H. Thomas Boyle—Mr. Boyle has served as our Chief Financial Officer (CFO) since January 1, 2019. Previously, Mr. Boyle was Vice President and Chief Financial Officer, Operations, of the Company since joining the Company in November 2016. Prior to joining the Company, Mr. Boyle served in roles of increasing responsibilities with Morgan Stanley since 2005, from analyst to his last role as Executive Director, Equity and Debt Capital Markets.

 

   

Natalia N. Johnson—Ms. Johnson has served as our Chief Administrative Officer since August 2020. Previously, Ms. Johnson was Senior Vice President, Chief Human Resources Officer from April 25, 2018 and as the Senior Vice President of Human Resources, a position she held since joining the Company in July 2016. Prior to joining Public Storage, Ms. Johnson held a variety of senior management positions at Bank of America, including Chief Operating Officer for Mortgage Technology and Human Resources Executive for the Mortgage Business, and worked for Coca-Cola Andina and San Cristóbal Insurance.

 

   

Nathaniel A. Vitan—Mr. Vitan has served as Senior Vice President, Chief Legal Officer and Corporate Secretary since April 2019 and previously served as Vice President and Chief Counsel—Litigation & Operations since joining the Company in June 2016. Prior to joining Public Storage, he was Assistant General Counsel for Altria Client Services LLC from 2008 to 2016 and was a Trial and Appellate Practice attorney at Latham & Watkins LLP.

 

Public Storage  |  2021 Proxy Statement  |  41


Table of Contents

Proposal 2: Approve Executive Compensation

 

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

This CD&A provides a detailed description of our executive compensation philosophy and program and the factors we believe shareholders should consider in evaluating our Say-on-Pay proposal.

WE DELIVERED STRONG PERFORMANCE DESPITE UNPRECEDENTED CHALLENGES FROM THE COVID-19 PANDEMIC

Despite an unprecedented and challenging operating environment caused by the COVID-19 pandemic, we delivered strong 2020 operating performance and further positioned the Company for long-term value creation.

In addition to the cyclical headwinds facing the self-storage industry, including high levels of new property development, slowing demand drivers, and strengthening expense pressures from rising property taxes, wages, and customer acquisition costs, the Company faced significant restrictions caused by COVID-19 that severely impacted our business and operations—particularly in the first half of 2020.

Despite these significant challenges, the Company delivered strong performance in 2020, including:

 

 

LOGO

 

(1) 

NOI, free cash flow, and Core FFO are all non-GAAP measures. Refer to pages 31 and F-30 of our Form 10-K filed on February 24, 2021 for information regarding NOI, including a reconciliation to GAAP net income. Refer to Appendix B for information regarding free cash flow and Core FFO.

Record Revenues of $2.9 billion Record NOI of $2 billion Highest Gross operating margin among self-storage REITs 12.6% 1-Year TSR Top 34% of S&P 500 REITs 23.4% 3-Year TSR Top Half of S&P 500 REITs 6.2 MM sf added through acquisitions, developments, and redevelopments $1+ billion Est. market value of properties added $9.78 Free Cash Flow per Share $10.61 Core FFO per Share Highest Return on Assets among self-storage REITs

 

42  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

The Company achieved the highest rental revenue per square foot among the self-storage REITs and outperformed its self-storage REIT competitors on NOI margins, demonstrating our outperformance on operating profitability:

 

 

LOGO

Rental Revenue Per Available Square Feet* 2020 $16.40 $15.94 $15.82 $13.17 Public Storage CubeSmart Extra Space Life Storage Operating Margin* 2020 NOI Per Available Square Foot* 2020 75.9% 71.3% 70.1% 66.8% $12.86 $12.28 $11.66 $8.90 Public Storage Extra Space CubeSmart Life Storage Public Storage Extra Space CubeSmart Life Storage

 

*

Same-store metrics per company disclosures. Public Storage calculations add back supervisory payroll, centralized management and share based compensation expenses to NOI in order to be consistent with competitor reporting methods. CubeSmart figures include tenant insurance income.

Our strategy of acquiring and developing high-quality properties in desirable markets, our scale, brand, and superior operating platform, and our disciplined approach to capital allocation have resulted in superior performance—even in a challenging operating environment and even as our REIT competitors enhance their reported “same store” NOI performance by including unstabilized properties in their same-store pools and a significant portion of their property operating expenses in G&A expense rather than in costs of operations.

In addition, our portfolio growth over the past two years has eclipsed the growth of our self-storage REIT competitors combined:

 

 

LOGO

Portfolio Growth Square Feet Added (millions) in the Past Two Years Public Storage Extra Space CubeSmart Life Storage 13 1.5 4.7 2.5

 

Public Storage  |  2021 Proxy Statement  |  43


Table of Contents

Proposal 2: Approve Executive Compensation

 

These strategic and operational strengths resulted in the following total shareholder returns over the one-year and three-year periods:

 

PSA Total Shareholder Returns
 
One Year (ended December 31, 2020)    Three Years (ended December 31, 2020)

12.56%

   7.25% (annualized)

  10th Best Performer out of 29 (Top 34% of S&P 500 REITs)

 

  70th Percentile Ranking vs. S&P 500 REITs

 

  18th Best Performer in the MSCI US REIT Index out of 137

 

  88th Percentile Ranking vs. MSCI US REIT Index Constituents

  

  13th Best Performer out of 29 (Top Half of S&P 500 REITs)

 

  59th Percentile Ranking vs. S&P 500 REITs

 

  45th Best Performer in the MSCI US REIT Index out of 133

 

  66th Percentile Ranking vs. MSCI US REIT Index Constituents

Successful Execution of our Long-Term Strategy for Value Creation

In addition to focusing on short-term value preservation and maintaining key short-term financial performance during the COVID-19 pandemic, our leadership team successfully executed against several strategic initiatives for creating long-term value in 2020, including the following:

 

 

 

   LOGO

 

 

  Growing our Scale

  and

  Creating Long-Term Value

  

•  Acquired 62 properties, adding 5.1 million square feet to our portfolio at a total cost of $796.1 million—the highest acquisition volume since 2013

 

•  Delivered 15 developed and redeveloped properties at a total cost of $139 million—adding 1.1 million square feet to our portfolio—through the only in-house development program among self-storage REITs

 

•  Maintained development pipeline for future growth of approximately $565 million

 

•  Signed contracts adding 37 properties to our third-party management business

 

 

 

 

   LOGO

 

  Driving Superior

  Operating Performance

  

•  Achieved average occupancy rate of 94.5% and $17.34 in rent per occupied square foot across our same-store portfolio

 

•  Attained lowest G&A as a percentage of revenues among self-storage REITs (1.9% for PSA versus 7.2% public competitor average)

 

 

   LOGO

 

  Improving our Brand,

  our Product,

  and the

  Customer Experience

  

•  Refreshed 33 properties in 3 markets through Property of Tomorrow, a comprehensive rebranding program through which we update older properties with elements of our new “Generation Five” developments

 

•  Deployed online, contactless eRental® leasing platform at all properties

 

•  Installed centralized access control and monitoring systems for gates, doors, and elevators across our portfolio

 

•  Released the Public Storage App, providing customers with convenient phone-based gate access, bill payment, and account management capabilities, with a 4.7 star rating on the Apple App Store

 

•  Achieved average of 4.8 out of 5.0 stars in Google Reviews

 

 

44  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

 

   LOGO

 

  Developing and

  Protecting the   Wellbeing

  of Our People

  

•  Established PS Cares Emergency Fund with enhanced employee benefits during the COVID-19 pandemic, in addition to comprehensive benefit programs

 

•  Completed 367,000 training events, over 68 hours per employee, to optimize internal skills development and advancement

 

•  Over 54,000 recognition instances as part of our employee recognition program

 

•  Our property personnel engagement scores improved from 4.0 to 4.2 (5 point scale)

 

•  Achieved diverse workforce comprising approximately 69% females and 52% people of color

 

 

   LOGO

 

  Optimizing our

  “Fortress”

  Balance Sheet

  

•  Maintained “fortress” balance sheet—one of the strongest in the REIT industry—with low leverage and emphasis on retained cash flow to fund growth opportunities

 

•  Issued 500 million of 12-year Euro-denominated unsecured bonds in 2020 and $500 million of 5-year dollar-denominated unsecured bonds in early 2021, both at 0.875% rates

 

•  One of only two U.S. REITs to achieve Moody’s A2 and S&P A credit ratings

 

OUR COMPENSATION PHILOSOPHY AND PRACTICES ALIGN EXECUTIVE PAY WITH PERFORMANCE AND CREATION OF LONG-TERM VALUE

Both during and after the COVID-19 pandemic, the Board and the Compensation Committee believe that it is critical to Public Storage’s long-term success to:

 

   

attract and retain exceptional executives in a competitive labor market;

 

   

create the proper incentives that encourage executive share ownership and align executive compensation with Company performance and the creation of long-term value;

 

   

motivate our executives to achieve the Company’s performance goals by putting a substantial portion of each executive’s compensation “at risk” and by tying a significant portion of executive compensation to the Company’s achievement of pre-established performance criteria; and

 

   

provide a total compensation package that is competitive and appropriate to each executive’s experience, responsibilities, and performance.

 

Public Storage  |  2021 Proxy Statement  |  45


Table of Contents

The following key features of our compensation program reflect our philosophy:

 

 
  What We Do             What We Don’t Do

 

 

   Substantial portion of our NEOs’ compensation is “at risk”

 

 

   High percentage of executive compensation in equity

 

   Long equity vesting periods promote retention and align pay with long-term value creation

 

   Robust stock ownership guidelines

 

   Strong clawback provisions

 

   Double-trigger for accelerated vesting of equity upon a change in control

      

 

   No employment, “golden parachute,” or severance agreements with our NEOs

 

   No guaranteed bonus arrangements with our NEOs except for new hires

 

   No excessive perquisites

 

   No repricing of stock options

 

   No tax gross ups

 

   No supplemental retirement plans

 

   No hedging against price fluctuations in the Company’s securities

VARIOUS COMPENSATION ELEMENTS INCENTIVIZE AND REWARD PERFORMANCE

Our executive compensation design is simple, effective, and links pay to performance and the creation of long-term value. We pay our NEOs a mix of cash and equity, the majority of which is “at risk” and tied to achieving performance objectives set by the Compensation Committee in light of the Company’s long-term strategy and the current business environment. We promote responsible growth and risk management and align the interests of our executives with the interests of our shareholders by using performance-based equity awards that are subject to long, above-market vesting periods as the predominant form of compensation. The main elements of our executive compensation program are as follows:

 

     
  Compensation Type   Pay Element    Primary Objectives
       

  Fixed

  Pay

 

Cash

Compensation

 

Base

Salary

  

•  As the only fixed element of compensation, provides stable income and compensation for day-to-day responsibilities

 

•  Helps attract and retain exceptional talent

 

 

  At-Risk
  Pay

 

 

Annual Performance-Based Bonus

  

 

•  Aligns compensation with business strategy

 

•  Motivates and rewards achievement of annual financial, operational, and individual goals

 

 

 

Equity Compensation

 

 

Performance-Based RSUs

 

Multi-Year Performance-Based Stock Options

  

 

•  Drive sustainable performance through achievement of predetermined financial and other goals

 

•  Align the interest of executives with those of shareholders

 

•  Help retain executive talent through extended vesting schedule (5 years)

 

2020 At-Risk Compensation for All NEOs. We believe that paying a significantly larger percentage of total compensation to our NEOs in performance-based cash and equity incentive awards advances our pay-for-performance compensation philosophy. The following charts depict for Mr. Russell, our CEO, and for all of our NEOs together, the split between (i) compensation tied to the achievement of performance goals, consisting of RSUs and annual cash incentive awards and (ii) compensation not tied to performance goals, consisting of base salary. The amounts below include RSUs and annual cash incentive awards that would have been paid assuming target achievement for 2020 and exclude

 

46  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

one-time promotion-related RSU awards for Ms. Johnson of 2,000 RSUs. The amounts below also do not include the value of the multi-year performance based options which are subject to a three-year performance period and have not yet been earned.

 

2020 CEO Compensation

 

62.26% RSUs 18.87% Salary 81.13% At Risk 18.87% Bonus

LOGO

 

2020 NEO Compensation

 

61% RSUs 19.5% Salary 80.5% At Risk 19.5% Bonus

LOGO

OUR COMPENSATION PROCESS IS DISCIPLINED, BALANCED, AND RESPONSIVE TO OUR SHAREHOLDERS

The Compensation Committee determines our compensation philosophy and makes all final compensation decisions for our CEO and other NEOs. It has the authority to select, retain, and terminate advisors and other experts (including compensation consultants) as it deems appropriate. The Compensation Committee’s charter provides that the Compensation Committee may delegate its authority to members of the Compensation Committee, but to date, it has not done so. Our performance review process includes the following features:

 

 

1   

 

   The Board annually reviews the Company’s strategy and business plans

 

 

2   

   Company and individual performance goals consistent with the Company’s strategy and business plans are established and discussed with the Board and the Compensation Committee

 

 

3   

   The Compensation Committee periodically reviews the Company and our NEOs’ performance, consulting with the Board and our CEO as appropriate (and as detailed below)

 

 
4        At year end, the Compensation Committee solicits the views of the Board on the performance of all our NEOs. In addition, our CEO shares his assessment of the other NEOs’ performance against their goals and his recommendation on compensation for the Compensation Committee’s consideration

 

Public Storage  |  2021 Proxy Statement  |  47


Table of Contents

Proposal 2: Approve Executive Compensation

 

The factors the Compensation Committee considers in making all final compensation decisions for our NEOs include:

Company Performance, Strategic Execution, and Individual Performance. The Compensation Committee considers the Company’s annual and long-term financial performance in light of operating conditions; management’s execution against the Company’s strategic plan and their goals, with a focus on management’s contributions to long-term value creation; and established priorities and goals.

Board and Management Views. The Compensation Committee solicits the views of the Board on performance of all NEOs, particularly for Mr. Russell.

The Compensation Committee also solicits Mr. Russell’s views on (1) compensation of the other NEOs and (2) Company-wide compensation matters. The Compensation Committee, at its discretion, may also solicit the views of other members of the management team, including our Chief Administrative Officer. Mr. Russell does not vote on items before the Compensation Committee and is not present during the Compensation Committee’s discussion and determination of his compensation. The Compensation Committee sets the CEO’s base salary, bonus, and equity compensation using its independent judgment and analysis.

Appropriate Pay Mix and Use of Deferred Compensation Subject to Lengthy Vesting Periods. The Compensation Committee considers what mix of cash and equity compensation attracts and retains exceptional talent and properly incentivizes management to focus on the creation of long-term value without excessive risk-taking. In this regard, the Compensation Committee believes that emphasizing the use of equity compensation (primarily in the form of RSUs and options) with long vesting periods—longer than any of our peer companies—is a highly effective way of incentivizing our executives to remain with the Company and focus on long-term value creation. Through the use of long vesting periods, we link our NEOs’ realized compensation to our long-term stock performance.

Shareholder Engagement and Feedback. We believe in maintaining an ongoing dialogue with our shareholders and seek their feedback on a wide range of issues, including our compensation practices. We currently submit an advisory vote to approve NEO compensation—i.e., a Say-on-Pay vote—to our shareholders annually.

At the 2020 annual meeting of shareholders, our shareholders approved all trustee nominees, our Say-on-Pay proposal, and the appointment of our independent registered public accounting firm.

 

48  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

The Compensation Committee will also consider the feedback it received, and additional feedback it receives through the Company’s ongoing shareholder engagement efforts, in future decisions on executive compensation matters. The Compensation Committee responded to shareholder feedback in 2019 and adjusted our compensation program. These changes were well-received, as evidenced by our Say-on-Pay proposal receiving 92.6% support in 2020.

Say-on-Pay History

 

 

LOGO

98.0% 94.5% 93.2% 69.1% 92.6% 2016 2017 2018 2019 2020 Previous Compensation Programs Compensation Committee redesigned the senior management compensation program based on feedback received from shareholder outreach efforts Following strong shareholder support, the Compensation Committee made minor adjustments to further enhance the design of the compensation program

Compensation Surveys and Other Market Data. Each component of compensation we pay to our NEOs—salary, cash bonuses, and equity—is based on the Compensation Committee’s assessment of each individual’s job scope and responsibilities and consideration of market compensation. In balancing these and other considerations, including the feedback of our shareholders, the Compensation Committee uses comparison data from various companies to guide in its review and determination of the various components of our executive compensation plans, including total target compensation and the appropriate mix of cash and equity compensation. The Compensation Committee uses market compensation information to:

 

   

understand how other public companies design executive compensation plans to align executive pay with long-term value creation; and

 

   

assist the Company in offering competitive compensation levels to attract and retain exceptional executives in the diverse industry sectors within which we compete for executive talent.

Market data is part of the diverse toolkit the Compensation Committee uses to set fair and competitive compensation levels that help drive the creation of long-term value while mitigating undue risk-taking and attracting and retaining top talent.

 

Public Storage  |  2021 Proxy Statement  |  49


Table of Contents

Proposal 2: Approve Executive Compensation

 

The Compensation Committee has the sole authority to engage and terminate any compensation consultant to assist in the evaluation of trustee or executive compensation, and has the sole authority to approve the fees and other terms of retention of such compensation consultants.

For 2020, the Compensation Committee evaluated market data and compensation plan design trends provided by Equilar, a leading executive compensation data solutions company. In addition, the Compensation Committee engaged FPL Associates L.P. (FPL) as its independent compensation consultant in early 2021 to assist with its review of compensation for the senior management team. FPL advised the Compensation Committee on a variety of subjects, including peer group benchmarking, compensation plan design and trends, pay-for-performance analytics, and other compensation topics. While FPL provided data and analyses and made recommendations for the compensation program, the Compensation Committee made all decisions regarding the compensation of the NEOs.

The Compensation Committee annually reviews the composition of our peer group to ensure that each company’s relevant attributes remain comparable to ours. The Committee believes it is appropriate to focus on companies within the real estate sector, including REITs, as well as other large companies with similarly large market capitalization and asset, operational, and employee footprints. These are representative companies that face many of the same strategic and operational considerations we do and against which we compete for executive talent.

For 2020, our peer group comprised the following 22 companies:

 

  2020 Company Peers
  American Tower Corp.    Equinix    Simon Property Group
  AvalonBay Communities, Inc.    Equity Residential    Ventas
  Boston Properties, Inc.    Essex    Vornado Realty Trust
  Brookfield Property    Extra Space    Welltower
  Chipotle*    HCP    Weyerhaeuser
  Crown Castle    Host Hotels & Resorts*    YUM! Brands*
  CubeSmart    Life Storage   
  Enterprise*    Prologis   

 

*

Denotes peers outside of the real estate sector with relevant asset, operational, and employee footprints

The Compensation Committee evaluates our peer group annually and may make adjustments or refinements to this peer group based on new or changed circumstances, including the relevant size or operations of our peers relative to ours.

THE COMPENSATION COMMITTEE DESIGNED OUR ORIGINAL 2020 NEO COMPENSATION FRAMEWORK TO BE CONSISTENT WITH OUR PAY-FOR-PERFORMANCE PHILOSOPHY

In March 2020, prior to the onset of the COVID-19 pandemic’s economic effects in the U.S., the Compensation Committee approved the following key components of the Company’s 2020 compensation program, taking into account the Company’s financial and strategic goals and performance expectations as of that date. The Committee’s ultimate 2020 performance awards, which account for the pandemic’s effects, are described in the following sections.

 

50  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

Base Salaries. Consistent with the Compensation Committee’s philosophy that executive compensation should be more heavily weighted towards performance-based, at-risk compensation, the Compensation Committee did not change base salaries for 2020.(1)

 

    Executive 2019 Base Salary   2020 Base Salary   % Increase  

    Joseph D. Russell, Jr.

$ 700,000 $ 700,000   0 %

    H. Thomas Boyle

$ 550,000 $ 550,000   0 %

    Natalia N. Johnson(1)

$ 400,000 $ 500,000   25 %

    Nathaniel A. Vitan

$ 350,000 $ 350,000   0 %
  (1) 

Ms. Johnson’s annualized salary increased to $500,000 upon her promotion as Chief Administrative Officer in August 2020.

2020 Annual Cash Incentive Program. The Compensation Committee approved an annual cash incentive program based on two criteria: (1) 80% based on positive growth of Core FFO per share; and (2) 20% based on the achievement of predefined personal goals directly tied to the execution of the Company’s long-term strategic plan.

 

 

LOGO

Annual Cash Incentive Plan 80% Core FFO per Share Positive Growth 100% Earned Negative Growth 0% Earned 20% Management Goals Personal goals directly tied to the execution of the Companys long-term strategic plan

As in prior years, the Compensation Committee selected Core FFO per share as the performance target because Core FFO per share, a widely-accepted measure of a REIT’s earnings, is a strong indicator of management’s operational effectiveness and is a foundational metric for measuring the Company’s execution of its long-term strategy. In determining the Core FFO per share performance goal for 2020, the Compensation Committee considered a number of factors, including the Company’s 2020 strategy and financial forecasts as of that time and existing competitive conditions. Based on these factors, the Compensation Committee determined that a target of positive Core FFO per share growth was appropriately rigorous for 2020, with a cash incentive payout of 80% of each NEO’s base salary if the target were met and no cash incentive paid for that element if the target were not met.

In addition to Core FFO per share, the Compensation Committee added a new strategic objectives component to the annual cash incentive program, amounting to 20% of each NEO’s base salary, partly in response to shareholder feedback received as part of our 2020 shareholder outreach program. The Compensation Committee believes the addition of this component emphasizes the importance of each NEO’s individual contributions, as well as the contributions of the executive team as a group, to the successful execution of the Company’s strategy and appropriately incentivizes our NEOs in a way that is directly tied to their individual and team responsibilities.

 

Public Storage  |  2021 Proxy Statement  |  51


Table of Contents

Proposal 2: Approve Executive Compensation

 

For 2020, the Compensation Committee established the following management goals for our NEOs:

 

2020 Management Goals
Individual Goals
Joseph D. Russell, Jr.   H. Thomas Boyle   Natalia N. Johnson   Nathaniel A. Vitan

 

•  Execution of the Company’s overall strategic plan for long-term value creation

 

•  Motivating the executive team to deliver superior results

 

•  Growth through acquisition, development and redevelopment

 

 

•  Leverage technology and optimize pricing and marketing

 

•  Optimize balance sheet

 

•  Succession planning and team development for critical positions

 

•  Expense optimization

 

 

•  Talent management and organizational development

 

•  Employee Engagement

 

•  Labor and medical costs optimization

 

•  Field recruiting improvements

 

•  Technology innovation and operating model efficiencies

 

 

 

•  ERM, including management of litigation and regulatory risks

 

•  Legal spend and services optimization

 

•  Protection of Company intellectual property

Team Goal
Utilize technology and data, including machine learning and automation, to streamline processes

2020 Performance-Based RSU Awards. In March 2020, the Compensation Committee approved the 2020 performance-based RSU award program for NEOs based on two equally-weighted performance metrics: (1) 2020 same store revenue growth and (2) 2020 NOI growth. The Committee believes that same store revenue growth is an appropriate performance metric because it tracks operational performance with respect to our stabilized property portfolio and therefore provides a useful year-over-year comparison of management’s operation of our core business.

Similarly, the Committee believes NOI growth is an appropriate performance metric because it measures growth in the profitability of our income-generating real estate assets and is widely used by shareholders to evaluate the performance and net asset value of the Company. In the Committee’s view, NOI growth measures fundamental components of long-term value creation, including: (a) a growing and diversified portfolio of properties located in the right markets; (b) a superior operating platform; (c) a strong brand, well-maintained properties, and an excellent customer experience; (d) hiring and developing the right people; and (e) a disciplined capital allocation strategy.

The Compensation Committee added the new NOI growth metric to our performance-based RSU program to further align target award achievement with Company performance and the creation of shareholder value, based on feedback from shareholders regarding the advantages of using multiple metrics for performance-based equity programs.

The Compensation Committee approved the following 2020 performance targets and award levels:

 

  Target Award Percentage

   None    50%    75%    100%    125%

  Same Store Revenue Growth

   <1.25%    1.25 – 1.5%    1.5 – 2%    2 – 2.25%    >2.25%

  NOI Growth

   Negative    Positive    Positive    >0.5%    >1.0%

In setting the same-store revenue and NOI goals for 2020, the Compensation Committee considered a number of factors, including the Company’s 2020 strategy and financial forecasts and existing

 

52  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

competitive conditions. Based on these factors, the Compensation Committee determined that a threshold of 1.25% for same store revenue growth and positive NOI growth would be appropriately challenging for the Company to achieve and would result in delivery of substantial shareholder value.

Target awards for each NEO were approved as follows: Mr. Russell—10,000 RSUs; Mr. Boyle—7,500 RSUs; Ms. Johnson—5,000 RSUs (subsequently increased to 6,000 RSUs in August 2020 to reflect her promotion to Chief Administrative Officer); and Mr. Vitan—5,000 RSUs.

2020 Multi-Year Performance-Based Stock Option Awards. The Compensation Committee also approved 2020 multi-year performance-based option awards as a new component of the compensation program for 2020. We received significant feedback from shareholders emphasizing the importance of long-term performance-based equity compensation based on multiple performance metrics. The Compensation Committee responded to such feedback by adopting a multi-year performance-based option award program based on the achievement of NAV per share growth and total shareholder value growth over a three-year performance period. The Compensation Committee approved the following performance targets and award levels:

 

Total Shareholder Value

2020-2022

 

Net Asset Value Growth  

2020-2022

  Percentage of Target  
Award

Below 14%

  Below 3%   None

14-16%

  3-5%   75%

16-18%

  5-7%   100%

Above 18%

  Above 7%   125%

To further align this component of NEO compensation with long-term shareholder value creation, the Compensation Committee implemented an extended vesting period for any awards that are earned upon satisfaction of the performance metrics. Three-fifths of any multiyear performance-based option award will vest upon achievement of the performance targets at the conclusion of the three-year performance period, with the remaining vesting ratably over the next two years. The following performance-based options were granted to the NEOs subject to the above performance and vesting conditions: Mr. Russell–80,000 options; Mr. Boyle–60,000 options; Ms. Johnson–50,000 options; and Mr.  Vitan–50,000 options.

CHANGES IN 2020 COMPANY STRATEGY AND OUTLOOK DUE TO THE COVID-19 PANDEMIC

The COVID-19 pandemic resulted in sudden and severe disruptions to economic activity in U.S and across the globe. The Company faced unprecedented operational challenges due to the pandemic’s adverse effects, including a historic increase in U.S. unemployment, widespread government restrictions on commercial activity and “stay-at-home” orders, and the need to adopt social distancing and other safety measures. The adverse economic effects of the pandemic directly and significantly impacted the Company’s business starting in March 2020 and continuing throughout the year. The immediate impacts of the COVID-19 pandemic on the Company’s business and operations included:

 

   

Material deterioration in move-in activity, with an average year-over-year decline in April through October 2020 of approximately 6%;

 

   

Operational challenges in keeping facilities open as governmental authorities imposed varying operating restrictions and on-site property managers attempted to manage childcare issues, illness, or other issues related to the pandemic;

 

Public Storage  |  2021 Proxy Statement  |  53


Table of Contents

Proposal 2: Approve Executive Compensation

 

   

Legal restrictions on our ability to address tenant delinquencies as a result of the pandemic;

 

   

Delays in development and expansion projects due to government restrictions on commercial activity and logistical issues resulting from the pandemic;

 

   

Significant decline in acquisition volumes; and

 

   

Regulatory pricing restrictions.

Revised Strategic and Operational Priorities

Given the significant impact of the COVID-19 pandemic on our business, the Company’s Board and our senior management team recognized the need to shift our focus from the goals established earlier in the year to mitigating these impacts and protecting the well-being of the Company’s employees and customers. Beginning in March 2020, the Company’s Board and senior management met regularly to discuss the Company’s new strategies for shepherding the Company through the crisis. In this regard, under the leadership of our senior management, the Company took significant steps to expand its strategic and operational priorities to include an emphasis on value preservation in the short-term—including protecting our employees and focusing on customer acquisition, retention, and issue resolution. At the same time, our senior leadership team advanced initiatives to build long-term capabilities and value for our shareholders, including accelerating the Company’s digital transformation, opportunistically taking advantage of organic and external growth opportunities, and optimizing our balance sheet.

Specifically, the senior management team, in consultation with the Board, determined that the following key objectives, crisis management goals to further value preservation, and long-term strategic capabilities to advance value creation were paramount to the continued viability and success of the Company as it navigated through the COVID-19 environment:

 

Crisis Management
and Value Preservation
 

Long-Term Strategic Capabilities

and Value Creation

 

•  Employee and customer safety and engagement

 

•  PS Cares Emergency Fund

 

•  Customer acquisition and retention

 

•  Customer resolution

 

•  Remote business operations

 

 

•  eRental® online lease, kiosks, and PS App

 

•  Centralized workforce management

 

•  Property access control system

 

•  ERM

 

•  Virtual call center

 

•  Succession planning and key hires

 

•  Balance sheet optimization

 

54  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

SUCCESSFUL EXECUTION OF REVISED STRATEGIC AND OPERATIONAL PRIORITIES

Under the leadership of our NEOs, the Company delivered several important achievements against these operational and strategic priorities, including:

 

 

LOGO

These efforts allowed the Company to take advantage of a rebound in customer demand and increased growth opportunities through acquisitions in the second half of 2020, as described above.

COMPENSATION COMMITTEE’S APPROACH TO 2020 INCENTIVE COMPENSATION PROGRAM

 

 

LOGO

Board and senior management begin meeting regularly to discuss the Company's strategy mitigating the pandemic's impact Board commenced evaluation or senior management and Company 2020 performance Nine Board Meetings Mar 2020 Dec 2020 2020 COMPENSATION DECISIONS Feb/Mar 2020 Jun 2020 Feb 2021 The Compensation Committee finalized the 2020 executive compensation program Onset or U.S. pandemic economic and other effects The Compensation Committee commenced comprehensive review of the Company's 2020 incentive compensation program and revised strategic and operational priorities Six Compensation Committee Meetings Compensation Committee finalized and approved senior management compensation funding for 2020 based on performance against revised strategic and operational priorities

In the wake of these revised strategic and operational priorities and the material change to the Company 2020 financial outlook resulting from the COVID-19 pandemic, the Compensation Committee in June 2020 began a comprehensive reassessment of the Company’s 2020 incentive compensation program. Through this evaluation, the Committee concluded that the 2020 financial performance metrics and targets that the Committee had established prior to the onset of the pandemic’s economic and other effects in the U.S. were likely not attainable due to the pandemic and were no longer

 

Public Storage  |  2021 Proxy Statement  |  55


Table of Contents

Proposal 2: Approve Executive Compensation

 

consistent with the Company’s updated strategic and operational priorities. Indeed, incentivizing management to achieve the previously established short-term performance targets could have had significant adverse effects on long-term performance given the current environment.

Consequently, the Compensation Committee concluded that the 2020 incentive compensation goals, as originally defined, were no longer consistent with the objectives of the compensation program of retaining and motivating our senior management team to achieve solid financial results and create long-term shareholder value. Moreover, because the duration and nature of the effects of the COVID-19 pandemic continue to be unpredictable, the Compensation Committee did not believe it could reasonably set revised financial metrics or targets, and instead decided to evaluate management’s performance against the revised strategic and operational priorities discussed above, as well as management’s effectiveness in leading the Company through the crisis.

The Compensation Committee received regular updates regarding management’s performance against these strategic and operational priorities. In early 2021, the Compensation Committee determined 2020 compensation awards after considering (i) the operating environment and the effects of COVID-19 on financial performance, (ii) management’s performance against all relevant factors, including management’s execution of the revised strategic and operational priorities and the Company’s financial performance, and (iii) each NEO’s performance against individual goals and objectives.

2020 INCENTIVE COMPENSATION AWARDS

The following is a summary of the Compensation Committee’s decisions with respect to 2020 incentive compensation for our NEOs. The Compensation Committee believes that these awards reasonably reward our NEOs for exemplary performance under extraordinarily difficult circumstances, reflect management’s contributions to the successes the Company achieved in 2020, and are consistent with the Company’s compensation philosophy.

2020 Annual Cash Incentives. In early 2020, the Compensation Committee approved the 2020 annual cash incentive program comprising: (1) 80% on positive growth of Core FFO per share; and (2) 20% on the achievement of personal goals directly tied to the execution of the Company’s long-term strategic plan. The Company delivered 1.3% Core FFO per share decline for 2020, which would have resulted in no payout for 80% of the annual cash incentive. With respect to the 20% based on the achievement of personal goals tied to the execution of the Company’s long-term strategic plan, the Compensation Committee determined that all NEOs successfully achieved their individual goals and deemed the 20% based on such achievement to be earned at target. In addition, due to the strong performance the Company was able to deliver despite the COVID-19 pandemic and the achievement of the revised strategic and operational priorities discussed above, the Compensation Committee decided to grant each NEO a total annual cash incentive award equal to 90% of target.

2020 Performance-Based RSUs. Also in early 2020, the Compensation Committee established the 2020 performance-based RSU award program for NEOs, which required satisfaction of two predetermined annual performance metrics: (a) Same Store revenue growth and (b) net operating income (NOI) growth. Threshold levels for both metrics must have been achieved in order for any RSUs to be awarded. The Company did not satisfy either metric due to the impacts of the COVID-19 pandemic on the Company’s operations. However, due to the leadership and exemplary execution by our NEOs of revised strategic and operational priorities in light of the COVID-19 pandemic and the strong performance the Company nonetheless delivered across the operational and financial metrics discussed above, the Compensation Committee decided to award RSUs at 90% of target to the NEOs for the 2020 performance-based RSU award program. As a result, awards for each NEO were granted as follows: Mr. Russell–9,000 RSUs; Mr. Boyle–6,750 RSUs; Ms. Johnson–5,400 RSUs; and Mr. Vitan–4,500 RSUs.

 

56  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

Multi-year Performance-Based Stock Option Awards. Given the three-year performance period of the 2020 Multi-Year Performance-Based Stock Option Awards, the Compensation Committee decided not to make any changes to those awards, notwithstanding the meaningful adverse impact of the pandemic on the applicable performance metrics, as they cover a multi-year performance period.

2021 COMPENSATION OUTLOOK AND ENHANCEMENTS

In March 2021, the Compensation Committee approved a compensation program for our NEOs that continues to emphasize at-risk, performance-based equity grants and that the Committee believes is responsive to our shareholders and properly incentivizes our executives to create sustainable long-term value.

The following summarizes key decisions for the 2021 compensation program:

 

   

Further enhanced the pay-for-performance design of the annual cash incentive program by using a target payout scale for the achievement of challenging and rigorous NOI goals, which will be weighted 60% of the overall payout. The remaining 40% will be based on the achievement of management strategic goals;

 

   

Continued to use a diversified set of long-term performance metrics, including Core FFO per share growth, absolute TSV, NAV per share growth, and NOI growth; and

 

   

Added a relative Total Shareholder Return (TSR) modifier to the multi-year performance-based stock option award program that will adjust the payout up or down by 25% based on relative performance as compared to both the S&P 500 REITs (excluding our performance) and self-storage peers.

Equity Compensation Highlights. Key elements of our 2021 equity compensation program are as follows. We have also included an overview of the vesting structure of the awards.

 

100% PERFORMANCE-CONTINGENT EQUITY

+

SHAREHOLDER ALIGNMENT WITH LONGER-TERM VESTING

       
Balanced Multiyear
Approach
    Multiple Performance  
Metrics
  Stock Price
Appreciation
 

Relative TSR

Modifier

  Long-Term Vesting

Majority of senior management compensation is contingent on multiyear performance goals

 

•  Performance-based RSUs are earned based Core FFO per share growth

 

•  Performance-
Based Options are earned based on TSV and NAV Growth

 

•  Earned Performance-Based Options only have value if the price of our Common Stock is greater than the exercise price of the option at the time of exercise

 

•  No repricing of options

 

•  Multi-Year Performance-Based Stock Options awards are subject to further adjustment (up or down 25%) based on Relative TSR Performance vs. (i) S&P 500 REITs (weighted 70%) and (ii) key self-storage REIT competitors (weighted 30%)

 

•  Time-Based and Performance-Based RSUs vest over a long-term five-year time horizon

 

•  Performance-Based Options are measured at the end of a three-year performance period, with additional two-year time-vesting for 40% of the earned award

 

Public Storage  |  2021 Proxy Statement  |  57


Table of Contents

Proposal 2: Approve Executive Compensation

 

2021 Annual Equity Grant Vesting

 

 

LOGO

2021 2022 2023 2024 2025 2026 Performance-Based RSUs 1-Year Perf. Period 20% 20% 20% 20% 20% Multi-Year Performance-Based 3-Year Perf. Period 60% 20% 20% Options

Relative TSR Modifier. In order to align with best practices and compare our performance on a relative basis, we have incorporated a relative TSR modifier to our Multiyear Performance-Based Stock Option program. Specifically, Performance-Based Stock Option payout will be adjusted based on a comparison of (a) our TSR performance and (b) a peer TSR calculated by combining the average return of the S&P 500 REITs (excluding Public Storage) weighted at 70% and the average return of three self-storage REIT peers—Extra Space Storage (EXR), CubeSmart (CUBE), and Life Storage (LSI)—weighted at 30%. If our TSR is at or below -250 bps of the peer TSR, the final performance-based stock option award will be decreased by 25%. If our TSR is at or above +250 bps of the peer TSR, the final performance-based stock option award will be increased by 25%. If our TSR falls between -250 bps and +250bps of the peer TSR, there will be no modification to the award payout.

 

58  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

2021 Compensation Program. The essential elements of our 2021 compensation program are as follows:

 

   
  Compensation Type   Pay Element   2021 Executive Compensation Plan Design

 

  Fixed

  Pay

 

 

Cash

Compensation

 

Base

Salary

 

•  The Compensation Committee set base salaries as follows: Mr. Russell—$800,000; Mr. Boyle—$550,000; Ms. Johnson—$500,000; and Mr. Vitan—$425,000

 

  At-Risk   Pay

 

 

Annual Performance-Based Bonus

 

 

•  Eligibility will be based on two criteria: (a) Net Operating Income (60% weighting) and (b) strategic management goals (40% weighting)

 

•  The Compensation Committee set 2021 annual bonus targets (as a percentage of base salary) as follows: Mr. Russell—150%; Mr. Boyle—150%; Ms. Johnson—100%; and Mr. Vitan—100%

 

 

Equity Compensation

 

 

Performance-Based RSUs

 

 

•  Eligibility will be based on Core FFO growth

 

•  If awarded, all performance-based RSUs will vest in equal installments over five years starting on the first anniversary of the grant date

 

•  The Compensation Committee approved the following RSU targets: Mr. Russell—15,000 RSUs; Mr. Boyle—10,000 RSUs; Ms. Johnson—6,000 RSUs; and Mr. Vitan—6,000 RSUs

 

 

Multi-Year Performance-Based Stock Options

 

 

•  Eligibility will be based on growth in NAV per share and growth in Total Shareholder Value over a three-year performance period

 

•  Awards will be subject to upward or downward adjustment based on relative Total Shareholder Return (TSR) performance as measured against S&P 500 REITs (70% weighting) and self-storage REIT competitors (EXR, CUBE, and LIFE) (30% weighting)

 

•  Three-fifths of earned awards will vest at the conclusion of the three-year performance period, with the remaining vesting ratably over the next two years

 

•  The Compensation Committee granted the following option awards subject to the above performance and vesting conditions: Mr. Russell—80,000 options; Mr. Boyle—65,000 options; Ms. Johnson—50,000 options; and Mr. Vitan—50,000 options

2022 COMPENSATION OUTLOOK

We expect to enhance the senior management compensation program further and to transition even more of our pay to measure longer-term performance.

TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION—SECTION 162(m)

The Compensation Committee considers the tax deductibility of compensation as one factor when considering executive compensation program alternatives. Due to its tax status as a REIT, the Company must generally distribute its taxable income to shareholders. To the extent that compensation

 

Public Storage  |  2021 Proxy Statement  |  59


Table of Contents

Proposal 2: Approve Executive Compensation

 

is not deductible, taxable income will be higher and so distributions to shareholders may be higher than they would be otherwise.

The Compensation Committee has in the past approved and has reserved the right in the future to approve compensation that does not qualify for deductibility in circumstances it deems in the Company’s best interests.

Prior to January 1, 2018, Section 162(m) imposed a $1,000,000 per person limit on the annual tax deduction for compensation paid to the Company’s current chief executive officer and certain other executive officers. Certain “performance-based” compensation exceeding $1,000,000 annually paid to the executives was excluded from Section 162(m)’s limitation and was deductible if certain requirements were met. The Company generally designed awards of stock options, certain restricted share units, and cash incentives to qualify as deductible “performance-based” compensation.

The tax reform legislation signed into law on December 22, 2017 (the Tax Cuts and Jobs Act), further limited the deductibility of executive compensation, effective January 1, 2018. Section 162(m) still imposes a $1,000,000 per person limit on the annual tax deduction for compensation paid to the Company’s current chief executive officer and certain other executive officers. But, the legislation repealed the exclusion for “performance-based” compensation and expanded the group of employees subject to the limitation to include the chief financial officer and certain former executive officers.    

Compensation awarded before November 3, 2017, which otherwise qualified as “performance based,” may continue to be deductible in the future as the cash compensation is paid, the restricted share units vest, and the stock options are exercised, under certain interim relief provisions of the Tax Cuts and Jobs Act. However, due to ambiguities and uncertainties about how the revised Section 162(m) should apply, it is uncertain whether previous awards that the Compensation Committee believed to be “performance based” compensation will be deductible going forward.

Under the 2016 Plan, the limit on the aggregate value of cash and non-cash awards, other than stock options and SARs, that the Company may grant to any individual in any calendar year, is $15 million.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Trustees of Public Storage has reviewed and discussed with management the foregoing Compensation Discussion and Analysis. Based on this review and discussion, the Compensation Committee recommended to the Board of Trustees that the Compensation Discussion and Analysis be included in this proxy statement and in the Annual Report on Form 10-K of Public Storage for the fiscal year ended December 31, 2020.

The following independent trustees, who comprise the Compensation Committee, provide this report:

 

  THE COMPENSATION COMMITTEE      

Avedick B. Poladian (Chair)

Michelle Millstone-Shroff

Shankh S. Mitra

Ronald P. Spogli

Paul S. Williams

 

60  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

EXECUTIVE COMPENSATION TABLES

Summary Compensation Table. The following table sets forth information concerning the compensation earned by each of our NEOs for the years ended December 31, 2020, 2019 and 2018.

 

  Name and Principal

  Position

  Year     Salary(1)     Bonus    

Stock

Awards(2)

   

Option

Awards(3)

   

Non-Equity

Incentive Plan

Compensation(4)

   

All Other

Compensation(5)

    Total  

Joseph D. Russell, Jr.

President and Chief

Executive Officer

    2020       700,000       -       1,695,600       1,758,928       630,000       16,400     $ 4,800,928  
    2019       700,000       -       2,679,000       194,000       700,000       16,200       4,289,200  
    2018       600,000       -       972,200       -       600,000       16,000       2,188,200  

H. Thomas Boyle

Chief Financial Officer

    2020       550,000       -       1,271,700       1,319,196       495,000       11,400     $ 3,635,896  
    2019       550,000       -       2,518,260       145,500       550,000       11,200       3,774,960  
    2018       -       -       -       -       -       -       -  

Natalia N. Johnson(6)

Chief Administrative Officer

    2020       441,667       -       1,250,560       1,099,330       450,000       11,400     $ 3,252,957  
    2019       400,000       -       1,553,820       97,000       400,000       11,200       2,462,020  
    2018       366,665       -       473,640       -       400,000       11,000       1,251,305  

Nathaniel A. Vitan

Chief Legal Officer and

Corporate Secretary

    2020       350,000       -       847,800       1,099,330       315,000       11,400     $ 2,623,530  
    2019       334,932       -       944,920       98,500       350,000       11,200       1,739,552  
    2018       -       -       -       -       -       -       -  
(1) 

Ms. Johnson’s annualized salary increased to $500,000 upon her promotion as Chief Administrative Officer in August 2020.

(2) 

The values reflected in this column reflect RSU awards based on the estimated fair value of such awards on the respective grant dates. 2020 amounts include 7,500, 5,625, 4,500 and 3,750 RSUs respectively for Mr. Russell, Mr. Boyle, Ms. Johnson, and Mr. Vitan, assuming achievement of performance conditions for 2020 at the 75% target level. The value of the awards at the grant date assuming achievement at the highest level of performance conditions are as follows: Mr. Russell, 12,500 RSUs ($2,826,000); Mr. Boyle, 9,375 RSUs ($2,119,500); Ms. Johnson, 7,500 RSUs ($1,695,600) after giving effect to a modification on August 3, 2020 and Mr. Vitan, 6,250 RSUs ($1,413,000). The values for Ms. Johnson also reflect a promotion grant of 2,000 RSUs on August 4, 2020 for Ms. Johnson. In February 2021, the Compensation Committee approved 2020 RSU awards at 90% of target as follows: Mr. Russell—9,000 RSUs; Mr. Boyle—6,750 RSUs; Ms. Johnson—5,400 RSUs; and Mr. Vitan—4,500 RSUs.

(3) 

The amounts shown in this column reflect the grant date fair value of multi-year performance-based stock option awards. 2020 amounts include 80,000 options for Mr. Russell, 60,000 options for Mr. Boyle, 50,000 options for Ms. Johnson, and 50,000 options for Mr. Vitan, assuming achievement of performance conditions over a three-year performance period (2020-2022) at the 100% target level. The value of the option awards at the grant date assuming achievement at the highest level of performance conditions are as follows : Mr. Russell, 100,000 options ($2,198,660); Mr. Boyle, 75,000 options ($1,648,995); Ms. Johnson, 62,500 options ($1,374,163) and Mr. Vitan, 62,500 options ($1,374,163). For further discussion concerning the assumptions used in this valuation, refer to Note 10 to the Company’s audited financial statements for the fiscal year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K.

(4) 

The amounts shown in this column reflect annual cash incentive awards for NEOs that are based on pre-established performance targets set early in the year and, therefore, under SEC rules are classified as non-equity incentive plan compensation. In February 2021, the Compensation Committee approved the annual cash incentive payouts at 90% of target. See the “Compensation Discussion and Analysis” section of this proxy statement for further discussion of the 2020 performance targets and payouts.

(5) 

The amounts shown in this column for all NEOs reflect contributions to each officer’s 401(k) Plan account (3% of the annual cash compensation up to a maximum of $11,000 for 2018, $ 11,200 for 2019, and $11,400 for 2020). For Mr. Russell, the amount shown in 2018, 2019, and 2020 includes a $5,000 payment for attending in person a meeting of the board of directors of the Company’s insurance subsidiary.

(6) 

Ms. Johnson was promoted to Chief Administrative Officer effective August 4, 2020 and previously served Chief Human Resources Officer from April 2018 until her promotion.

 

Public Storage  |  2021 Proxy Statement  |  61


Table of Contents

Proposal 2: Approve Executive Compensation

 

Grants of Plan-Based Awards. The following table sets forth information relating to estimated future payouts under non-equity incentive plan awards, stock options and RSUs granted pursuant to our equity incentive plans during the year ended December 31, 2020 to each of our NEOs.

 

   Name   Grant
Date
   

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards ($)(1)

   

Estimated Future Payouts

Under Equity Incentive

Plan Awards (#)

   

All

Other
RSU

Awards
(#)

    All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
   

Exercise

or Base
Price of
Option
Awards ($)

   

Grant Date

Fair Value

of Stock

and Option

Awards ($)(2)(3)

 
    Threshold     Target     Maximum     Threshold     Target     Maximum  

Joseph D. Russell, Jr.

                     

Cash Incentive(5)

      -       700,000       2,100,000       -       -       -       -       -       -       -  

Performance RSUs(6)

    03/06/20       -       -       -       5,000       10,000       12,500       -       -       -       1,695,600  

Stock Options

    03/06/20       -       -       -       60,000       80,000       100,000       -       -       228.94       1,758,928  

H. Thomas Boyle

                     

Cash Incentive(4)

      -       550,000       1,650,000       -       -       -       -       -       -    

Performance RSUs(5)

    03/06/20       -       -       -       3,750       7,500       9,375       -       -       -       1,271,700  

Stock Options

    03/06/20       -       -       -       45,000       60,000       75,000       -       -       228.94       1,319,196  

Natalia N. Johnson(6)

                     

Cash Incentive(4)

      -       500,000       1,500,000             -       -       -    

Performance RSUs(5)

    03/06/20       -           3,000       6,000       7,500             847,800  

Promotion Related RSUs

    08/04/20       -       -       -       -       -       -       2,000       -       -       402,760  

Stock Options

    03/06/20       -       -       -       37,500       50,000       62,500       -       -       228.94       1,099,330  

Nathaniel A. Vitan

                     

Cash Incentive(4)

      -       350,000       1,050,000       -       -       -       -       -       -       -  

Performance RSUs(5)

    03/06/20       -       -       -       2,500       5,000       6,250       -       -       -       847,800  

Stock Options

    03/06/20       -       -       -       37,500       50,000       62,500       -       -       228.94       1,099,330  
(1) 

The amounts shown in these columns represent the range of possible annual cash incentive payouts and stock awards pursuant to the 2016 Equity and Performance-Based Incentive Compensation Plan (the “2016 Plan”) based upon achievement of performance targets. The amounts shown for Ms. Johnson were established as part of the compensation package approved in connection with her promotion to Chief Administrative Officer on August 4, 2020.

(2) 

Amounts shown in this column reflect the fair value of stock and option awards computed as of the grant dates noted on this table. The fair value of stock awards is calculated by multiplying the fair market value of our Common Stock on the grant date by the number of shares awarded, adjusted for the probability of satisfying the underlying performance criteria, which for Mr. Russell, Mr. Boyle, Ms. Johnson, and Mr. Vitan was assumed to be 75% of the target level. Stock awards receive dividends as and when and at the same rate paid to all common shareholders of Public Storage.

(3) 

Three-fifths of any multi-year performance-based option award granted to each of Mr. Russell, Mr. Boyle, Ms. Johnson, and Mr. Vitan will vest upon achievement of the performance target at the conclusion of the three-year performance period (2020-2022), with the remaining vesting ratably over the next two years.

(4) 

In February 2021, the Compensation Committee approved annual cash incentive payouts at 90% of target as follows: Mr. Russell—$630,000, Mr. Boyle—$495,000, Ms. Johnson—$360,000, and Mr. Vitan—$315,000.

(5) 

In February 2021, the Compensation Committee approved 2020 RSU awards at 90% of target as follows: Mr. Russell—9,000 RSUs; Mr. Boyle—6,750 RSUs; Ms. Johnson—5,400 RSUs; and Mr. Vitan—4,500 RSUs. These RSUs vest in five equal annual installments, beginning one year from the award date.

(6) 

Ms. Johnson was promoted to Chief Administrative Officer on August 4, 2020. The amounts shown for her RSU awards reflect modifications made to her possible awards in connection with her promotion.

 

62  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

Option Exercises and Stock Vested In 2020. The following table provides information about options exercised by and RSU awards vested for the NEOs during the year ended December 31, 2020.

 

    Name   

Number of

Shares

Acquired on

Exercise (#)

    

Value

Realized on

Exercise ($)(1)

    

Number of

Shares

Acquired on

Vesting (#)

    

Value

Realized on

Vesting ($)(2)

 

    Joseph D. Russell, Jr.

     -        -        4,000      $ 843,813  

    H. Thomas Boyle

     -        -        3,218        728,147  

    Natalia N. Johnson

     -        -        1,600        347,158  

    Nathaniel A. Vitan

     -        -        1,430        290,170  
(1) 

Value realized represents the difference between the market price of our Common Stock on the NYSE at the time of exercise and the exercise price of the options. Does not reflect any tax or other required withholdings.

(2) 

Value realized was calculated by multiplying the number of shares vesting by the closing price of our Common Stock on the NYSE on the vesting date as follows:

 

    Name    RSU
Vesting
Date
     Fair Market
Value of PSA ($)
 

    Joseph D. Russell, Jr.

     02/28/20        209.12  
     03/08/20        228.94  
       07/01/20        199.16  

    H. Thomas Boyle

     03/08/20        228.94  
     12/05/20        224.50  
       12/31/20        230.93  

    Natalia N. Johnson

     03/05/20        229.06  
     03/08/20        228.94  
       08/05/20        196.97  

    Nathaniel A. Vitan

     05/27/20        196.97  
     07/05/20        199.36  
       12/31/20        230.93  

 

Public Storage  |  2021 Proxy Statement  |  63


Table of Contents

Proposal 2: Approve Executive Compensation

 

Outstanding Equity Awards in 2020. The following table sets forth certain information concerning outstanding equity awards held by the NEOs at December 31, 2020.

 

   Name   Grant Date    

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

   

Number of

Securities

Underlying

Unexercised
Options

(#)
Unexercisable

   

Equity Incentive
Plan Awards:

Number of
Securities

Underlying
Unexercised

Unearned
Options (#)

   

Option

Exercise

Price ($)

   

Option

Expiration

Date

   

Number of

Shares or Units

of Stock that

Have Not

Vested (#)(3)

   

Market

Value of

Shares of

Stock that

Have Not

Vested ($)(3)

 

Joseph D.

Russell, Jr.

    3/6/2020       -       -       80,000 (4)      228.94       3/6/2030       -       -  
    3/4/2020       -       -         -       -       9,000 (5)      2,078,370  
    3/8/2019       -       -         -       -       4,375 (2)      1,010,319  
    3/8/2019       4,000 (1)      16,000 (1)        214.32       3/8/2029       3,000 (1)      692,790  
    2/28/2018       -       -         -       -       3,750 (2)      865,988  
    3/10/2017       12,000 (1)      8,000 (1)        220.07       3/10/2027       -       -  
    7/1/2016       20,000 (1)      5,000 (1)        253.84       7/1/2026       2,000 (1)      461,860  
    TOTAL       36,000       29,000       80,000                       22,125       5,109,327  

H. Thomas

Boyle

    3/6/2020       -       -       60,000 (4)      228.94       3/6/2030       -       -  
    3/4/2020       -       -         -       -       6,750 (5)      1,558,778  
    3/8/2019       -       -         -       -       3,282 (2)    $ 757,912  
    3/8/2019       3,000 (1)      12,000 (1)        214.32       3/8/2029       2,400 (1)      554,232  
    12/31/2017       -       -         -       -       750 (2)      173,198  
    12/5/2016       12,000 (1)      3,000 (1)        212.45       12/5/2026       2,000 (1)      461,860  
    TOTAL       15,000       15,000       60,000                       15,182       3,505,980  

Natalia N.

Johnson

    3/6/2020       -       -       50,000 (4)      228.94       3/6/2030       -       -  
    3/4/2020       -       -         -       -       5,400 (5)      1,247,022  
    8/4/2020       -       -         -       -       2,000 (1)    $ 461,860  
    3/8/2019       -       -         -       -       1,750 (2)      404,128  
    3/8/2019       2,000 (1)      8,000 (1)        214.32       3/8/2029       1,800 (1)      415,674  
    3/5/2018       -       -         -       -       1,800 (2)      415,674  
    8/5/2016       8,000 (1)      2,000 (1)        232.76       8/5/2026       600 (1)      138,558  
    TOTAL       10,000       10,000       50,000                       13,350       3,082,916  

Nathaniel A.

Vitan

    3/6/2020       -       -       50,000 (4)      228.94       3/6/2030       -       -  
    3/4/2020       -       -         -       -       4,500 (5)      1,039,185  
    5/27/2019       2,000 (1)      8,000 (1)        236.23       5/27/2029       1,750 (2)    $ 404,128  
    12/31/2018       -       -         -       -       240 (1)      55,423  
    12/31/2017       -       -         -       -       500 (2)      115,465  
    7/5/2016       20,000 (1)      5,000 (1)        259.74       7/5/2026       1,000 (1)      230,930  
    TOTAL       22,000       13,000       50,000                       7,990       1,845,131  
(1) 

These options or RSUs vest in five equal annual installments, beginning one year from the grant date.

(2) 

These options or RSUs vest in eight equal installments, beginning one year from the grant date.

(3) 

Stock awards consist of RSUs granted to the NEOs, and the values shown assume a price of $230.93 per share, the closing price for our Common Stock on the NYSE on December 31, 2020.

(4) 

Three-fifths of these multiyear performance-based option awards will vest upon achievement of the performance targets at the conclusion of the three-year performance period, with the remaining vesting ratably (assuming the performance conditions were met) over the subsequent next two years, beginning one year from the grant date.

(5) 

One-fifth of these performance-based RSUs will vest upon achievement of the performance targets at the conclusion of the one-year performance period, with the remaining vesting ratably (assuming the performance conditions were met) over the subsequent next four years, beginning one year from the grant date.

 

64  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Payments upon Termination. We do not have employment agreements with any NEO that provide for future payments upon termination of employment with the Company.

We do not have a formal severance policy for payments upon termination of employment, whether through voluntary or involuntary termination, other than as specifically set forth in our 2016 Plan, 2001 Plan, 2007 Plan, 401(k) Plan, Employee Equity Awards Retirement Policy, or as required by law. The following indicates our general practice:

 

   

any vested stock options following a voluntary termination of employment must be exercised within 30 days following the individual’s last date of employment;

 

   

all unvested stock options, restricted shares, and/or RSUs are forfeited (except in the case of death or disability or a qualifying retirement); and

 

   

accrued and unused vacation pay is paid in a lump sum.

Payments upon Death or Disability. In the event of the death or permanent and total disability of a NEO:

 

   

all outstanding unvested stock options and unvested RSUs accelerate and vest upon the officer’s death or permanent and total disability;

 

   

all such stock options may be exercised during the one-year period following the date of death or permanent and total disability (but before the termination date of the option); and

 

   

the officer or his/her estate will receive payments under Public Storage’s life insurance program or disability plan, as applicable.

Payments upon Retirement. NEOs participate in our Employee Equity Awards Retirement Policy on the same terms as other employees. The Employee Equity Awards Retirement Policy is intended to recognize long-tenured employees who have contributed to the growth and success of the Company. Specifically, in the event of an NEO’s qualifying retirement:

 

   

all outstanding unvested stock options and unvested RSUs accelerate and vest on the date of retirement; and

 

   

all such stock options may be exercised during the one-year period following the date of retirement (but before the termination date of the option).

In order for an NEO to be eligible for potential acceleration of equity award vesting under the Employee Equity Awards Retirement Policy, all eligibility conditions must be satisfied, including: (1) the NEO must be at least 55 years old and have been in service for at least 10 years, and the sum of the employee’s age and total years of service must be at least 80; (2) the NEO must provide at least 12 months’ prior written notice of his or her intention to retire; (3) the NEO must enter into a written separation agreement; and (4) the Equity Awards Committee of the Board must, in its sole discretion, approve the application of the Employee Equity Awards Policy to the NEO.

Payments upon Change in Control. Under the 2016 Plan, the vesting of outstanding awards will not accelerate unless two conditions are met. First, the Company must experience a qualifying change in control. Second, one of the following conditions must also be met: (a) for a change of control where such awards will be assumed or continued by the surviving entity, the holder’s employment must be terminated without “cause” (as defined in the 2016 Plan) within one year following the change of control, or (b) such awards must be terminated in connection with the change of control.

 

Public Storage  |  2021 Proxy Statement  |  65


Table of Contents

Proposal 2: Approve Executive Compensation

 

A “change of control” is defined in the plan to include generally the following:

 

   

the dissolution or liquidation of Public Storage or merger in which Public Storage does not survive;

 

   

the sale of substantially all Public Storage assets;

 

   

merger in which the company is the surviving corporation but after which the company’s shareholders immediately prior to such merger cease to own their shares or other equity interest in the company; or

 

   

any transaction that results in any person or entity owning 30% or more of the combined voting power of all classes of our shares.

The following table shows the estimated value of the acceleration of vesting of unvested equity awards pursuant to the termination events described above that trigger acceleration assuming the event occurred as of December 31, 2020 and using the value of our Common Stock on December 31, 2020 of $230.93 per share.

 

    Name   

Value of all

outstanding

unvested

options(1)

    

Value of all

outstanding

unvested RSUs(2)

     Total  

    Joseph D. Russell, Jr.

   $ 352,640      $ 5,109,327      $ 5,461,967

    H. Thomas Boyle

   $ 254,760      $ 3,505,980      $ 3,760,740  

    Natalia N. Johnson

   $ 132,880      $ 3,082,916      $ 3,215,796  

    Nathaniel A. Vitan

     -      $ 1,845,131      $ 1,845,131  
(1) 

Represents the difference, if positive, between the exercise price of unvested options held by the executive and the closing price of our Common Stock on the NYSE on December 31, 2020. If the exercise price exceeds the closing price of our Common Stock on the NYSE on December 31, 2020, then the value presented is zero.

(2) 

Represents the number of unvested RSUs multiplied by the closing price of our Common Stock on the NYSE on December 31, 2020. Includes unvested portion of performance-based RSU awards.

 

66  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

Share Ownership of Trustees and Management

The following table sets forth information as of February 23, 2021 concerning the beneficial ownership of shares of Common Stock by each of our trustees, the CEO, the CFO, and the other two most highly compensated persons who were executive officers of the Company on December 31, 2021, and all trustees and executive officers as a group. Except as otherwise indicated and subject to applicable community property and similar statutes, each trustee and executive officer has sole voting and investment power over his or her shares.

 

    Name   

Common Shares

Beneficially

Owned(1)

   

Percent of

Class(1)

 

    Ronald L. Havner, Jr.

     736,470 (2)      *  

    Tamara Hughes Gustavson

     17,284,117 (3)      9.89

    Leslie S. Heisz

     28,332       *  

    Michelle Millstone-Shroff

     -       -

    Shankh S. Mitra

     -       -

    David J. Neithercut

     -       -

    Rebecca Owen

     -       -

    Kristy M. Pipes

     -       -

    Avedick B. Poladian

     72,000       *  

    John Reyes

     675,015 (4)      *  

    Joseph D. Russell, Jr.

     64,995       *  

    Tariq M. Shaukat

     7,481       *  

    Ronald P. Spogli

     47,670       *  

    Paul S. Williams

     -       -

    H. Thomas Boyle

     30,488       *  

    Natalia N. Johnson

     23,325       *  

    Nathaniel A. Vitan

     26,250       *  

    All trustees and executive officers as a group (17 persons)

     18,996,143 (1)(2)(3)(4)      10.87

 

*

Less than 1%

(1) 

Represents shares of Common Stock beneficially owned as of February 23, 2021. Includes options to purchase shares of Common Stock exercisable within 60 days of February 23, 2021 or, in the case of non-management trustees who are eligible for retirement, options to purchase shares of Common Stock that are subject to acceleration upon retirement within 60 days of February 2021, as follows: R. Havner, 544,999 shares; T. Gustavson, 40,000 shares; L. Heisz, 28,332 shares; A. Poladian, 50,000 shares; J. Reyes, 494,000 shares; J. Russell, Jr., 44,000 shares; T. Shaukat, 6,666; R. Spogli, 45,000 shares; T. Boyle, 18,000 shares; N. Johnson, 12,000 shares; and N. Vitan, 22,000 shares. Also includes RSUs which are scheduled to vest within 60 days of February 23, 2021 as follows: J. Reyes, 3,300 RSUs; R. Havner, 5,000 RSUs; J. Russell, Jr., 2,000 RSUs; T. Boyle, 1,069 RSUs; and N. Johnson, 1,000 RSUs.

(2) 

Includes 170,891 shares held indirectly in a joint margin account with Mr. Havner’s spouse. Includes the 10,000 RSUs granted February 19, 2015 with an original vesting date of April 1, 2016. In accordance with the terms of the 2007 Plan, Mr. Havner elected to defer the receipt of these shares in ten equal annual installments beginning on April 1, 2021. Does not include 1,900 shares held by Mr. Havner’s spouse in an IRA for which Mr. Havner disclaims beneficial ownership. Includes 1,102 deferred stock units.

(3) 

Includes 11,348 shares of Common Stock held jointly by Ms. Gustavson and Mr. Hughes, Jr., as to which they share investment power.

(4) 

Includes 127,296 held in a trust jointly with spouse.

 

Public Storage  |  2021 Proxy Statement  |  67


Table of Contents

Proposal 2: Approve Executive Compensation

 

The following table sets forth information as of the dates indicated with respect to persons known to us to be the beneficial owners of more than 5% of the outstanding shares of Common Stock:

 

    

Shares of Common Stock

Beneficially Owned

 
    Name and Address    Number of Shares      Percent of Class    

    B. Wayne Hughes(1)

     457,880        *  

    B. Wayne Hughes, Jr.(1)

     5,064,728        2.9

    Tamara Hughes Gustavson(1)

     17,272,769        9.9

    B. Wayne Hughes, Jr., and Tamara

    Hughes Gustavson(1)

     11,348        *  

    Hughes Family Total

     22,806,725        13.05

    BlackRock , Inc.(2)

    55 East 52nd Street

    New York, NY 10055

     17,234,617        9.9

    The Vanguard Group(3)

    100 Vanguard Blvd.

    Malvern, PA 19355

     19,399,769        11.10

    State Street Corporation(4)

    One Lincoln Street

    Boston, MA 02111

     9,613,671        5.50

    Cohen & Steers, Inc.(5)

    280 Park Avenue

    10th Floor

    New York, NY 10017

     20,904,224        11.96
*

Less than 1%

(1) 

This information is as of February 23, 2021. B. Wayne Hughes, B. Wayne Hughes, Jr., and Tamara Hughes Gustavson have filed a joint Schedule 13D, as amended most recently on June 12, 2015, to report their collective ownership of shares of Common Stock and may constitute a “group” within the meaning of section 13(d) (3) of the Securities Exchange Act of 1934, as amended (Exchange Act), although each of these persons disclaims beneficial ownership of the shares of Common Stock owned by the others. The address for the Hughes Family is 701 Western Avenue, Glendale, California 91201. The number of shares of Common Stock owned also reflects transactions reported on Form 4s through February 23, 2021. Includes 40,000 shares of Common Stock subject to options to purchase shares exercisable within 60 days of February 23, 2021 in the case of T. Gustavson.

(2) 

This information is as of December 31, 2020 and is based on a Schedule 13G/A filed on January 29, 2021 by BlackRock, Inc. to report that it (including affiliates) has sole voting power with respect to 15,888,344 shares of Common Stock, no shared voting power with respect to the shares of Common Stock, sole dispositive power with respect to 17,234,617 shares of Common Stock and no shared dispositive power with respect to shares of Common Stock.

(3) 

This information is as of December 31, 2020 and is based on a Schedule 13G/A filed on February 10, 2021 by The Vanguard Group to report that it (including affiliates) has sole voting power with respect to 0 shares of Common Stock, shared voting power with respect to 610,387 shares of Common Stock, sole dispositive power with respect to 18,373,607 shares of Common Stock and shared dispositive power with respect to 1,026,162 shares of Common Stock.

(4) 

This information is as of December 31, 2020 and is based on a Schedule 13G filed on February 10, 2021 by State Street Corporation to report that it (including affiliates) has sole voting power with respect to 0 shares of Common Stock, shared voting power with respect to 8,264,601 shares of Common Stock, sole dispositive power with respect to 0 shares of Common Stock and shared dispositive power with respect to 9,613,671 shares of Common Stock.

(5) 

This information is as of December 31, 2020 and is based on a Schedule 13G filed on February 16, 2021 by Cohen & Steers, Inc. to report that: (1) it has sole voting power with respect to 6,912,020 shares of Common Stock, shared voting power with respect to 0 shares of Common Stock, sole dispositive power with respect to 10,452,112 shares of Common Stock and shared dispositive power with respect to 0 shares of Common Stock; (2) Cohen & Steers Capital Management Inc. has sole voting power with respect to 6,883,130 shares of Common Stock, shared voting power with respect to 0 shares of Common Stock, sole dispositive power with respect to 10,265,134 shares of Common Stock and shared dispositive power with respect to 0 shares of Common Stock; and (3) Cohen & Steers UK Limited has sole voting power with respect to 28,890 shares of Common Stock, shared voting power with respect to 0 shares of Common Stock, sole dispositive power with respect to 186,978 shares of Common Stock and shared dispositive power with respect to 0 shares of Common Stock

 

68  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

ADDITIONAL INFORMATION ABOUT TRUSTEES, EXECUTIVE OFFICERS, AND MANAGEMENT

Incentive Compensation Recoupment Policy (Clawback Policy). The Board has adopted an Incentive Compensation Recoupment Policy, effective January 1, 2020, which applies to our executive officers, our controller, and our Vice President, Finance Operations. Pursuant to this policy, in the event the Company’s financial results (a) are restated due to material noncompliance with any financial reporting requirement or (b) have been determined by the Board to have been materially misstated, then an independent committee of the Board may require any covered officer to repay to the Company all or part of any “Excess Compensation” that such officer had previously received. Excess Compensation is defined as that part of the cash or equity incentive compensation received by a covered officer during the three-year period preceding the restatement or material misstatement determination that was in excess of the amount that such officer would have received had such incentive compensation been calculated based on the restated or corrected financial results.

Anti-Hedging Policy. Our insider trading policy includes an anti-hedging provision that prohibits trustees, officers, and employees from directly or indirectly engaging in hedging against future declines in the market value of any securities of the Company. Hedging transactions include the purchase of financial instruments, including prepaid variable forward contracts, instruments for the short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to or that may reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any securities of the Company. The objective of this policy is to enhance alignment between the interests of our trustees, officers, and employees and those of our shareholders.

Policy Regarding Pledging of Shares. Our securities trading policy discourages (but does not prohibit) the pledging of shares of Common Stock by insiders. We have considered the pledges of shares of Common Stock by Ms. Gustavson and the fact that Mr. Havner holds 100,722 shares in a margin brokerage account in light of the Company’s securities trading policy and the position of ISS Corporate Solutions (ISS), which is that pledges of shares of Common Stock by insiders may adversely affect shareholders if the insiders are forced to sell their shares of Common Stock. We believe that the existing pledge arrangements do not present a significant risk of lender foreclosure or an unexpected sale of large volumes of Common Stock by insiders on the open market. Additionally, none of Ms. Gustavson’s pledges is part of a hedging strategy, and Ms. Gustavson owns a greater number of shares of Common Stock of the Company that are unpledged. Further, none of Mr. Havner’s shares that are held in a margin account have been pledged as security for a loan. In our Board’s view, these arrangements are unlikely to result in adverse effects to shareholders.

Related Party Transaction Approval Policies and Procedures. The Audit Committee, in accordance with its charter, reviews and approves, as applicable, all related party transactions involving our executive officers and trustees, PS Business Parks, and Shurgard, unless approved by the Board (with the interested trustees abstaining) or by another independent committee of the Board. In addition, our trustees and executive officers are required to disclose any actual or potential conflicts of interest to the Company. In accordance with our Corporate Governance Guidelines and Trustee’s Code of Ethics and the Governance Committee charter, our Governance Committee is responsible for evaluating any actual or potential conflicts of interest relating to our executive officers and trustees and for making recommendations to the Board with respect to any action to be taken. Any trustee with an actual, potential, or apparent conflict of interest may not participate in the decision-making process related to conflict.

Chairman Emeritus. Following his retirement as Chairman in 2011, B. Wayne Hughes has continued to serve as Chairman Emeritus and Co-Founder, which enables the Board to continue to benefit from his wisdom, judgment, and experience. Pursuant to a consulting arrangement approved by the

 

Public Storage  |  2021 Proxy Statement  |  69


Table of Contents

Proposal 2: Approve Executive Compensation

 

Compensation Committee and the disinterested trustees in March 2004, Mr. Hughes (1) agreed to be available for up to 50 partial days a year for consulting services, (2) receives compensation of $60,000 per year and the use of a company car, and (3) is provided with the services of an executive assistant at the Company’s headquarters. This consulting arrangement was extended in 2020 through December 31, 2021.

Relationships and Transactions with the Hughes Family. Tamara Hughes Gustavson, a trustee, and her adult children own and control 64 self-storage facilities in Canada. Ms. Gustavson’s direct ownership in these properties is currently less than 1.0%. These facilities operate under the Public Storage® trade name under a royalty-free, non-exclusive license agreement in place since 1993, when the Hughes family privately owned both the U.S. concern that ultimately became the Public Storage REIT, and the company owning Canadian facilities.

Our subsidiaries reinsure risks relating to loss of goods stored by customers in these facilities and have received approximately $1.6 million for the year ended December 31, 2020. Our right to continue receiving these premiums may be qualified. We have a right of first refusal, subject to limitations, to acquire the stock or assets of the corporation engaged in the operation of these facilities if their owners agree to sell them.

Management Agreement with PS Business Parks. PS Business Parks manages certain of the commercial facilities that we own pursuant to management agreements for a management fee equal to 5% of revenues. Public Storage paid a total of $0.3 million in management fees with respect to PS Business Parks’ property management services in 2020. In 2020, PS Business Parks allocated approximately $0.4 million in operating expenses to Public Storage related to the management of the properties, including payroll and other overhead expenses.

PS Business Parks owns certain commercial facilities that include self-storage space. We manage this self-storage space for PS Business Parks for a management fee equal to 6% of revenues generated by the self-storage space. We recorded management fees with respect to these facilities of approximately $0.1 million for the year ended December 31, 2020. In 2020, we allocated approximately $0.1 million in operating expenses to PS Business Parks related to the management of the properties, including payroll and overhead expenses.

Cost Sharing and Other Arrangements with PS Business Parks. Pursuant to a cost sharing and administrative services arrangement, we share certain administrative services, corporate office space, and certain other third party costs with PS Business Parks that are allocated based upon time, effort, and other methodologies. PS Business Parks reimbursed us $1.2 million for the year ended December 31, 2020, for costs paid on their behalf, and we reimbursed PS Business Parks less than $0.1 million in costs that PS Business Parks incurred on our behalf for the year ended December 31, 2020.

At December 31, 2020, we had a net receivable from PS Business Parks of less than $0.1 million.

Common Management/Board Members with PS Business Parks and Shurgard. Ronald L. Havner, Jr., Chairman of Public Storage, is also Chairman of the Board of Directors of PS Business Parks and Shurgard. Joseph D. Russell, Jr., President and CEO of Public Storage, is also a member of the Board of Directors of PS Business Parks. Kristy M. Pipes is a member of the Board of Directors of PS Business Parks.

Trademark Agreement and Transactions with Shurgard. Pursuant to a trademark license agreement, we receive monthly royalty fees from Shurgard for the use of the Shurgard® tradename equal to 1% of Shurgard’s gross revenues. Shurgard paid us $3.1 million for the year ended December 31, 2020, for royalty fees in connection with their use of the Shurgard® tradename.

 

70  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 2: Approve Executive Compensation

 

Pay Ratio Disclosure. SEC rules require us to disclose the ratio of annual total compensation of our CEO, Joseph D. Russell, Jr., to the annual total compensation of our median employee (excluding Mr. Russell). As of October 1, 2020, we had 5,372 talented and dedicated employees performing the following functions:

 

   

Approximately 82% (4,415) of our employees work at one of our self-storage facilities serving our customers. We generally pay these on-site property managers on an hourly basis. The median annual total compensation for these employees in 2020 was $26,671.

 

   

Approximately 7% (392) of our employees manage on-site property managers and assist them in providing our customers superior service. The median annual total compensation for these employees in 2020 was $109,694.

 

   

Approximately 5% (234) of our employees work in our call centers and assist potential customers and existing customers. The median annual total compensation for these employees in 2020 was $36,857.

 

   

Approximately 6% (331) of our employees are corporate employees, including our executive management team and our finance, legal, information technology, and human resources personnel. The median annual total compensation for these employees in 2020 was $127,274.

The ratio presented below is a reasonable estimate calculated in a manner consistent with SEC rules. We selected the median employee based on the 5,372 full-time and part-time workers employed by the Company and its consolidated subsidiaries as of October 1, 2020. In identifying our median employee, we used annual gross pay based on W-2 information. We did not apply any cost-of-living adjustments as part of the calculation.

Based on these calculations, our median employee is one of our 4,415 employees who work at one of our self-storage facilities serving our customers. This employee is paid on an hourly basis. The 2020 annual total compensation for our median employee as determined based on SEC rules was $27,976. The 2020 annual total compensation for our CEO as determined based on SEC rules was $4,800,928. The ratio of our CEO’s annual total compensation to our median employee’s total compensation for fiscal year 2020 is 172 to 1.

The Board recommends a vote FOR approval

of the compensation of our NEOs

as described in this proxy statement.

 

Public Storage  |  2021 Proxy Statement  |  71


Table of Contents

 

Proposal 3:

Ratification of Independent Registered

Public Accounting Firm

 

 

 

 

The Audit Committee has appointed EY as the

Company’s independent registered public accounting firm to audit the Consolidated Financial Statements of

Public Storage and its subsidiaries for the year ending December 31, 2021.

 

 

RECOMMENDATION:

 

Vote FOR ratification of the appointment of EY

as our independent registered public accounting firm for the fiscal year ending December 31, 2021

 

 

72  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 3: Approve Auditor

 

PROPOSAL 3

RATIFICATION OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

 

 

EXECUTIVE SUMMARY

The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the Company’s independent registered public accounting firm. The Audit Committee has appointed EY as the independent registered public accounting firm for Public Storage for the fiscal year ending December 31, 2021. The Audit Committee believes that the selection of EY is in the best interests of the Company and its shareholders and has recommended that the Board submit the appointment of EY to the Company’s shareholders for ratification.

Although we are not required to seek shareholder ratification of the appointment of EY as the independent registered public accounting firm, Public Storage is asking its shareholders to do so because it believes that shareholder ratification of the appointment is a matter of good corporate practice. Ratification of the appointment of EY requires approval by a majority of the votes cast at the meeting. For these purposes, abstentions, and broker non-votes will not be counted. If the shareholders do not ratify the appointment of EY, the Audit Committee will reconsider whether or not to retain EY as the independent registered public accounting firm for Public Storage, but may nevertheless determine to do so. Even if the shareholders ratify the appointment of EY, the Audit Committee may change the appointment at any time during the year if it determines that a change would be in the best interest of Public Storage and its shareholders.

A representative of EY will be present at our 2021 Annual Meeting, where the representative will be afforded an opportunity to make a statement and to respond to appropriate questions.

Fees Billed to the Company by EY for 2020 and 2019

The following table shows the fees billed or expected to be billed to Public Storage by EY for audit and other services provided for fiscal 2020 and 2019:

 

     2020        2019    

    Audit Fees

   $ 1,308,000      $ 1,247,000  

    Audit-Related Fees

     113,000        48,000  

    Tax Fees

     422,000        104,000  

    All Other Fees

     0        0  

    Total

   $ 1,843,000      $ 1,399,000  

Audit Fees. Audit fees represent fees for professional services provided in connection with the audits of Public Storage’s annual financial statements and internal control over financial reporting, review of the quarterly financial statements included in Public Storage’s quarterly reports on Form 10-Q and services in connection with the Company’s registration statements and securities offerings.

Audit-Related Fees. Audit-related fees represent professional services for auditing the Public Storage 401(k) plan financial statements and performing financial due diligence.

 

Public Storage  |  2021 Proxy Statement  |  73


Table of Contents

Proposal 3: Approve Auditor

 

Tax Fees. In 2020 and 2019, tax fees included $53,000 and $53,000, respectively, for preparation of federal and state income tax returns for Public Storage and its consolidated entities and $369,000 and $51,000, respectively, for various tax consulting matters.

Audit Committee Pre-Approval Policies. The Audit Committee has approved a policy concerning the pre-approval of audit and non-audit services to be provided by EY, our independent registered public accounting firm. The policy requires that all services provided by EY to us, including audit services, audit-related services, tax services and other services, must be pre-approved by the Audit Committee.

In 2020 and 2019, our Audit Committee pre-approved all services performed for us by EY.

 

74  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 3: Approve Auditor

 

Audit Committee Report

The Audit Committee’s responsibilities include appointing the Company’s independent registered public accounting firm, pre-approving audit and non-audit services provided by the firm, and assisting the Board in providing oversight to the Company’s financial reporting process. In fulfilling its oversight responsibilities, the Audit Committee meets with the Company’s independent registered public accounting firm, internal auditors, and management to review accounting, auditing, internal controls, and financial reporting matters.

In connection with its oversight responsibilities related to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K, the Audit Committee met with management and EY, the Company’s independent registered public accounting firm, and reviewed and discussed with them the audited consolidated financial statements. The Audit Committee discussed with EY matters required to be discussed by the Public Company Accounting Oversight Board (the PCAOB) Auditing Standard No. 16, Communications with Audit Committees, as modified or supplemented. The discussion included, but was not limited to, the overall scope and plans for the annual audit, the results of their audit, their evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In addition to providing the required written disclosures and communications, EY also provided to the Audit Committee the letter confirming EY’s independence of the Company as required by the applicable rules of the PCAOB, and the Audit Committee discussed with EY their independence. In addition, the Audit Committee has considered whether EY’s provision of non-audit services to the Company and its affiliates is compatible with EY’s independence.

The Audit Committee met with representatives of management, the internal auditors, legal counsel, and EY regularly throughout the year to discuss the progress of management’s testing and evaluation of the Company’s system of internal control over financial reporting in response to the applicable requirements of the Sarbanes-Oxley Act of 2002 and related SEC regulations. At the conclusion of this process, the Audit Committee received from management its assessment and report on the effectiveness of the Company’s internal controls over financial reporting. In addition, the Audit Committee received from EY its assessment of and opinion on the Company’s internal control over financial reporting as of December 31, 2020. The Audit Committee reviewed and discussed the results of management’s assessment and EY’s audit.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Trustees, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the SEC. The Audit Committee also approved the appointment of EY as the Company’s independent registered public accountants for the fiscal year ending December 31, 2021 and recommended that the Board submit this appointment to the Company’s shareholders for ratification at the 2021 Annual Meeting.

 

  THE AUDIT COMMITTEE
  Kristy M. Pipes (Chair)
  Rebecca Owen
  Avedick B. Poladian

  Tariq M. Shaukat

 

VOTE REQUIRED AND RECOMMENDATION

The affirmative vote of a majority of the votes cast at the Annual Meeting is necessary for the ratification of the appointment of EY as our independent registered public accounting firm for the fiscal year ending December 31, 2021. For purposes of the vote on this proposal, abstentions and broker non-votes will not affect the vote.

The Board recommends a vote FOR

the Appointment of EY as our

Independent Registered Public Accounting Firm

for the Fiscal Year Ending December 31, 2021.

 

Public Storage  |  2021 Proxy Statement  |  75


Table of Contents

Proposal 4: Approve 2021 Equity and Performance-Based Incentive Compensation Plan

 

 

Proposal 4:

Approval of Public Storage 2021 Equity

and Performance-Based Incentive

Compensation Plan

 

 

 

   

Approve the 2021 Equity and Performance-Based Incentive Compensation Plan

 

   

RECOMMENDATION:

 

Vote FOR approval of the 2021 Equity and Performance-Based Incentive Compensation Plan

 

 

76  |  Public Storage  |  2021 Proxy Statement


Table of Contents

Proposal 4: Approve 2021 Equity and Performance-Based Incentive Compensation Plan

 

On February 16, 2021, upon the recommendation of our Compensation Committee, our Board unanimously approved the Public Storage 2021 Equity and Performance-Based Incentive Compensation Plan (the 2021 Plan), subject to approval by our shareholders at this Annual Meeting.

The 2021 Plan would replace the Public Storage 2016 Equity and Performance-Based Incentive Compensation Plan (as amended, the 2016 Plan) and would apply to awards granted on or after the date of our Annual Meeting. If the 2021 Plan is approved, no further grants will be made pursuant to the 2016 Plan.

2021 Plan: Key Facts

Shareholder Approval

At our Annual Meeting, we are asking our shareholders to consider and approve adoption of the 2021 Plan.

Protection of Shareholder Interests and Alignment with Compensation Principles

The 2021 Plan includes the following features designed to protect shareholder interests and reflect our compensation principles:

 

   

Fixed plan term of ten years;

 

   

No “evergreen” provision to automatically increase the number of shares available for issuance without shareholder approval;

 

   

Awards granted pursuant to the 2021 Plan will be subject to our “clawback” (recoupment) policy;

 

   

No repricing or below-market grants of options and stock appreciation rights (“SARs”);

 

   

No liberal share recycling;

 

   

Double-trigger change of control provisions that limit acceleration in a change of control unless the employee was also terminated without cause;

 

   

No liberal change of control definition;

 

   

Minimum one-year vesting requirement that applies to 95% of the shares authorized for grant under the 2021 Plan; and

 

   

No payment of dividends on performance awards before performance standards are met.

Importance of the 2021 Plan

Our equity plan continues to be a crucial component of our compensation program for our executives and other key employees. Without a shareholder-approved equity plan, we would be reliant on cash-settled awards as our sole method of incentive-based compensation. Our ability to grant equity-based awards is