UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

(RULE 14a-1)

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

Filed by the Registrant    þ

Filed by a Party other than the Registrant    o

Check the appropriate box:
o  Preliminary Proxy Statement
o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material under Rule 14a-12

VORNADO REALTY TRUST

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

AND PROXY STATEMENT

 

2009

 

888 Seventh Avenue
New York, New York 10019

 

Notice of Annual Meeting of Shareholders to Be Held on May 14, 2009

 

To our Shareholders:

 

The 2009 Annual Meeting of Shareholders of Vornado Realty Trust, a Maryland real estate investment trust (the “Company”), will be held at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663, on Thursday, May 14, 2009, beginning at 11:30 A.M., local time, for the following purposes:

 

(1) To elect three persons to the Board of Trustees of the Company. Each person elected will serve for a term of three years and until his successor is duly elected and qualified.

 

(2) To consider and vote upon the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the current fiscal year.

 

(3) To consider and vote upon a shareholder proposal regarding majority voting, if properly presented at the meeting.

 

(4) To consider and vote upon a shareholder proposal regarding the appointment of an independent Chairman, if properly presented at the meeting.

 

(5) To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting.

 

The Board of Trustees of the Company has fixed the close of business on March 13, 2009 as the record date for the determination of shareholders entitled to notice of, and to vote at, the meeting.

 

Please review the accompanying Proxy Statement and proxy card. Whether or not you plan to attend the meeting, your shares should be represented and voted. You may authorize your proxy by the Internet or by touch-tone phone as described on the proxy card. Alternatively, you may wish to sign the proxy card and return it in accordance with the instructions included with the proxy card. You may revoke your proxy by (1) executing and submitting a later-dated proxy card that is received prior to May 14, 2009, (2) subsequently authorizing a proxy through the Internet or by telephone, (3) sending a written revocation of proxy to our Secretary at our principal executive office, or (4) attending the Annual Meeting and voting in person.

 

By Order of the Board of Trustees,

 

Secretary

 

April 3, 2009

888 Seventh Avenue
New York, New York 10019

 

PROXY STATEMENT

 

Annual Meeting of Shareholders to Be Held on May 14, 2009

 

The accompanying proxy is being solicited by the Board of Trustees (the “Board”) of Vornado Realty Trust, a Maryland real estate investment trust (“we,” “us,” “our” or the “Company”), for use at our 2009 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on Thursday, May 14, 2009, beginning at 11:30 A.M., local time, at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663. Our principal executive office is located at 888 Seventh Avenue, New York, New York 10019. Our proxy materials, including this Proxy Statement, the Notice of Annual Meeting of Shareholders, the proxy card or voting instruction card and our 2008 Annual Report are being distributed and made available on or about April 3, 2009.

 

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials to our shareholders on the Internet. Accordingly, a notice of Internet availability of proxy materials will be mailed on or about April 3, 2009 to our shareholders of record as of March 13, 2009. Shareholders will have the ability to access the proxy materials on a website referred to in the notice or request that a printed set of the proxy materials be sent, at no cost to them, by following the instructions in the notice. You will need your 12-digit control number that is included with the notice mailed on April 3, 2009, to vote your shares through the internet. If you have not received a copy of this notice, please contact our investor relations department at 201-587-1000 or send an e-mail to ircontact@vno.com. If you wish to receive a hard copy of these materials you can request them at www.proxyvote.com or by dialing 1-800-579-1639 and following the instructions at that website or phone number.

 

How do you vote?

 

You may authorize your proxy over the Internet (at www.proxyvote.com), by telephone (at 1-800-690-6903) or by executing and returning a proxy card. Once you authorize a proxy, you may revoke that proxy by (1) executing and submitting a later dated proxy card, (2) subsequently authorizing a proxy through the Internet or by telephone, (3) sending a written revocation of proxy to our Secretary at our principal executive office, or (4) attending the Annual Meeting and voting in person. Attending the Annual Meeting without submitting a new proxy or voting in person will not automatically revoke your prior authorization of your proxy. Proxies authorized via the internet or telephone must be received by 11:59 P.M., New York City time, on Wednesday, May 13, 2009.

 

We will pay the cost of soliciting proxies. We have hired MacKenzie Partners, Inc. to solicit proxies for a fee not to exceed $5,500. In addition to solicitation by mail, by telephone and by e-mail or the Internet, arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to their principals and we may reimburse them for their expenses in so doing. If you hold shares in “street name” (i.e., through a bank, broker or other nominee), you will receive instructions from your nominee that you must follow in order to have your proxy authorized, or you may contact your nominee directly to request these instructions.

 

Who is entitled to vote?

 

Only shareholders of record as of the close of business on March 13, 2009 are entitled to notice of and to vote at the Annual Meeting. We refer to this date as the “record date.” On that date, there were 158,275,854 of our common shares of beneficial interest, par value $0.04 per share (the “Shares”), outstanding. Holders of Shares as of the record date are entitled to one vote per Share on each matter properly submitted at the Annual Meeting.

 2  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

How do you attend the meeting in person?

 

If you would like to attend the Annual Meeting in person, you will need to bring an account statement or other evidence acceptable to us of ownership of your Shares as of the close of business on the record date. If you hold Shares in “street name” and wish to vote at the Annual Meeting, you will need to contact your nominee and obtain a proxy from your nominee and bring it to the Annual Meeting.

 

How will your votes be counted?

 

The holders of a majority of the outstanding Shares as of the close of business on the record date, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. Any proxy submitted will be voted as directed. Any proxy executed and submitted, but for which no direction is given, will be voted as recommended by the Board of Trustees in this proxy statement and in the discretion of the proxy holder on any other matter that may properly come before the meeting. A broker non-vote and any proxy marked “withhold authority” or an abstention, as applicable, will count for the purposes of determining a quorum, but will have no effect on the result of the vote on the election of trustees, the ratification of the appointment of our registered independent public accounting firm or the shareholder proposals.

 

PROPOSAL 1: ELECTION OF TRUSTEES

 

TRUSTEES STANDING FOR ELECTION

 

Our Board currently has 11 trustees. On February 19, 2009, our Board, on the recommendation of our Corporate Governance and Nominating Committee, nominated each of Messrs. Steven Roth, Michael D. Fascitelli and Russell B. Wight, Jr. for election at our Annual Meeting to the class of trustees to serve until 2012 and until his respective successor is duly elected and qualified. Messrs. Roth, Fascitelli and Wight are currently serving as members of our Board. Our organizational documents provide that our trustees are divided into three classes, as nearly equal in number as reasonably possible, as determined by the Board. One class of trustees is elected at each Annual Meeting to hold office for a term of three years and until their respective successors have been duly elected and qualified.

 

Unless you direct otherwise in the proxy, each of the persons named in the attached proxy will vote your proxy for the election of the three nominees listed below as trustees. If any nominee at the time of election is unavailable to serve, it is intended that each of the persons named in the proxy will vote for an alternate nominee who will be nominated by our Corporate Governance and Nominating Committee and designated by the Board or the Board, on the recommendation of the Corporate Governance and Nominating Committee, may simply reduce the size of the Board and number of nominees. Proxies may be voted only for the nominees named or such alternates. We do not currently anticipate that any nominee for trustee will be unable to serve as trustee.

 

Under our Amended and Restated Bylaws (the “Bylaws”), a plurality of all the votes cast at the Annual Meeting, if a quorum is present, is sufficient to elect a trustee. Under Maryland law, proxies marked “withhold authority” will be counted for the purpose of determining the presence of a quorum but will have no effect on the result of this vote. A broker non-vote will have no effect on the result of this vote.

 

The Board of Trustees recommends that shareholders vote “FOR” approval of the election of each of the nominees listed below to serve as a trustee until the Annual Meeting of Shareholders in 2012 and until his respective successor has been duly elected and qualified.

2009 PROXY STATEMENT      VORNADO REALTY TRUST  3 

 

The following table lists the nominees and the other present members of the Board. For each such person, the table lists the age, principal occupation, position presently held with the Company, if any, and the year in which the person first became or was nominated to become a member of our Board or a director of our predecessor, Vornado, Inc.

 

 

 4  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

BIOGRAPHIES OF OUR TRUSTEES

 

Ms. Beinecke was appointed to our Board in September of 2007. Ms. Beinecke has served as Chair of Hughes Hubbard & Reed LLP, a New York law firm, since 1999. Ms. Beinecke is also a practicing partner in Hughes Hubbard’s Corporate Department. Ms. Beinecke also serves as Chairperson of Arnhold & S. Bleichroeder Advisors LLC First Eagle Funds, Inc. (a U.S. public mutual fund family), and as a board member of ALSTOM (a public French transport and power company).

 

Mr. Deering is Chairman of Exeter Capital, LLC (a private investment firm). He previously served as Chairman of the Board and Chief Executive Officer of The Rouse Company (a public real estate company), until its merger with General Growth Properties in November 2004. Mr. Deering joined The Rouse Company in 1972 and was previously its Vice President and Treasurer, Senior Vice President and Chief Financial Officer, and President and Chief Operating Officer. Mr. Deering is also a director of a number of the T. Rowe Price Mutual Funds (investment management funds) and a director of Under Armour, Inc. (a sporting goods company).

 

Mr. Fascitelli has been our President and a trustee since December 1996. From December 1992 to December 1996, Mr. Fascitelli was a partner at Goldman, Sachs & Co. (an investment banking firm) in charge of its real estate practice and was a vice president prior thereto. He is also a director and the President of Alexander’s, Inc. (“Alexander’s”) (a real estate investment trust) and a director of Toys “R” Us, Inc. (a retailer).

 

Mr. Kogod was appointed a trustee on January 1, 2002, the date Charles E. Smith Commercial Realty L.P. merged into a subsidiary of the Company. Currently Mr. Kogod is the President of Charles E. Smith Management LLC (a private investment firm). Previously, Mr. Kogod was Co-Chief Executive Officer and Co-Chairman of the Board of Directors of Charles E. Smith Commercial Realty L.P., from October 1997 through December 2001, and was Co-Chief Executive Officer and Co-Chairman of the Board of Directors of Charles E. Smith Residential Realty from June 1994 to October 2001. Mr. Kogod also served as a trustee of Archstone-Smith Trust (a real estate investment trust) until it was sold in 2007.

 

Mr. Lynne has been a principal of Unique Features (a motion picture company) since its formation in 2008. Prior to that he was Co-Chairman and Co-Chief Executive Officer of New Line Cinema Corporation (a subsidiary of Time Warner, Inc. and a motion picture company) since 2001. Prior to 2001, Mr. Lynne served as President and Chief Operating Officer of New Line Cinema, starting in 1990.

 

Mr. Mandelbaum has been a member of the law firm of Mandelbaum & Mandelbaum, P.C. since 1967. Since 1968, he has been a general partner of Interstate Properties (an owner of shopping centers and investor in securities and partnerships, “Interstate”). Mr. Mandelbaum is also a director of Alexander’s.

 

Mr. Roth has been the Chairman of our Board and Chief Executive Officer since May 1989 and Chairman of the Executive Committee of the Board since April 1980. Since 1968, he has been a general partner of Interstate and he currently serves as its Managing General Partner. He is the Chairman of the Board and Chief Executive Officer of Alexander’s. Mr. Roth is also a director of Toys “R” Us, Inc.

 

Mr. Smith was appointed a trustee on January 1, 2002, the date Charles E. Smith Commercial Realty L.P. merged into a subsidiary of the Company. Currently, Mr. Smith is the Vice President, Secretary and Treasurer of Charles E. Smith Management LLC. Previously, Mr. Smith was Co-Chief Executive Officer and Co-Chairman of the Board of Directors of Charles E. Smith Commercial Realty L.P., from October 1997 until December 2001. Mr. Smith also served as Chairman of our Washington DC Office Division from 2001 until May 2008. Mr. Smith also served as a trustee of Archstone-Smith Trust until it was sold in 2007.

 

Mr. Targan has been the President of Malt Products Corporation of New Jersey (a producer of malt syrup) since 1962. From 1964 until July 2002, Mr. Targan was a member of the law firm of Schechner and Targan, P.A.

 

Dr. West is Dean Emeritus of the Leonard N. Stern School of Business at New York University. He was a professor there from September 1984 until September 1995 and Dean from September 1984 until August 1993. Prior thereto, Dr. West was Dean of the Amos Tuck School of Business Administration at Dartmouth College.

2009 PROXY STATEMENT      VORNADO REALTY TRUST  5 

Dr. West is also a director of Alexander’s, Bowne & Co., Inc. (a commercial printing company) and a number of investment companies managed by BlackRock Advisors (an asset management firm).

 

Mr. Wight has been a general partner of Interstate since 1968. Mr. Wight is also a director of Alexander’s.

 

RELATIONSHIPS AMONG OUR TRUSTEES

 

Mr. Smith and Mr. Kogod are brothers-in-law. We are not aware of any other family relationships among any of our trustees or executive officers or persons nominated or chosen by us to become trustees or executive officers.

 

Messrs. Roth, Wight and Mandelbaum are each general partners of Interstate. Since 1992, Vornado has managed all the operations of Interstate for a fee as described in “Certain Relationships and Related Transactions—Transactions Involving Interstate Properties.”

 

Messrs. Roth, Fascitelli, Wight, Mandelbaum and Dr. West are also directors of Alexander’s. We, together with Interstate, beneficially own approximately 59% of the common stock of Alexander’s.

 

For more information concerning Interstate, Alexander’s and other relationships involving our trustees, see “Certain Relationships and Related Transactions.”

 

CORPORATE GOVERNANCE

 

The Company or its predecessor has been continuously listed on the NYSE since January 1962 and is subject to the NYSE’s Corporate Governance Standards.

 

The Board has determined that Ms. Beinecke and Messrs. Deering, Lynne, Mandelbaum, Targan, Wight and Dr. West are independent under the Corporate Governance Rules of the NYSE, making seven of our 11 trustees independent. The Board reached its conclusion after considering all applicable relationships between or among such trustees and the Company or management of the Company. These relationships are described in the sections of this proxy statement entitled “Relationships Among Our Trustees” and “Certain Relationships and Related Transactions.” Among other factors considered by the Board in making its determinations regarding independence was the Board’s determination that these trustees met all of the “bright-line” requirements of the NYSE Corporate Governance Rules as well as the categorical standards adopted by the Board as contained in our Corporate Governance Guidelines.

 

As part of its commitment to good corporate governance, the Board of Trustees has adopted the following committee charters and policies:

 

 

We have made available on our website (www.vno.com) copies of these charters, guidelines and policies. We will post any future changes to these charters, guidelines and policies to our website and may not otherwise publicly file such changes. Our regular filings with the SEC and our trustees’ and executive officers’ filings under Section 16(a) of the Securities Exchange Act of 1934 are also available on our website. In addition, copies of these charters, guidelines and policies are available free of charge from the Company.

 

The Code of Business Conduct and Ethics applies to all of our trustees, executives and other employees.

 6  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

COMMITTEES OF THE BOARD OF TRUSTEES

 

The Board has an Executive Committee, an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee. Other than the Executive Committee, each committee is comprised solely of independent trustees.

 

The Board held eight meetings during 2008. Each trustee attended at least 75% of the combined total of the meetings of the Board and all committees on which he or she served during 2008.

 

In addition to full meetings of the Board, non-management trustees met four times in sessions without members of management present. During these meetings, these trustees selected their own presiding member. We do not have a policy with regard to trustees’ attendance at Annual Meetings of Shareholders. All of our trustees were present at the 2008 Annual Meeting of Shareholders.

 

Executive Committee

 

The Executive Committee possesses and may exercise certain powers of the Board in the management of the business and affairs of the Company. The Executive Committee consists of four members, Messrs. Roth, Fascitelli, Smith and Wight. Mr. Roth is the Chairman of the Executive Committee. The Executive Committee did not meet in 2008.

 

Audit Committee

 

The Audit Committee, which held eight meetings during 2008, consists of three members: Dr. West, as Chairman, and Messrs. Deering and Targan.

 

The Board has adopted a written Audit Committee Charter, which sets forth the membership requirements of the Audit Committee, among other matters. The Board has determined that all existing Audit Committee members meet the NYSE and SEC standards for independence and the NYSE standards for financial literacy. In addition, at all times, at least one member of the Audit Committee has met the NYSE standards for financial management expertise.

 

The Board has determined that each of Dr. West and Mr. Deering is an “audit committee financial expert,” as defined by SEC Regulation S-K, and thus has at least one such expert serving on its Audit Committee. The Board reached these conclusions based on the relevant experience of Dr. West and Mr. Deering, including as described above under “Biographies of our Trustees.”

 

The Audit Committee’s purposes are to (i) assist the Board in its oversight of (a) the integrity of our financial statements, (b) our compliance with legal and regulatory requirements, (c) the independent registered public accounting firm’s qualifications and independence, and (d) the performance of the independent registered public accounting firm and the Company’s internal audit function; and (ii) prepare an Audit Committee report as required by the SEC for inclusion in our annual proxy statement. The function of the Audit Committee is oversight. The management of the Company is responsible for the preparation, presentation and integrity of our financial statements and for the effectiveness of internal control over financial reporting. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for planning and carrying out a proper audit of our annual financial statements, reviewing of our quarterly financial statements prior to the filing of each Quarterly Report on Form 10-Q, annually auditing the effectiveness of internal control over financial reporting and other procedures. Persons interested in contacting our Audit Committee members with regard to accounting, auditing or financial concerns will find information on how to do so on our website (www.vno.com).

 

Compensation Committee

 

The Compensation Committee is responsible for establishing the terms of the compensation of the executive officers and the granting and administration of awards under the Company’s 2002 Omnibus Share Plan, as

2009 PROXY STATEMENT      VORNADO REALTY TRUST  7 

amended. The committee, which held six meetings and acted twice by written consent during 2008, consists of three members: Mr. Lynne, as Chairman, Mr. Targan and Dr. West. All members of the Compensation Committee are independent. Dr. West served as Chairman of this committee until our Annual Meeting of Shareholders on May 15, 2008. The Board has adopted a written Compensation Committee Charter.

 

Compensation decisions for our executive officers and trustees are made by the Compensation Committee. Decisions regarding compensation of other employees are made by our President in consultation with the Chief Executive Officer and are subject to review and approval of the Compensation Committee.

 

The agenda for meetings of the Compensation Committee is determined by its Chairman with the assistance of the Company’s Secretary. Compensation Committee meetings are attended from time to time by members of management at the invitation of the Compensation Committee. The Compensation Committee’s Chairman reports the committee’s recommendation on executive compensation to the Board. The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee reviews the total fees paid by us to outside consultants to ensure that the consultant maintains its objectivity and independence when rendering advice to the committee.

 

The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee. In particular, the Compensation Committee may delegate the approval of certain transactions to a subcommittee consisting solely of members of the Committee who are (i) “Non-Employee Directors” for the purposes of Rule 16b-3; and (ii) “outside directors” for the purposes of Section 162(m).

 

See “Compensation Discussion and Analysis” below for a discussion of the role of executive officers in determining or recommending compensation for our executive officers. We have also included under “Compensation Discussion and Analysis” a discussion of the role of compensation consultants in determining or recommending the amount or form of executive or director compensation.

 

Corporate Governance and Nominating Committee

 

During 2008, the members of the Corporate Governance and Nominating Committee consisted of Mr. Wight, as Chairman, and Messrs. Deering and Mandelbaum. On January 14, 2009, Mr. Deering resigned from the committee and was replaced by Ms. Beinecke, who was elected chairperson of the committee effective that date. Each of Messrs. Wight, Deering and Mandelbaum and Ms. Beinecke is independent. The committee’s responsibilities include the selection of potential candidates for the Board and the development and review of our governance principles. It also reviews trustee compensation and benefits, and oversees annual self-evaluations of the Board and its committees. The committee also makes recommendations to the Board concerning the structure and membership of the other Board committees as well as management succession plans. The committee selects and evaluates candidates for the Board in accordance with the criteria set out in the Company’s Corporate Governance Guidelines and pursuant to the Corporate Governance and Nominating Committee Charter. These criteria include, among others, personal qualities and characteristics, accomplishments and reputation in the business community; current knowledge and contacts in the communities in which we do business and in our industry or other industries relevant to our business; ability and willingness to commit adequate time to Board and committee matters; the fit of the individual’s skills and personality with those of other trustees and potential trustees in building a Board that is effective, collegial and responsive to our needs, and diversity of viewpoints, experience and other demographics. The committee is then responsible for recommending to the Board a slate of candidates for trustee positions for the Board’s approval. Generally, candidates for a position as a member of the Board are suggested by existing Board members, however, the Corporate Governance and Nominating Committee will consider shareholder recommendations for candidates for the Board sent to the Corporate Governance and Nominating Committee, c/o Alan J. Rice, Secretary, Vornado Realty Trust, 888 Seventh Avenue, New York, New York 10019 and will evaluate any such recommendations using the criteria set forth in the Corporate Governance and Nominating Committee Charter. The Corporate Governance and Nominating Committee met twice in 2008.

 8  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

LEAD TRUSTEE

 

On February 19, 2009, our independent Trustees appointed Mr. Russell B. Wight, Jr. to serve as Lead Trustee for a one-year term. The responsibilities and duties of the Lead Trustee are described in our Corporate Governance Guidelines (a copy of which is attached to this Proxy Statement).

 

* * * * *

 

Persons wishing to contact the independent members of the Board should call (866) 537-4644. A recording of each phone call to this number will be sent to one independent member of the Board who sits on the Audit Committee as well as to a member of management who may respond to any such call if the caller provides a return number. This means of contact should not be used for solicitations or communications with us of a general nature. Information on how to contact us generally is available on our website (www.vno.com).

2009 PROXY STATEMENT      VORNADO REALTY TRUST  9 

 

PRINCIPAL SECURITY HOLDERS

 

The following table lists the number of Shares and Units as of March 13, 2009, beneficially owned by (i) each person who holds more than a 5% interest in the Company or our operating partnership, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”), (ii) trustees of the Company, (iii) the executive officers of the Company defined as “Covered Executives” in “Executive Compensation” below, and (iv) the trustees and all executive officers of the Company as a group. Unless otherwise specified, “Units” are Class A units of limited partnership interest of our Operating Partnership and other classes of units convertible into Class A units. The Company’s ownership of Units is not reflected in the table but is described in footnote (2).

 

 

*Less than 1%.

 

 10  VORNADO REALTY TRUST   2009 PROXY STATEMENT

2009 PROXY STATEMENT      VORNADO REALTY TRUST  11 

 12  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires our trustees and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership of, and transactions in, certain classes of our equity securities with the SEC. Such trustees, executive officers and 10% shareholders are also required to furnish us with copies of all Section 16(a) reports they file.

 

Based solely on a review of the Forms 3, 4 and 5, and any amendments thereto, furnished to us, and on written representations from certain reporting persons, we believe that the only filing deficiencies under Section 16(a) by our trustees, executive officers and 10% shareholders in the year ended December 31, 2008 (or in 2009, prior to the mailing of this proxy statement) are as follows:

 

2009 PROXY STATEMENT      VORNADO REALTY TRUST  13 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Overview of Compensation Philosophy and Program

 

We believe that the quality, skills and dedication of our senior executive officers are critical factors affecting the long-term value of our company. Our key compensation goals are to attract world-class executive talent; retain our key leaders; reward past performance; provide an incentive for future performance; and align our executives’ long-term interests with those of our investors. We use a variety of compensation elements to achieve these goals, including base salary, annual bonuses, options, Restricted Shares, Restricted Units and out-performance units, all of which we discuss in detail below.

 

Compensation Reductions in Response to Current Economic Conditions

 

In light of the current uncertain economic conditions, we determined to decrease the compensation levels of our executive officers and other officers throughout the Company. This process was undertaken in connection with our annual compensation review completed in the first quarter of 2009. This decision was made despite our reporting strong results in our core operations for 2008 (as reported in our Annual Report on Form 10-K for the year ended December 31, 2008, our same-store EBITDA for our New York Office, Washington, DC Office and Retail divisions increased by 6.2%, 4.5% and 4.8%, respectively, over the prior year). In the aggregate, we reduced by 29% the salary, bonuses and annual equity compensation of our executive officers, with total compensation being reduced in a range of 16% to 52% for the individual executives. For other employees of the Company, the aggregate salaries and bonuses did not increase and the value of annual equity grants decreased by 19%. Additionally, OPP Units were granted to members of management in 2008 and not in 2009.

 

The compensation reductions discussed above are not reflected in the Summary Compensation Table below for three reasons: (1) the reductions pertain to awards granted in 2009 (for 2008 performance) and were not recorded in the periods presented; (2) the Summary Compensation Table reflects the accounting costs associated with amortizing equity grants made in multiple years (from 2003 to 2008) over the applicable vesting period while our discussion of compensation reductions pertains to a single year’s compensation decisions; and (3) the Summary Compensation Table reflects the accounting cost (which we refer to as “Fair Value”) of Restricted Units is based on a valuation formula determined by a third-party valuation firm that changes from year to year while our Compensation Committee grants Restricted Units based on the market price of our Shares on the date of grant (which we refer to as “Market Value”) which was the method used in the discussion above.

 

Additionally, we have excluded the impact of OPP Unit awards from this Compensation Discussion and Analysis in comparing aggregate 2008 salary, bonus and annual equity compensation to the comparable amount for 2007 because, while OPP Units were awarded in 2008 (for 2007 performance), there were no comparable awards made in 2009 (for 2008 performance).

 

Surrender of Equity Awards

 

In the first quarter of 2009 each of our nine most senior executive officers voluntarily surrendered all grants to them during 2007 and 2008 of options and of 2008 OPP Units, as defined below (without any consideration or agreement for consideration in the future). The voluntary surrender of these awards resulted in an approximate $32.6 million expense to the Company in the first quarter of 2009 due to the acceleration of the unamortized expense associated with the granting of these awards.

 

Implementing Our Objectives

 

Our decisions on senior executive officer compensation are based primarily upon our assessment of each executive’s leadership, operational performance and potential to enhance long-term shareholder value. We rely upon our judgment about each individual—and not on rigid formulas or short-term changes in business performance—in determining the amount and mix of compensation elements. Key factors affecting our judgment include: actual performance compared to the financial, operational and strategic goals established for the executive’s operating division at the beginning of the year; the nature, scope and level of responsibilities; the contribution to the Company’s financial results, particularly with respect to key metrics such as earnings before

 14  VORNADO REALTY TRUST   2009 PROXY STATEMENT

interest, taxes, depreciation and amortization (“EBITDA”), funds from operations (“FFO”) and total return to shareholders during the year; and the contribution to the Company’s commitment to corporate responsibility, including success in creating a culture of unyielding integrity and compliance with applicable laws and our ethics policies. We also consider each executive’s current salary and prior-year bonus, the value of an executive’s equity stake in the Company, and the appropriate balance between incentives for long-term and short-term performance and the compensation paid to the executive’s peers within the Company. We also consider competitive market compensation paid by other companies that operate in our business or that compete for the same talent pool, such as other S&P 500 REITS, other real estate companies operating in our core markets and, in some cases, investment banking, hedge fund and private equity firms. However, we do not tie our compensation decisions to any particular range or level of total compensation paid to executives at these companies. In addition, while we encourage alignment with shareholders’ interests through long-term, equity-based compensation, we have no pre-established target for the allocation of compensation between cash and non-cash or short-term and long-term incentive elements. We apportion cash payments and equity incentive awards as another tool to provide the appropriate incentives to meet our compensation objectives both individually and in the aggregate for executives and other employees. The factors we consider in evaluating compensation for any particular year may not be applicable to determinations in other years. In addition, typically, our Chief Executive Officer and President receive a higher proportion of their compensation in the form of equity than our other senior executives. This allocation is based on (1) the relative seniority of these executives; and (2) a determination that these executives should have a greater proportion of their compensation in a form that aligns further their interests with those of shareholders. We believe the most important indicator of whether our compensation objectives are being met is whether we have motivated our named executives to deliver superior performance and retained them to continue their careers with us on a cost-effective basis.

 

Role of the Corporate Governance and Nominating Committee, the Compensation Committee, the CEO and the President

 

The Corporate Governance and Nominating Committee of our Board is responsible for evaluating potential candidates for executive positions, including the Chief Executive Officer, and for overseeing the development of executive succession plans. The Compensation Committee of our Board (1) reviews and approves the compensation of our officers and other employees whose total cash compensation exceeds $200,000 per year, (2) administers our incentive compensation and other equity-based plans, and (3) regularly evaluates the effectiveness of our overall executive compensation program.

 

As part of this responsibility, the Compensation Committee oversees the design, development and implementation of the compensation program for our Chief Executive Officer, our President and our other named executives. The Compensation Committee evaluates the performance of our Chief Executive Officer and our President and sets their compensation. Our Chief Executive Officer, our President and the Compensation Committee together assess the performance of our named executives and determine their compensation, based on the initial recommendations of our Chief Executive Officer and our President. The other named executives do not play a role in determining their own compensation, other than discussing individual performance objectives with our Chief Executive Officer and our President.

 

In support of these responsibilities, members of our senior management in conjunction with other senior executives, have the initial responsibility of reviewing the performance of the employees reporting to him or her and recommending compensation actions for them.

 

This process involves multiple meetings among our Chief Executive Officer, our President and our Compensation Committee. Typically, in the third and fourth quarter of each year, these parties meet to discuss and establish an overall level of compensation for the year and the base compensation for the following year. For 2008, as has been our normal practice, our President obtained individual recommendations from division heads as to compensation levels for those persons reporting to the division heads. These recommendations are discussed among our President and the division heads prior to a recommendation being presented to the Compensation Committee. For our senior executives other than the Chief Executive Officer and President, recommendations are prepared based upon discussions among the Compensation Committee, our Chief Executive Officer and our President. These recommendations are based upon our objectives described above and may include factors such as information obtained from compensation consultants. Our Chief Executive Officer and President discuss these

2009 PROXY STATEMENT      VORNADO REALTY TRUST  15 

recommendations with our other senior executives in one-on-one meetings. After these discussions, certain allocations or other aspects of compensation may be revised to some degree and the revised recommendations are presented to the Compensation Committee for discussion and review and, ultimately, through a continued process, approval. The compensation of our Chief Executive Officer and President is determined in accordance with a similar process involving direct discussions among the Compensation Committee and our Chief Executive Officer and President. Historically, except for OPP awards, specific performance targets are not used in determining compensation.

 

Role of Compensation Consultants

 

We and the Compensation Committee also consult with one or more executive compensation experts, from time to time, and consider the compensation levels of companies within our industry and other industries that compete for the same talent. Periodically, we have retained compensation consultants to assist in the design of programs that affect senior executive compensation, most recently in the development of our out-performance plan (described below). Currently, the Compensation Committee has retained Watson Wyatt & Company to provide assistance in reviewing our overall compensation plan, its objectives and implementation. In 2008, Watson Wyatt was directed to review our overall compensation process and comparative compensation levels for senior executive officers. Watson Wyatt prepared an analysis of compensation levels at the following companies that it determined to be comparable: BlackRock, Inc.; Boston Properties, Inc.; CB Richard Ellis Group, Inc.; Equity Residential; Franklin Resources, Inc.; Host Hotels & Resorts, Inc.; Jefferies Group, Inc.; Jones Lang LaSalle Incorporated; Lazard Ltd.; Legg Mason, Inc.; ProLogis; Simon Property Group, Inc.; and SL Green Realty Corp. The consensus of the Compensation Committee was that the analyses were useful in indicating that our compensation levels were not out-of-line with these other companies.

 

Compensation Elements for Senior Executive Officers

 

The elements of our executive compensation program are set forth below. The factors we consider in making compensation awards for our senior executive officers are set forth above and are based upon a subjective, non-formulaic evaluation of senior executive and Company performance conducted by the Compensation Committee together with our Chief Executive Officer and President, which we discuss below. These factors are considered as a whole and no one factor is determinative of an executive’s compensation. Among the factors considered were the changes in the Company’s and the applicable division’s operating and performing metrics during the year (EBITDA and FFO), our total return to shareholders during the year, asset and personnel development and the other factors previously mentioned. Decreases and allocations for 2008 and increases and allocations for 2007 and 2006 of various compensation elements to our named executive officers were based upon the results of these reviews. In several cases, as described below, some aspects of the compensation paid to our executives are affected by the terms of applicable employment agreements. In such cases, for instance, base salaries cannot be decreased during the employment term.

 

Base Salary

 

Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar positions as well as salaries paid to the executives’ peers within the Company. We set base salaries at a level designed to attract and retain superior leaders. Base salaries are typically reviewed every 12 months in the first quarter of each year in connection with annual performance reviews, and adjusted to take into account outstanding individual performance, promotions and competitive compensation levels. There were no increases in senior executive base salaries for 2009 over that of 2008.

 

Annual Bonus

 

We pay annual bonuses as a component of overall compensation as well as to provide an incentive and a reward for superior performance. From time to time, we may pay additional special bonuses for superior performance. None of our current bonuses are (and only in rare cases are any) bonuses based on specific performance targets. Bonuses are paid in cash and/or in equity interests, generally in the first quarter of each year for the prior year’s performance. These bonuses are based upon our evaluation of each executive’s individual performance

 16  VORNADO REALTY TRUST   2009 PROXY STATEMENT

during the prior year in the context of our assessment of the overall performance of the Company and the executive’s business unit or function in meeting the budgeted financial and other goals established for the Company and the executive’s business unit or function. For our senior executives, the annual bonuses paid to them in 2009 (for 2008 performance) were, in the case of our Chief Executive Officer and President, all in the form of Restricted Units and for the remainder of our senior executive officers 50% in Restricted Units and 50% in cash. As described below, we believe Restricted Units to be a tax-efficient form of compensation that continues to align the executive’s interests with those of our shareholders, and enhances retention through vesting conditions. Special bonuses are generally awarded in recognition of outstanding achievement with regard to specific events based upon an after-the-fact subjective evaluation of factors then deemed important by our Chief Executive Officer, President and Compensation Committee.

 

Options, Restricted Shares and Restricted Units

 

Also, generally in the first quarter of each year in connection with annual performance reviews, we make grants to the Company’s officers, including our senior executive officers of: options to purchase our common shares, Restricted Shares, and/or Restricted Units. The portion of overall compensation, if any, allocated each year among these types of grants is determined by the Compensation Committee, in conjunction with our Chief Executive Officer and our President, taking into account our overall compensation objectives. These grants are intended to serve as incentives for our superior performers to remain with us and continue that performance. Generally, unvested equity grants are forfeited if the executive leaves the Company, however, options fully vest if an executive departs the Company after the age of 65 or his or her employment is terminated due to a disability prior to retirement and all equity awards automatically vest on death or upon a change of control. All equity grants are accounted for in accordance with Statement of Financial Accounting Standards 123R-Share Based Payment (“SFAS 123R”).

 

Upon vesting, each option permits the executive, for a period of ten years from the original grant date, to purchase the stated number of common shares from the Company at an exercise price per share determined on the date of grant. Options have value only to the extent the price of our shares on the date of exercise exceeds the applicable exercise price. Options generally become exercisable in five equal annual installments beginning approximately one year after the grant date.

 

“Restricted Shares” are grants of our common shares that generally vest in five equal annual installments beginning approximately one year after the grant date. “Restricted Units” are grants of limited partnership interests in Vornado Realty L.P., our operating partnership through which we conduct substantially all of our business. These units also generally vest in five equal annual installments beginning approximately one year after the grant date and are exchangeable on a one-for-one basis into Vornado Realty L.P.’s Class A common units, and then for our common shares, in certain circumstances. Restricted Units are intended to also provide recipients with better income tax attributes than Restricted Shares. During the restricted period, each Restricted Share or Restricted Unit entitles the recipient to receive payments from the Company equal to the dividends on one Share.

 

Out-Performance Units

 

A principal component of our long-term equity incentives has been our out-performance plans. In 2006 and again in 2008, our Compensation Committee approved the adoption of an out-performance plan. These plans are designed to provide compensation in a “pay for performance” structure. Awards under our out-performance plans are a class of units (collectively referred to as “OPP Units”) of the Company’s operating partnership, Vornado Realty L.P., issued under our 2002 Omnibus Share Plan, as amended. If the specific performance objectives of these out-performance plans are achieved as determined by our Compensation Committee, the OPP Units become convertible into Class A common units of Vornado Realty L.P. (and ultimately into our Shares) following vesting, and their value fluctuates with changes in the value of our Shares. If the performance objectives are not met, the OPP Units are cancelled. Generally, unvested OPP Units are forfeited if the executive leaves the Company, except that OPP Units vest automatically on death or upon a change of control. OPP Units are intended to also provide recipients with better income tax attributes than grants of options. All grants under our OPP Plans are accounted for in accordance with SFAS 123R.

2009 PROXY STATEMENT      VORNADO REALTY TRUST  17 

 

The out-performance plan approved in 2006 (the “2006 OPP Plan”) was adopted as part of our regular annual evaluation of executive performance and compensation for 2005 performance. Under the 2006 OPP Plan, the Company’s senior management and approximately 45 of our other officers received the opportunity to share in a performance pool if our total return to shareholders for the three-year period from March 15, 2006 to March 14, 2009 were to exceed a cumulative 30%, including both share appreciation and dividends paid. These performance targets were fully achieved as of January 12, 2007 in accordance with the 2008 OPP Plan provisions. The size of the pool was 10% of the out-performance return amount in excess of the 30% benchmark, subject to a maximum aggregate award equal to $100 million. Once the performance targets were met, the receipt of the applicable awards became subject only to time-based vesting. However, the value of these awards fluctuates with changes in the value of our Shares. Compensation earned under the program vests 331/3% on each of March 14, 2009, 2010 and 2011. The grants under the 2006 OPP Plan were not a factor in determining compensation earned for 2008. We refer to grants under the 2006 OPP Plan as “2006 OPP Units.”

 

The Compensation Committee approved a new $75 million out-performance plan in March of 2008 (the “2008 OPP Plan”) that requires achievement against both absolute and relative thresholds. The 2008 OPP Plan established a potential performance pool in which our senior management (and approximately 70 of our other officers) has the opportunity to share in that performance pool’s value if the total return to our shareholders (“TRS”), resulting from both share appreciation and dividends, for the four-year period from March 31, 2008 to March 31, 2012 exceeds the absolute and/or relative hurdles described below. We established $86.20 per Share as the initial value from which to determine TRS. In the first quarter of 2009, each of our executive officers (the nine most senior executives) surrendered all grants to them of 2008 OPP Units (without any consideration or agreement for consideration in the future).

 

 

If achieved, the size of the outperformance pool for the 2008 OPP Plan will be 6% of the aggregate “out-performance return” subject to a maximum total award of approximately $75 million (the “Maximum Award”). The “out-performance return” is comprised of (i) 3% of the total dollar value of the Company’s TRS in excess of that calculated using the Absolute Threshold plus (ii) 3% of the total dollar value of the Company’s TRS in excess of that calculated using the Relative Threshold over the four-year performance period. In the event that the Relative Component creates a negative award because the Company underperformed the SNL Equity REIT Index, the value of any out-performance award potentially earned under the Absolute Component will be reduced dollar for dollar. The size of this out-performance pool, if any, will be determined based on the highest 30-day trailing average price of our Shares during the final 150 days of the four-year period.

 

The 2008 OPP Plan also provides for two interim measurement periods (the “Interim Periods”) in addition to the four-year aggregate period: (a) one for a period consisting of the first two years of the plan and (b) one for a period consisting of the second two years of the plan. For each Interim Period, participants may be entitled to share in up to 40% ($30,000,000) of the total possible performance pool if the performance thresholds have been met on a prorated basis based on performance over the applicable two-year period. If the performance hurdles are not met for the first Interim Period, participants will still be able to earn awards for (a) the second Interim Period based upon a TRS achieved based on the market price of our Shares at the beginning of the second Interim Period (but which comparison price will not be less than the price used at the start of the 2008 OPP Plan less aggregate dividends paid to that date from the start of the plan) or (b) for the cumulative four-year period if the four-year TRS performance hurdles are met. In no event will the aggregate awards exceed the Maximum

 18  VORNADO REALTY TRUST   2009 PROXY STATEMENT

Award. The size of any out-performance pool for an Interim Period will be determined based on the highest 30-day trailing average price of our Shares during the final 120 days of the applicable Interim Period.

 

Compensation earned under the 2008 OPP Plan (including any awards earned for the Interim Periods), will vest 50% on March 31, 2012 and 50% on March 31, 2013. Individual awards were made in the form of OPP Units. During the course of the performance period, participants are entitled to 10% of any regular quarterly dividends paid on a Share for every 2008 OPP Unit granted, regardless of whether such unit is ultimately earned. The actual number of 2008 OPP Units issued is subject to the determination of the performance pool referred to above and Compensation Committee approval.

 

Nonqualified Deferred Compensation Plans

 

We maintain two nonqualified deferred compensation plans, the Vornado Realty Trust Nonqualified Deferred Compensation Plan (“Plan I”) and the Vornado Realty Trust Nonqualified Deferred Compensation Plan II (“Plan II”; collectively, the “Plans”). Plan I and Plan II are substantially similar, except that Plan II, which applies to deferrals on and after January 1, 2005, is designed to comply with the deferred compensation restrictions of Section 409A of the Internal Revenue Code of 1986, as amended.

 

Employees having annual compensation of at least $200,000 are eligible to participate in Plan II, provided that they qualify as “accredited investors” under securities laws. Members of our Board of Trustees are also eligible to participate. To participate, an eligible individual must make an irrevocable election to defer at least $20,000 of his or her compensation per year. Participant deferrals are always fully vested. The Company is permitted to make discretionary credits to the Plans on behalf of participants, but as yet has not done so. Deferrals are credited with earnings based on the rate of return of specific security investments or various “benchmark funds” selected by the individual, some of which are based on the performance of the Company’s securities.

 

Participants may elect to have their deferrals credited to a “Retirement Account” or a “Fixed Date Account.” Retirement Accounts are generally payable following retirement or termination of employment. Fixed Date Accounts are generally payable at a time selected by the participant, which is at least two full calendar years after the year for which deferrals are made. Participants may elect to receive distributions as a lump sum or in the form of annual installments over no more than ten years. In the event of a change in control of the Company, all Accounts become immediately payable in a lump sum. Plan I also permits a participant to withdraw all or a portion of his or her Accounts at any time, subject to a 10% withdrawal penalty.

 

Retirement and 401(k) Plans

 

Our defined benefit retirement plan was frozen for new participants and benefits in 1997 and was terminated in 2008. Of the named executives, only Messrs. Roth, Fascitelli and Macnow were participants. The amounts payable to these persons is set forth below under “Employee Retirement Plan.” We offer a 401(k) Retirement Plan to all of our employees for whom we provide matching contributions (up to 75% of the statutory maximum but not more than 7.5% of cash compensation) which vest over five years. We do not have any other retirement plan. These plans are not a factor in our current compensation determinations.

 

Perquisites and Other Compensation

 

We provide our senior executive officers with perquisites that we believe are reasonable, competitive and consistent with our overall executive compensation program. These perquisites may include: use of a Company car and a driver; financial counseling and tax preparation services; and supplemental life insurance. The costs of these benefits constitute a small percentage of any applicable executive’s overall compensation.

 

Basis for Chief Executive Officer Compensation

 

Cash compensation

 

Mr. Roth’s base salary of $1,000,000 was established in March 2001 and has remained unchanged since then. Mr. Roth’s bonuses for 2008, 2007 and 2006 (granted in 2009, 2008 and 2007, respectively) were principally in

2009 PROXY STATEMENT      VORNADO REALTY TRUST  19 

the form of equity. His total cash compensation for 2008, 2007 and 2006 was $1,003,800, $1,009,500 and $1,000,000, respectively.

 

Equity compensation

 

Mr. Roth’s bonus (granted in 2009) for 2008 performance was $1,000,000 (at Market Value) in Restricted Units as opposed to $1,500,000 (at Market Value) in Restricted Units in 2007, a 33% reduction. Using Fair Value, Mr. Roth’s bonus (granted in 2009) for 2008 performance was $928,000 in Restricted Units as opposed to a $1,078,300 grant of Restricted Units in 2008, a 14% reduction from that granted in 2008 for 2007 performance. In 2007, Mr. Roth was granted a bonus (for 2006 performance) of $1,078,300 (at Fair Value) in Restricted Units.

 

For 2008, Mr. Roth was also granted (in 2009) long-term equity incentive compensation of 45,000 Restricted Units (having a Market Value of $1,521,500 and a Fair Value of $1,412,000) and an option to acquire 300,000 Shares with an exercise price of $33.815 per share. The aggregate value at the date of grant of these awards of Restricted Units and options is $3,114,000 (at Market Value) and $3,004,500 (at Fair Value) and represents a 31% and 33% reduction for the aggregate value of non-bonus grants of Restricted Units and options made in 2008. In 2008, Mr. Roth was also granted an award of OPP Units which were not granted in 2009. For 2007 performance, Mr. Roth was granted (in 2008): (a) 143,294 OPP Units; and (b) a 10-year option to acquire 700,000 Shares at an exercise price of $103.00 per share. For 2006 performance, Mr. Roth was granted (in 2007) (1) an award of $1,925,500 in the form of Restricted Units (at Fair Value) and (2) a 10-year option to acquire 89,732 Shares at an exercise price of $121.58 per share.

 

Mr. Roth’s salary, bonus and equity awards were based on an evaluation of those factors previously described and were approved by the Compensation Committee. Among the factors considered were the strategic position of the Company, the changes in the Company’s operating and performing metrics during the year (EBITDA and FFO), our total return to shareholders during the year and the other factors previously mentioned. These factors were considered as a whole and no numerical weight was attributed to any particular factor. The majority of Mr. Roth’s compensation is in the form of equity to further align his interests with those of our shareholders.

 

We believe that Mr. Roth’s cash and equity compensation in and for 2008 appropriately reflect his and the Company’s performance, measured both objectively and subjectively, the Company’s strategic growth position at the time such compensation was determined and the current economic environment.

 

Basis for Compensation of Other Named Executives

 

For our other named executive officers (Messrs. Fascitelli, Greenbaum, Macnow and Mathrani), such executive’s salary, bonus and other equity awards were based on an evaluation of those factors previously described and were approved by the Compensation Committee. Among the factors considered were the strategic position of the Company, the changes in the Company’s operating and performing metrics during the year (EBITDA and FFO), our total return to shareholders during the year and the other factors previously mentioned. With regard to Messrs. Fascitelli and Macnow (our President and Chief Financial Officer, respectively), we considered these factors as they apply to our Company as a whole as their responsibilities are company-wide. For Mr. Fascitelli as our President, we determined that the majority of his compensation should be in the form of equity to further align his interests with those of our shareholders. For Messrs. Greenbaum and Mathrani, we also considered these factors as they pertain to the applicable operating division of which such executive is the head. Mr. Greenbaum is the President of our New York Office Division, and Mr. Mathrani is our Executive Vice President—Retail. In all cases, these factors were considered as a whole and no numerical weight was attributed to any particular factor. In the aggregate, salary and bonuses awarded to these named executive officers in 2009 (for 2008 performance) decreased from that granted in 2008 by 17% (valuing Restricted Units at Market Value) and 10% (valuing Restricted Units at Fair Value). In addition, the value of other recurring equity awards granted in 2009 as compared to that granted in 2008 decreased by 48% (valuing Restricted Units at Market Value) and 49% (valuing Restricted Units at Fair Value).

 20  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

Other Compensation Policies and Practices

 

Equity Grant Practices

 

All equity-based compensation awards are made under our 2002 Omnibus Share Plan, as amended, which our shareholders approved in 2002 and as amended in 2006. This plan limits total shares that may be issued pursuant to awards to 10,000,000 of our common shares. The exercise price of each stock option awarded to our senior executives must be no less than the average of the high and low price or our Shares on the New York Stock Exchange on the date granted by the Compensation Committee. The vast majority of our equity awards are determined and granted in the first quarter of each year, at the same time as management and the Compensation Committee conclude their evaluation of the performance of our senior executives as a group and each executive individually. In addition and from time to time, additional equity awards may be granted in connection with new hires or promotions. We have never repriced options.

 

Share Ownership Guidelines

 

As our senior executives generally have significant personal investments in our equity securities, we have not established any policy regarding security ownership by management.

 

In accordance with Federal securities laws, we prohibit short sales by our executive officers of our equity securities.

 

Employment, Severance and Change of Control Agreements

 

We do, from time to time, enter into employment agreements with some of our senior executive officers, which we negotiate on a case-by-case basis in connection with a new employment arrangement or a new agreement governing an existing employment arrangement. Otherwise, our senior executives and other employees serve “at will.” Except as may be provided in these employment agreements or pursuant to our compensation plans generally, we have not entered into any separate severance or change of control agreements. For those of our senior executives who have employment agreements, these agreements generally provide for a severance payment (for termination by us without cause or by the executive with good reason (each as defined in the applicable employment agreement and further described below under “Employment Contracts”)) and change of control payment (if employment is terminated following a change of control) in the range of one to three times the applicable executive’s annual salary and bonus. In addition, the agreements evidencing awards under the Company’s 2002 Omnibus Share Plan, as amended, generally provide that equity grants will vest automatically on a change of control. These change of control arrangements are designed to compensate management in the event of a fundamental change in the Company, their employer, and to provide an incentive to these executives to continue with the Company at least through such time. Severance and change of control arrangements do not generally affect other compensation arrangements for a particular period. A more complete description of employment agreements, severance and change of control arrangements pertaining to named executives and officers is set forth under “Employment Contracts” and “Severance and Change of Control Arrangements.”

 

Tax Deductibility of Compensation

 

The tax efficiency of compensation is one of many factors that enter into the design of our compensation programs. We look at a combination of the rates at which our executives will be taxed and the value of any deduction that we may be entitled to when developing our approach to compensation. We believe that the limitation of Section 162(m) of the Internal Revenue Code (which limits the corporate tax deduction for certain executive officer compensation that exceeds $1 million a year) does not apply to most of the compensation we paid to our Covered Executives for 2008 and only a small portion of their compensation may not be deductible due to that limitation.

2009 PROXY STATEMENT      VORNADO REALTY TRUST  21 

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee of the Company has reviewed and discussed the Compensation Committee Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

The Compensation Committee of the
Board of Trustees:

 

MICHAEL LYNNE

RONALD G. TARGAN

DR. RICHARD R. WEST

 22  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

EXECUTIVE COMPENSATION

 

The following table sets forth the compensation earned by each of the Company’s Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers for 2008, 2007 and 2006 (the “Covered Executives”). The information below does not reflect the recent reductions in compensation described in “Compensation Discussion and Analysis—Compensation Reductions in Response to Current Economic Conditions” because the reductions pertain to grants in 2009 (for 2008 performance) and were not recorded for the periods presented below.

 

Summary Compensation Table

 

 

 

2009 PROXY STATEMENT      VORNADO REALTY TRUST  23 

 

All Other Compensation Table

 

The following table describes each component of the All Other Compensation column in the Summary Compensation Table.

 

 

 

 24  VORNADO REALTY TRUST   2009 PROXY STATEMENT

 

Grants of Plan-Based Awards in 2008

 

The following table lists all grants of plan-based awards to the Covered Executives made in 2008 and their grant date fair value. All of these awards were voluntarily surrendered (without any consideration or agreement for consideration in the future) in the first quarter of 2009.

 

 

 

2009 PROXY STATEMENT      VORNADO REALTY TRUST  25 

 

Outstanding Equity Awards at Year-End

 

The following tables summarize the number and value of equity awards held at December 31, 2008 and the aggregate option exercises in 2008 by, and shares that vested in 2008 for, the Covered Executives. Pursuant to the terms of our 1993 and 2002 Omnibus Share Plans (each, as amended), the exercise price and number of shares underlying options originally made at any date of grant may be adjusted to compensate the holder for special or extraordinary dividends that may be subsequently declared. The following table reflects such adjustments.

 

(table continued on following page)

 26  VORNADO REALTY TRUST   2009 PROXY STATEMENT

(table continued on following page)

2009 PROXY STATEMENT      VORNADO REALTY TRUST  27