DEF 14A
Table of Contents
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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
(Amendment No. )
 
 
Filed by the Registrant ☒
Filed by a party other than the Registrant ☐
Check the appropriate box:
 
  Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12
COSTAR GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
 
  No fee required
  Fee paid previously with preliminary materials
  Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
 
 


Table of Contents

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Table of Contents

MESSAGE FROM OUR FOUNDER AND CHIEF EXECUTIVE OFFICER

 

Dear Fellow Stockholders,

It is my pleasure to report that CoStar Group grew to new heights in 2023. Our commercial information and marketplace businesses saw revenue growth of 14%, despite continued headwinds in the commercial real estate market, and delivered 40% adjusted EBITDA margin in the year.

One of the most exciting chapters in CoStar Group’s history is well underway, as we officially launched the industry’s largest marketing campaign that is designed to make Homes.com the number one homebuying platform in the world. We debuted four advertisements at the Super Bowl, an unprecedented strategy for the real estate sector. The groundwork for this massive project was laid last year, as we empowered thousands of analysts, photographers, salespeople, and real estate professionals to make Homes.com the most content-rich and community-driven residential portal ever. That investment, along with our proven “Your Listing, Your Lead” business model that works with agents rather than against them, has already put us in a strong position. In the first quarter of 2024, the Homes.com Residential Network (comprising Homes.com, Apartments.com, and Land.com) reached a new height of 140 million average monthly unique visitors, far surpassing two of our three largest rivals and putting the #1 spot within our reach. In the meantime, we can celebrate a major milestone for Apartments.com: 23% year-over-year revenue growth, and annual run rate revenue crossed $1 billion in January 2024, making it our first billion-dollar business.

All of these accomplishments add up to an exceptional bottom line for CoStar Group. We have achieved 13 consecutive years of double-digit revenue growth; in 2023, our revenue grew by 13% to $2.46 billion, while net income at $375 million also topped the prior year. These strong results are a direct result of the more than 6,200 CoStar Group employees globally. In all, approximately 1,000 CoStar employees grew into new roles within the Company in 2023, and we maintained a 99.1% average monthly employee retention rate. These numbers reflect our

confidence in our team and the dedication and passion they have for their work at CoStar. An industry-leading team deserves an industry-leading workplace, which is why in 2023 we acquired a new, premier office building in Arlington, Virginia to serve as CoStar Group’s new global headquarters. In Richmond, progress continues on the construction of the expansion of our campus to accommodate our ongoing growth.

Our international expansion continues apace: we completed our entry into the United Kingdom residential market by acquiring OnTheMarket.com, one of the UK’s three most visited property portals, and are poised to leverage it for further growth in that market. In France, we’ve consolidated our acquisitions under the leadership of a new France General Manager.

Importantly, we’ve lived up to our Environmental, Social, and Governance (ESG) commitments, welcoming a more diverse Board of Directors than ever before and completing the Carbon Disclosure Project questionnaire for the first time and signing on to the Science Based Targeting Initiative.

Stockholder feedback is integral to the success of the Company, and we will continue to proactively engage with our stockholders to enhance our understanding and respond to stockholders’ perspectives and needs. We take great pride in our ability to not only deliver value to our stockholders but to build a business that positively impacts our employees, clients, customers and communities.

As always, I appreciate your continued support for and investment in CoStar Group.

Sincerely,

 

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ANDREW C. FLORANCE

Founder & Chief Executive

Officer, President and Director

 

 

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2024 PROXY STATEMENT  

 


Table of Contents

NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS

 

 

THURSDAY, JUNE 6, 2024 | 10:00 A.M., EASTERN TIME

Exclusively online at www.virtualshareholdermeeting.com/CSGP2024

 

 

 

Items of Business

 

1.

To elect eight nominees named in the attached proxy statement to serve on our Board of Directors for a one-year term expiring at the 2025 Annual Meeting of Stockholders;

 

2.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2024;

 

3.

To approve, on an advisory basis, the Company’s executive compensation; and

 

4.

To transact any other business properly presented before the Annual Meeting.

Record Date

The Board of Directors has fixed Wednesday, April 10, 2024, as the record date for determining stockholders entitled to receive notice of and to vote at the Annual Meeting (or any adjournment or postponement of it). Only stockholders of record at the close of business on that date are entitled to notice of and to vote at the Annual Meeting.

Participation in Virtual Annual Meeting

We are pleased to invite you to participate in our Annual Meeting, which will be conducted exclusively online at www. virtualshareholdermeeting.com/CSGP2024. Please see “Other Information” beginning on page 72 of this Proxy Statement for additional information.

Voting

Your vote is very important to us. Please act as soon as possible to vote your shares, even if you plan to participate in the Annual Meeting. For specific instructions on how to vote your shares, please see “Other Information” beginning on page 72 of this Proxy Statement.

By Order of the Board of Directors,

 

LOGO

Gene Boxer

General Counsel and Corporate Secretary

April 26, 2024

 

 

Review your proxy statement and vote in one of three ways:

 

                 
      LOGO   

Internet

 

Visit the website on
your proxy card

  LOGO   

By Telephone

 

Call the telephone number
on your proxy card

   LOGO   

By Mail

 

Sign, date and return your proxy
card in the enclosed envelope

 

   

                 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 6, 2024: The Notice of Meeting and this Proxy Statement, as well as our Annual Report to Stockholders (the “2023 Annual Report”), are available on our corporate website at https://investors.costargroup.com/financials-filings. We are furnishing proxy materials to some of our stockholders through the Internet instead of through the mail. On or about April 26, 2024, we mailed to stockholders as of the record date a Notice of Internet Availability of Proxy Materials (the “Notice”). The Notice tells you how to access this Proxy Statement and our 2023 Annual Report, as well as how to submit your proxy over the Internet. If you received the Notice and would still like to receive a printed copy of our proxy materials, please follow the instructions in the Notice.

 

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2024 PROXY STATEMENT  

 


Table of Contents

TABLE OF CONTENTS

 

  1        Proxy Highlights
  12        Proposal 1 – Election of Directors
     13     

Board Composition

     15     

Board Diversity Matrix

     15     

Board Evaluation Process

     17     

Director Nominees

     21     

Board Leadership Structure

     21      The Board’s Role in Risk Oversight
     22      Risk Assessment in Compensation Programs
     23     

Board Committees

     24      Corporate Governance Overview
     26     

Director Compensation

     27     

Director Stock Ownership Policy

     27     

Certain Relationships and Transactions

     29     

Executive Officers

  32       
Proposal 2 – Ratification of the Appointment of
Independent Registered Public Accounting Firm
  35       
Proposal 3 – Advisory Resolution to Approve
Executive Compensation
  36        Compensation Discussion and Analysis
     36      Executive Compensation Program Objectives
     37      Executive Compensation Policies and Practices
     39     

2023 Business Highlights

     41     

Elements of Compensation

     51     

Determining Executive Compensation

     54      Company Compensation Policies and Practices
     56     

Compensation Committee Report

     57     

2023 Summary Compensation Table

     58     

2023 Grants of Plan-Based Awards

     59     

Employment Agreements and Arrangements

     60      Outstanding Equity Awards at 2023 Fiscal Year-End
    
62
 
  

Option Exercises and Stock Vested in 2023

     62      Non-Qualified Deferred Compensation in 2023
     62      Potential Payments Upon Termination or Change of Control
    
63
 
  

Termination and Change of Control Provisions Pursuant to Employment Agreements

    
64
 
  

Change of Control Provisions under the Company’s 2007 Plan and 2016 Plan

    
65
 
  

Company-Wide Severance Policy

     65     

Delinquent Section 16(a) Reports

     65     

Equity Compensation Plan Information

     66      Pay Ratio
     67     

Pay Versus Performance

  70       
Stock Ownership Information
  72        Other Information
     72     

Attending the Annual Meeting of Stockholders

     72      Notice of Business to Come Before the Annual Meeting
     72     

Voting Information

     74     

Multiple Stockholders Sharing the Same Address

     74     

Stockholder Proposals and Nominations for Directors for the 2025 Annual Meeting of Stockholders

  A-1       
Appendix A - Information Regarding Non-GAAP
Financial Measures
 

 

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2024 PROXY STATEMENT i

 


Table of Contents

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Proxy Statement are defined below:

 

Abbreviation

or Acronym

   Definition

2007 Plan

   CoStar Group 2007 Stock Incentive Plan, as amended from time to time

2016 Plan

   CoStar Group 2016 Stock Incentive Plan, as amended from time to time

2023 Annual Report

   CoStar Group Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024

Adjusted EBITDA

   EBITDA before stock-based compensation expense, acquisition- and integration-related costs, restructuring costs, and settlements and impairments incurred outside the Company’s ordinary course of business

Annual Meeting

   CoStar Group’s 2024 Annual Meeting of Stockholders

ASC

   Accounting Standards Codification

Audit Committee

   Audit Committee of the Board

Board (also “Board of Directors”)

   The Board of Directors of CoStar Group

By-Laws

   Fourth Amended and Restated By-Laws of CoStar Group

Code

   Internal Revenue Code of 1986, as amended and in effect from time to time

Commercial information and marketplace businesses

   Our consolidated financial position and results excluding the estimated impact of our residential brands which are Homes.com network and OnTheMarket, plc.

CoStar Group (also “CoStar,” “we,” “us,” “our,” or the “Company”)

   CoStar Group, Inc., a Delaware corporation, one or more of its consolidated subsidiaries or operating segments, or the entirety of CoStar Group, Inc. and its consolidated subsidiaries

Compensation Committee

   Compensation Committee of the Board

DSUs

   Deferred Stock Units

EBITDA

   Net income before interest (expense) and other income (expense), loss on debt extinguishment, income taxes, depreciation and amortization

ESG

   Environmental, Social, and, Governance

ESPP

   Employee Stock Purchase Plan

Exchange Act

   Securities and Exchange Act of 1934, as amended

FASB

   Financial Accounting Standards Board

GAAP

   Generally accepted accounting principles in the U.S.

Matching RSUs

   Awards of matching restricted stock units awarded under the Company’s Management Stock Purchase Plan

MSPP

   CoStar Group Management Stock Purchase Plan, as it may be amended and restated from time to time

Nasdaq

   Nasdaq Global Select Market

NEO

   Named executive officer for purposes of Item 402 of Regulation S-K

Nominating and Corporate Governance Committee

   Nominating and Corporate Governance Committee of the Board

Notice

   Notice of Internet Availability of Proxy Materials

PCAOB

   Public Company Accounting Oversight Board

SEC

   U.S. Securities and Exchange Commission

Securities Act

   Securities Act of 1933, as amended

TSR

   Total shareholder return

 

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2024 PROXY STATEMENT ii

 


Table of Contents

Proxy Highlights

 

LOGO

 

OUR

MISSION

   We are digitizing the world’s real estate, empowering all people to discover properties, insights, and connections that improve their businesses and lives.

 

 

OUR

VALUES

 

Integrity

We uphold the highest ethical standards at all times. We earn our colleagues, customers. and stakeholders’ trust by saying and doing the right thing.

Respect for the Individual

Value diversity and cherish uniqueness. We are inclusive always. CoStar is for all people, without exception. We recognize that the thoughts and feelings of others are as important and valuable as our own.

Work-Life Balance

We work hard and take pride in our professional accomplishments. We are committed to creating value for our customers, while still recognizing the need to have a sacrosanct place for our personal lives and families.

Cohesive Innovation

We create products of vital utility, delivering information and tools that are critical to the success of our customers and industry. Our solutions mobilize individuals to enable them to make confident, intelligent decisions.

Embrace and Drive Change

At our core we are about change. We challenge the status quo and constantly seek a better way.

Build Awesome Things

We work passionately to design and build awe-inspiring, beautiful products that delight and improve the lives of billions of people. We know that design matters.

Keep the Customer at the Center of All We Do

We succeed only when our customers succeed. We treat each of our customers the way we would prefer to be treated when buying a product or service. We invest in and enjoy the strong bonds and long-lasting, authentic friendships built with our customers.

The Best Teams Anywhere

We hire the best. We work and learn alongside exceptionally talented peers who are passionate about building the best possible workplace and taking our business to great heights. We have a zero-tolerance policy for jerks.

Continuous Learning

We are curious. We want to learn, grow, and better ourselves. We view mistakes as a necessary part of learning. Through the expertise we develop, we are better partners to our clients, stockholders, communities, and colleagues.

Be Collaborative

We are all part of the bigger team, and we are at our best when we communicate, empathize. and collaborate.

 

 

 

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2024 PROXY STATEMENT 1

 


Table of Contents
 
   PROXY SUMMARY

 

Financial Results

 

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Business
Highlights(2)

 

•  Full year 2023 revenue increased 13% year-over-year

 

•  Commercial information and marketplace businesses grew revenue 14% in 2023, with adjusted EBITDA margin improving to 40% for the full year

 

•  Apartments.com delivered 23% year-over-year revenue growth in 2023. Annual revenue run rate crossed $1 billion in January 2024, making Apartments.com our first billion-dollar business

 

•  CoStar annual run rate revenue crossed $1 billion in the first quarter of 2024

 

•  Homes.com residential network3 traffic reached 140 million average monthly unique visitors in the first quarter of 2024, making it the second most trafficked network of residential sites in the U.S.

 

•  Homes.com is the fastest growing residential property site in the U.S.

 

•  Homes.com launched the industry’s biggest brand campaign during Super Bowl LVIII.

 

       

(1) Adjusted EBITDA is a non-GAAP measure. See Appendix A for a reconciliation of Adjusted EBITDA to Net Income and for a discussion of management’s use of non-GAAP measures.

(2) All traffic as measured by Google Analytics.

(3) Homes.com residential network includes Homes.com network, Apartments.com network and Lands.com network.

 

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2024 PROXY STATEMENT 2

 


Table of Contents
 
   PROXY SUMMARY

 

ESG Highlights

2023 was a year of great ESG successes at CoStar Group. In keeping with our longstanding prioritization of sustainability in our own occupied office spaces, we have taken steps to help ensure that our upcoming 750,000 square-foot Richmond campus expansion will attain LEED Net Zero and WELL Platinum certifications. In 2023, we improved our scores with industry standard rating agencies MSCI, Sustainalytics, ISS and JUST Capital, and signed on to the Science Based Targets initiative (SBTi). We have continued to prioritize diversity within our supplier network, increasing our total direct spend with small businesses and diverse suppliers by 261% in 2023.

 

44%

 

2023 BOARD DIVERSITY

    

54

 

AVERAGE TRAINING HOURS PER EMPLOYEE

    

100

 

NEARLY 100 VOLUNTEER
EVENTS IN 2023

    

$3.5M+

 

DONATED TO MORE THAN 100 PARTNERS

 

 

     

 

100K

 

     
     

METRIC TONS OF CO2e
AVOIDED IN 2023

 

     
 

due to more than 30 million unique virtual tours of
properties on CoStar Group platforms in 2023, which
avoided the need for in-person visits.*

 

 

 

Human Capital Management

We measure our success in providing a positive work environment through a yearly Employee Engagement Survey administered by a third-party agency. Surveying our employees each year gives us an opportunity to see where we are excelling and what areas need improvement. The results of these surveys have helped us innovate how we look at employee programs, benefits, environment, and our internal protocols.

In 2023, 4,440 employees participated in the survey, and we celebrate our outstanding employee engagement scores, with an overall engagement score of 83%, which sustains our score from 2022. With a Diversity, Equity & Inclusion (DEI) Dimension Score of 86%, we know our employees are experiencing an inclusive culture and continue to embrace our commitment to an inclusive workplace. We are proud to have a highly engaged workforce, reflected in our average monthly employee retention rate of 99.1%.

 

99.1%

 

AVERAGE MONTHLY EMPLOYEE RETENTION RATE

    

83%

 

OVERALL ENGAGEMENT SCORE

    

86%

 

DEI DIMENSION SCORE

    

15%

 

EMPLOYEES MOVED
TO NEW ROLES
INTERNALLY IN 2023

 

*Using a conservative estimate of a 10-mile round trip and U.S. Environmental Protection Agency estimated emissions of an average passenger vehicle.

 

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2024 PROXY STATEMENT 3

 


Table of Contents
 
   PROXY SUMMARY

 

Stockholder Engagement

2023 by the Numbers

 

7

 

investor (non-deal) road shows

    

9

 

investor conferences

    

26+

 

ESG investor engagements

    

340+

 

institutional investment firms

 

As part of our investor outreach, our management continues to regularly communicate with our investor base about the Company’s plans and associated investments. Management communicated with investors throughout the year through quarterly press releases and conference calls that were recorded and made available on the Company’s website, as well as by participating in hundreds of in-person meetings and presentations at investor conferences. The Company also conducted hundreds of additional investor telephone calls throughout the year. The Company actively communicates and discusses with investors our progress towards stated strategic initiatives, including corporate governance and ESG initiatives, as well as expected investments and the rationale and expected returns on those investments. In 2023, our management engaged with our active stockholders as follows:

 

LOGO    LOGO    LOGO

 

LOGO

 

  

2024 PROXY STATEMENT 4

 


Table of Contents
 
   PROXY SUMMARY

 

Investor Day

 

LOGO

In May 2023, we conducted an Investor Day at our Richmond, Virginia campus. The Investor Day provided an opportunity for our CEO, CFO, and other members of management to provide an update to investors on our vision and strategy, including an overview of our various product lines. Question and answer sessions were also held with members of the investment community throughout the day. Our Investor Day was an important opportunity to demonstrate the breadth and expertise of our leadership team, offer our current and prospective stockholders a deeper understanding of CoStar and its opportunities, and build confidence across all stakeholder groups.

CoStar Group at a Glance

 

LOGO

All numerical data as of December 31, 2023.

 

LOGO

 

  

2024 PROXY STATEMENT 5

 


Table of Contents
 
   PROXY SUMMARY

 

Proposals to be Voted on and Board Voting Recommendations

 

     

PROPOSAL

   RECOMMENDATION
OF THE BOARD
   PAGE  
       
1  

Election of eight director nominees named in this proxy statement

  

FOR

each of the nominees

     12  
       
2  

Ratification of the appointment of Ernst & Young LLP as the Company’s independent auditor for 2024

   FOR      32  
       
3  

Advisory vote to approve named executive officer compensation

   FOR      35  

 

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2024 PROXY STATEMENT 6

 


Table of Contents
 
   PROXY SUMMARY

 

Corporate Governance Highlights

 

LOGO  

BOARD STRUCTURE AND INDEPENDENCE

 

•  Our Board reflects diversity in skills, experience and backgrounds, including diversity of
gender and race.

 

•  All directors are independent except for our CEO.

 

•  Executive sessions of the independent directors are held at Board meetings without
management present.

 

•  All of our directors are elected annually by our stockholders; we do not have a classified or
staggered board.

       
LOGO  

BOARD OVERSIGHT

 

 

•  Our Board oversees the Company’s strategy and annual business plan and risk management.

 

•  Our Board oversees ESG matters, including climate-related matters.

 

•  Our Audit Committee oversees the integrity of the Company’s financial statements.

 

•  Our Audit Committee oversees the Company’s cybersecurity risk profile.

 

•  Our Compensation Committee oversees risk in compensation policies and practices.

 
LOGO  

STOCKHOLDER RIGHTS

 

 

•  The holders of 25% of our issued and outstanding shares entitled to vote can request a special meeting.

 

•  We have a majority voting standard for the election of directors in uncontested elections.

 

•  Our governance documents do not contain provisions requiring a supermajority stockholder vote on any issue.

 

•  We do not maintain a stockholder rights plan or “poison pill.”

 

•  We adopted a proxy access right for holders of 3% of our common stock for at least three years to nominate a specified number of directors for inclusion in the proxy statement for our annual meeting.

 
LOGO  

CORPORATE GOVERNANCE PRACTICES

 

•  We prohibit hedging and pledging transactions in our securities by directors and officers.

 

•  We engage with our stockholders to solicit their feedback regarding issues, including corporate governance, and have taken actions to implement their feedback.

 

•  We have adopted share ownership requirements for directors and officers.

 

•  We have a clawback policy for cash and equity awards in the event of certain financial restatements.

 

•  We adopted a Code of Business Conduct and Ethics for directors, and for officers and employees with an annual certification requirement.

 

 

 

 

 

 

 

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2024 PROXY STATEMENT 7

 


Table of Contents
 
   PROXY SUMMARY

 

Our Board of Directors

The below summarizes information about our director nominees and their Board committee assignments. Our director nominees possess a range of diverse skills, experiences, backgrounds, and viewpoints that we believe are essential to an effective Board. Detailed information about each director nominee’s qualifications, skills, experiences, and expertise can be found beginning on page 17.

2024 Director Nominees

 

               
 

NAME

AGE(1) DIRECTOR
SINCE
OTHER
PUBLIC
COMPANY
BOARDS
 AC   CC   NCGC
               
LOGO

Andrew C. Florance

Founder, President, and

Chief Executive Officer,

CoStar Group, Inc

60 1987 0
               
LOGO

Michael R. Klein

Chairman, CoStar Group, Inc.;

Vice Chairman, Tutor Perini Corporation

81 1987 1 l
               
LOGO

Angelique G. Brunner

Founder and Chief Executive Officer,

EB5 Capital

52 2023 0

 

¡

               
LOGO

John W. Hill

Founder and Chief Executive Officer,

J Hill Group

69 2012 0
               
LOGO

Laura Cox Kaplan

Adjunct Professor, American

University; former Principal,

PricewaterhouseCoopers

54 2016 0 l
               
LOGO

Robert W. Musslewhite

Former Chief Executive Officer,

Definitive Healthcare Corp.

54 2019 1
               
LOGO

Christopher J. Nassetta

Chief Executive Officer and President,

Hilton Worldwide Holdings Inc.

61 2002 1 l
               
LOGO

Louise S. Sams

Former EVP & General Counsel,

Turner Broadcasting System, Inc.

66 2019 2 l

(1) Age as of April 1, 2024 AC = Audit Committee CC = Compensation Committee NCGC = Nominating and Corporate Governance Committee

lMember  Chair ¡ Nominated

 

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Table of Contents
 
   PROXY SUMMARY

 

Director Nominee Experience Highlights

Our director nominees have a diversity of skills and experiences, including some or significant experience in the following:

 

 

 

    LOGO   

COMMERCIAL

REAL ESTATE

   LOGO   

PUBLIC COMPANY      

GOVERNANCE

   LOGO   

GLOBAL

BUSINESS

    LOGO   

FINANCIAL

ACCOUNTING AND

REPORTING

   LOGO   

LEGAL, PUBLIC

POLICY, AND

REGULATORY

   LOGO   

BUSINESS

DEVELOPMENT

AND M&A

LOGO   

TALENT MANAGEMENT      

AND EXECUTIVE

COMPENSATION

   LOGO   

MARKETING

AND SALES

   LOGO   

RISK

MANAGEMENT

LOGO   

SENIOR

MANAGEMENT AND

LEADERSHIP

   LOGO   

CYBERSECURITY

AND DATA PRIVACY

   LOGO   

ESG AND

CLIMATE

 VERY SKILLED/EXPERIENCED   SOME SKILL/EXPERIENCE   NO EXPERIENCE

 

 

Board Nominee Composition

 

50%

 

FEMALE OR
ETHNICALLY DIVERSE NOMINEES

    

3

 

FEMALE NOMINEES

    

2

 

ETHNICALLY DIVERSE NOMINEES

    

7/8

 

INDEPENDENT

DIRECTOR NOMINEES

 

 

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2024 PROXY STATEMENT 9

 


Table of Contents
 
   PROXY SUMMARY

 

Board Refreshment

 

In August 2023, the Board appointed Angelique Brunner as an independent director. Over the course of her 30-year career, Ms. Brunner has worked in various aspects of capital markets, real estate, and early-stage funding. She is an active global angel investor and advisor across industries, including consumer goods, digital transformation, capital markets, energy, and software ventures. She is an active member of the U.S. Chamber of Commerce, Real Estate Executive Council (REEC), and Urban Land Institute (ULI). Ms. Brunner brings extensive public boardroom experience in governance, compliance, and global strategy to CoStar Group, having previously served on the boards of Chesapeake Lodging Trust and Cushman & Wakefield.

 

On April 23, 2024, Mr. Glosserman notified the Company of his decision not to seek re-election at the end of his term. His retirement will be effective on the date of the Annual Meeting. Mr. Glosserman’s decision was not the result of any disagreement with the Company. The Board acknowledges that Mr. Glosserman has served as a director since 2008, during a period of enormous growth and success of the Company, and thanks him for his years of valuable service to the Board and the Company.

  LOGO

Executive Compensation Highlights

Our Compensation Committee has designed our executive compensation program to closely align executive compensation with Company performance and stockholder interests. The Compensation Committee achieves this alignment by allocating the majority of our executive officers’ target compensation to performance-based incentive compensation. In particular, we grant performance-based equity awards that directly link the value of annual equity awards to financial performance measures and the value of long-term equity awards to multi-year financial performance and TSR. The primary elements of our 2023 executive compensation program and the portions of such executive compensation that are performance-based are highlighted below.

 

 

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2024 PROXY STATEMENT 10

 


Table of Contents

COSTAR GROUP, INC.

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON THURSDAY, JUNE 6, 2024

The Board of Directors (the “Board”) of CoStar Group, Inc. (“CoStar,” “CoStar Group,” “we,” “our,” “us,” or the “Company”) solicits your proxy for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 10:00 a.m., Eastern Time, on Thursday, June 6, 2024, and at any adjournment or postponement of the Annual Meeting. The Annual Meeting will be held online only as a live webcast via the internet at www.virtualshareholdermeeting.com/CSGP2024. The webcast replay of the Annual Meeting will be made available in the Investor section of CoStar Group’s website after completion of the Annual Meeting and will remain available for a period of time following the call.

We are mailing the Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders eligible to vote at the Annual Meeting on or about April 26, 2024. If you are a registered stockholder, to be admitted to the Annual Meeting, you will need to enter the 16-digit control number found on your Notice or proxy card. If your shares are held in brokerage accounts and your voting instruction form or the Notice indicates that you may vote those shares through the http://www.proxyvote.com website, then you may be admitted to the Annual Meeting using the 16-digit control number indicated on that voting instruction form or the Notice. Otherwise, stockholders who hold their shares in brokerage accounts should contact their bank, broker or other nominee (preferably at least five days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting. Only stockholders as of the record date or their proxies are permitted to attend the Annual Meeting online.

The Annual Meeting will include a question and answer session, and stockholders may submit questions appropriate to our business during the Annual Meeting. Questions may be submitted during the Annual Meeting through www.virtualshareholdermeeting.com/CSGP2024. Questions pertinent to meeting matters that comply with the meeting rules of conduct will be answered during the question and answer session, subject to time constraints. However, we reserve the right to exclude questions that are not pertinent to meeting matters, irrelevant to the business of the Company, derogatory or in bad taste, or relate to pending or threatened litigation, personal grievances or are otherwise inappropriate. Questions that are substantially similar may be grouped and answered once to avoid repetition. If there are any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints, management expects to post answers to those questions on the “Investor Relations” section of the Company’s website at http://investors.costargroup.com as soon as practicable after the meeting.

We encourage you to access the Annual Meeting 15 minutes before it begins to avoid any delay from technical issues. If you encounter technical issues accessing the virtual Annual Meeting, you can contact the technical support number posted on the login page at www.virtualshareholdermeeting.com/CSGP2024.

 

LOGO

 

  

2024 PROXY STATEMENT 11

 


Table of Contents

Proposal 1

ELECTION OF DIRECTORS

In connection with Mr. Glosserman’s decision not to seek re-election to the Board, the Board fixed the number of directors constituting the Board at eight, effective as of the Annual Meeting. At the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated eight of the current directors for reelection, all of whom were last elected at the 2023 Annual Meeting of Stockholders, except for Ms. Brunner, who was appointed to the Board in August 2023.

Each director elected at the Annual Meeting will serve until the next Annual Meeting of Stockholders or until his or her successor is elected and qualified. We know of no reason why any nominee would be unable to serve. If any nominee becomes unable to serve prior to the Annual Meeting, the Board may reduce the size of the Board or designate substitute nominees, and proxies that do not withhold authority to vote for directors will be voted for such substitute nominees. In no event may proxies be voted for a greater number of persons than the number of nominees named. We did not receive any stockholder nominations for directors in connection with the Annual Meeting.

 

LOGO    THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES

 

LOGO

 

LOGO

 

  

2024 PROXY STATEMENT 12

 


Table of Contents
 
   PROPOSAL 1 – ELECTION OF DIRECTORS

 

Board Composition

Our Nominating and Corporate Governance Committee reviews and assesses with the Board the Board’s membership criteria. These criteria include independence, judgment, integrity, ability to commit sufficient time and attention to the activities of the Board, absence of potential conflicts with the Company’s interests, business experience, skills and background, including an understanding of and experience with real estate, information services and technology industries, and finance and marketing expertise.

In addition, the Nominating and Corporate Governance Committee evaluates the composition of the Board to assess the skills and experience that are currently represented on the Board, as well as the skills and experience that the Nominating and Corporate Governance Committee believes the Board will find valuable in the future, given the Company’s current standing and strategic plans. This evaluation enables the Nominating and Corporate Governance Committee to assess its effectiveness at achieving these Board membership objectives.

We expect that our Board members will have a diverse portfolio of skills, experiences and backgrounds and that each will contribute to the composition of the Board so that collectively, the Board will possess the necessary skills, experience and background to oversee our business and affairs in light of the Company’s current standing and strategic plans. Below is a list of key skills and experience that our directors bring to our Board that we consider important in light of our current business and structure.

 

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2024 PROXY STATEMENT 13

 


Table of Contents
 
   PROPOSAL 1 – ELECTION OF DIRECTORS

 

                 
                 
   

DIRECTOR SKILLS/EXPERIENCE

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Industry I Commercial Real Estate: Experience in the real estate, information services and technology industries areas is valuable in understanding our growth and development efforts, as well as the market segments in which we operate.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Public Company Governance: Experience with reporting obligations, investor interaction, public company governance, knowledge and understanding of governance planning, and experience in encouraging management accountability and protecting stockholder interests.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Global Business: Broad exposure to companies or organizations that have a significant global presence, including developing and managing business in markets around the world.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Financial Accounting and Reporting: Experience in accounting or financial reporting, including understanding of internal controls; experience in overseeing such reporting and controls.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Legal, Public Policy, and Regulatory: Expertise in compliance with applicable governmental regulations; experience in legal and regulatory matters, and corporate compliance and ethics policies; experience in managing the effects of government policies and regulations.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Business Development and M&A: Expertise in and understanding of business development, strategic planning, and implementation; experience in leading strategy discussion at the board level; experience with developing and implementing strategies for growth, including mergers and acquisitions and divestitures.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Talent Management and Executive Compensation: Broad experience in executive development, performance, and compensation; experience with HR processes and strategies and efforts to attract, motivate, and retain candidates for key positions; experience in talent development, including developing diversity, equity, and inclusion in workforce.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Marketing and Sales: Experience with enhancing sales in existing markets; experience in developing new products and services and markets for growth; experience in marketing communication, brand strategy development, and advertising.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Risk Management: Experience in the management of critical business and/or legal risk; understanding of risk management functions, including risk identification/classification, crisis management and similar functions; ability to think strategically about risk and provide oversight and advice relating to risk.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Senior Management and Leadership: Experience as chief executive officer, president, chairman, or at similar leadership position in a large company or other large organization.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

Cybersecurity and Data Privacy: Experience in overseeing and managing cybersecurity and data privacy risks; history of leadership roles in cybersecurity risk management; degrees, certifications, or other background in cybersecurity.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO
                 

ESG and Climate: Experience in overseeing and managing ESG practices and initiatives; skills and knowledge in climate-related strategic planning, risk mitigation, and management; ability to provide oversight and advice relating to climate-related risks.

LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO

LOGO  VERY SKILLED/EXPERIENCED      LOGO  SOME SKILL/EXPERIENCE

 

LOGO

 

  

2024 PROXY STATEMENT 14

 


Table of Contents
 
   PROPOSAL 1 – ELECTION OF DIRECTORS

 

Our commitment to progressive and representative governance is a reflection of our belief that Company leadership has a particular responsibility to live up to our corporate social responsibility goals. Our Principles of Corporate Governance ensure that when identifying, screening, recruiting and recommending candidates to the Board, the Nominating and Corporate Governance Committee is committed to including in each search qualified candidates who reflect diverse backgrounds, including diversity of gender and race/ethnicity. The current composition of our Board is as follows:

Board Diversity Matrix (as of April 1, 2024)

 

         

TOTAL NUMBER OF DIRECTORS: 9

FEMALE MALE NON-BINARY

DID NOT DISCLOSE
GENDER

   

Part I: Gender Identity

         

Directors

  3   6
   

Part II: Demographic Background

         

African American or Black

  1   1
         

Alaskan Native or Native American

         

Asian

         

Hispanic or Latinx

         

Native Hawaiian or Pacific Islander

         

White

  2   5
         

Two or More Races or Ethnicities

     

LGBTQ+

  2
     

Did Not Disclose Demographic Background

Board Evaluation Process

The Nominating and Corporate Governance Committee identifies nominees for director, and considers recommendations from other members of the Board, officers and employees of CoStar and other sources that the Nominating and Corporate Governance Committee deems appropriate, which may include professional search firms. Ms. Brunner was initially recommended to the Nominating and Corporate Governance Committee by a current director. The Nominating and Corporate Governance Committee will also consider Board nominees suggested by stockholders if such recommendations are submitted timely, and include the required information specified in our By-Laws, as described under “Stockholder Proposals and Nominations for Directors for the 2025 Annual Meeting of Stockholders” below. The Company may require any proposed nominee to furnish other information as reasonably required to determine eligibility to serve as a director of the Company, including information regarding the proposed nominee’s independence. There is no difference in the manner by which the Nominating and Corporate Governance Committee evaluates prospective nominees for director based on the source from which the individual was first identified.

When evaluating nominees for director, the Nominating and Corporate Governance Committee considers, among other things, an individual’s business experience and skills, background, independence, judgment, integrity and ability to commit sufficient time and attention to the activities of the Board, as well as the absence of any potential conflicts with the Company’s interests. If the nominee is a director standing for reelection, that individual’s past contribution, engagement and commitment to CoStar are also considered. The Nominating and Corporate Governance Committee evaluates the totality of the merits of each prospective nominee that it considers and does not establish minimum qualifications or attributes. Candidates are evaluated within the context of the perceived needs of the Board as a whole, so that the members of the

 

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2024 PROXY STATEMENT 15

 


Table of Contents
 
   PROPOSAL 1 – ELECTION OF DIRECTORS

 

Board, collectively, will possess the necessary skills, experience and background. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, it believes that it is important that Board members represent diverse viewpoints and seeks to achieve a diversity of occupational and personal backgrounds on the Board. Accordingly, the Nominating and Corporate Governance Committee aims to include diverse candidates whenever conducting a search for new Board members. The Nominating and Corporate Governance Committee assesses the effectiveness of its approach toward maintaining and encouraging diversity on the Board through ongoing, informal feedback from Board members.

 

LOGO

 

  

2024 PROXY STATEMENT 16

 


Table of Contents
 
   PROPOSAL 1 – ELECTION OF DIRECTORS

 

Director Nominees

 

 

 

LOGO

Founder, President, and Chief Executive Officer, CoStar Group, Inc.

 

Director Since: 1987

 

Age: 60

  

 

EXPERIENCE

Mr. Florance founded the Company in 1987. As President and CEO of the Company, Mr. Florance has directed the Company’s successful expansion from start-up, to its initial public offering in July 1998, to its market leading position today. In his role, Mr. Florance manages an international service platform that includes the United States, United Kingdom, France, Spain, Germany, Canada, and several other countries throughout Asia Pacific and Latin America. While leading CoStar, he has identified, negotiated, and closed more than 30 acquisitions across six countries.

 

QUALIFICATIONS

As the founder of the Company, Mr. Florance brings to the Board significant knowledge and understanding of the real estate and information services industries, unique expertise on the Company’s products and services, and extensive leadership experience. Over his tenure with the Company, Mr. Florance has served as the CEO and has been actively involved in all facets of the Company’s business, including developing the Company’s products and services, identifying

  

 

and developing markets for the Company’s products and services and identifying and integrating acquisition targets. This experience enables Mr. Florance to make significant contributions to the Company’s business development and strategy.

 

EDUCATION

B.A. (Economics), Princeton University

 

 

Notable Affiliations and Recognitions

•  Board of Visitors, Virginia Commonwealth University

•  Governing Board, Management Leadership for Tomorrow

•  Honorary Doctorate, Virginia Commonwealth University

 

Other Public Company Directorships

•  None

 

Other Public Company Directorships
in the Past Five Years

•  None

 

 

 

 

 

LOGO

Chairman, CoStar Group, Inc.; Vice Chairman, Tutor Perini Corporation

 

Director Since: 1987

 

Age: 81

 

Independent

 

Committees

•  Compensation (Chair)

•  NCGC

  

 

EXPERIENCE

Mr. Klein has been the Chairman of our Board since 1987. Mr. Klein also currently serves as Vice Chairman of the board of directors of Tutor Perini Corporation, a publicly traded construction company. Mr. Klein additionally has over three decades of service as a corporate and securities lawyer specializing incorporate financings and mergers and acquisitions.

 

QUALIFICATIONS

Mr. Klein has been on our Board since the Company’s inception and has extensive knowledge of the commercial real estate, information services and technology industries, as well as the Company’s products, services and business strategies. Mr. Klein also brings to the Board extensive experience through his service over the past 30 years on the boards of directors of several public companies, privately-held businesses and non-profit organizations, including in the roles of Chairman and Lead Director. Mr. Klein’s experience as a founder, director and/ or investor in those entities enables him to contribute significantly to the oversight and governance of the Company.

  

 

EDUCATION

B.B.A., University of Miami; J.D., University of Miami; L.L.M., Harvard University

 

 

Notable Affiliations and Recognitions

•  Director and Secretary, American Himalayan Foundation

•  Trustee, Aspen Institute

•  Chairman, Board of Trustees, Aspen Music Festival and School

•  Founder and Chairman, Global Warming Mitigation Project

•  Chairman and Founder, Gun Violence Archive

•  Director, NAACP Legal Defense and Education Fund

•  Trustee, The Shakespeare Theatre Company

•  Director, ThinkFood Group, LLC

 

Other Public Company Directorships

•  Tutor Perini Corporation

 

Other Public Company Directorships
in the Past Five Years

•  None

 

LOGO

 

  

2024 PROXY STATEMENT 17

 


Table of Contents
 
   PROPOSAL 1 – ELECTION OF DIRECTORS

 

 

 

LOGO

CEO and Founder, EB5 Capital

 

Director Since: 2023

 

Age: 52

 

Independent

 

Committees

•  Audit (Nominated)

  

 

EXPERIENCE

Ms. Brunner is Founder and CEO of EB5 Capital, a $900 million investment firm raising capital for commercial real estate development projects in the United States for the EB-5 Immigrant Investor Program. Prior to founding her investment firm, Ms. Brunner worked in various aspects of finance at Fannie Mae and other companies, completing more than $3 billion in debt and equity transactions. Ms. Brunner previously served on the boards of directors of Chesapeake Lodging Trust, a formerly publicly traded lodging real estate investment trust, and Cushman & Wakefield, a publicly traded commercial real estate services company.

 

QUALIFICATIONS

Through her current and previous experiences, Ms. Brunner has gained over 25 years of experience in the finance, real estate development and the commercial real estate industry.

  

 

EDUCATION

B.A. (Urban Policy), Brown University; M.P.A., Princeton University

 

 

Notable Affiliations and Recognitions

•  Climate Leadership Certified, Corporate Climate Strategy (July 2023)

•  Owner, BWI Westin Hotel

•  Advisor, Trade Advisory Committee on Africa

•  Advisor, EOP, U.S. Trade Representative

•  Executive Board Member, Marriott – Sorenson Center for Hospitality Leadership, Howard University School of Business

•  Member, The Real Estate Roundtable

•  Industry Membership Chair, EB-5 Investment Coalition

•  Council member, Urban Land Institute, U.S. Chamber of Commerce and Real Estate Executive Council

• Board of Governors, Watson Institute for International & Public Affairs, Brown University

 

Other Public Company Directorships

•  None

 

Other Public Company Directorships
in the Past Five Years

•  Cushman & Wakefield

•  Chesapeake Lodging Trust Corporation

 

 

 

 

LOGO

 

Founder and Chief

Executive Officer of

J Hill Group

 

Director Since: 2012

 

Age: 69

 

Independent

 

Committees

•  Audit (Chair)

  

 

EXPERIENCE

Mr. Hill is Founder and CEO of J Hill Group, a professional services practice specializing in assisting clients in improving their management operations, which he started in 2012. He served as the Chief Financial Officer of the City of Detroit, Michigan on a personal services contract from 2013 to 2018. Prior to starting his consulting practice, from 2004 to 2012, Mr. Hill served as CEO of Federal City Council, a non-profit, non-partisan organization dedicated to improving the Nation’s Capital. Mr. Hill has previously served in multiple other executive and financial leadership positions, including as CEO of In2Books, Inc. and as a Partner at Andersen, LLP.

 

QUALIFICATIONS

Through his current and previous positions, Mr. Hill has gained over 40 years of experience in accounting, auditing and financial matters, as well as significant management expertise. As a result of his

  

 

extensive experience, Mr. Hill brings to the Board valuable financial knowledge and executive management experience.

 

EDUCATION

B.S. (Accounting), University of Maryland

 

 

Notable Affiliations and Recognitions

•  Certified Public Accountant

•  Honorary Trustee, The Shakespeare Theater Company

•  Director, Step Afrika!

•  Board Chair, National Minority AIDS Council

 

Other Public Company Directorships

•  None

 

Other Public Company Directorships
in the Past Five Years

•  Chesapeake Lodging Trust Corporation

 

LOGO

 

  

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LOGO

 

Adjunct Professor,

American University;

former Principal,

PricewaterhouseCoopers, LLP

 

Director Since: 2016

 

Age: 54

 

Independent

 

Committees

•  NCGC

  

 

EXPERIENCE

Ms. Kaplan is the former Principal-in-Charge of Government, Regulatory Affairs and Public Policy for PricewaterhouseCoopers LLP (“PwC”). Ms. Kaplan served on PwC’s Global Public Policy and Regulatory Board, as Chair of the American Institute of Certified Public Accountants’ (AICPA) Federal Legislative Task Force and was a member of the Center for Audit Quality’s Executive Management Committee. Prior to joining PwC, Ms. Kaplan served in senior level positions at the SEC and the U.S. Department of the Treasury. Ms. Kaplan has been an adjunct professor at American University since 2017.

 

QUALIFICATIONS

Ms. Kaplan has more than 25 years of experience in communications, corporate governance, stakeholder engagement and public policy strategy. She lends her experience and voice publicly to a range of topics important to the public and private sectors, including career and talent development, the importance of developing a diversified workforce and the value of diversified teams, women’s leadership,

  

 

and corporate governance. As a result of her experience, Ms. Kaplan brings to the Board valuable leadership, management and corporate governance experience.

 

EDUCATION

B.A. (Journalism and Government), University of Texas at Austin; M.A. (Communications), American University

 

 

Notable Affiliations and Recognitions

•  Director, The Policy Circle

•  Director, The Bush School of Government and Public Service at Texas A&M University

•  Director, Running Start

•  Creator and Host, “She Said/She Said Podcast,” She Said/She Said Media

 

Other Public Company Directorships

•  None

 

Other Public Company Directorships
in the Past Five Years

•  None

 

 

 

 

LOGO

 

Former Chief Executive Officer, Definitive Healthcare Corp.

 

Director Since: 2019

 

Age: 54

 

Independent

  

 

EXPERIENCE

Mr. Musslewhite served as CEO of Definitive Healthcare from August 2022 to January 2024. Prior, Mr. Musslewhite served as the CEO of OptumInsight, Optum’s health services business connecting the health care system with services, analytics, and platforms designed to make clinical and administrative processes easier and more efficient, beginning in 2019. While at Optum, prior to leading OptumInsight, Mr. Musslewhite was CEO of Optum360, CEO of Optum Analytics and CEO of Advisory Board Research. Mr. Musslewhite joined Optum in 2017, following its acquisition of the Advisory Board Company where he served as CEO since 2008 and Chairman since 2013. Prior to joining The Advisory Board Company, Mr. Musslewhite was an Associate Principal with McKinsey & Company, a global management consulting firm, in the Washington, D.C., Amsterdam, and Dallas offices.

  

 

QUALIFICATIONS

Through his current and previous positions, Mr. Musslewhite has gained over 20 years of experience in executive management and leadership, business operations and development, growth strategies, development of products and services and research and technology.

 

EDUCATION

B.A. (Economics), Princeton University;

J.D., Harvard Law School

 

 

Notable Affiliations and Recognitions

•  Director, Ascend Learning

•  Director, Iodine Software

•  Member, Economic Club of Washington, D.C.

 

Other Public Company Directorships

•  None

 

Other Public Company Directorships
in the Past Five Years

•  Definitive Healthcare Corp.

 

LOGO

 

  

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LOGO

 

Chief Executive Officer and President, Hilton Worldwide Holdings Inc.

 

Director Since: 2002

 

Age: 61

 

Independent

 

Committees

•  Compensation

•  NCGC (Chair)

  

 

EXPERIENCE

Mr. Nassetta is the President and CEO of Hilton Worldwide (f/k/a Hilton Hotels Corporation), a global hospitality company. He joined Hilton Worldwide in 2007. Prior to joining Hilton Worldwide, Mr. Nassetta was President and CEO of Host Hotels & Resorts, Inc. (f/k/a Host Marriott Corporation), a lodging REIT and owner of luxury and upscale hotels, from 2000 to 2007. Mr. Nassetta joined Host Hotels & Resorts, Inc. in 1995 as Executive Vice President and became Chief Operating Officer in 1997. Prior to joining Host Hotels & Resorts, Inc., Mr. Nassetta co-founded Bailey Capital Corporation in 1991, a real estate investment and advisory firm. Prior to founding Bailey Capital Corporation, he spent seven years at The Oliver Carr Company, ultimately serving as Chief Development Officer.

 

QUALIFICATIONS

Through his current and previous positions, Mr. Nassetta brings to the Board significant operational and business development experience, mergers and acquisition experience, public company board and management experience, leadership

  

 

experience and commercial real estate industry expertise. As a user of commercial real estate information, Mr. Nassetta also provides the Board with a client’s perspective on the Company’s business, including valuable insight into the potential “fit” of acquisition targets and the development and marketing of products and services.

 

EDUCATION

B.S. (Finance), University of Virginia

 

 

Notable Affiliations and Recognitions

•  Member of the Executive Committee, World Travel & Tourism Council

•  Member, Real Estate Roundtable

•  Advisory Board Member, McIntire School of Commerce at University of Virginia

•  Member, Federal City Council

•  Member, Economic Club of Washington, D.C.

 

Other Public Company Directorships

•  Hilton Worldwide Holdings Inc.

 

Other Public Company Directorships
in the Past Five Years

•  None

 

 

 

 

LOGO

 

Former EVP & General Counsel, Turner Broadcasting System, Inc.

 

Director Since: 2019

 

Age: 66

 

Independent

 

Committees

•  Audit

  

 

EXPERIENCE

Ms. Sams was the Executive Vice President and General Counsel of Turner Broadcasting System, Inc. (“Turner”), a television and media conglomerate, from 2000 until 2019 and also served as the President of Turner Broadcasting System International, Inc. from 2003 until 2012. Prior to joining Turner in 1993 as a corporate attorney, she was an associate at White & Case LLP, specializing in mergers and acquisitions and securities law. Ms. Sams currently serves on the boards of directors of Loop Industries, Inc. and Rollins, Inc.

 

QUALIFICATIONS

Ms. Sams has over 25 years of experience as a media executive and over 34 years as a practicing attorney. As a result of her broad range of business and legal experience, Ms. Sams brings to the Board valuable business development, growth strategies,

  

 

risk management, corporate governance, technology, and mergers and acquisitions experience.

 

EDUCATION

B.A. (English), Princeton University;

J.D., University of Virginia School of Law

 

 

Notable Affiliations and Recognitions

•  Director, Princeton University

•  Director, High Museum of Art, Atlanta

•  Director, Westminster Schools

•  Director, Meals on Wheels, Atlanta

 

Other Public Company Directorships

•  Loop Industries, Inc.

•  Rollins, Inc.

 

Other Public Company Directorships
in the Past Five Years

•  D&Z Media Acquisition Corp.

 

LOGO

 

  

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   PROPOSAL 1 – ELECTION OF DIRECTORS

 

Board Leadership Structure

Currently, Mr. Klein, an independent director, serves as Chairman of the Board, and Mr. Florance serves as CEO and director. The Board does not have a policy regarding the separation of the roles of CEO and Chairman of the Board, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board at the particular time. The Board believes the advisability of having separate or combined chairman and CEO positions is dependent upon the strengths of the individual or individuals that hold these positions and the most effective means of leveraging their strengths to lead the Board, set Board agendas, and identify and oversee key issues in light of the challenges and circumstances facing the Company, which may change over time. During a period in which the chairman and CEO positions are combined, a Lead Director would be appointed from our independent directors. Our stockholders would be notified of a combination of the chairman and CEO roles promptly upon the Board’s decision to do so.

The Board has determined that this leadership structure currently is in the best interest of the Company’s stockholders. This structure provides a greater role for the independent directors in overseeing the Company and in setting agendas and establishing Board priorities and procedures and it also permits our CEO to focus on managing the Company’s day-to-day operations. Our Chairman’s responsibilities include:

 

   

Serving as Chair of regular sessions of the Board and managing the overall Board process;

 

   

Modeling culture, philosophy, inclusivity and values expected of all directors;

 

   

Conducting individual meetings with other directors, including the CEO, and management team to encourage open communication and collaboration;

 

   

Representing the Board on occasions where it is important for the Board to respond on matters independently from the Company’s management team;

 

   

Providing guidance and direction to the CEO and management team; and

 

   

Engaging with stockholders, through verbal or written communications, and presiding over the Company’s Annual Meeting of Stockholders.

The Board’s Role in Risk Oversight

One of the Board’s functions is oversight of risk management, which is administered both through the full Board and through Board committees that oversee specific risks, as described below.

The Company faces a variety of risks, including macroeconomic risks, such as inflation, economic downturns, or recession; business-specific risks related to the Company’s strategic position, operations, financial structure, legal and regulatory compliance, cybersecurity and corporate governance; and event-specific risks, such as natural disasters, pandemics or wars. The Company believes that an effective risk management system should:

 

   

Timely identify the material risks that the Company faces;

 

   

Communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board committee;

 

   

Implement appropriate and responsive risk management strategies consistent with the Company’s risk profile; and

 

   

Integrate risk management into Company decision-making.

The Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day operations. Management is responsible for identifying risk and risk controls related to significant business activities and developing programs and recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential reward, and the appropriate manner in which to control risk.

 

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Management, typically the Chief Financial Officer (CFO) or General Counsel, periodically discusses with the Board or appropriate Board committee the significant voluntary and involuntary risks that the Company faces and how the Company is seeking to control risk if and when appropriate. When appropriate, other members of management provide information to the Board or appropriate Board committees with respect to a specific area of potential risk and how the Company manages or seeks to control the identified risk. The Audit Committee oversees management’s implementation of our cybersecurity risk management program and is informed about the Company’s cybersecurity risks program in periodic presentations by management, including an overview of cybersecurity risks and the threats landscape as well as the Company’s risk posture.

In some cases, as with risks related to product or service acceptance, risk oversight is addressed as part of the full Board’s engagement with the CEO and management. In other cases, a Board committee is responsible for oversight of specific risk topics, in which case management meets directly with the Board committee. For example, the Audit Committee oversees issues related to internal control over financial reporting and auditor independence, and the Compensation Committee oversees the assessment of risks related to the Company’s compensation policies and programs applicable to officers and employees, as discussed in greater detail below. The Board also works with the Company’s management to assess, analyze and address the most likely areas of future risk for the Company. In February 2023, the Company released its second ESG Report, underscoring its commitment to building a foundation of responsible business strategies that drive value for its people, communities, and stockholders through positive ESG practices. In March 2023, the Board formally adopted oversight over ESG matters, including climate-related issues, and is committed to considering ESG-related matters at least annually. The Company’s management anticipates regularly reviewing the ESG Report and providing periodic updates to the Board.

Risk Assessment in Compensation Programs

Management assesses the Company’s executive and broad-based compensation and benefits programs to determine if the programs’ provisions and operations encourage or create undesired or unintentional risk of a material nature. The Compensation Committee also engaged its independent compensation consultant to assess the Company’s executive compensation program. The risk assessment evaluated potential risk factors from three primary perspectives:

 

   

CoStar’s compensation structure and philosophy;

 

   

Pay program design and policies; and

 

   

Governance and the role of the Compensation Committee.

The Compensation Committee reviews all compensation programs but is focused on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout. The Company supports the use of base salary, performance-based compensation and retirement plans that are generally uniform in design and operation throughout the Company. In most cases, the compensation policies and practices are centrally designed and administered and are substantially identical throughout the Company, except that sales personnel are also eligible to receive sales commissions depending upon performance. Programs may differ by country due to variations in local laws and customs.

Based on the foregoing, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond our ability to effectively identify and manage significant risks, are compatible with effective internal controls and our risk management practices, and are supported by the Compensation Committee’s oversight and administration of executive compensation programs.

 

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Board Committees

 

 
AUDIT COMMITTEE
         

LOGO

 

 

4  

Meetings   

in 2023   

 

2023 Members

 

•  Michael J. Glosserman

•  John W. Hill (Chair)

•  Louise S. Sams

 

Independence

 

Each member of the committee is independent and financially literate.

 

Audit Committee
Financial Expert

 

Each of Mr. Glosserman and Mr. Hill meets the requirements defined in SEC rules.

 

Role and Responsibilities

 

The Audit Committee assists the Board in fulfilling its oversight responsibilities as to accounting policies, internal controls, the outside auditor’s qualifications, independence and performance, compliance with legal and regulatory requirements, cybersecurity risk management, audit activities and reporting practices of the Company. The Audit Committee also produces the report of the Audit Committee included in this Proxy Statement. The Audit Committee operates under a written charter adopted by the Board and reviewed annually by the Audit Committee. This charter is available in the “Investors” section of the Company’s website under Corporate Governance – Governance Documents.

 

 
COMPENSATION COMMITTEE
       

LOGO

 

 

2  

Meetings  

in 2023  

 

2023 Members

 

•  Michael R. Klein (Chair)

•  Christopher J. Nassetta

 

Independence

 

Each member of the committee is independent.

 

Role and Responsibilities

 

The Compensation Committee operates under a written charter adopted by the Board and reviewed annually by the Compensation Committee. This charter is available in the “Investors” section of the Company’s website under Corporate Governance – Governance Documents. The Compensation Committee discharges the Board’s responsibilities relating to compensation of the Company’s executive officers and directors, and produces the Compensation Committee report on executive compensation included in this Proxy Statement. In addition, the Board has designated the Compensation Committee as the Administrator of the 2016 Plan, ESPP, MSPP, and the Company’s cash incentive plan.

 

Compensation Committee Interlocks and Insider Participation

 

Messrs. Klein and Nassetta, each a non-employee director, served on the Compensation Committee during fiscal year 2023. Mr. Klein serves as the Chairman of the Board of the Company. None of the members of the Compensation Committee during fiscal year 2023 were officers or employees of the Company during or prior to fiscal year 2023 or had any relationship that is required to be disclosed as a transaction with a related person. During 2023, none of the Company’s executive officers served as a director or compensation committee member of any entity with an executive officer who served as a director or Compensation Committee member of the Company.

 

LOGO

 

  

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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
       

 

LOGO

 

1  

Meeting  

in 2023  

 

2023 Members

 

•  Michael R. Klein

•  Michael J. Glosserman

•  Laura Cox Kaplan

•  Christopher J. Nassetta (Chair)

 

Independence

 

Each member of the committee is independent.

 

Role and Responsibilities

 

The Nominating and Corporate Governance Committee identifies individuals qualified to become Board members, recommends to the Board director candidates and performs a leadership role in shaping the Company’s corporate governance. The Nominating and Corporate Governance Committee operates under a written charter adopted by the Board and reviewed annually by the Nominating and Corporate Governance Committee. This charter is available in the “Investors” section of the Company’s website under Corporate Governance – Governance Documents.

Corporate Governance Overview

Principles of Corporate Governance

The Board, based on the recommendation of the Nominating and Corporate Governance Committee, adopted the Company’s Principles of Corporate Governance, which direct our Board’s actions with respect to, among other things, Board composition, director membership criteria, composition of the Board’s standing committees, and the Board’s performance evaluations. Our Principles of Corporate Governance provide that, when identifying, screening, recruiting and recommending candidates to the Board, the Nominating and Corporate Governance Committee is committed to including in each search (whether conducted in-house or with the assistance of a third-party search firm) qualified candidates who reflect diverse backgrounds, including diversity of gender and race. The Company’s Principles of Corporate Governance can be found in the “Investors” section of the Company’s website under Corporate Governance – Governance Documents.

Majority Voting Standard

In a non-contested election, directors are elected by a majority of votes cast by stockholders (i.e., if the number of votes cast for the nominee’s election exceeds the number of votes cast against the nominee’s election). A non-contested election is an election where the number of nominees does not exceed the number of directors to be elected. In a contested election, the director nominees who receive the plurality of votes cast are elected as directors. Under the plurality standard, the number of persons equal to the number of vacancies to be filled who receive more votes than other nominees are elected to the Board, regardless of whether they receive a majority of votes cast. An election is considered contested under our By-Laws if there are more nominees than positions on the Board to be filled at the meeting of stockholders as of the fifth day prior to the date on which we file our definitive proxy statement with the SEC.

Meeting Attendance

Directors are expected to attend all meetings of the Board and the committees on which they serve. During 2023, the Board held seven meetings. The Audit, Compensation, and Nominating and Corporate Governance Committees held four meetings, two meetings, and one meeting, respectively, in 2023. During 2023, each director attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by each committee of the Board on which the director served, during the period in which the director so served.

We encourage, but do not require, directors to attend the Annual Meetings of Stockholders. In 2023, none of our directors were able to attend the Annual Meeting of Stockholders.

 

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Executive Sessions

Executive sessions of independent directors enable the Board to discuss matters, such as strategy, CEO and senior management performance and compensation, and board effectiveness, without management present. Any director may request additional executive sessions of independent directors.

Proxy Access

Our By-Laws allow eligible stockholders to propose director nominees for inclusion in the proxy statement in addition to the nominees proposed by the Board. The proxy access By-Law permits stockholders owning 3% or more of our issued and outstanding shares of common stock for at least three years, to nominate candidates for election to our Board. The number of candidates that may be so nominated is limited to the greater of two or the largest whole number that does not exceed 20% of our Board. The number of stockholders who may aggregate their shares to meet the 3% ownership threshold is limited to 20. The stockholder(s) and nominee(s) must also satisfy the other requirements contained in our By-Laws.

Director Independence

The Board has determined that Messrs. Klein, Glosserman, Hill, Nassetta, and Musslewhite, and Mses. Brunner, Kaplan, and Sams are each independent as defined under Rule 5605(a)(2) of the Nasdaq listing rules. In assessing directors’ independence, the Board took into account certain transactions, relationships, and arrangements involving some of the directors and concluded that such transactions, relationships, and arrangements did not impair the independence of the relevant director. As part of this determination, the Board received information regarding Mr. Klein’s position as a trustee of the Shakespeare Theatre Company, a non-profit organization, and Mr. Hill’s position as an emeritus trustee of the Shakespeare Theatre Company. The Company made contributions to the Shakespeare Theatre Company of $100,000 in 2021, $50,000 in 2022, and $50,000 in 2023, which amounts are less than five percent of the consolidated gross annual revenues of the Shakespeare Theatre Company for those years. In addition, the Board considered that (1) Mr. Nassetta serves as an executive officer of a company that subscribes to the Company’s services and from which the Company purchased services, (2) Mr. Glosserman serves as a trustee of a company that subscribes to the Company’s services, and (3) Ms. Brunner serves as CEO of a company that subscribes to the Company’s services. In each such case, the payments received by the Company were less than one percent of the Company’s consolidated gross annual revenues in each of the last three fiscal years. In addition, the payments from the Company to Mr. Nassetta’s company were less than one percent of the consolidated gross annual revenues of such company in each of the last three fiscal years. Further, the services provided by the Company to and received from the companies Mr. Nassetta, Mr. Glosserman and Ms. Brunner are affiliated with are on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances.

Stockholder Communications with the Board

Stockholders may communicate with our Board by sending written correspondence to CoStar Group, Inc., Attention: Corporate Secretary, 1331 L Street N.W., Washington, DC 20005. The Corporate Secretary opens and retains a copy of the contents of such correspondence and promptly forwards such correspondence to the Chairman of the Nominating and Corporate Governance Committee and, if addressed to a particular committee or Board member, to that committee’s Chairman or such Board member. The Corporate Secretary, together with the Chairman of the Nominating and Corporate Governance Committee and his duly authorized agents, are responsible for collecting and organizing stockholder communications. Absent a conflict of interest, the Chairman of the Nominating and Corporate Governance Committee is responsible for evaluating the materiality of each stockholder communication and determining which stockholder communications will be presented to the full Board, individual directors or other appropriate body.

 

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Director Compensation

The Compensation Committee annually reviews director compensation for service on the Board and its committees and recommends director compensation and any changes to such compensation to the Board for approval. The Board annually reviews and approves director compensation based on the recommendations of the Compensation Committee. Directors who are also employees of the Company do not receive any additional compensation for service on the Board. The charts below show the percentage of our Chairman’s and all other directors’ compensation that is paid in stock as compared to cash to align their interests with those of our stockholders, and the following table shows the compensation we paid in 2023 to our non-employee directors.

 

LOGO

2023 Director Compensation

 

       

NAME

FEES EARNED OR

PAID IN CASH(1)

($)

STOCK

AWARDS(2)

($)

TOTAL

($)

       

Michael R. Klein, Chairman

$ 120,000 $ 287,053 $ 407,053
       

Angelique G. Brunner(3)

$ 25,000 $ 250,030 $ 275,030
       

Michael J. Glosserman

$ 50,000 $ 277,001 $ 327,001
       

John W. Hill

$ 50,000 $ 280,045 $ 330,045
       

Laura Cox Kaplan

$ 50,000 $ 262,065 $ 312,065
       

Robert W. Musslewhite

$ 50,000 $ 250,030 $ 300,030
       

Christopher J. Nassetta

$ 50,000 $ 287,053 $ 337,053
       

Louise S. Sams

$ 50,000 $ 265,038 $ 315,038

 

(1)

Annual Retainers. This column shows the amount of cash compensation earned in 2023 for Board and Committee service. Annual cash retainers are paid to directors in biannual installments and to the Chairman in monthly installments. The Company also reimburses all directors for reasonable travel and out-of-pocket expenses incurred in connection with their duties as directors, including attendance at meetings.

 

(2)

Stock Awards. To align our non-employee directors’ annual compensation with stockholder interests, each non-employee director receives a restricted stock award for service on the Board and its committees. For service in 2023, non-employee directors received equity awards with the following grant date values: $250,000 for service on the Board (including the Chairman); $30,000 for service as Chair of the Audit Committee; $15,000 for service on the Audit Committee; $25,000 for service as Chair of the Compensation Committee; $12,000 for service on the Compensation Committee; $25,000 for service as Chair of the Nominating and Corporate Governance Committee; and $12,000 for service on the Nominating and Corporate Governance Committee. Annual equity awards are granted on or around the date of the first regular Board meeting following the date of the annual meeting of stockholders, are payable in the form of restricted stock, and vest in four equal annual installments, subject to continued service on the vesting date. The number of shares of restricted stock subject to each award is determined by dividing the total dollar amount by the closing price of the Company’s common stock on the date of grant. This column shows the aggregate grant date fair value of shares of restricted stock granted in 2023 to each non-employee director, computed in accordance with FASB Accounting Standards Codification Topic 718, “Compensation – Stock Compensation.”

 

(3)

Ms. Brunner began serving as a director on August 1, 2023, and the cash fees earned by her reflect a partial year of service.

 

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The following table shows the aggregate number of shares of unvested restricted stock held by each non-employee director as of December 31, 2023. Other than as set forth below, the non-employee directors did not hold any other outstanding equity awards at fiscal year-end.

 

   

NAME

 

AGGREGATE
SHARES OF
UNVESTED
RESTRICTED
STOCK
HELD AS OF
12/31/2023
   

Michael R. Klein, Chairman

  9,089
   

Angelique G. Brunner

  3,532
   

Michael J. Glosserman

  8,846
   

John W. Hill

  9,000
   

Laura Cox Kaplan

  8,359
   

Robert W. Musslewhite

  8,013
   

Christopher J. Nassetta

  9,111
   

Louise S. Sams

  8,502

Director Stock Ownership Policy

Under the Company’s Director Stock Ownership Policy, each non-employee director is required to own shares of the Company’s common stock with a value equal to five times the annual, standard director cash retainer. Newly appointed directors are required to meet the ownership requirement on or before the first December 31st following the fifth anniversary of the date of their appointment to the Board. The current directors all currently meet this ownership requirement.

The number of shares of unvested restricted stock held by each non-employee director as of December 31, 2023 is shown above by footnote to the 2023 Director Compensation table.

Certain Relationships and Transactions

Review and Approval of Related Person Transactions

The Board recognizes that Interested Transactions (as defined below) can present potential or actual conflicts of interest and create the appearance that Company decisions are based on considerations other than the best interests of the Company and its stockholders. The Board has delegated authority to the Audit Committee to review and approve Interested Transactions, and the Audit Committee has adopted written procedures as detailed below for the review, approval, or ratification of Interested Transactions.

An “Interested Transaction” is any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness), or any series of similar transactions, arrangements or relationships, in which (a) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (b) the Company or any of its subsidiaries is a participant, and (c) any Related Party (as defined below) has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). An Interested Transaction does not include a transaction in which a Related Party has an indirect interest solely as a result of being (1) a director or a less than 10% beneficial owner of an equity interest in another entity, or both, or (2) a limited partner in a partnership in which the Related Party has an interest of less than 10%. A “Related Party” is any (a) person who is or was (since the beginning of the Company’s last fiscal year, even if they do not presently serve in that role) an executive officer, director or nominee for

 

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   PROPOSAL 1 – ELECTION OF DIRECTORS

 

election as a director of the Company, (b) greater than 5% beneficial owner of the Company’s outstanding common stock, or (c) Immediate Family Member of any of the foregoing. An “Immediate Family Member” includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers-and fathers-in-law, sons and daughters-in-law, brothers-and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee).

The Audit Committee will review all of the material facts of all Interested Transactions and either approve or disapprove of the entry into the Interested Transaction, subject to a limited list of enumerated transactions that are deemed to be pre-approved as described in the Interested Transactions policy. In determining whether to approve an Interested Transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the Related Party’s interest in the transaction.

Related Person Transactions

During 2023, the Company engaged with G.H. Smart & Company, Inc. (“ghSMART”), a leadership advisory consulting firm. The Company paid ghSMART $120,993 to perform leadership assessment services. Randy Street, the brother-in-law of our Chief Executive Officer, is an officer of ghSMART and owns approximately 11% of the equity of ghSMART. Mr. Street is not involved in the provision of services to CoStar. In accordance with the procedures described above for Interested Transactions, the Audit Committee reviewed and approved the engagement with ghSMART prior to commencement of the engagement.

 

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   PROPOSAL 1 – ELECTION OF DIRECTORS

 

Executive Officers

Below is biographical information about each of our current executive officers as defined by the Exchange Act, including ages as of April 1, 2024.

 

LOGO

 

Founder, President, and
Chief Executive Officer

 

Employee since 1987

 

Age 60

  

EXPERIENCE

Mr. Florance founded the Company in 1987. As President and CEO of the Company, Mr. Florance has directed the Company’s successful expansion from start-up, to its initial public offering in July 1998, to its market-leading position today. In his role, Mr. Florance manages an international service platform that includes the United States, United Kingdom, France, Spain, Germany, Canada, and several other countries throughout Asia Pacific and Latin America. While leading CoStar, he has identified, negotiated, and closed more than 30 acquisitions across six countries.

 

EDUCATION

B.A. (Economics), Princeton University

 

 

 

LOGO

 

Chief Financial Officer

 

Employee since 2016

 

Age 60

  

EXPERIENCE

Mr. Wheeler joined the Company in January 2016. Prior to his appointment as Chief Financial Officer, Mr. Wheeler served in various senior financial leadership roles with Experian plc., a global data analytics and consumer credit reporting company, from 2006 to 2016. Prior to Experian, Mr. Wheeler held various financial and mergers and acquisitions roles with Avery Dennison and General Electric, including an international assignment in Germany as Chief Financial Officer of GE-Bayer Silicones. Mr. Wheeler began his professional career as a CPA with Touche Ross in Seattle, Washington.

 

EDUCATION

B.A. (Business Administration), University of Washington, Seattle

 

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   PROPOSAL 1 – ELECTION OF DIRECTORS

 

 

LOGO

Senior Vice President,
Global Operations

 

Employee since 1999

 

Age 57

  

EXPERIENCE

Ms. Ruggles joined the Company in November 1999 as a Field Research Photographer. Since joining the Company, Ms. Ruggles has served in various roles of increasing responsibility, including Field Research Operations Manager from 2000 to 2006, Director of Field Research from 2006 to 2009, Senior Director of Field Research from 2009 to 2013, Vice President of Field Research from 2013 to 2016, Senior Vice President of Portfolio Research from early 2016 until October 2016, and Senior Vice President, Global Research from 2016 until her appointment as Senior Vice President, Global Operations in 2022. During her tenure, she launched CoStar’s research coverage of numerous markets throughout the United States, facilitating the Company’s national expansion, launched research coverage in the United Kingdom, and was instrumental in establishing a Toronto-based research center and launching research coverage in Toronto, Canada. She was responsible for operationalizing CoStar’s first aerial research plane to collect high quality images of new construction in an expedited manner. Ms. Ruggles also established CoStar’s research headquarters in Richmond, Virginia, which focuses on the collection and curation of content for all CoStar Group products.

 

EDUCATION

B.A. (Photography), Savannah College of Art and Design

 

 

 

 

LOGO

Chief Technology Officer

 

Employee since 1999

 

Age 57

  

EXPERIENCE

Mr. Simuro joined the Company in December 1999 as Director of Information Systems. He served as Senior Vice President of Information Systems from May 2005 to January 2008 and was promoted to Chief Information Officer in January 2008. Most recently, in March 2015, Mr. Simuro was promoted to Chief Technology Officer. Prior to joining CoStar, Mr. Simuro was Director of Data Warehousing at GRC International (“GRC”). Prior to GRC, Mr. Simuro was a technology consultant specializing in operational efficiency and database technologies.

 

EDUCATION

B.A. (Computer Science), State University of New York - Geneseo

M.S. (Information Systems), George Washington University

 

 

 

 

LOGO

President, Marketplaces

 

Employee since 2000(1)

 

Age 58

 

  

EXPERIENCE

Mr. Saint is responsible for product, marketing and business development for the Apartments.com network of online apartment listing websites, as well as CoStar’s Land and Businesses For Sale marketplaces. Mr. Saint joined the Company as a result of the Company’s acquisition of LoopNet in 2012, and served as President of LoopNet from April 2012 until January 2016, when he took over as President of Apartments.com. In September 2018, he was promoted to President, Marketplaces. He had previously joined LoopNet as President of Cityfeet and Vice President of LoopNet Business Development in August 2007 upon the acquisition of Cityfeet, where he had served as CEO from January 2004 to August 2007.

 

EDUCATION

B.S. (Business Administration), Wake Forest University

M.B.A. (Finance and Real Estate), The Wharton School of the University of Pennsylvania.

 

(1)

Includes years of service with acquired companies.

 

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   PROPOSAL 1 – ELECTION OF DIRECTORS

 

LOGO

 

Chief Human Resources
Officer

 

Employee since 2019

 

Age 58

  

EXPERIENCE

Mr. Desmarais joined the Company in July 2019. Prior to joining the Company, Mr. Desmarais was a Managing Director within Human Capital Management at Goldman Sachs & Co., a global investment bank and financial services company, from February 2002 to July 2019. Over the course of more than 17 years, he contributed innovative thought leadership and held a variety of senior positions including Head of Human Resources for Engineering from January 2018 to July 2019, Chief Operating Officer for the Human Capital Management division from January 2017 to January 2018 and Head of Global Recruiting from March 2013 to January 2017. Additionally, he spent approximately ten years in Executive Search where he was responsible for establishing and managing the New York City region for Vendor Professional Services, NV from September 1993 to February 2002. Mr. Desmarais began his career in public accounting at KPMG and later Grant Thornton, becoming a Certified Public Accountant in 1993.

 

EDUCATION

B.S. (Accounting), Stonehill College

 

 

 

LOGO

 

General Counsel and
Corporate Secretary

 

Employee since 2022

 

Age 49

  

EXPERIENCE

Mr. Boxer joined the Company in March 2022. Previously, Mr. Boxer served as Executive Vice President, Group General Counsel, of Sirius International Insurance Group from August 2016, and as its Chief Strategy Officer from September 2018 until February 2021. From January 2011 until October 2015, Mr. Boxer served as Global General Counsel of Cushman & Wakefield, where he headed the Legal and Compliance functions and served as a member of the Executive Committee and Global Management Committee, and Co-Chaired the Global Enterprise Risk Management Committee, of the firm. From October 2006 until January 2011, Mr. Boxer served as a senior member of the Restructuring Group and Legal Mergers & Acquisitions Group of American International Group, Inc. (AIG). Prior to October 2006, Mr. Boxer practiced at Milbank, LLP, focusing on mergers and acquisitions and securities offerings.

 

EDUCATION

B.S. (Finance and International Business), New York University, Leonard N. Stern School of Business

J.D., Boston University School of Law

 

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Proposal 2

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee approved the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2024. As a matter of good corporate governance, the Board is asking stockholders to ratify this appointment. If stockholders do not ratify this appointment, the Audit Committee may reconsider such appointment and consider other accounting firms.

Ernst & Young LLP has served as the independent registered public accounting firm for the Company, its subsidiaries, and its predecessors since 1994. A representative from Ernst & Young LLP is expected to attend the Annual Meeting, and will have the opportunity to make a statement and to respond to appropriate questions.

 

LOGO    THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024

Ernst & Young LLP Fees and Services

For the years ended December 31, 2022 and 2023, Ernst & Young LLP billed CoStar the fees set forth below, including expenses, in connection with services rendered to CoStar:

 

     
  YEAR ENDED
DECEMBER 31,
2022
YEAR ENDED
DECEMBER 31,
2023
     
Audit Fees(1) $1,501,499 $1,555,869
     
Audit-Related Fees(2) $  236,206 $  483,731
     
Tax Fees(3) $        0 $   69,718
     
All Other Fees(4) $    6,262 $    7,632
     
Total $1,743,967 $2,116,950

 

(1)

Audit Fees include fees in connection with CoStar’s: (i) annual consolidated financial statements; (ii) quarterly interim financial information; (iii) statutory audits required internationally; and (iv) registration statements.

 

(2)

Audit-Related Fees consist of due diligence on acquisitions and attestation reports for service organizations.

 

(3)

Tax Fees primarily consist of acquisition-related tax consulting services.

 

(4)

All Other Fees consist of subscription fees for access to Ernst & Young LLP’s library of accounting and financial reporting guidance.

Audit Committee Pre-Approval Policy

The Audit Committee’s policy is that all audit and non-audit services provided by CoStar’s independent registered public accounting firm shall either be approved before the independent registered public accounting firm is engaged for the particular services or shall be rendered pursuant to pre-approval procedures established by the Audit Committee. These

 

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      PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   

 

 

services may include audit services and permissible audit-related services, tax services and other services. Pre-approval spending limits for services to be performed by CoStar’s independent registered public accounting firm are established on an annual (for audit services) or periodic (for permissible non-audit services) basis, detailed as to a particular service or category of services to be performed. Any audit or non-audit service fees that may be incurred by CoStar that fall outside the pre-approved limits must be reviewed and approved by the Chairperson of the Audit Committee or the Audit Committee as a whole prior to the performance of services. CoStar’s independent registered public accounting firm reports to the Audit Committee on a quarterly basis on all services rendered by the independent registered public accounting firm that were pre-approved and all fees paid to the independent registered public accounting firm for such services since the previous quarter’s Audit Committee meeting. The Audit Committee may revise its pre-approval spending limits and policies at any time.

All fees paid to the independent registered public accounting firm in 2023 were pre-approved by the Audit Committee, and therefore no services were approved after the services were rendered pursuant to the “de minimis” exception established by the SEC for the provision of non-audit services.

 

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Report of the Audit Committee

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements to GAAP.

In this context, the Audit Committee has:

 

 

reviewed and discussed with management and the independent registered public accounting firm the Company’s audited consolidated financial statements for 2023;

 

 

discussed with the independent registered public accounting firm the matters required to be discussed by applicable standards of the PCAOB and the SEC;

 

 

received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence;

 

 

discussed with the independent registered public accounting firm its independence from the Company and management; and

 

 

considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with the auditors’ independence.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the 2023 Annual Report for filing with the SEC.

By the Audit Committee

of the Board of Directors

John W. Hill, Chairman

Michael J. Glosserman

Louise S. Sams

 

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Table of Contents

Proposal 3

ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

(SAY-ON-PAY)

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Rule 14a-21 under the Exchange Act, we request that our stockholders cast a non-binding, advisory vote to approve the compensation of our NEOs identified in the section titled “Compensation Discussion and Analysis” set forth below in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement.

We urge stockholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which describes in detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the 2023 Summary Compensation Table and other related compensation tables and narrative accompanying the “Compensation Discussion and Analysis” in this Proxy Statement, which provide detailed information on the compensation of our NEOs. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our NEOs reported in this Proxy Statement has supported and contributed to the Company’s recent and long-term success.

We are asking stockholders to approve the following advisory resolution at the Annual Meeting:

RESOLVED, that the stockholders of CoStar Group, Inc. approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the 2023 Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2024 Annual Meeting of Stockholders.

This advisory resolution is non-binding on the Board and the Compensation Committee. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. At the 2023 Annual Meeting, approximately 88% of the votes cast were for approval of the “say-on-pay” advisory vote.

At our annual meeting of stockholders held on June 8, 2023, our stockholders selected “1 Year” as the recommended frequency for future “say-on-pay” advisory votes. As a result, we expect to continue to submit our say-on-pay proposal to our stockholders at each annual meeting.

 

LOGO    THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

 

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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Discussion and Analysis describes our executive compensation programs and compensation decisions for our NEOs for 2023. Our Compensation Committee is responsible for reviewing our executive compensation program and for reviewing and approving the compensation arrangements for our NEOs. Our NEOs for 2023 were:

 

   
NAME TITLE
   
Andrew C. Florance

Chief Executive Officer and President

   
Scott T. Wheeler

Chief Financial Officer

   
Lisa C. Ruggles

Senior Vice President, Global Operations

   
Frederick G. Saint

President, Marketplaces

   
Frank A. Simuro

Chief Technology Officer

Executive Compensation Program Objectives

Our Compensation Committee is responsible for designing and maintaining the Company’s executive compensation program consistent with the objectives below. The Company’s executive compensation program seeks to:

 

 

Link executive compensation with the achievement of overall corporate goals;

 

 

Encourage and reward superior performance;

 

 

Maintain competitive compensation levels in order to attract, motivate and retain talented executives; and

 

 

Align executives’ interests with those of the Company’s stockholders.

 

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   COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Compensation Policies and Practices

Below we highlight certain key characteristics of our executive compensation practices that we believe align executive compensation with stockholder interests and promote good governance.

 

LOGO    Purpose    LOGO    Compensation Program/Policy

Structure executive
compensation program with
focus on achievement of
Company performance goals.

   Equity incentive compensation granted in 2023 consisted (based on grant date value at target) 45% of annual performance-based restricted stock (which vest ratably over three years after grant), 15% of stock options (which vest ratably over three years after grant), and 40% of long-term performance shares (which vest based on achievement of a three-year cumulative revenue goal and are subject to adjustment based on the Company’s TSR over the same period).

Structure executive
compensation program to
include both long-term and
short-term performance goals.

   Awards under our equity incentive compensation program include a three-year performance metric for the long-term performance shares, and a one-year performance metric for the annual performance-based restricted stock and our annual incentive plan includes a one-year performance metric for cash incentive awards.

Align executives’ interests with
stockholders’ interests.

   In order to even more closely align long-term incentives with stockholder results, our equity incentive compensation program provides for adjustment of the long-term performance shares issued to executives based on the Company’s TSR relative to the Russell 1000 index for performance shares granted prior to 2023 and measured against the S&P 500 for performance shares granted beginning February 2023.

Structure annual and long-term
incentive compensation so that
payouts are based on different
performance metrics.

  

The executive compensation program utilizes distinct performance metrics as follows:

•  Annual incentive plan – EBITDA and individual objectives

•  Annual performance-based restricted stock – net income

•  Performance shares – 3-year cumulative revenue goal, adjusted by the Company’s relative TSR (measured against the Russell 1000 index for performance shares granted prior to 2023, and beginning with 2023 performance awards, measured against the S&P 500 index).

Structure executive
compensation to motivate and
reward performance and retain
executives, but generally keep in
line with median peer values.

   Aggregate target value at grant date of equity compensation granted to executives in 2023 was generally targeted between the 50th and 75th percentiles of peer company data.

Maintain robust executive
compensation corporate
governance policies.

  

The Company has executive and director stock ownership policies as follows:

•  CEO and President – 6X base salary

•  Other executive officers – 2X base salary

•  Non-employee directors – 5X annual, standard director cash retainer

 

The Company has a clawback policy for cash and equity awards in the event of certain financial restatements.

The Company maintains Principles of Corporate Governance.

The Company prohibits directors, officers and employees from engaging in pledging and hedging transactions in Company stock.

 

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   COMPENSATION DISCUSSION AND ANALYSIS

 

 

LOGO

   WHAT WE DO        

X

   WHAT WE DON’T DO

 

•  Pay for Performance. At least 80% of our NEOs’ target total compensation is performance-based and tied to performance metrics aligned with our short- and long-term objectives. We tie annual pay to objective performance metrics, including our fiscal year 2023 EBITDA and net income. We tie long-term pay to three-year cumulative revenue and relative TSR. We ask our independent compensation consultant to evaluate the alignment of pay and performance relative to our peer group.

 

•  Total Stockholder Return Metric and Stock Price PerformanceWe link executive compensation to stock price performance by factoring relative TSR in determining performance share payouts. Further, stock options and performance-based restricted stock are awarded annually, and the value of those awards to the executives is ultimately based on stock price performance.

 

•  Executive Stock Ownership Guidelines. Executives are expected to own shares of CoStar common stock with a value equal to at least two to six times base salary, depending on position.

 

•  Vesting Period on Equity Awards. Options and annual performance-based restricted stock vest ratably over three years.

 

•  Clawback Policy. In 2023, we adopted the Policy for Recovery of Erroneously Awarded Compensation (the “Clawback Policy”) in accordance with the Nasdaq listing standards and Exchange Act Rule 10D-1, which applies to the Company’s current and former executive officers (as defined under Exchange Act Rule 10D-1). The Clawback Policy provides for the mandatory recovery (subject to limited exceptions) from current and former officers of incentive-based compensation that was erroneously received during the three years preceding the date that the Company is required to prepare an accounting restatement. The amount required to be recovered is the excess of the amount of incentive-based compensation received over the amount that otherwise would have been received had it been determined based on the restated financial measure.

 

•  Target Pay. We generally target each component of pay between the 50th and 75th percentiles of peer company data, except as may otherwise be appropriate to reflect promotions, tenure, new-hire needs, internal pay equity, and other circumstances. The Compensation Committee periodically reviews the compensation peer group and makes adjustments, when appropriate, to keep pay practices competitive and in line with investor expectations.

 

•  Limit Transactions Involving Company Stock. We prohibit executive officers from hedging Company stock or margining or pledging shares.

    

•  Limited Employment AgreementsWe do not provide our NEOs, with the exception of our CEO, with employment agreements that provide severance payments, medical or insurance benefits or other perquisites in the event the executive is terminated or resigns. Mr. Wheeler, our Chief Financial Officer, has employment terms pursuant to an offer letter that provide for a severance payment in the event he is terminated by the Company without cause or he resigns for good reason. A Company-wide severance policy provides minimal severance pay tied to tenure to executives who incur a qualifying termination of employment and is available generally to all salaried employees.

 

•  Limited Golden Parachute Gross-Up. We do not provide a 280G golden parachute excise tax gross up to any executive other than our CEO, who has had the provision in his employment agreement since 1998.

 

•  No Guaranteed Minimum Payouts. We do not have guaranteed minimum payment levels for executives’ cash incentives or performance-based equity awards.

 

•  No Repricings. Our stock incentive plans and Nasdaq listing standards prohibit us from repricing options without stockholder approval.

 

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   COMPENSATION DISCUSSION AND ANALYSIS

 

Pay for Performance

Our executive compensation program is designed to hold our executives accountable for corporate results over the short and long term, and to reward them for successful execution. As a result, a substantial portion of our executives’ overall compensation is tied to performance. The charts below illustrate the percentage of 2023 compensation (based on target award opportunities) that was performance-based (including cash incentives, restricted stock, the value of which was determined based on performance in the prior fiscal year (2022), long-term performance shares and options), and the percentage that is fixed (consisting solely of base salary).

 

 

LOGO

The Compensation Committee links executive compensation to the attainment of challenging goals. Cash compensation includes payments under our executive annual cash incentive plan that are based on Company performance relative to operational goals as well as individual performance. Equity-based compensation is used to align executive compensation with the long-term interests of our stockholders, including a focus on increasing the Company’s TSR both on an absolute and a relative basis.

2023 Business Highlights

2023 was another strong year for CoStar. We delivered exceptional results in our commercial information and marketplace businesses for the full year 2023, while at the same time devoting major time and resources towards launching the new Homes.com. Our commercial information and marketplace businesses grew revenue by 14% in 2023 in one of the worst commercial real estate market in decades and delivered 40% adjusted EBITDA margin in 2023, our highest profit levels ever. For the full year of 2023, we generated strong net new bookings totaling $286 million.

We launched our first marketing and branding campaign for Homes.com with four commercials in Super Bowl LVIII which was watched by an estimated 123 million viewers. The next day, on February 12, 2024, we began monetizing Homes.com, selling subscriptions to residential real estate agents. Our, “your listing, your lead” business model that puts the agent’s name and company on their listings and sends the consumer lead to them rather than to their competitors, not surprisingly, has been very well received.

Apartments.com had a standout year in 2023 with revenue growth of 23% over the prior year, adding almost $170 million of incremental revenue in just 12 months. Our sales team delivered a remarkable 34% growth rate in net new bookings, and we now have over 70,000 properties advertising on Apartments.com. For eight straight quarters Apartments.com has held the number one position in the industry in terms of monthly unique visitor traffic, according to Google Analytics. Apartments.com is now our single largest business in CoStar Group, with annualized run rate revenue exceeding $1 billion in January 2024.

 

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   COMPENSATION DISCUSSION AND ANALYSIS

 

We continue to invest in our future and, as a result, we have achieved 51 consecutive quarters of double-digit revenue growth. We have strong liquidity, ending 2023 with more than $5.2 billion of cash and cash equivalents compared to just under $1.0 billion of long-term debt carrying a 2.8% annual interest rate maturing in 2030.

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

(1) Adjusted EBITDA is a non-GAAP measure. See Appendix A for a reconciliation of Adjusted EBITDA to Net Income and for a discussion of management’s use of non-GAAP measures and other operating metrics.

 

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   COMPENSATION DISCUSSION AND ANALYSIS

 

Elements of Compensation

Each year, the Compensation Committee approves a compensation arrangement for each of the Company’s NEOs that specifies the NEO’s (i) base salary, (ii) annual cash incentive (bonus) potential based on a percentage of base salary subject to achievement of individual and/or corporate goals, and (iii) equity awards, including the annual performance-based restricted stock that is granted based on achievement of prior year corporate goals and stock options, both of which are subject to service-based vesting conditions, as well as performance-based restricted stock that vests based on achievement of predetermined, objective goals over a multi-year period.

The following table summarizes each of these elements of our compensation program, as well as how each element is set and is linked to performance.

 

       
     COMPONENT   ROLE   HOW IT’S SET/LINKS TO PERFORMANCE
     
 FIXED   Base Salary  

•  To provide a consistent income

•  Comprise a low percentage of total compensation

 

•  Reviewed annually in light of responsibilities, performance, internal pay equity, total compensation, and advice of the independent compensation consultant

     

 VARIABLE

 CASH

  Annual Cash Incentive Compensation  

•  Rewards achievement of annual company financial goals and personal performance goals

 

•  Variable based on the Company’s corporate performance and achievement of individual goals for the prior year

•  Key financial metric for fiscal 2023: EBITDA

     

 VARIABLE

 EQUITY

 

Stock Options

 

LOGO

 

•  Increase alignment with stockholders

•  Executive retention

 

•  Potential value of awards increases or decreases with stock price

•  Vests over three years

 

Annual Performance-Based Restricted Stock

 

LOGO

 

•  Increase alignment with stockholders

•  Executive retention

 

•  Based on company performance

•  Key financial metric for 2022: net income

•  Payout range is 0-200% based on achievement

•  Vests over three years

 

Performance Share Awards

 

LOGO

 

•  Rewards achievement of longer-term financial goals

•  Executive Retention

•  Value is based on achievement of three-year revenue growth goals and relative TSR

 

•  Payout range is 0-200% of target award

•  Vests based on achievement of a three-year cumulative revenue performance goal, subject to adjustment +/-20% based on relative TSR

•  Key financial metric: cumulative three-year revenue

     
 OTHER   Other Compensation  

•  To allow executive officers to participate in other employee benefit plans

 

•  Executives may participate in all other CoStar compensation and benefit programs on the same terms as other eligible employees

 

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   COMPENSATION DISCUSSION AND ANALYSIS

 

Performance Measures and Time Horizons

We use a combination of performance measures and service-based vesting conditions to foster and reward performance. The following chart summarizes the relevant performance measures and time frames used for our variable pay elements.

 

 

LOGO

2023 Base Salaries

Base salaries provide a minimum, fixed level of cash compensation for the NEOs. Salary levels of the executive officers are reviewed annually by the Compensation Committee. In establishing salary levels, the Compensation Committee considers each executive’s individual responsibilities and performance, prior base salary and total compensation, the pay levels of similarly situated executives within the Company, market data on base salary and total compensation levels, including Willis Towers Watson peer group and survey data, and current market conditions.

In 2023, the Compensation Committee conducted its annual review of NEO salaries and adjusted the base salaries of our NEOs between 2%-6%, except for Mr. Simuro, in each case to bring them in line with our peer group. Mr. Simuro’s base salary increased by 16% to bring him closer to the 75th percentile range for Chief Technology Officers in our peer group because our CEO and Compensation Committee believed that his institutional experience, value to the technology organization, and vital role in acquisitions and integration efforts warranted such increase. Following the Compensation Committee’s review and adjustment (effective February 2023), the NEO salaries were as follows:

 

   
NAME 2023 ANNUAL BASE SALARY
   
Andrew C. Florance $1,000,000
   
Scott T. Wheeler $575,000
   
Lisa C. Ruggles $550,000
   
Frederick G. Saint $550,000
   
Frank A. Simuro $600,000

2023 Annual Cash Incentive Awards

The Compensation Committee administers an annual cash incentive program under which our NEOs may earn a cash incentive bonus based on a fixed target percentage of base salary during the fiscal year if individual and corporate performance objectives for the fiscal year are achieved. At the beginning of each year, the Compensation Committee establishes individual goals for each NEO, other than the Chief Executive Officer, based upon recommendations from our Chief Executive Officer, as well as Company financial goals that apply to all NEOs that are based upon recommendations

 

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from our Chief Executive Officer and our Chief Financial Officer. The Compensation Committee determines the target percentages of base pay for each NEO based on market and competitive conditions, peer company practices, and internal pay equity considerations. The Compensation Committee also determines the weighting of the various individual and Company financial goals, based upon position and functional accountability and responsibility, as well as recommendations from our Chief Executive Officer. The target percentages and weighting of the various individual and Company financial goals may vary among the NEOs and are subject to change from year to year. After the completion of each year, the Compensation Committee reviews individual and Company performance to determine the extent to which the goals were achieved and the actual cash bonuses to be paid to the NEOs.

In the Compensation Committee’s view, the use of annual performance-based cash incentive bonuses creates a direct link between executive compensation and individual and corporate performance. Therefore, the annual performance-based cash incentive bonus is generally divided into two components, one tied to corporate performance and one tied to individual performance. As discussed in greater detail below, the Compensation Committee sets a threshold, target and maximum award for the corporate performance objectives. The annual performance-based cash incentive bonus provides each NEO with the potential to earn awards up to two times the amount of their target award value for exceptional performance as measured against metrics and goals, each of which is discussed below. If the maximum is achieved, the NEOs receive 200% credit for the corporate performance portion of the award. If the target is achieved, the NEOs receive 100% credit for the corporate performance portion of the award. If the threshold level of corporate performance is not reached, the NEO does not receive any amount in respect of that portion of the award. Achievement of the individual performance goals are subjective and executives can receive between 0% and 200% credit for that portion of the award.

In February 2023, the Compensation Committee set the weighting of the various individual and Company financial goals, and the threshold, target, and maximum annual cash incentive awards for all NEOs based upon the NEO’s individual responsibilities, competitive practices, and internal pay equity considerations. The following table shows each NEO’s 2023 potential cash incentive award values at threshold, target and maximum, expressed as a percentage of his or her base salary.

 

     
  WEIGHTING OF GOALS POTENTIAL AWARDS AS A
PERCENTAGE OF BASE SALARY
   

NAME

INDIVIDUAL
GOALS
CORPORATE
GOAL
THRESHOLD
(50% OF
TARGET)
TARGET

MAXIMUM

(200% OF
TARGET)

           

Andrew C. Florance

 0.0% 100.0% 75.0% 150.0% 300.0%
           

Scott T. Wheeler

35.0%  65.0% 50.0% 100.0% 200.0%
           

Lisa C. Ruggles

50.0%  50.0% 42.5%  85.0% 170.0%
           

Frederick G. Saint

40.0%  60.0% 42.5%  85.0% 170.0%
           

Frank A. Simuro

50.0%  50.0% 50.0% 100.0% 200.0%

Individual Performance Goals and Achievement

At the beginning of each year, the Compensation Committee establishes individual goals for each NEO other than the CEO. After the completion of each year, the Compensation Committee reviews individual performance to determine the extent to which the goals were achieved. The determination as to whether the individual performance goals have been achieved is subjective and executives can receive between 0% and 200% credit for that portion of the award. The applicable 2023 individual performance goals set by the Compensation Committee for each NEO other than the CEO and percentage of such goals achieved for each NEO are summarized in the table below.

 

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NAME

  2023 INDIVIDUAL GOALS    % OF GOALS 
 ACHIEVED 
     

Scott T. Wheeler

 

•  Execute identified targets for acquisition and develop integration plans focused on efficiency of resources

 

•  Continue bolstering efficient sales operations and sales growth

 

•  Manage the ongoing development of Finance functions and placing key leadership

 

•  Maintain investor engagement through residential rollout

  200%
     

Lisa C. Ruggles

 

•  Deliver critical content research to support the Homes.com neighborhood and school page functions

 

•  Manage the ongoing development of US Research functions

 

•  Manage the expansion of CoStar and LoopNet in Europe

 

•  Hire senior level leadership to support key areas of Research

  175%
     

Frederick G. Saint

 

•  Help Apartments.com achieve revenue, EBITDA margin, and contribution goals

 

•  Grow Apartments.com site traffic to targeted levels

 

•  Continue to recruit and fill leadership roles within the Apartments.com organization with a focus on senior level leadership

 

•  Manage Apartments.com sales customer service program with a focus on NPS scores

 

•  Achieve revenue growth targets for other marketplaces

  200%
     

Frank A. Simuro

 

•  Support release of LoopNet International

 

•  Oversee release of CoStar Suite International, including hospitality data

 

•  Continue development of residential product, including Homes Pro features and proprietary content collection and display

 

•  Continue development of internal proprietary sales tools

  200%

Corporate Performance and Achievement

For the corporate performance objectives, the Compensation Committee sets a threshold, target and maximum performance level. If the maximum level of corporate performance is achieved, the NEOs receive 200% credit for the corporate performance portion of the award. If the target level of corporate performance is achieved, the NEOs receive 100% credit for the corporate performance portion of the award. If the threshold level of corporate performance is achieved, the NEOs receive 50% credit for the corporate performance portion of the award. If the threshold level of corporate performance is not reached, the NEO does not receive any amount in respect of that portion of the award. Credit for performance between threshold and target and between target and maximum is determined by linear interpolation.

The Compensation Committee approved a Company-wide financial goal for the annual cash incentive plan based on the Company’s achievement of EBITDA included in the Company’s 2023 Annual Budget. The EBITDA goal is intended to reflect the Company’s expected investments and strategic initiatives. In 2023, the Company’s EBITDA goal was lower than in the prior year to reflect the Company’s expected significant investment in its residential marketplace business, including product and content development and marketing expense. Given the anticipated investment in the residential marketplace business, the Compensation Committee believed that the EBITDA target goal was challenging to achieve. EBITDA is our GAAP-basis net income (loss) before interest (expense) income and other (expense) income, loss on debt extinguishment, income taxes, depreciation and amortization. The Compensation Committee also determined that setting an EBITDA-based performance goal would incentivize management to further drive stockholder value.

 

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The following graphic shows the threshold, target, and maximum EBITDA goals and payout percentages for 2023 performance, as well as the actual EBITDA and payout percentage determined by the Compensation Committee for 2023 performance (dollar amounts in millions).

 

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Performance Metric Threshold Goal Target Goal Maximum Goal Actual 2023 EBITDA $336.1 $420.2 $441.2 $430.4 Payout Percentage 50% 100% 200% 150%

2023 Performance Against Individual and Corporate Objectives

Based on the individual and corporate achievements relative to the targets set at the beginning of the year 2023, in February 2024, the Compensation Committee awarded the annual cash incentive awards shown in the table below.

 

                 
NAME ACHIEVEMENT
OF
INDIVIDUAL
GOALS
WEIGHTING
OF
INDIVIDUAL
GOALS
ACHIEVEMENT
OF
CORPORATE
GOAL
WEIGHTING
OF
CORPORATE
GOAL
TOTAL
ACHIEVEMENT

TARGET
AS A

% OF
SALARY

ACTUAL

AWARD
AS A %
OF
SALARY

ACTUAL
CASH

AWARD
($)

                 
Andrew C. Florance —% 150% 100% 150.0% 150% 225.0% $2,250,000
                 
Scott T. Wheeler 200% 35% 150%  65% 167.5% 100% 167.5% $  963,125
                 
Lisa C. Ruggles 175% 50% 150%  50% 162.5%  85% 138.1% $  759,688
                 
Frederick G. Saint 200% 40% 150%  60% 170.0%  85% 144.5% $  794,750
                 
Frank A. Simuro 200% 50% 150%  50% 175.0% 100% 175.0% $1,050,000

Equity Incentive Compensation

The Compensation Committee has designed the executive equity incentive compensation program to align executive incentives with long-term stockholder value and with a view toward executive retention. The Compensation Committee believes that equity-based compensation and executive ownership of the Company’s stock help support the Compensation Committee’s goal that the Company’s NEOs have a continuing stake in the long-term success of the Company.

Each NEO was eligible to receive equity awards under the 2016 Plan. The Compensation Committee generally grants time-based restricted stock and/or stock options to each executive when he or she joins the Company or in connection with promotion to an executive position as an incentive to accept the position and become a member of the Company’s executive team. As set forth in more detail below, the Compensation Committee generally also makes annual grants of equity awards as part of the executive compensation program. Over the past few years, those grants have consisted of restricted stock and stock options. In support of stockholders’ belief that a greater portion of the equity awards should be long-term performance awards, the restricted stock portion of the annual grants consists of (i) an award that covers a number of shares of restricted stock determined based on the achievement of the prior year’s net income goal and is subject to time-based vesting following grant and (ii) a performance-based grant of restricted stock that vests based on achievement of a three-year cumulative revenue goal and is subject to adjustment based on the Company’s relative TSR over the three-year performance period. Under the program, target award values are determined at the time of grant.

 

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     STOCK OPTIONS   PERFORMANCE-BASED
RESTRICTED STOCK
  PERFORMANCE SHARE PLAN
       

 

% of Target Value

 

 

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Grant Determination Process

  Target value ranges by position   Target value ranges by position; actual grant set by previous year’s performance   Target value ranges by position
     

Vesting / Performance

Period

  3-year vesting   3-year performance cycle with vesting upon achievement and Compensation Committee certification
       

Performance

Goals

  N/A   Net income for prior fiscal year; performance scale up to maximum of 200%   Multi-year goals—3-year cumulative revenue, plus relative TSR kicker (+/- 20% payout modifier)

Stock Options Performance-Based Restricted Stock Performance Share Plan % of Target Value 15% 45% 40% Grant Determination Process Target value ranges by position Target value ranges by position; actual grant set by previous years performance Target value ranges by position Vesting / Performance Period 3-year vesting 3-year performance cycle with vesting upon achievement and Compensation Committee certification Performance Goals N/A Net income for prior fiscal year; performance scale up to maximum of 200% Multi-year goals - 3-year cumulative revenue, plus relative TSR kicker (+/- 20% payout modifier)

The three-year performance shares vest based on long-term (i.e., multi-year) performance, which encourages executives to achieve sustained growth and provides a direct link in the long-term incentive plan to long-term revenue growth. The shares earned, if any, as a result of the Company’s three-year revenue relative to the revenue goal will be positively or negatively adjusted based on the Company’s three-year TSR relative to the three-year TSR of the companies included within the Russell 1000 index, in order to tie the value of the equity awards to the Company’s performance and appreciation of the Company’s stock price relative to the performance of other companies within the index. For purposes of legacy performance awards, the Compensation Committee chose the Russell 1000 index (which measures the performance of the large cap segment of the U.S. equity markets and represents approximately 90% of the U.S. market as measured by capitalization) in order to closely align the three-year performance goal with that of the U.S. equity market. The Compensation Committee determined that the Russell 1000 index would provide a comprehensive and unbiased barometer against which to compare the Company’s TSR. In September 2022, the Company was added to the S&P 500 index and, beginning with the performance awards granted in February 2023 for the 2023-2025 performance period, the Compensation Committee chose the S&P 500 index for purposes of comparing the Company’s three-year relative TSR.

As explained below, the Compensation Committee decided to grant various types of equity awards because each type of award helps achieve some of the objectives of the executive compensation program.

 

 

Restricted Stock: Restricted stock awards have value when they vest regardless of the stock price, so they have retention value even if the Company’s common stock price declines or stays flat from the grant date.

 

 

Performance Shares: Grants of performance shares that vest based on achievement of a long-term performance goal also provide a long-term (i.e., multi-year) performance measurement that encourages executives to achieve sustained growth, increases executives’ focus on longer-term financial goals and further links executives’ interests with those of our stockholders.

 

 

Options: Options have a performance-based element because the option holder realizes value only if the stockholders also realize value (i.e., if the price of the Company’s common stock has increased from the grant date at the time the option is exercised).

The value of the annual equity compensation awards granted to our NEOs is based on a target award dollar amount and varies among NEOs by position depending upon individual responsibility and performance, external market and peer group practices, internal pay equity considerations, and, with respect to the annual performance-based restricted stock awards, achievement of the performance criteria as described below. Consistent with the program philosophy of aligning executive incentives with long-term stockholder value and with a view toward executive retention, the Compensation Committee has generally set the aggregate target equity compensation between the 50th and 75th percentiles of peer company data provided by its compensation consultant, where available, but retains discretion to set target award levels based on the considerations set forth above.

 

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All grants of equity awards to our NEOs made in 2023 were made under the Company’s 2016 Plan. Under the 2007 Plan and the 2016 Plan, recipients of restricted stock are entitled to receive all dividends and other distributions, if any, paid with respect to the common stock. The Compensation Committee will determine if any such dividends or distributions will be automatically reinvested in additional shares of restricted stock and subject to the same restrictions as the restricted stock or whether the dividend or distribution will be paid in cash.

The below illustrates the performance periods and grant timing for each of our equity awards:

 

 

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Annual Performance-Based Equity Incentive Awards Granted in 2023

In February 2022, the Compensation Committee set targets for the potential performance-based equity incentive award for each NEO, which were granted in 2023. Each NEO had the potential to earn up to two times their annual performance-based restricted stock target award value for exceptional performance as measured against a net income goal.

In February 2022, the Compensation Committee established a net income goal for purposes of the performance-based equity incentive awards. The net income goal for 2022 reflected the Company’s expected investments and strategic initiatives to support and sustain the long-term growth of the Company, including a significant strategic investment in increased marketing. The net income target for 2022 was set at a level the Compensation Committee believed was challenging given the profitability growth target expected to be achieved while continuing to make strategic investments. As a result of the investments made in the business and the performance of our management team, the Company achieved stronger than expected net new bookings, which together with management’s focus on operational efficiency and cost controls and management initiatives implemented during the year, resulted in stronger than forecasted earnings results.

 

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The following graphic shows the threshold, target, and maximum net income goals and payout percentages for 2022 performance, as well as the actual net income and payout percentage determined by the Compensation Committee for 2023 performance (dollar amounts in millions). From 80% to 100% of target net income, interpolation is 2.5% of target award for every tenth of a percent of achievement of target net income. From 100% to 105% of target net income, interpolation is 20.0% of target award for every tenth of a percent of achievement of target net income.

 

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Performance Metric Threshold Goal Target Goal Maximum Goal Actual 2022 Net Income $209.1 $261.4 $274.5 $369.5 Payout Percentage 50% 100% 200% 200%

In February 2023, the Compensation Committee determined, based on the Company’s achievement of net income of $369.5 million in 2022, that achievement of the net income goal was 141.4% of the target. As a result, each NEO was awarded 200% of the target award set in February 2022. The table below shows the target award amount, extent of achievement, award value earned, and number of shares granted to each NEO in 2023. The shares granted to each NEO vest in three equal annual installments, subject to continued service.

 

         
NAME 2022 PERFORMANCE-
BASED TARGET
EQUITY AWARD VALUE
EXTENT OF
ACHIEVEMENT
(1)
AWARD VALUE
EARNED
SHARES GRANTED(2)
         
Andrew C. Florance $5,400,000 200% $10,800,000 138,300
         
Scott T. Wheeler $1,575,000 200% $ 3,150,000  40,400
         
Lisa C. Ruggles $  900,000 200% $ 1,800,000  23,100
         
Frederick G. Saint $  900,000 200% $ 1,800,000  23,100
         
Frank A. Simuro $1,575,000 200% $ 3,150,000  40,400

 

(1)

NEOs could receive between 0% and 200% credit for the net income goal, depending upon actual net income achieved in 2022. Credit for performance between target and maximum is determined by linear interpolation. For 2022, no credit was given for performance below target, and credit was capped at 200% of target.

 

(2)

The number of shares granted is determined by dividing the award value earned by the average fourth quarter price of the Company’s stock ($78.14 for 2022), rounded to the nearest hundred shares.

Stock Option Awards Granted in 2023

The Compensation Committee supplements the NEOs’ annual restricted stock awards with an annual award of stock options. Annual option grants are also based on the target award values determined as of the date of grant and vest pro rata in annual installments over three years. The value actually awarded to each NEO is converted to the number of options based on our compensation consultant’s assessed value per option calculated using the Black-Scholes model. The exercise price for each option is equal to the closing price of the Company’s common stock on the date of grant, which is the date of approval by the Compensation Committee.

 

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In February 2023, the Compensation Committee awarded stock options to each of the NEOs. The table below sets forth the option award values and the number of shares of common stock underlying each option award for the option grants to the NEOs.

 

     
NAME OPTION AWARD VALUES SHARES UNDERLYING OPTION
AWARDS
(1)
     
Andrew C. Florance $1,800,000 73,400
     
Scott T. Wheeler $  525,000 21,400
     
Lisa C. Ruggles $  300,000 12,300
     
Frederick G. Saint $  300,000 12,300
     
Frank A. Simuro $  525,000 21,400

 

(1)

The number of shares subject to the options granted is determined by dividing the option award value by our compensation consultant’s assessed value per option calculated using the Black-Scholes model, rounded up to the nearest 100 shares. The amounts reported in this table under “Option Award Values” differ from the grant date fair values for these awards reported in the “2023 Summary Compensation Table” and the “Grants of Plan-Based Awards” table in this Proxy Statement.

Multi-Year Performance-Based Equity Incentive Awards

Each year, the Compensation Committee awards the NEOs shares of restricted stock subject to vesting based on achievement of a three-year cumulative revenue goal and adjustment based on the Company’s achievement of TSR relative to TSR of companies within a defined peer group over the same three-year period. Each NEO has the potential to earn up to two times his or her three-year performance stock target award value for exceptional performance as measured against the pre-established revenue goal, plus up to an additional 20% based on the Company’s relative TSR over the same three-year period.

NEOs can receive between 0% and 200% credit for the revenue component of their three-year performance stock award, depending on actual, cumulative revenue achieved over the three-year performance period. Credit for performance between threshold performance (95% of target revenue) and target performance and between target performance and maximum performance (102% of target revenue) is determined by linear interpolation. No credit is given for performance below the threshold level of performance and credit is capped at 200% of target. For performance at threshold performance (95% of target revenue), the NEOs receive 50% of target performance shares. After the number of earned performance shares is determined based on the cumulative revenue for the three-year period, the TSR modifier may increase or decrease the number of shares earned by up to 20%. Shares are reduced by 20% if relative TSR performance is at or below the threshold level of performance (25th percentile). Shares are increased by 20% if relative TSR performance is at or above the maximum level of performance (75th percentile). There is no adjustment to the number of shares at target (50th percentile). Adjustments are made between threshold level of performance and target level of performance and between target level of performance and maximum level of performance by linear interpolation.

2023-2025 Performance Awards Granted in 2023

In February 2023, the Compensation Committee granted to the NEOs restricted stock awards for the 2023-2025 performance period. The Company believes that disclosing the specific revenue goal would cause competitive harm, but believes that achievement of the goal at the target level is attainable but will require significant effort. The maximum number of shares was calculated by first determining the target number of shares by dividing the target value by the fourth quarter 2022 average daily price ($78.14) and rounding up to the nearest 100 shares, multiplying the target number of shares by 2 (to take into account the potential for the maximum 200% credit) and then multiplying the result by 1.2 (to take into account the potential +20% TSR adjustment).

 

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The table below sets forth the target and maximum three-year performance stock award values and the number of shares of common stock subject to those awards granted to the NEOs in February 2023 (representing maximum performance), subject to vesting as described above:

 

       
NAME TARGET
PERFORMANCE
STOCK VALUE
MAXIMUM
3-YEAR
PERFORMANCE-
STOCK AWARD
VALUES
(1)
MAXIMUM
SHARES
(#)
       
Andrew C. Florance $4,800,000 $11,520,000 147,600
       
Scott T. Wheeler $1,400,000 $ 3,360,000  43,200
       
Lisa C. Ruggles $  800,000 $ 1,920,000  24,720
       
Frederick G. Saint $  800,000 $ 1,920,000  24,720
       
Frank A. Simuro $1,400,000 $ 3,360,000  43,200

 

(1)

The amounts reported in this table under “Maximum 3-year Performance Stock Award Values” differ from the grant date fair values for these awards reported in the “2023 Summary Compensation Table” and the “Grants of Plan-Based Awards” table in this Proxy Statement, which are computed in accordance with FASB ASC Topic 718 pursuant to SEC rules.

Settlement of 2020-2022 Performance Awards

In February 2020, the Compensation Committee granted the maximum number of shares achievable for the 2020-2022 performance period to each of the NEOs, subject to the above-described vesting provisions. At the time of grant, the Compensation Committee set a three-year aggregate revenue target for 2020-2022 of $5,855 million. In February 2023, the Compensation Committee evaluated the Company’s performance against the 2020-2022 aggregate revenue target. For the 2020-2022 performance period, aggregate revenue was $5,785 million, and the Compensation Committee determined that the Company’s TSR over the same period was 10.1%, which it determined was at 63% percentile of the Russell 1000 TSR. As a result, the Compensation Committee determined the achievement of the 2020-2022 performance awards as follows:

 

 

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Actual / Target = % of Target Level of Performance Resulting Payout (as % of Target Number of Shares) X TSR Modifier = % of Target Award Vesting $5,785M $5,855M 98.8 % 88.1 % 110.4 % 97.2 % From 100% to 102%, interpolation is 5% payout for each additional tenth of a percent of target Shares are increased by 20% if TSR performance is at or above the 75% percentile of TSR of the Russell 1000

 

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Based on the above, the Compensation Committee determined vesting of the 2020-2022 performance awards for the NEOs as follows:

 

       
NAME TARGET AWARD SET IN
FEBRUARY 2020
(# OF SHARES)
MAXIMUM AWARD GRANTED
IN FEBRUARY 2020
(# OF SHARES)
SHARES VESTED IN
FEBRUARY 2023
(1)
       
Andrew C. Florance 48,000 115,200 46,663
       
Scott T. Wheeler 15,000  36,000 14,582
       
Lisa C. Ruggles 10,000  24,000  9,721
       
Frederick G. Saint 10,000  24,000  9,721
       
Frank A. Simuro 10,000  24,000  9,721

 

(1)

As noted above, the maximum number of shares of restricted stock subject to the three-year performance award are granted at the beginning of the performance period. Upon determination of the extent of achievement by the Compensation Committee, restrictions are removed from the shares deemed vested and the remainder of the shares under the original award are forfeited to the Company. Amounts vested were determined by multiplying the target award by the extent of achievement (the 97.2% extent of achievement presented in the above table is rounded from the actual amount used to determine the number of shares vested).

Management Stock Purchase Plan

The MSPP provides selected key employees of the Company and its subsidiaries, including the NEOs, the opportunity to defer a portion of their cash incentive compensation and to align management and stockholder interests through awards of DSUs under the MSPP and awards of Matching RSUs under the 2016 Plan (or a successor plan). Participants can elect to defer up to 100% of their annual incentive bonus or commissions that may be earned during the calendar year. On the day the bonus would have otherwise been paid, the Company will award to the participant DSUs covering a number of shares of common stock having an aggregate fair market value on that date equal to the amount of the annual cash incentive for the prior calendar year that the participant elected to be deferred under the MSPP. On the same date the DSUs are awarded, the participant will receive a grant of Matching RSUs covering a number of shares of common stock equal to 100% of the DSUs granted.

The DSUs issued under the MSPP will be fully vested at grant and will be settled as soon as practicable following the earliest to occur of (i) the fourth anniversary of the date of grant; (ii) the participant’s death; (iii) the participant’s disability; (iv) the participant’s separation from service from the Company; or (v) a change in control (as defined in the MSPP) of the Company. Matching RSUs will vest four years after the date of grant, subject to the participant’s continued employment through that date, or upon a change in control of the Company that occurs prior to such date (as defined in the MSPP). If the participant’s employment terminates for any reason before the Matching RSUs vest, they will be forfeited. In accordance with SEC rules, the Matching RSUs granted in March of 2021, 2022 and 2023 are included in the 2023 Summary Compensation Table and the Matching RSUs granted to NEOs in March of 2023 are included in the Grants of Plan-Based Awards Table below.

Determining Executive Compensation

The Compensation Committee annually establishes and reviews all forms of direct compensation for the Company’s NEOs, including base salaries, annual cash incentive bonuses, and both the terms and types of equity awards. As part of the compensation review process, the Compensation Committee annually reviews and approves each element and the mix of compensation that comprises each NEO’s total compensation package. Our independent compensation consultant and Chief Executive Officer make recommendations to the Compensation Committee for each element of compensation awarded to NEOs (including establishment of individual and corporate financial goals), but the Compensation Committee must approve each element of and any changes to an NEO’s compensation. The Compensation Committee may consider a number of factors in establishing or revising each NEO’s total compensation, including individual performance, the Company’s financial performance, external market and peer group practices, current compensation arrangements, internal

 

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pay equity considerations and long-term potential to enhance stockholder value. Particular factors considered by the Compensation Committee with respect to each element of executive compensation are discussed below.

Historically, the Compensation Committee has retained Willis Towers Watson as its independent compensation consultant to assist the Compensation Committee in gathering comparison data and to provide the Compensation Committee with information about trends in compensation among comparable companies based on factors such as market capitalization, annual revenues, earnings, operating cash flow, and business focus and operations. The Compensation Committee believes that comparing the compensation of each of the Company’s NEOs with executives in comparable positions at these peer companies supports the Compensation Committee’s goal that the total compensation provided to the Company’s NEOs be set at an appropriate level to attract, reward and retain top performers over the long term. In general, the Compensation Committee currently believes that compensation is competitive if it falls within +/- 10% of the targeted market position for base salary, within +/- 15% of the targeted market position for total cash compensation and within +/- 20% of the targeted market position for total direct compensation based on peer company data provided by its compensation consultant. The peer company data was created by the compensation consultant using a 75% weighting of data from the Company’s peer group discussed below and a 25% weighting of data from published survey data. The Compensation Committee did not review the individual companies in the published survey data, which was comprised of Willis Towers Watson’s 2022 Tech, Media, and Gaming Industry Executive Compensation Report, Willis Towers Watson’s 2022 General Industry Executive Compensation Report, Radford’s 2022 Executive Compensation Survey—Global Tech Custom Cut ($1B - $2.99B in revenue) and Mercer’s 2022 Executive Compensation Survey. In addition to peer company data, the Compensation Committee reviews individual responsibility and performance, prior compensation, external market and competitive practices (including available general industry executive compensation data), and internal pay equity considerations when setting each NEO’s compensation.

The Compensation Committee assesses each element of the compensation program within the whole, however, and may target certain elements of executive compensation at different levels. While the Compensation Committee generally sets target compensation between the 50th and 75th percentile of peer company data, one or more elements of the compensation program may be higher or lower depending on the Company’s current goals, individual achievement and internal pay equity considerations. In addition, changes to different or particular elements of an executive’s compensation, changes in publicly available peer group data or significant changes to peer practices may result in total target compensation being higher or lower than the 50th and 75th percentile of peer group data. For example, data for a President, Marketplaces can change more often due to changes in peer group companies reporting data for such a position. As a result, Mr. Saints’ compensation elements may fall outside of the 50th and 75th percentile of peer company data due to changes in the number of peer group companies reporting for such position.

In connection with the Compensation Committee’s executive compensation determinations in February 2023, the Compensation Committee engaged Willis Towers Watson to review and recommend revisions to the Company’s competitive peer group and to update its review and competitive assessment of the Company’s executive compensation program based on the peer group. The Compensation Committee’s decisions regarding executive compensation for 2023, including executives’ long-term incentives or equity compensation for 2023, were based on Willis Towers Watson’s recommendations.

Willis Towers Watson reported directly to the Compensation Committee when performing the executive compensation studies and, at the direction of the Compensation Committee chair, also worked directly with the Company’s management to develop materials and proposals with respect to NEO compensation.

Willis Towers Watson’s recommended peer companies culminated from review of peer companies included in the Research and Consulting GICS code, as well as peer companies previously selected by CoStar, peers selected by proxy advisors, other peers with similar business models and those referenced by analysts, in each case to which size screening criteria were applied. Willis Towers Watson screened these peers by considering companies with revenue, net income, EBITDA, operating cash flow, and market cap between 50% and 250% of CoStar’s. The potential peer list was further refined based on the number of criteria met through the size screening, similar business model or focus, peers of current peers, and peer

 

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companies selected by proxy advisors. Willis Towers Watson recommended that Citrix Systems, which had been acquired and would no longer be a public company, be removed from the peer group, and that Equifax, Inc. and Paycom Software, Inc. be added to the peer group based on criteria including revenue, net income, EBITDA, operating cash flow, and number of employees.

As a result, the following is the list of peer companies for 2023 approved by the Compensation Committee in December 2022 based upon the recommendations of Willis Towers Watson:

2023 Peer Group Companies

 

 

 

•  ANSYS, Inc.

 

•  BlackKnight, Inc.

 

•  Equifax, Inc.

 

•  FactSet Research Systems Inc.

 

•  Fair Isaac Corp.

  

•  Gartner, Inc.

 

•  Mercadolibre, Inc.

 

•  MSCI Inc.

 

•  Paycom Software, Inc.

 

•  ServiceNow, Inc.

 

•  Splunk, Inc.

 

•  TransUnion

 

•  Tyler Technologies, Inc.

 

•  VeriSign, Inc.

  

•  Verisk Analytics, Inc.

 

•  Workday, Inc.

 

•  Zillow Group, Inc.

 

 

Independent Compensation Consultant

Willis Towers Watson is engaged by and reports to the Compensation Committee, and occasionally meets with management to discuss compensation initiatives and issues. The Compensation Committee reviewed an assessment of the independence of, and any potential conflicts of interest raised by, Willis Towers Watson’s work for the Compensation Committee by considering, among other things, the factors prescribed by the SEC and Nasdaq, and concluded that Willis Towers Watson is independent and there are no such conflicts of interest.

For purposes of the Company’s 2023 executive compensation program, Willis Towers Watson provided the following services to the Compensation Committee:

 

 

Reviewed the Company’s peer group;

 

 

Provided the Compensation Committee with a compensation analysis with respect to the competitiveness of the Company’s executive compensation programs;

 

 

Conducted a market study of executive compensation practices to help ensure that the Company’s compensation programs are reasonable and competitive; and

 

 

Conducted an assessment of potential risk factors associated with the design and administration of the Company’s executive compensation programs.

Management

 

 

Supports the Compensation Committee by making recommendations and providing analyses and meets with Willis Towers Watson to discuss compensation initiatives and competitive practices;

 

 

The CEO is responsible for conducting an annual performance evaluation of each of the other NEOs; and

 

 

Based on performance and competitive benchmarking reports, the CEO makes recommendations to the Compensation Committee for the compensation of the other NEOs.

Stockholder Outreach and Say-on-Pay Response

As part of our investor outreach, our management continues to regularly communicate with our investor base about the Company’s plans and associated investments. Management communicated with investors throughout the year through quarterly press releases and conference calls that were recorded and made available on the Company’s website, as well as by participating in hundreds of in-person meetings and presentations at investor conferences. The Company also conducted hundreds of additional investor telephone calls throughout the year. The Company actively communicates and discusses

 

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with investors our progress towards stated strategic initiatives, as well as expected investments and the rationale and expected returns on those investments.

CoStar annually offers stockholders the opportunity to cast an advisory vote on our executive compensation program. This annual vote is known as the “say-on-pay” proposal. At our annual meeting of stockholders held in 2023, approximately 88% of the votes cast were voted in favor of the say-on-pay proposal covering our executive compensation program. The Compensation Committee values stockholder feedback and endeavors to respond to stockholders’ concerns about the Company’s executive compensation practices. The Company regularly communicates with its stockholders to better understand their opinions on its business strategy and objectives and to obtain feedback regarding other matters of investor interest, such as executive compensation. Many of the current program features are a result of the Company proactively reaching out to stockholders to discuss the Company’s executive compensation program. For instance, in response to previous stockholder discussions, the Compensation Committee implemented and approved a long-term performance component within the executive compensation program; distinct financial metrics for the annual awards of cash incentives, performance-based restricted stock and the three-year performance-based restricted stock awards; the executive stock ownership policy; and the clawback policy. In light of the high level of stockholder support, the Compensation Committee did not make any changes to the executive compensation program directly as a result of the 2023 say-on-pay vote.

The Compensation Committee carefully considers any feedback the Company receives as part of its annual review of our executive compensation program. The Compensation Committee has determined the basic structure of our executive compensation program, which continues to include significant changes previously made in response to stockholder feedback. The next page sets out highlights of the design of the current executive compensation program and the Company’s corporate policies.

Company Compensation Policies and Practices

Executive Stock Ownership Policy

The Company believes that its executive officers should have a significant financial stake in the Company. To better align the interests of our executive officers with those of our stockholders, the Compensation Committee adopted an Executive Stock Ownership Policy. Executive officers are expected to own shares of the Company’s common stock as follows:

 

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In April 2023, the Compensation Committee amended the Executive Stock Ownership Policy to require that executive officers are required to hold any shares of vested restricted stock awards or shares obtained upon exercise of vested stock options until the thresholds under the Executive Stock Ownership Policy are met. Shares of stock represented by DSUs issued pursuant to the Company’s Management Stock Purchase Plan are considered owned by the executive for purposes of the policy. Any new executive officer has until the first December 31st following the fifth anniversary of the date of appointment as an executive officer to meet this requirement. As of December 31, 2023, each of the executive officers was in compliance with the Executive Stock Ownership Policy.

Equity Grant Practices

The Company does not have any program, plan or practice to time equity awards in coordination with the release of material non-public information, nor does the Company time the release of material nonpublic information for the purpose of affecting the value of executive compensation.

 

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Clawback Policy

In 2023, we adopted the Clawback Policy in accordance with the Nasdaq listing standards and Exchange Act Rule 10D-1, which applies to the Company’s current and former executive officers (as defined under Exchange Act Rule 10D-1). The Clawback Policy provides for the mandatory recovery (subject to limited exceptions) from current and former officers of incentive-based compensation that was erroneously received during the three years preceding the date that the Company is required to prepare an accounting restatement. The amount required to be recovered is the excess of the amount of incentive-based compensation received over the amount that otherwise would have been received had it been determined based on the restated financial measure.

Anti-Hedging and Anti-Pledging Policies

Pursuant to the Company’s insider trading policy, the Company’s directors, officers and employees are prohibited from pledging or margining Company stock and from engaging in hedging transactions in Company stock. In addition, pursuant to the Company’s insider trading policy, the Company does not permit directors, officers or employees to engage in speculative or short-term financial activities involving the Company’s stock or derivatives based on the Company’s securities without the prior written consent of the Company’s compliance officer. In September 2021, the Board approved an exception to the pledging policy to allow Mr. Klein to pledge shares of the Company’s stock to secure a margin loan. The Board considered the amount of the pledge as compared to the total value of the Company’s stock held by Mr. Klein and Mr. Klein’s ability to substitute other assets to fund a margin call.

Termination and Change of Control Provisions

Except for Messrs. Florance and Wheeler, each of whom has termination provisions in his respective employment agreement or employment terms as described in more detail below in the section titled “Potential Payments Upon Termination or Change of Control” of this Proxy Statement, the Company is not obligated to provide significant severance or termination payments to NEOs. All Company employees are employed at will and, unless specified otherwise by an employment agreement, CoStar is not liable to pay severance but has chosen to adopt a severance policy as described in more detail below to apply only in limited circumstances. The Company may choose to pay severance outside of the severance policy in its sole discretion and may amend, alter or discontinue the severance policy at any time.

Similarly, except for Mr. Florance, who negotiated change of control provisions in his employment agreement, the Company does not provide significant cash payments to NEOs upon a change of control or other similar significant corporate event. However, in order to protect the rights granted under the 2007 Plan and 2016 Plan, including the Matching RSUs to be issued when DSUs are awarded under the MSPP, the form of grant agreement provides for acceleration of vesting of stock and option grants and rights to exercise stock options upon certain significant events, including a change of control, as described in more detail below (except in the event that the awards are assumed or substitute grants are awarded pursuant to the terms of the grant). Those rights do not discriminate in scope, terms or operation in favor of NEOs of the Company and are available generally to all employees who participate in those plans.

Details of the potential termination payments for Messrs. Florance, Wheeler, Saint, and Simuro and Ms. Ruggles, of the rights triggered under the 2007 Plan and 2016 Plan in the case of a significant corporate event and potential payments under the Company-wide severance policy are set out below in the section titled “Potential Payments Upon Termination or Change of Control” in this Proxy Statement.

Policy on Deductibility of Compensation

Section 162(m) of the Code limits a publicly traded company’s federal income tax deduction for compensation in excess of $1 million paid to its Chief Executive Officer, Chief Financial Officer and certain other current and former executive officers. The Company expects that it will be unable to deduct all compensation in excess of $1 million paid to its Chief Executive Officer, Chief Financial Officer and other NEOs, other than any awards granted prior to November 2, 2017 to the extent they qualify for certain transition rules under Section 162(m).

 

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Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of this Proxy Statement. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

By the Compensation Committee

of the Board of Directors

Michael R. Klein, Chairman

Christopher J. Nassetta

 

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2023 Summary Compensation Table

 

               

NAME AND

PRINCIPAL POSITION

YEAR

SALARY

($)

STOCK

AWARDS(1)

($)

OPTION

AWARDS(1)

($)

NON-EQUITY

INCENTIVE PLAN

COMPENSATION(2)

($)

ALL OTHER

COMPENSATION(3)

($)

TOTAL

($)

               

Andrew C. Florance

Chief Executive Officer

and President

  2023 $ 997,000 $ 23,225,988 $ 2,119,231 $ 2,250,000 $ 583,961 (3)  $ 29,176,180

 

 

 

2022

 

$ 971,962 $ 13,454,822 $ 2,071,602 $ 2,549,300 $ 372,828 $ 19,420,514

 

 

 

2021

 

$ 905,769 $ 16,703,568 $ 2,007,200 $ 2,405,000 $ 142,804 $ 22,164,341
               

Scott T. Wheeler

Chief Financial

Officer

  2023 $ 569,708 $ 7,312,473 $ 617,818 $ 963,125 $ 17,981 (3)  $ 9,481,105

 

 

 

2022

 

$ 535,892 $ 5,197,575 $ 672,147 $ 919,020 $ 15,422 $ 7,340,056

 

 

 

2021

 

$ 503,000 $ 6,207,582 $ 652,340 $ 867,000 $ 13,355 $ 8,243,277
               

Lisa C. Ruggles

Senior Vice President, Global Operations

  2023 $ 545,293 $ 3,671,620 $ 355,101 $ 759,688 $ 240,941 (3)  $ 5,572,643

 

 

 

2022

 

$ 514,877 $ 3,193,059 $ 461,718 $ 706,384 $ 46,200 $ 4,922,238

 

 

 

2021

 

$ 479,615 $ 3,929,659 $ 426,530 $ 784,000 $ 12,924 $ 5,632,728
               

Frederick G. Saint

President, Marketplaces

  2023 $ 546,985 $ 3,671,620 $ 355,101 $ 794,750 $ 17,590 (3)  $ 5,386,046

 

 

 

2022

 

$ 527,262 $ 2,997,097 $ 461,718 $ 721,344 $ 16,322 $ 4,723,743

 

 

 

2021

 

$ 503,000 $ 4,139,100 $ 476,710 $ 840,990 $ 12,773 $ 5,972,573
               

Frank A. Simuro

Chief Technology Officer

 

 

2023

 

 

$ 587,446 $ 6,418,808 $ 617,818 $ 1,050,000 $ 44,917 (3)  $ 8,718,989

 

 

 

2022

 

$ 512,493 $ 3,728,252 $ 461,718 $ 829,440 $ 16,322 $ 5,548,225

 

(1)

This column shows the aggregate grant date fair value of the awards granted in the years shown, computed in accordance with FASB ASC Topic 718 pursuant to SEC rules, including the grant date fair value of the maximum number of shares that could be earned pursuant to the three-year performance-based restricted stock awards granted in 2021, 2022 and 2023, which vest based on achievement of a three-year cumulative revenue goal for the three-year period commencing January 1 of the year of grant and running through December 31 of the third year following the date of grant (i.e., January 1, 2021 – December 31, 2023 for the 2021 grants; January 1, 2022 – December 31, 2024 for the 2022 grants; and January 1, 2023 – December 31, 2025 for the 2023 grants) and are subject to adjustment based on the Company’s relative TSR over the respective three-year performance period. These amounts reflect the Company’s accounting expense and do not necessarily correspond to the actual value that will be realized by the NEOs. Additional information regarding the size of the awards is set forth in the notes to the “Grants of Plan Based Awards” and “Outstanding Equity Awards” tables. Assumptions used in calculating the fair value for awards granted in 2023 are described in Note 17 to the audited financial statements in the 2023 Annual Report. For additional information on the stock awards, see the “Equity Incentive Compensation” discussion within the section titled “Compensation Discussion and Analysis” of this Proxy Statement.

 

(2)

This amount represents the annual cash incentive earned under the Company’s annual incentive bonus plan based on the achievement of individual and/or Company financial goals. These bonuses are awarded and paid in the year following the year for which performance was measured. For additional information regarding the annual cash incentives paid for 2023 performance, see the “2023 Annual Cash Incentive Program” discussion within the section titled “Compensation Discussion and Analysis” of this Proxy Statement. In addition, this amount includes a deferral in the amount set forth in the table below for those NEOs who elected to defer a portion of their 2023 cash incentive compensation under the MSPP. Under the terms of the MSPP, a participant may elect to defer a stated portion of his or her cash incentive compensation award into DSUs. The Company then matches these DSUs with a grant of Matching RSUs under the 2016 Plan. The DSUs and Matching RSUs awarded pursuant to the NEOs’ elections with respect to their 2022 cash incentive compensation were issued in March 2023. For additional information regarding the MSPP, see the “Management Stock Purchase Plan” discussion within the section titled “Compensation Discussion and Analysis” of this Proxy Statement.

 

     

NAME

MSPP CONTRIBUTION
($)
DSUs AWARDED
(#)
     

 

Andrew C. Florance

$ 1,274,586   18,922
     

 

Scott T. Wheeler

$ 893,665   13,267

 

(3)

For Mr. Florance, his respective amount for the year ended December 31, 2023 included (i) a 401(k) Plan employer matching contribution in the amount of $13,200, (ii) $226,751 of incremental costs associated with personal use of the Company aircraft by Mr. Florance and guests accompanying Mr. Florance during the year ended December 31, 2023, (iii) a Company paid housing allowance of $48,000 related to a non-primary residence to facilitate Mr. Florance’s frequent travel to our Richmond, Virginia office, (iv) a trip Mr. Florance attended with other Company employees to recognize the contributions of high-performing employees to the

 

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  Company in the amount of $13,666 and a $10,389 tax gross up on the value of that trip, and (v) the costs of providing security services during the year ended December 31, 2023 to Mr. Florance for risks arising from his employment with the Company of $160,596 and a tax gross up on this benefit of $104,196.

 

For Messrs. Wheeler and Saint, each of their respective amounts for the year ended December 31, 2023 included a 401(k) Plan employer matching contribution in the amount of $13,200.

 

For Ms. Ruggles, her respective amount for the year ended December 31, 2023 included (i) a 401(k) Plan employer matching contribution in the amount of $13,200 and (ii) the costs of providing security services during the year ended December 31, 2023 to Ms. Ruggles for risks arising from her employment with the Company of $123,115 and a tax gross up on this benefit of $101,138.

 

For Mr. Simuro, his respective amount for the year ended December 31, 2023 included (i) a 401(k) Plan employer matching contribution in the amount of $13,200, and (ii) a trip Mr. Simuro attended with other Company employees to recognize the contributions of high-performing employees to the Company in the amount of $16,013 and a $11,227 tax gross up on the value of that trip.

 

For purposes of the “Summary Compensation Table,” we determined the incremental cost associated with personal use of the Company aircraft by calculating an hourly variable rate for variable costs such as fuel and hourly engine program costs for the aircraft and multiplied that result by the hours flown for personal use, then added one-time, variable costs incurred while using the corporate aircraft for personal use, such as catering and crew travel expenses. Since the aircraft is used primarily for business travel, the calculation does not include the fixed costs that do not change based on usage, such as crew salaries, hangar storage costs and cost of maintenance not related to personal use trips.

 

All Other Compensation for each of Mr. Florance and Ms. Ruggles increased in 2023 largely due to the costs of providing security services during the year ended December 31, 2023. These security services were provided in response to specific security concerns and were provided at the direction of the Board.

2023 Grants of Plan-Based Awards

The following Grants of Plan-Based Awards table provides additional information about stock and option awards granted to our NEOs during the year ended December 31, 2023, as well as non-equity incentive plan awards for the year ended December 31, 2023.

 

               
   

ESTIMATED FUTURE

PAYOUTS

UNDER NON-EQUITY

INCENTIVE PLAN

AWARDS(1)

ESTIMATED FUTURE PAYOUTS
UNDER EQUITY INCENTIVE PLAN
AWARDS
(2)

ALL OTHER

STOCK
AWARDS:

NUMBER OF

SHARES OF

STOCK OR

UNITS(3)

(#)

ALL OTHER

OPTION
AWARDS:

NUMBER OF

SECURITIES

UNDERLYING

OPTIONS(4)

(#)

EXERCISE
OR

BASE
PRICE

OF
OPTION

AWARDS(5)

($/SH)

GRANT DATE

FAIR VALUE

OF STOCK AND

OPTION

AWARDS(6)

NAME

GRANT

DATE

THRESHOLD

($)

TARGET

($)

MAXIMUM

($)

THRESHOLD

(#)

TARGET

(#)

MAXIMUM

(#)

                       

Andrew C. Florance

$ 750,000 $ 1,500,000 $ 3,000,000

 

 

 

2/14/2023

 

  24,600   61,500   147,600 $ 11,332,728 (7) 

 

 

 

2/14/2023

 

  138,300 $ 10,618,674

 

 

 

2/14/2023

 

  73,400 $ 76.78 $ 2,119,058

 

 

 

3/15/2023

 

  18,922 $ 1,274,586
                       

Scott T. Wheeler

$ 287,500 $ 575,000 $ 1,150,000

 

 

 

2/14/2023

 

  7,200   18,000   43,200 $ 3,316,896 (7) 

 

 

 

2/14/2023

 

  40,400 $ 3,101,912

 

 

 

2/14/2023

 

  21,400 $ 76.78 $ 617,818