SCHEDULE 14A

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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COUSINS PROPERTIES INCORPORATED

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 2008

 

To our Stockholders:

 

The Annual Meeting of Stockholders of Cousins Properties Incorporated (“we”, “our” or the “Company”) will be held on Tuesday, May 6, 2008, at 11:00 a.m. local time at 191 Peachtree Street, Atlanta, Georgia 30303. The purposes of the meeting are:

 

(1) To elect nine Directors;

 

(2) To approve an amendment to the 1999 Incentive Stock Plan (the “Plan”) to increase the number of shares of common stock available under the Plan by 1,200,000 shares;

 

(3) To ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the fiscal year ending December 31, 2008; and

 

(4) To transact any other business as may properly come before the meeting.

 

All holders of record of our common stock at the close of business on March 20, 2008 are entitled to vote at the meeting and any postponements and adjournments of the meeting.

 

By Order of the Board of Directors,

 

ROBERT M. JACKSON

Corporate Secretary

 

Atlanta, Georgia

April 7, 2008

 

Whether or not you expect to attend the Annual Meeting, you are urged to vote, date, sign and return the enclosed proxy in the enclosed postage paid envelope. If you attend the Annual Meeting, you may revoke the proxy and vote your shares in person.

TABLE OF CONTENTS

 

COUSINS PROPERTIES INCORPORATED
191 Peachtree Street, Suite 3600
Atlanta, Georgia 30303-1740

 

PROXY STATEMENT

 

GENERAL INFORMATION

 

This proxy statement and proxy card are furnished in connection with the solicitation of proxies to be voted at our 2008 Annual Meeting of Stockholders. Our Annual Meeting will be held on Tuesday, May 6, 2008, at 11:00 a.m., local time, at 191 Peachtree Street, Atlanta, Georgia 30303. The proxy is solicited by our Board of Directors. This proxy statement and proxy card are first being sent to holders of our common stock on April 7, 2008.

 

Why am I receiving this proxy statement and proxy card?

 

You are receiving this proxy statement and proxy card because you owned shares of Cousins Properties Incorporated common stock on March 20, 2008. This proxy statement describes issues on which we would like you to vote at our Annual Meeting. It also gives you information on these issues so that you can make an informed decision.

 

What is a proxy?

 

It is your legal designation of another person to vote the stock you own. That other person is called a proxy. The written document in which you designate that person is called a proxy or a proxy card. Two of our Directors have been designated as proxies for the 2008 Annual Meeting of Stockholders. These Directors are Boone A. Knox and William Porter Payne.

 

Who is entitled to vote?

 

Holders of our common stock at the close of business on March 20, 2008 are entitled to receive notice of the meeting and to vote at the meeting and any adjournments or postponements of the meeting. March 20, 2008 is referred to as the record date.

 

To how many votes is each share of common stock entitled?

 

Holders of our common stock are entitled to one vote per share.

 

What is the difference between a stockholder of record and a stockholder who holds common stock in “street name”?

 

If your shares of common stock are registered in your name, you are a stockholder of record. If your shares are in the name of your broker or bank, your shares are held in “street name.”

 

How do I vote?

 

Common stockholders of record may vote by mail. Simply mark your proxy card, date and sign it, and return it in the postage-paid envelope provided. Stockholders also may attend the meeting and vote in person. If you hold your shares of common stock through a bank or broker, please refer to your proxy card or the information forwarded by your bank or broker to see the voting options that are available to you.

 

Written ballots will be passed out to anyone who wants to vote at the Annual Meeting. However, if you hold your shares of common stock in street name, you must obtain a legal proxy from your bank or broker to be able to vote in person at the Annual Meeting.

 

What if I change my mind after I return my proxy?

 

You may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting. You may do this by:

 

 

 

Attendance at the meeting will not by itself revoke a proxy.

 

On what items am I voting?

 

You are being asked to vote on three items:

 

 

No cumulative voting rights are authorized, and dissenters’ rights are not applicable to these matters.

 

How may I vote for the nominees for election of Directors, and how many votes must the nominees receive to be elected?

 

With respect to the election of Directors, you may:

 

 

Directors are elected by a plurality vote. As a result, the nine nominees receiving the highest number of FOR votes will be elected as Directors.

 

We have a majority voting policy for the election of directors. The policy, which is part of our Corporate Governance Guidelines, sets forth our procedures if a nominee is elected, but receives a majority of votes withheld. In an uncontested election, any nominee for director who receives a greater number of votes withheld from his or her election than votes for his or her election is required to promptly tender his or her resignation. Our Compensation, Succession, Nominating and Corporate Governance Committee is required to promptly consider the resignation offer and make a recommendation to the Board with respect to the resignation. The Board is required to take action with respect to this recommendation. The policy is more fully described below under “Majority Voting Policy.”

 

What happens if a nominee is unable to stand for election?

 

If a nominee is unable to stand for election, the Board may, by resolution, provide for a lesser number of Directors or designate a substitute nominee. If the Board designates a substitute nominee, shares represented by proxies voted for the nominee unable to stand for election will be voted for the substitute nominee.

 

How may I vote for the approval of the amendment to the Plan and the ratification of the appointment of the independent registered public accounting firm, and how many votes must the proposals receive to pass?

 

With respect to the proposals to amend the Plan and to ratify the independent registered public accounting firm, you may:

 

 

The proposals must receive the affirmative vote of a majority of the shares present at the Annual Meeting either in person or by proxy to pass. Abstentions with respect to a proposal are counted for purposes of establishing a quorum, but will have no effect on the outcome of the vote.

 

How does the Board of Directors recommend that I vote?

 

The Board recommends a vote FOR the nine Director nominees, FOR the amendment to the Plan and FOR the ratification of the independent registered public accounting firm.

 

What happens if I sign and return my proxy card but do not provide voting instructions?

 

If you return a signed card but do not provide voting instructions, your shares of common stock will be voted FOR the nine nominees for Director, FOR the amendment to the Plan and FOR the ratification of the independent registered public accounting firm.

 

Will my shares be voted if I do not sign and return my proxy card?

 

If you are a common stockholder of record and you do not sign and return your proxy card or attend the Annual Meeting and vote in person, your shares will not be voted and will not count in deciding the matters presented for stockholder consideration in this proxy statement.

 

If your shares of common stock are held in “street name” through a bank or broker and you do not provide voting instructions before the Annual Meeting, your bank or broker may vote your shares on your behalf under certain circumstances. Brokerage firms have the authority under New York Stock Exchange (“NYSE”) rules to vote shares for which their customers do not provide voting instructions on routine matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” Broker non-votes will be counted for purposes of establishing a quorum, but not for determining the number of shares voted for or against the non-routine matter.

 

The election of Directors and the ratification of the independent registered public accounting firm described in this proxy statement are routine matters. The amendment to the Plan described in this proxy statement is not a routine matter.

 

How many votes do you need to hold the Annual Meeting?

 

Shares of our common stock are counted as present at the Annual Meeting if the stockholder either is present and votes in person at the Annual Meeting or properly has submitted a proxy.

 

As of the record date, 51,285,741 shares of our common stock were outstanding and are entitled to vote at the Annual Meeting. Holders of a majority of the outstanding shares entitled to vote as of the record date must be represented at the Annual Meeting either in person or by proxy in order to hold the Annual Meeting and conduct business. This is called a quorum. Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the meeting.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 6, 2008.

 

The proxy statement and annual report are available on the Investor Relations page of our Web site at www.cousinsproperties.com.

 

There are nine nominees for our Board of Directors this year. Our Directors are elected annually to serve until the next Annual Meeting of Stockholders and until their respective successors are elected. The Board has nominated the individuals named below for election as Directors at the Annual Meeting. All of the Director nominees are currently members of the Board and were elected as Directors by the stockholders at the Annual Meeting in 2007. Each Director nominee has consented to serve as a Director if so elected at the Annual Meeting.

 

Thomas G. Cousins, our founder and former Chairman of the Board, has served as Chairman Emeritus since December 2006. In this role he is invited to attend Board meetings, but does not have the right to vote as a Director.

 

Our Board of Directors recommends that you vote “FOR”
each of the nominees for Director.

 

 

There are no family relationships among our Directors or executive officers.

 

Our Board held six meetings during 2007. Each Director attended at least 75% of the total number of meetings of the Board and any committees of which he or she was a member.

 

We typically schedule a Board meeting in conjunction with our Annual Meeting and expect that our Directors will attend, absent a valid reason. All Directors serving at the time of last year’s Annual Meeting attended the Annual Meeting.

 

Our Board has three standing committees — the Audit Committee, the Compensation, Succession, Nominating and Governance Committee and the Executive Committee.

 

Audit Committee.  The current members of our Audit Committee are Mr. Glover, Mr. Hance, Mr. Harrison and Mr. Knox. Mr. Knox is the Chairman of the Committee. The Audit Committee held nine meetings during 2007. All of the members of the Audit Committee are independent within the meaning of the SEC regulations, the listing standards of the NYSE and our Director Independence Standards. All of the members of the Audit Committee are financially literate within the meaning of the SEC regulations, the listing standards of the NYSE and the Company’s Audit Committee Charter. The Board has determined that Mr. Knox is an audit committee financial expert within the meaning of the SEC regulations and that he has accounting and related financial management expertise within the meaning of the NYSE listing standards.

 

The primary responsibilities of our Audit Committee include:

 

 

Compensation, Succession, Nominating and Governance Committee.  The current members of our Compensation, Succession, Nominating and Governance Committee are Mr. Bowles, Mr. Edwards, Mr. Hance, Mr. Harrison and Mr. Payne. Mr. Payne is the Chairman of the Committee. The Compensation, Succession, Nominating and Governance Committee held six meetings during 2007. All of the members of the Compensation, Succession, Nominating and Governance Committee are independent within the meaning of the listing standards of the NYSE and our Director Independence Standards.

 

The primary responsibilities of our Compensation, Succession, Nominating and Governance Committee include:

 

 

The Compensation, Succession, Nominating and Governance Committee retained Towers Perrin, an outside human resources consulting firm, in 2007 to provide advice regarding compensation for our executive officers,

including the named executive officers listed in the compensation tables in this proxy statement. Towers Perrin provided the Compensation, Succession, Nominating and Governance Committee with relevant market data and alternatives to consider when making compensation decisions for our executive officers, including our named executive officers. For more information about the market data provided to the committee, see “Compensation Discussion & Analysis.”

 

Towers Perrin advised the Compensation, Succession, Nominating and Governance Committee with respect to compensation trends and best practices, plan design and individual compensation amounts. Towers Perrin also provided services to management regarding benchmarking of non-executive officer positions and other matters. The Compensation, Succession, Nominating and Governance Committee is aware of the services provided by Towers Perrin to management.

 

Executive Committee.  The members of our Executive Committee are Mr. Bell, Mr. Knox and Mr. Payne. Mr. Bell is Chairman of the Executive Committee. The Executive Committee may exercise all powers of the Board in the management of our business and affairs, except for those powers expressly reserved to the Board. The Executive Committee did not take any action during 2007.

 

In order to evaluate the independence of each Director, our Board has adopted a set of Director Independence Standards as part of our Corporate Governance Guidelines. The Director Independence Standards are attached to this proxy statement as Annex A. They can also be found on the Investor Relations page of our Web site at www.cousinsproperties.com.

 

The Board has reviewed Director independence under NYSE Rule 303A.02(a) and our Director Independence Standards. In performing this review, the Board considered all transactions and relationships between each Director and our Company, subsidiaries, affiliates, senior executives and independent registered public accounting firm, including those reported under the section “Certain Transactions.” As a result of this review, the Board affirmatively determined that seven of our nine Directors currently serving on the board are independent. The independent Directors are Mr. Bowles, Mr. Edwards, Mr. Glover, Mr. Hance, Mr. Harrison, Mr. Knox and Mr. Payne.

 

Mr. Bell is not an independent Director because of his employment as our Chief Executive Officer. Ms. Giornelli is not an independent Director because she is an immediate family member of Mr. Cousins, who was one of our executive officers in the last three years.

 

Our Audit Committee and our Compensation, Succession, Nominating and Governance Committee are composed solely of independent Directors.

 

Our non-management Directors meet without management present at least two times each year, and our independent Directors meet at least once per year. In January 2004, our Board named Mr. Payne as the Lead Director. He is responsible for presiding at meetings of non-management and independent Directors.

 

Any stockholder or interested party who wishes to communicate directly with the Lead Director or the non-management Directors as a group may do so by writing to: Cousins Properties Incorporated, 191 Peachtree Street, Suite 3600, Atlanta, GA 30303-1740, Attention: Lead Director.

 

Our Board has adopted a set of Corporate Governance Guidelines. The Corporate Governance Guidelines are available on the Investor Relations page of our Web site at www.cousinsproperties.com. The charters of the Audit Committee and the Compensation, Succession, Nominating and Governance Committee are also available on the Investor Relations page of our Web site.

Our Board has adopted a Code of Business Conduct and Ethics (the “Ethics Code”), which applies to all officers, Directors and employees. This Ethics Code reflects our long-standing commitment to conduct our business in accordance with the highest ethical principles. Our Ethics Code is available on the Investor Relations page of our Web site at www.cousinsproperties.com. Copies of our Corporate Governance Guidelines, committee charters and Ethics Code are also available upon written request to Cousins Properties Incorporated, 191 Peachtree Street, Suite 3600, Atlanta, Georgia 30303-1740, Attention: Corporate Secretary.

 

Any stockholder or interested party who wishes to communicate directly with our Board, or an individual member of our Board, may do so by writing to Cousins Properties Incorporated Board of Directors, c/o Corporate Secretary, 191 Peachtree Street, Suite 3600, Atlanta, Georgia 30303-1740. At each regular Board meeting, the Corporate Secretary will present a summary of any communications received since the last meeting (excluding any communications that consist of advertising, solicitations or promotions of a product or service) and will make the communications available to the Directors upon request.

 

Our Corporate Governance Guidelines include a majority voting policy for the election of Directors. Pursuant to this policy, in an uncontested election of directors, any nominee who receives a greater number of votes withheld from his or her election than votes for his or her election will promptly tender his or her resignation for consideration by the Compensation, Succession, Nominating and Governance Committee. The Compensation, Succession, Nominating and Governance Committee will promptly consider the resignation offer and make a recommendation to the Board. The Board will act on the Compensation, Succession, Nominating and Governance Committee’s recommendation within 90 days following the certification of the stockholder vote.

 

We will publicly disclose, in a Form 8-K furnished to the SEC, the Board’s decision regarding whether to accept the resignation offer. Any Director who tenders his or her resignation will not participate in the Committee or Board deliberations.

 

Our Directors take a critical role in guiding our strategic direction and overseeing our management. Our Board has delegated to the Compensation, Succession, Nominating and Governance Committee the responsibility for reviewing and recommending nominees for membership on the Board. Candidates are considered based upon various criteria. Candidates must have integrity, accountability, judgment and perspective. In addition, candidates are chosen based on their leadership and business experience, as well as their ability to contribute toward governance, oversight and strategic decision-making.

 

The Compensation, Succession, Nominating and Governance Committee will consider Director nominees proposed by stockholders on the same basis as recommendations from other sources. Any stockholder who wishes to recommend a prospective nominee for consideration by the committee may do so by submitting the candidate’s name and qualifications in writing to Cousins Properties Incorporated Compensation, Succession, Nominating and Governance Committee, c/o Corporate Secretary, 191 Peachtree Street, Suite 3600, Atlanta, Georgia 30303-1740.

 

The following table sets forth, as of February 1, 2008 unless otherwise noted, information regarding the beneficial ownership of our common stock by:

 

 

 

 

 

 

Compensation Objectives

 

The Compensation, Succession, Nominating and Governance Committee of our Board of Directors (the “Compensation Committee”) is responsible for establishing the underlying policies and principles of our compensation program, as well as determining the compensation of our executive officers, including our Named Executive Officers (or “NEOs”) that is detailed in the tables that follow. In assessing the compensation of our executives, including our NEOs, we consider strategies intended to appeal to talented executives, both new hires and our existing team, in a competitive and dynamic real estate marketplace. While keeping in mind our accountability to our stockholders, we aim to reward executives commensurate with corporate, business unit and individual performance in a variety of circumstances.

 

The success of our business plan depends significantly on the performance of the executives responsible for its execution. Our strategy differs from the strategy of most real estate investment trusts (or “REITs”). Rather than growing by acquisitions and focusing on portfolio management, we create value through the development of real estate. In order to accomplish this goal through market cycles, we have created an organization that has the capacity to develop multiple product types in several geographic markets. Our ability to execute development and investment management, to mitigate associated risk and to plan for succession requires us to attract and retain executive talent across all of the development disciplines.

 

Our goal is to perform in the top quartile of the real estate industry through the real estate cycle. In order to perform at that level, one principle of our compensation program is to position our NEOs’ cash and equity-based compensation to be within a range of the average compensation paid by the 50th to the 75th percentile of certain relevant labor markets (described below under “Peer Group Analysis”) for similarly situated positions. Providing compensation levels within this range allows us to be competitive in finding and retaining the top talent we need to continue to perform at high levels. Another principle of our compensation strategy is to provide a meaningful portion of total compensation via equity-based awards.

 

All of our employees, including our NEOs, are employed “at-will.” Other than a 401(k)/profit sharing plan, we do not have a pension plan or deferred compensation program for any of our employees, including our NEOs. Rather, we focus on providing current cash compensation and long-term equity-based awards in amounts necessary to retain our NEOs and to allow them to provide for their own retirement. However, we have typically made annual discretionary contributions to our 401(k)/profit sharing plan for the benefit of all employees meeting certain service requirements. In addition, in 2007 we entered into Change in Control Severance Agreements with certain key employees, including our NEOs. These agreements are discussed below under “Severance Policy, Retirement and Change in Control Agreements.”

 

Compensation Review Process

 

Peer Group Analysis

 

The Compensation Committee begins its evaluation of NEO compensation by reviewing available competitive data. For 2007 compensation, the Compensation Committee engaged Towers Perrin to compile data from two sources: (1) companies from the 2006 National Association of Real Estate Investment Trusts (“NAREIT”) survey with a total market capitalization of $1-3 billion and (2) a “custom cut” peer group of 10 companies with similar business activities, strategies, and asset classes.

The 25 companies in the NAREIT survey with $1-3 billion market capitalization were:

 

 

The 10 companies in the “custom cut” peer group were:

 

 

The NAREIT survey provided data from all REITs with a comparable market capitalization regardless of their business strategy or asset class. Most of the REITs in this category are not diversified, nor do they have a business strategy focused on development. These REITs buy assets and tend to hold them for long periods of time. In order to find REITs that better matched our business strategy, we developed our custom cut peer group of companies which had larger market capitalizations, but that we considered to be our competitors for business projects as well as for talent. By reviewing both of the data sets, the Compensation Committee was able to set NEO compensation within the acceptable ranges. Variances, if any, to the comparable ranges were based upon the NEO’s tenure in the current position.

 

Role of Management

 

In making decisions regarding executive officer compensation, the Compensation Committee considers recommendations from our CEO with respect to each of the other executive officers. These recommendations are based upon the CEO’s analysis of each executive officer’s performance and contributions. However, the Compensation Committee retains the right to act in its sole and absolute discretion.

 

Components of Compensation

 

As provided in the Summary Compensation Table for 2007 below, compensation for our NEOs in 2007 incorporated four primary components: a base salary, annual incentive cash award, long-term equity incentive (or “LTI”) award and certain benefits and perquisites.

 

Base Salary

 

The Compensation Committee at its December 11, 2006 meeting determined the 2007 base salaries for our NEOs. We view base salary as the foundation of our compensation program. We make base salary decisions based on the individual’s scope of responsibilities, experience, qualifications, individual performance and contributions to the Company. We established base salaries for 2007 after an analysis of data from the peer groups discussed previously. In particular, with respect to Mr. Bell, the Compensation Committee increased his base salary for 2007

by $85,000, or 15%, to reflect a market adjustment and to acknowledge his exceptional performance in 2006. The base salaries of our NEOs for 2006 and 2007 were as follows:

 

 

Annual Incentive Cash Award Opportunity

 

Our NEOs have an opportunity to earn an annual incentive cash award. This award is designed to reward annual corporate performance and business unit performance, as well as to encourage and reward individual achievement during the year. The target incentive cash award typically ranges from approximately 90% to 125% of the NEO’s base salary amount, with our most senior NEOs at the higher end of this range. The Compensation Committee established the 2007 target incentive cash award opportunity for each NEO. The annual incentive cash award opportunity, the targeted amount of the award and the performance goals set by the Compensation Committee (discussed below) are communicated to the NEOs each year. The determination of the actual incentive cash award paid to an executive officer is not entirely formulaic. The Compensation Committee, in exercising its discretion, considers all facts and circumstances when evaluating an individual executive’s performance, including changing market conditions and broad corporate strategic initiatives, along with overall responsibilities and contributions.

 

2007 Annual Incentive Cash Award

 

In evaluating 2007 performance to make determinations regarding annual incentive cash awards for our NEOs, the Compensation Committee considered certain performance goals for each of our NEOs’ respective business units (i.e., the Corporate Group, the Retail Division and the Office/Multi-Family Division) for the year. The Compensation Committee established the 2007 goals at its February 19, 2007 meeting after a review of our annual business plan and budget for the year. The Compensation Committee assigned each goal for each business unit a weight of relative importance. The Compensation Committee considered these goals to be aggressive and that, if met, the Company and the applicable business units would have had a good year. The following were the annual incentive cash award performance goals for 2007:

 

1. Development Starts and Investments.  As a development-oriented REIT, a key goal for all of our business units is new development starts and investments. Each of our Division’s 2007 development starts and investments goal took into account its development capacity, its development pipeline and the status of the real estate cycle for its market. In addition, the Corporate Group had a goal based upon overall new development starts and investments across all Divisions.

 

2. Funds From Operations.  The Compensation Committee established a “Funds From Operations” (or “FFO”)¹ goal for the Corporation that applied to each business unit. We believe that FFO is an appropriate measure of corporate performance when it is properly adjusted for activities related to our development and capital recycling strategies.

 

3. Percentage Leased.  Another 2007 goal that generally applied to each of our business units was the percentage of space leased in its rental portfolio. We believe one of our core competencies is to develop and lease property. Therefore, we expect each project to achieve near capacity occupancy after a pro forma lease-up period following completion of construction or acquisition. Leasing targets for 2007 also took into account overall market conditions. The Corporate Group’s 2007 goals included leasing percentages for the Retail and Office/Multi-Family Divisions.

 

 

¹ For the definition of FFO, please see our Annual Report on Form 10-K for the year ended December 31, 2007 available at www.sec.gov or on the Investor Relations page of our Web site at www.cousinsproperties.com.

4. Cost Controls.  Each Division and the Corporate Group had a goal to control costs in their respective business units in 2007. The Compensation Committee established these goals based on the amount of approved overhead set forth in each business unit’s strategic plan for 2007, before allocation or capitalization of expenses to projects.

 

5. Profits From Lot and Tract Sales.  The Compensation Committee established goals for 2007 regarding profits from lot and tract sales for our Land and Industrial Divisions and the Corporate Group.

 

The Compensation Committee, at its December 6, 2007 meeting, evaluated performance against these goals as follows:

 

 

The Compensation Committee believed that the 2007 performance goals, and the weighting of each for the 2007 annual incentive cash awards, were aggressive and appropriate given our business strategy and historic performance. In addition to business unit performance against the established goals, the Compensation Committee considered each NEO’s 2007 individual performance and contributions to the Company during the year. However, individual performance did not result in any adjustment to the actual award for any of our NEOs. Based on these considerations and the performance against goals discussed above, each of our NEOs earned annual incentive cash awards for 2007 as follows:

 

2008 Annual Incentive Cash Awards

 

At a meeting of the Compensation Committee held on December 6, 2007, the committee established the 2008 target annual incentive cash awards for our NEOs as follows (established as a percentage of base salary and expressed below as a dollar amount):

 

 

The Compensation Committee established the goals for 2008 incentive cash awards at a meeting held on February 18, 2008. The 2008 goals for each business unit were comprised of (1) Development Starts and Investments, (2) FFO, (3) Percentage Leased and/or (4) Profits From Lot and Tract Sales. The Committee weighted these goals to emphasize Percentage Leased across our portfolio and FFO. The Development Starts and Investments goal was given a relatively smaller weighting than in previous years given the current status of the real estate cycle for each of our business units. The Compensation Committee eliminated cost control as a goal for 2008, as recommended by management, instead believing that the FFO goal would appropriately motivate management to control costs. The Compensation Committee considers these goals to be aggressive and that, if met, the Company and the applicable business units would have had a good year.

 

Long-Term Incentive Awards

 

Our LTI program is intended to provide an incentive to our executives for the creation of value and the corresponding growth of our stock price over time. The ultimate goal of equity-based compensation is to encourage executives to act as equity owners. We believe equity-based compensation plays an essential role in retaining and motivating our NEOs by providing incentives that are linked to our long-term success and increasing stockholder value. The Compensation Committee grants stock options, stock appreciation rights (“SARs”), restricted stock and restricted stock units under our LTI program.

 

Stock Options And Stock Appreciation Rights

 

We believe a significant portion of equity-based compensation should be in the form of stock options or SARs, which reward stock price growth in a more substantial way than full value stock awards, such as restricted stock and restricted stock units (or “RSUs”). We believe stock options and SARs provide a significant link between the executive and our goal of maximizing stockholder value, as the award will have value only if the market value of our stock increases above the exercise price. Typically, we allocate LTI awards 60% to full value awards and 40% to stock options and SARs.

 

Stock options and SARs (i) are issued with an exercise price equal to the closing market price on the grant date, (ii) vest ratably over the four-year period beginning on the grant date and (iii) expire 10 years from the grant date. The vesting requirement creates an incentive for an executive to remain employed with the Company. Stock options and SARs do not include dividend equivalents or any reload grant features, but they are adjusted as a result of special dividends. Stock options and SARs are valued using the Black-Scholes method for purposes of determining the number of options or SARs granted to a particular NEO and the contribution of the grant to his total compensation figure.

 

For 2007, we granted both “non-qualified options” and “incentive stock options” (or “ISOs”). In some cases, ISOs can provide a recipient with preferential tax treatment if, among other conditions, the stock received upon exercise is held for at least one year. For 2007, we granted ISOs to all recipients of option grants, including NEOs, to the maximum extent possible.

Restricted Stock and Restricted Stock Units

 

In 2007, the Compensation Committee awarded full value equity awards to our NEOs as part of our LTI program. Full value equity awards, such as restricted stock and RSUs, do not reward stock price growth to the same extent as stock options and SARs. Nevertheless, we believe that full value awards are an effective compensation tool because the current value of the award is more visible to the executive, creates an interest that encourages executives to think and act like stockholders and serves as a competitive retention vehicle because the awards vest over four years.

 

An RSU is a bookkeeping unit that is essentially the economic equivalent of a share of restricted stock, the difference being that upon vesting the RSU is settled in cash. RSUs generally are valued at the corresponding stock price on the grant date and generally vest ratably over a four-year period following the grant. Upon vesting, each RSU pays a cash amount equal to the closing price of our common stock on the vesting date. Also, holders of restricted stock and RSUs generally receive all regular and special cash dividends declared, or dividend equivalents in the case of RSUs, with respect to our common stock. However, performance-conditioned RSUs are treated differently (see footnote 6 to the Summary Compensation Table for 2007 below).

 

We periodically issue RSUs as part or all of the full value component of LTI because our ability to issue grants that settle in stock is limited. Specifically, in 2005, the Compensation Committee made a commitment to our stockholders that until the end of 2007 we would not grant to employees an aggregate number of shares subject to options or other awards settled in stock greater than 2% per year, on average over the period, of the number of shares of common stock that the Compensation Committee reasonably believes will be outstanding at the end of each year. For periods prior to 2008, for purposes of calculating the number of shares awarded in one year, each stock option counts as one share of common stock and each share of restricted stock counts as four shares of common stock. The RSUs that we granted in 2005 and 2006 are settled in cash rather than in shares of common stock and, as a result, they were not included in calculating the overall annual 2% equity award limit. For 2007, we issued restricted stock to our NEOs and remained within the 2% commitment for the applicable period. Therefore, we did not grant any RSUs to our NEOs in 2007.

 

2007 LTI Targets

 

The Compensation Committee, at its April 12, 2007 meeting, established the target 2007 LTI awards for our NEOs. These LTI targets were determined after an analysis of the peer group data previously discussed. The 2007 target awards were expressed as a dollar amount, rather than a number of shares or options which had been the practice since 2003. The Compensation Committee determined it was more appropriate to use a dollar amount as a target, rather than a number of shares or options, so as to neutralize the impact of stock price volatility and permit our equity-based compensation to be budgeted with greater accuracy. The Compensation Committee views LTI as an essential component of annual compensation of our NEOs and, as a result, the committee does not consider prior grants when making current year determinations. The 2007 LTI targets for our NEOs were:

 

 

2007 LTI Performance Goals

 

In 2006, the Compensation Committee established the following three factors to evaluate performance for purposes of making LTI awards: (1) “total stockholder return” over various time periods, both on an absolute basis and relative to the Morgan Stanley REIT index, (2) development starts and investments over time and (3) “value creation” over time. In 2007, the Compensation Committee reviewed these LTI performance factors and determined that each was still appropriate for purposes of evaluating 2007 LTI grants. The Compensation Committee may review the goals again in 2008 if it believes it is warranted. Our LTI performance factors are neither absolute targets

nor are they applied in a formulaic manner. Rather, performance is evaluated across the three factors and over time. The Compensation Committee believes that the LTI performance factors are aggressive and appropriate given our business strategy and historic performance. The Compensation Committee, at its December 6, 2007 meeting, evaluated performance in 2007 against these factors as follows:

 

1. Total Stockholder Return.  Performance of our common stock was considered on both an absolute basis, as well as relative to the Morgan Stanley REIT index. To encourage management to focus on long-term strategy, the Compensation Committee considered performance over 1, 3, 5, 7 and 10-year intervals. Our stock price fell significantly in 2007 and “total stockholder return” on an absolute basis was uniformly below both our targets and against the Morgan Stanley REIT index.

 

2. Development Starts and Investments.  Our development starts and investments were reviewed for 2007 and for the 5-year period ended December 31, 2007. For 2007, the Compensation Committee considered that we had development starts and investments of approximately $356 million. For the 5-year period, the Compensation Committee considered that we had aggregate development starts and investments of approximately $1.755 billion. The level of development starts and investments for the 5-year period ending December 31, 2007 set records for us and for both the 5-year and for 12-month significantly exceeded the applicable long-term target amounts.

 

3. Value Creation.  Our “value creation” was evaluated for 2007 and over the 5-year period ended December 31, 2007. “Value creation” is the amount we realize upon the sale or other disposition of an asset, or the value given the asset upon its contribution to certain joint ventures, compared to our investment in the asset, without any adjustment for depreciation. We believe value creation is a core measure of our performance and is an essential component when evaluating management performance. During 2007, we only sold one asset, 3301 Windy Ridge Parkway, and realized value creation of 19%, or $2.494 million. Nevertheless, the Compensation Committee also considered that over the 5-year period ended December 31, 2007 we had an average of 39% overall value creation, totaling over $574 million.

 

Based on the foregoing, for 2007 the Compensation Committee granted LTI awards to our NEOs at 70% of the amount targeted for each NEO based on our average stock price over a 30-day period ending on November 30, 2007. The Compensation Committee determined that our high level of development starts and investments, combined with our value creation over the last real estate cycle, mitigated, but did not eliminate, the unfavorable total stockholder return performance relative to the applicable standards and indices. The Compensation Committee weighted the 2007 grants more heavily to options, making option grants at 100% of target and awarding full value awards, restricted stock to our NEOs, at 50% of target (with the resulting aggregate LTI value being 70% of target). The Compensation Committee determined to alter the weighting between full value and option awards because it felt that options would provide further incentive for management to increase total shareholder return. The grants to each NEO are set forth in the Grants of Plan Based Awards in 2007 and the Outstanding Equity Awards at 2007 Fiscal Year End tables below.

 

2008 LTI Targets

 

At a meeting held on February 18, 2008, the Compensation Committee established 2008 LTI targets for each of our NEOs as follows:

 

 

LTI Grant Practices

 

For at least the past 10 years, we have granted LTI awards to “key employees” (as defined in the 1999 Incentive Stock Plan) at a regularly scheduled meeting of the Compensation Committee in November or December of each

year, in anticipation of our fiscal year ending December 31 and at the same time as annual incentive cash awards are evaluated. We generally do not grant options to newly-hired employees. We do not have any program, plan or practice that coordinates the grant of equity awards with the release of material information.

 

Benefits and Perquisites

 

To remain competitive in the market, we provide certain benefits and perquisites to our NEOs. These include health, life and disability insurance premiums paid by us on behalf of our NEOs, certain club membership dues and contributions to our 401(k)/profit sharing plan. In addition, our CEO is permitted to use the Company aircraft for personal use, the cost of which is borne by us. We have also paid the travel expenses of our CEO, including the cost of using the Company aircraft, to attend meetings related to his service on boards of other companies. The Compensation Committee has reviewed the benefits and perquisites provided to our NEOs in 2007 and determined that they are appropriate. Additional information on the aggregate incremental cost to us of providing these benefits and perquisites to our NEOs in 2007 is shown in the Summary Compensation Table for 2007 below.

 

Stock Ownership Guidelines and Insider Trading Policy

 

Our Corporate Governance Guidelines include stock ownership guidelines for our executive officers. Generally, these guidelines require the executive officers to maintain ownership of our stock with a value equal to the following multiple of his or her base salary:

 

 

The guidelines are consistent with our belief that our executive officers’ interests should be aligned with those of our stockholders and our expectation that executive officers maintain a significant level of investment in our Company. The following count toward the executive officer stock ownership requirements:

 

 

Existing executives have five years from the adoption of the guidelines in 2006 to accumulate the required shares. New executives are allowed five years from the date of election, promotion to executive officer, or commencement of employment as an executive officer to accumulate the required shares. The Chairman of the Compensation Committee may approve exceptions to the guidelines from time to time as he or she deems appropriate.

 

Our insider trading policy does not permit trading in our securities on a short-term basis, purchases of our stock on margin, short sales or trading puts or calls with respect to our stock.

 

Severance Policy, Retirement and Change in Control Agreements

 

We provide severance benefits to all employees, including our NEOs, following termination of employment by us other than for “cause.” In general, the severance benefit payable is an amount equal to the employee’s weekly pay times the sum of the number of his or her full years of service plus four.

 

Our 1999 Incentive Stock Plan and our 2005 Restricted Stock Unit Plan generally provide for accelerated vesting of awards upon a “change in control.” However, under our 1999 Incentive Stock Plan, if the plan is

continued or assumed after the change in control, accelerated vesting occurs only in the event a participant’s employment is terminated for any reason (including voluntary resignation) during the 2-year period following the change in control. Our NEOs participate in the 1999 Incentive Stock Plan and 2005 Restricted Stock Unit Plan on the same terms as our other key employees. The Compensation Committee believes that the accelerated vesting of outstanding equity awards following a change in control is a customary and reasonable component of an equity incentive program.

 

In general, an employee will forfeit any unvested LTI grants upon termination of employment for any reason other than following a change in control. However, stock options and RSUs (excluding performance conditioned RSUs) vest upon retirement of the employee if the employee is at least 60 years of age and the sum of the employee’s whole years of age plus whole years of service equals at least 65 (collectively, the “Rule of 65”). The Rule of 65 does not apply to restricted stock awards. The Compensation Committee adopted the Rule of 65 to provide a further incentive for long-term employment, as well as to recognize that options and RSUs are part of annual compensation and if an employee retired after satisfying certain age and service requirements then he or she should get the benefit of outstanding options and RSUs. The Compensation Committee did not adopt the Rule of 65 for restricted stock grants because it would result in adverse tax consequences to the recipient.

 

In addition, each of our NEOs is a party to a Change in Control Severance Agreement (the “Severance Agreement”), which provides the NEOs with an additional severance benefit in the event that his employment is terminated under certain circumstances following a “change in control.” The Compensation Committee approved the Severance Agreements at its meeting on August 13, 2007 meeting. The committee received input from Towers Perrin regarding the competiveness of the benefits provided to each NEO under the Severance Agreements. The Compensation Committee believes that the cash severance and other benefits provided to each NEO pursuant to his Severance Agreement is a customary and reasonable component of a plan to keep our NEOs focused on the interests of the stockholders in the event of a potential strategic transaction. The amount of the estimated payments to each NEO assuming retirement, severance or a change in control and a qualifying termination of employment as of December 31, 2007 are set forth in Potential Payments Upon Termination, Retirement or Change in Control table below.

 

Tax Implications of Executive Compensation

 

Our aggregate deductions for compensation paid to certain executive officers during 2007 was limited by Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), primarily because our compensation elements generally are not considered “paid under a predetermined objective performance plan” meeting certain requirements, and, in addition, did not meet other exceptions that would permit a deduction. The exception to this treatment is compensation resulting from the exercise of stock options, which qualify for a deduction. While we are mindful of the impact of the deduction limitation, we feel that the compensation was structured in an appropriate manner. In light of our current pay levels and practices applicable to NEOs, the tax deduction limitation of Section 162(m) does not, in the aggregate, have a material impact on our financial results.

 

The Compensation, Succession, Nominating and Governance Committee is responsible for, among other things, setting and administering the policies that govern executive compensation, establishing the performance goals on which the compensation plans are based and setting the overall compensation principals that guide the committee’s decision-making. The Compensation, Succession, Nominating and Governance Committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on the review and the discussions with management, the Compensation, Succession, Nominating and Governance Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 2008 proxy statement for filing with the Securities and Exchange Commission.

 

COMPENSATION, SUCCESSION, NOMINATING
AND GOVERNANCE COMMITTEE

 

William Porter Payne, Chairman

Erskine B. Bowles

James D. Edwards

James H. Hance, Jr.

William B. Harrison, Jr.

 

The foregoing report should not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934 (the “Acts”), except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed filed under the Acts.

 

The following table sets forth information concerning total compensation for our NEOs for 2007 and 2006.

 

 

 

 

		Profit Sharing Plan				Life Insurance
Name		Contribution				Premiums				Perquisites
Thomas D. Bell, Jr.		$	22,500			$	1,290			$	231,786
Daniel M. DuPree		$	22,500			$	1,320			$	25,000
James A. Fleming		$	22,500			$	450				—
Larry L. Gellerstedt III		$	22,500			$	690				—
Joel T. Murphy		$	22,500			$	450				—

 

We maintain a Profit Sharing Plan for the benefit of all eligible employees. The annual contribution is determined by the Compensation Committee and is allocated among eligible participants. During the first three years of a participant’s employment, contributions vest ratably each year. After a participant has three years of service, all contributions are fully vested. Vested benefits are generally paid to participants upon retirement, but may be paid earlier in certain circumstances, such as death, disability or termination of employment.

 

For Mr. Bell, perquisites include $135,477 for the aggregate incremental cost of his personal use of the Company aircraft. We calculate the aggregate incremental cost for personal use of the aircraft by taking total variable costs, which include parts, repairs, maintenance and fuel, and dividing by total yearly engine hours to establish a per-hour rate. This rate is then multiplied by flight hours for personal flights. In addition, perquisites include $46,309 for the aggregate incremental cost associated with repositioning the aircraft in connection with Mr. Bell’s personal use of the aircraft. The table does not include $5,733 for the aggregate incremental cost of his use of the Company aircraft to attend meetings of the board of directors of other companies on which he serves. Perquisites also include a $50,000 discount on the purchase of a lot at one of our residential developments.

 

For Mr. DuPree, perquisites include a $25,000 discount on the purchase of a lot at one of our residential developments.

 

We did not provide perquisites to the other NEOs that are above the reporting threshold.

 

 

The following table sets forth information with respect to grants of plan-based awards to each of our NEOs during 2007.

 

 

 

 

The following table sets forth information with respect to all outstanding option and stock awards for each of our NEOs on December 31, 2007.

 

 

 

 

 

The following table sets forth information concerning the amounts realized upon the exercise of options and the vesting of stock, including RSUs, during 2007 by each of our NEOs.

 

 

 

 

		Shares of
Name		Restricted Stock				RSUs(A)
Thomas D. Bell, Jr.			18,225				11,300
Daniel M. DuPree			9,846				4,825
James A. Fleming			2,477				1,606
Larry L. Gellerstedt III			662				2,187
Joel T. Murphy			6,034				2,412

 

 

 

We provide severance benefits to our NEOs as described in “Severance Policy, Retirement and Change in Control Agreements” above. In 2007, we entered into Severance Agreements with our NEOs. In the event that (1) a “change in control” occurs and (2) during the 2-year period thereafter, the NEO’s employment is terminated without “cause” (discussed below) or the NEO resigns for “good reason” (discussed below), then the NEO will be paid the amount described herein. The severance benefit is payable in a lump sum six months and one day after termination. For Mr. Bell, we have agreed to pay an amount equal to 2.99 times the sum of annual base salary plus the average of cash bonuses for the three years prior to the change-in-control. For Messrs. DuPree, Fleming, and Murphy, we have agreed to pay an amount equal to 2.00 times the sum of annual base salary plus the average of cash bonuses for the three years prior to the change-in-control. For Mr. Gellerstedt, we have agreed to pay an amount equal to 2.00 times the sum of annual base salary plus the average of cash bonuses for the two years prior to the change-in-control, as Mr. Gellerstedt was not eligible for bonuses in 2004 and 2005.

 

For purposes of determining the benefit, “annual base salary” is the NEO’s annual base salary in effect on the day before the NEO’s employment with the Company terminates in connection with the change in control. The “average bonus” is the sum of the annual bonuses that were paid by the Company to the NEO during the three years immediately prior to the date the NEO’s employment with the Company terminates in connection with the change in control, divided by the number of bonuses the NEO was eligible to receive during such period. The table below assumes a triggering event of December 31, 2007. The annual base salary is the salary in effect for 2007 and the average bonus is based on bonuses paid in 2004, 2005, and 2006 (unless otherwise noted). Neither the annual base salary nor the average bonus include the value of any stock option, restricted stock or RSU grants made to the NEO, or any dividends, or dividend equivalents, paid with respect thereto, in any calendar year, or any income realized by the NEO in any calendar year as a result of the exercise of any such stock options or the lapse of any restrictions on such restricted stock or RSUs.

 

The other terms and benefits of each Severance Agreement is substantially identical and are summarized as follows:

 

 

 

 

 

 

 

 

 

The following table shows the potential payments to the NEOs upon a termination of employment under various scenarios, assuming that the triggering event occurred on December 31, 2007. The table does not include a severance benefit payable generally to all salaried employees following termination of employment other than for cause, in an amount equal to the employee’s weekly pay times the sum of the number of his or her full years of service plus four. In addition, the table also does not include the value of equity awards that are already vested, as described in the compensation tables earlier in this proxy statement.

 

 

 

 

 

In 2007, each non-employee Director was paid:

 

 

The chairman of the Audit Committee and the chairman of the Compensation, Succession, Nominating and Governance Committee each receives an additional annual retainer of $10,000 for his service as chairman of the committee.

 

On March 31 of each year, each non-employee Director that has served for the 10 consecutive months immediately prior to March 31 receives an annual grant of options to purchase 6,000 shares of common stock under the 1999 Incentive Stock Plan and an annual grant to each non-employee Director of restricted stock or RSUs with a value of $20,000 on the date of grant. In 2007, the option and RSU grant was made on March 31, 2007.

 

In addition, when a non-employee Director is first elected to our Board, the new Director receives a grant of options to purchase 6,000 shares of common stock under the 1999 Incentive Stock Plan. These options have a term of 10 years, are exercisable upon grant and have an exercise price equal to the closing price of our common stock on the date of grant.

 

Mr. Cousins retired from our Board and was named Chairman Emeritus in December 2006. In this role, he is invited to attend Board meetings, but does not have the right to vote as a Director and does not receive any compensation from the Company.

 

Mr. Bell did not receive any compensation for serving as a Director in 2007.

 

The following table shows the amounts paid to our Directors in 2007, except for Mr. Bell. Mr. Bell’s compensation is disclosed in the Summary Compensation Table for 2007 that appears earlier in the proxy statement.