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

Check the appropriate box:

REALTY INCOME CORPORATION
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

April 1, 2019

Dear Stockholder:

You are cordially invited to attend our 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 9:00 a.m., Pacific Time on May 14, 2019 at the San Diego Marriott Del Mar, 11966 El Camino Real, San Diego, California 92130. The business that will be conducted at the Annual Meeting is described in the Notice of the 2019 Annual Meeting of Stockholders and Proxy Statement.

Our company completed another year of strong operating performance in 2018, delivering favorable risk-adjusted returns for our stockholders. Stockholders who owned our stock for the duration of 2018 realized total shareholder return (“TSR”) of 15.9% assuming reinvestment of dividends, ranking in the 96th percentile of the MSCI US REIT Index and providing the highest TSR of any S&P 500 REIT. During the year, we received our second ‘A’ credit rating, and we recast and expanded our unsecured credit facility to $3.25 billion, which provides us with ample liquidity and flexibility to execute on our strategic initiatives. We continue to invest selectively in high-quality real estate, fund our investment activity with well-priced permanent and long-term capital, and actively manage our portfolio to maximize long-term value.

As The Monthly Dividend Company^®, we remain committed to our mission of providing our stockholders with dependable monthly dividends that increase over time. During 2018, we paid twelve monthly dividends and increased the dividend per share by 4.1% over 2017. I would like to thank our team for their continued hard work and dedication in achieving our mission, and our Board of Directors for their continued support and guidance. We are excited about the current position of the company and remain committed to continuing to responsibly manage your company as prudent stewards of your capital.

We encourage you to review the information contained in the Proxy Statement. It is meant to provide an overview of the company’s achievements during the year, including information on the company’s compensation program and enhancements to our corporate governance practices. After your review, we hope that you will vote at the meeting (either in person or by proxy) in accordance with the Board of Directors’ recommendations.

Your vote is important to us and we appreciate your continued support of our company.

Sincerely,

Sumit Roy
President, Chief Executive Officer
Director, Board of Directors

Notice of the 2019
Annual Meeting of Stockholders

NOTICE IS HEREBY GIVEN that the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Realty Income Corporation, a Maryland corporation (the “company”), will be held as follows:

RECORD DATE: You may vote if you were a holder of record of our shares of common stock, par value $0.01 per share, at the close of business on March 14, 2019.

ITEMS OF BUSINESS:

The Proxy Statement following this Notice describes these matters in detail. We have not received notice of any other proposals to be presented at the Annual Meeting. At the Annual Meeting, management will report on the current activities of the company and comment on its future plans. A discussion period is planned so that stockholders will have an opportunity to ask questions and make appropriate comments. All presentation materials shared at the Annual Meeting will be made available on the company’s website at www.realtyincome.com/annual-reports-proxy.

PROXY VOTING: Your vote is important. Whether or not you plan to attend our Annual Meeting, we urge you to submit your proxy as soon as possible to ensure your shares are represented and voted at our Annual Meeting. You may authorize a proxy to vote your shares by telephone, via the Internet, or—if you have received and/or requested paper copies of our proxy materials by mail—by signing, dating and returning the proxy card in the envelope provided. If you attend the Annual Meeting, you may, if you wish, withdraw your proxy and vote in person.

No person is authorized to make any representation with respect to the matters described in this Proxy Statement other than those contained herein and, if given or made, such information or representation must not be relied upon as having been authorized by us or any other person.

You are encouraged to read this Proxy Statement in its entirety before voting or authorizing a proxy to vote on your behalf.

By Order of the Board of Directors,

Michael R. Pfeiffer
Executive Vice President, Chief Administrative Officer, General Counsel and Secretary
April 1, 2019

Table of Contents

Proxy Summary

The Board of Directors (or, the “Board” or, “Board of Directors”) of Realty Income Corporation, a Maryland corporation (the “company”), is soliciting proxies for the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) and any postponement or adjournment of the Annual Meeting. This Proxy Summary provides an overview of the proposals to be considered and voted on at the Annual Meeting and information contained in the Proxy Statement, but does not contain all of the information that should be considered before voting. We encourage you to read the Proxy Statement in its entirety before voting.

How to Vote

On or about April 1, 2019, we will mail or e-mail a copy of our Notice of 2019 Annual Meeting of Stockholders, Proxy Statement, proxy card, and 2018 Annual Report (collectively “Proxy Materials”) to our stockholders according to their previously indicated preference. Some of our stockholders will be mailed a Notice of Availability of Proxy Materials, which contains instructions on how to request and receive a paper or e-mailed copy of our Notice of 2019 Annual Meeting of Stockholders, Proxy Statement and 2018 Annual Report, and how to view these materials online. All methods of correspondence will provide stockholders with instructions on how to vote or authorize a proxy to vote using any of the following methods:

Beneficial Stockholders: If your shares of common stock are held by a bank, broker or other holder of record, please follow the instructions you receive from your bank, broker or other nominee on how to vote your shares of common stock at our Annual Meeting.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 14, 2019: This Proxy Statement and our 2018 Annual Report are available on our website at www.realtyincome.com/investors/financial-information/annual-reports-and-proxy. You can also view these materials at www.proxyvote.com by using the control number that is provided to you either on your proxy card, in your e-mailed Proxy Materials, or on your Notice of Availability of Proxy Materials. You are encouraged to access and review all of the information contained in the Proxy Materials before voting.

Proposal Guide

Performance Highlights

We achieved another year of positive earnings growth in 2018 as measured by Adjusted Funds from Operations (AFFO) per share that allowed us to continue to pay dependable monthly dividends that increase over time.

Our focus on providing dependable monthly dividends that increase over time helps drive strong total shareholder return (“TSR”) performance.

Executive Compensation Highlights

We believe our performance demonstrates the effectiveness, over time, of the execution of our strategic business plan, and the alignment of our compensation program with our philosophy to reward executives for enhancing long-term stockholder value. Our compensation program focuses on pay-for-performance principles that are linked to short-term and long-term financial and operational metrics, including relative TSR. The following are the two primary components of the 2018 plan:

Under both the STIP and LTIP programs, no compensation is awarded for below-threshold performance and maximum payouts were capped at 200% of target. All of the compensation awarded under the programs is at risk. On October 16, 2018, the Board of Directors elected Sumit Roy, the company’s former President and Chief Operating Officer, as the company’s Chief Executive Officer (our “CEO”) and as a member of the Board, succeeding John P. Case (our “Former CEO”). Approximately 72% of our CEO’s total target direct compensation for the 2018 performance year consisted of compensation that was at risk based on the achievement of certain performance metrics. Salary and time-based equity awards made up the remaining 28% of our CEO’s compensation.

Corporate Governance Highlights

We remain committed to managing the company for the benefit of our stockholders and maintaining good corporate governance practices. In 2018 and in early 2019, we further enhanced our corporate governance practices by:

Further, we are seeking approval from our stockholders in this Proxy Statement to ratify the company’s Bylaws, which permit stockholders to propose binding amendments to the company’s Bylaws, as more fully described on page 9.

In addition to these enhancements, we continue to uphold the following features of our corporate governance practices to maintain the company’s reputation for integrity and serving its stockholders responsibly:

Stockholder Engagement During 2018

We believe engaging with our stockholders on an ongoing basis is important to understand what is important to them and ensure best practices. In addition to maintaining active communication with stockholders throughout the year, we engage with stockholder governance teams annually in anticipation of each Annual Meeting.

Proposals

Proposal 1 - Election of Directors

Our Board of Directors currently consists of ten directors. Stephen E. Sterrett has chosen not to stand for re-election to our Board of Directors at the Annual Meeting. Accordingly, our Board of Directors intends to reduce its size to nine directors, to be effective upon the commencement of the Annual Meeting. Based on the recommendation of our Nominating/Corporate Governance Committee, our Board of Directors has nominated the following current nine directors, who we believe contribute the breadth and diversity of knowledge and experience necessary for the advancement of our business strategies and objectives, for re-election at the Annual Meeting, each to serve for a one-year term expiring at our annual meeting of stockholders in 2020, and until their respective successors have been duly elected and qualify:

For more information regarding our nominees, please see the “Board of Directors and Corporate Governance” section of this Proxy Statement beginning on page 11.

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” EACH OF THE NOMINEES LISTED ABOVE.

Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm

The Audit Committee of our Board of Directors has appointed KPMG LLP as the independent registered public accounting firm to audit our consolidated financial statements and internal control over financial reporting for the year ending December 31, 2019. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will be provided an opportunity to make a statement if the representatives desire to do so. The representatives are also expected to be available to respond to appropriate questions.

Although ratification by our stockholders is not a prerequisite to the power of the Audit Committee to appoint KPMG LLP as our independent registered public accounting firm, our Board of Directors and the Audit Committee believe such ratification to be advisable and in the best interest of the company. Accordingly, stockholders are being requested to ratify, confirm, and approve the appointment of KPMG LLP as our independent registered public accounting firm to conduct the annual audit of our consolidated financial statements and internal control over financial reporting for the year ending December 31, 2019. If the stockholders do not ratify the appointment of KPMG LLP, the appointment of an independent registered public accounting firm will be reconsidered by the Audit Committee; however, the Audit Committee has no obligation to change its appointment based on stockholder ratification. If the appointment of KPMG LLP is ratified, the Audit Committee will continue to conduct an ongoing review of KPMG LLP’s scope of engagement, pricing and work quality, among other factors, and will retain the right to replace KPMG LLP at any time.

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP.

Proposal 3 - Advisory Vote to Approve the Compensation of Our Named Executive Officers

Our Board of Directors has adopted a policy of providing for annual “say-on-pay” advisory votes. In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and as a matter of good corporate governance, we are asking our stockholders to vote on a non-binding, advisory basis to approve the compensation paid to our named executive officers, as described in the Compensation Discussion and Analysis and the executive compensation tables narrative that follow.

In an effort to align the interests of management with those of our stockholders, our compensation program focuses on pay-for-performance principles that are linked to short-term and long-term financial and operational metrics, including relative TSR. Our compensation mix rewards the continued performance of the company, encourages a disciplined approach to management, and maintains focus on the creation of long-term value for our stockholders. We believe this structure is competitive and allows us to attract, motivate, and retain highly qualified executive officers.

In connection with reviewing our compensation program and the 2018 compensation paid to our named executive officers, it is important to consider the company’s excellent performance results achieved during 2018 as well as our long-term TSR performance. During the 3-year performance period ending December 31, 2018, our TSR outperformed the MSCI US REIT Index and the Nareit Freestanding Index. These performance results are discussed in detail in the “Executive Compensation” section beginning on page 28.

Based on the company’s performance in 2018, our named executive officers were awarded compensation in accordance with our STIP and LTIP, in addition to a fixed compensation component. All of the compensation awarded under the 2018 STIP and LTIP is at risk, and not guaranteed and based on the following performance metrics:

The performance hurdles and weightings for each program are determined by the Compensation Committee in consultation with its independent compensation consultant. This structure effectively links the compensation awarded to our executives to the achievement of the company’s financial and strategic goals. The independent members of our Board of Directors believe that the performance-based structure of our compensation program, as summarized above and detailed in the “Executive Compensation” section beginning on page 28, allows the company to attract and retain talented executives while aligning their interests with the best interests of the company to support long-term value creation for the benefit of stockholders. Unless our Board of Directors modifies its determination on the frequency of future “say-on-pay” advisory votes, the next vote will be held at the annual meeting of stockholders in 2020.

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL ON A NON-BINDING ADVISORY BASIS OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

Proposal 4 - Amendment of the Charter to Increase the Number of Authorized Shares of Common Stock

On March 12, 2019, our Board of Directors approved and declared advisable an amendment to our Charter that increases the number of authorized shares of common stock from 370,100,000 to 740,200,000. The proposed amendment is subject to approval by our stockholders. As of March 14, 2019, 303,800,262 shares of our common stock were issued and outstanding. As of December 31, 2018, (i) 303,742,090 shares of our common stock were issued and outstanding, (ii) 238,360 shares of our common stock were subject to outstanding equity awards, which include RSUs and potential awards under our LTIPs, assuming the issuance of shares based on target performance, (iii) 1,031,604 shares of our common stock were reserved for future issuance under our 2012 Stock Incentive Award Plan, (iv) 11,770,190 shares of our common stock were reserved for future issuance under our Dividend Reinvestment and Stock Purchase Plan, and (v) 20,453,861 shares of our common stock were reserved for future issuance under our current ATM equity distribution plan. If the amendment is approved, it will become effective upon the filing of the Articles of Amendment to our Charter with, and acceptance for record by, the State Department of Assessments and Taxation of Maryland.

Our Board of Directors has determined that it is advisable and in the best interests of the company and our stockholders to amend the Charter in order to have available additional authorized but unissued shares of common stock in an amount adequate to provide for our future needs, which may include possible future equity financings, future opportunities for expanding our business through investments or acquisitions, management incentives and employee benefit plans, stock dividends or stock splits, and for other general corporate purposes. If our stockholders do not approve this proposal, we believe that we may be substantially limited in our ability to advance our operational and future strategic plans, including our ability to access the capital markets, finance the acquisition and development of properties, complete corporate collaborations, partnerships or other strategic transactions, attract, retain and motivate employees, and pursue other business opportunities integral to our growth and success.

The company’s issuance of shares of common stock, including the additional shares that will be authorized if this proposal is approved by stockholders, may dilute the equity ownership position of current holders of common stock and may be made without stockholder approval, unless otherwise required by applicable law or the New York Stock Exchange (the “NYSE”).

If our Board of Directors were to increase the number of issued shares of common stock, it could have an anti-takeover effect, although this is not the intent of our Board of Directors in proposing the amendment. For instance, our authorized but unissued common stock could be issued in one or more transactions that would make a change in control of our company more difficult or costly, and less likely. As of the date of this Proxy Statement, we are not aware of any attempt or plan to obtain control of us.

The holders of our common stock have no preemptive rights, and our Board of Directors has no plans to grant such rights with respect to any such shares.

The full text of the amendment to Section 6.1 of Article VI of the Charter is attached as Appendix A to this Proxy Statement on page 69, and is incorporated by reference into this proposal.

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE AMENDMENT OF THE CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.

Proposal 5 – Advisory Vote to Ratify the Amendment to the Company’s Bylaws to Permit Stockholders to Propose Binding Amendments to the Company’s Bylaws

On March 13, 2018, our Board of Directors amended and restated our Bylaws to permit the stockholders of the company to amend our Bylaws directly (i.e. without the approval of the Board of Directors) pursuant to (a) a binding proposal submitted by any stockholder or group of up to five stockholders holding in the aggregate at least one percent of the outstanding shares of our common stock continuously for at least one year (the “Bylaw Amendment Provision”) and (b) thereafter approval by the affirmative vote of the holders of a majority of the outstanding shares of our common stock. A copy of the Bylaw Amendment Provision is attached as Appendix B to this Proxy Statement on page 70 and is incorporated by reference into this proposal.

The Board of Directors is voluntarily submitting this Bylaw Amendment Provision for stockholder consideration on a non-binding advisory basis because it believes it is important to provide our stockholders with an opportunity to provide direct input on such an amendment.

As permitted by Maryland law, our Board of Directors had the exclusive power to amend our Bylaws prior to the adoption of the Bylaw Amendment Provision. In connection with its regular review of the company’s corporate governance practices, the Nominating/Corporate Governance Committee considered whether amending our Bylaws to grant stockholders a concurrent power to amend our Bylaws was in the best interests of the company. A majority of Maryland-formed, exchange-listed real estate investment trusts (“REITs”), approximately 90 companies, have made no changes to their bylaws on this issue and approximately 60 have taken some action to provide some power to their stockholders to amend the bylaws.

After careful consideration of this matter and in light of the considerations discussed in more detail below, the Nominating/Corporate Governance Committee and the Board of Directors concluded that the adoption of the Bylaw Amendment Provision strikes an appropriate balance between enhancing stockholder rights and adequately protecting the best interests of the company and all stockholders.

The Board of Directors recognizes that allowing any stockholder the right to submit binding proposals to amend our Bylaws is viewed by some as an important stockholder right. However, consistent with the Board of Director’s duties under Maryland law, the Board of Directors believes it is not in the interest of the company to allow a single stockholder, without a meaningful equity stake in the company or with shares owned for only a brief period of time, to submit binding proposals to amend our Bylaws.

Stockholders are already permitted to submit non-binding proposals. The company’s stockholders have had, and will continue to have, the right to submit non-binding (precatory) proposals to amend our Bylaws or take other action pursuant to Rule 14a-8 of the Exchange Act, which requires stockholder proponents to own at least $2,000 of shares of common stock (which is the equivalent of approximately 0.00001% of the outstanding shares of our common stock) for one year. If a non-binding proposal were to receive majority support, it would be the intention of our Board of Directors to consider and respond to the input of our stockholders.

Board actions are informed by stockholder input. Throughout the year, we communicate extensively with the company’s stockholders and other stakeholders on topics ranging from financial and operational performance to corporate governance matters. This stockholder dialogue has been immensely valuable and informed changes, such as the Board of Directors’ action in March 2018 to amend and restate the Bylaws to permit the company’s stockholders to amend the Bylaws as detailed in Appendix B, as well as providing direct Board oversight on matters relating to environmental and social considerations.

Historically, the company’s stockholders have not expressed a concern to management or the Board of Directors about not having the concurrent power to amend our Bylaws. In addition, the company has never received a stockholder proposal on this issue. During 2018, we specifically sought stockholder input on the Bylaw Amendment Provision, engaging with holders of approximately 30% of our outstanding shares of common stock on this topic, with our Chairman participating in meetings with stockholders owning 23%. While stockholder views differed on the appropriate ownership threshold for submission of a proposed Bylaw amendment, nearly all stockholders we consulted supported the concept of requiring some meaningful threshold, expressed support for the prior amendment to the Bylaws, and encouraged us to submit the Bylaw Amendment Provision to all stockholders for consideration.

Accordingly, after careful consideration of this matter and in recognition of feedback received from stockholders, the Nominating/Corporate Governance Committee and the Board of Directors each concluded that the adoption of the Bylaw Amendment Provision achieves an appropriate balance between enhancing stockholder rights and adequately protecting the best interests of the company and all stockholders. If the Bylaw Amendment Provision is not ratified by stockholders at the Annual Meeting, we intend to re-engage with our stockholders, and bring any feedback received to the full Board of Directors for discussion, and the Nominating/Corporate Governance Committee and the Board of Directors will reconsider our approach to the Bylaw Amendment Provision. Although this proposal is advisory and non-binding, it is the Nominating/Corporate Governance Committee’s and the Board of Directors’ objective to ensure action on our Bylaw Amendment Provision is informed by stockholder dialogue and designed to protect and maximize long-term value for all stockholders.

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION ON A NON-BINDING ADVISORY BASIS OF THE AMENDMENT TO THE COMPANY’S BYLAWS.

Board of Directors and Corporate Governance

Director Nominees

The Board of Directors has nominated the following nine current directors, identified below, for re-election at the Annual Meeting, each to serve for a one-year term expiring at our annual meeting of stockholders in 2020, and until their respective successors are duly elected and qualify. Stephen E. Sterrett has chosen not to stand for re-election at the Annual Meeting. The information presented below highlights each director nominee’s specific experience, qualifications, attributes, and skills that led our Board of Directors to the conclusion that he or she should serve as a director. We believe that all of our director nominees have a reputation for integrity, honesty, and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to Realty Income and our Board of Directors. We also value the additional perspective that comes from serving on other companies’ boards of directors and board committees. We continue to review the composition of the Board of Directors in an effort to assemble a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in various areas. Since our last annual meeting of the stockholders in 2018, we added two new directors, Reginald H. Gilyard and Gerardo I. Lopez, to the Board of Directors, and Sumit Roy joined our Board of Directors upon his election as Chief Executive Officer in October 2018. We believe these new additions to our Board of Directors have expanded our Board of Director’s diversity of composition, thought and experience, and has provided our Board of Directors with fresh perspectives.

Kathleen R. Allen, Ph.D.   Age: 73 Director Since: 2000 Committees: Audit Independent: Yes	Experience
	Kathleen R. Allen, Ph.D. is Professor Emerita at the Marshall School of Business and the founding director of the Center for Technology Commercialization at the University of Southern California (1991-2016). She was the co-founder and chairwoman of Gentech Corporation (1994-2004) and in 2006 co-founded and became the Chief Executive Officer and served on the board of directors of N2TEC Institute, a nonprofit company focused on technology commercialization in rural America, until it completed its mission in 2013. Dr. Allen has co-founded four private companies, is currently a principal and on the board of directors of a real estate investment and development company, and serves on the board of advisors for two life science companies. She was a Visiting Scholar at the Department of Homeland Security, where she advised on issues related to technology deployment, including cybersecurity. She is the author of 15 books in the field of entrepreneurship and technology commercialization, a field in which she is considered an expert.
	Qualifications
	As a distinguished businesswoman, entrepreneur, and consultant, Dr. Allen has helped our Board of Directors identify and assess the risks associated with new endeavors. She has also worked with many early-growth and established companies to develop effective leadership and team-building skills. With her years of experience in risk management in the areas of business models, investment opportunities, and technology, Dr. Allen brings to the Board of Directors achievement in strategic business planning, which is a key part of our growth strategy.

Committees of the Board

Our Board has three standing committees that perform certain delegated functions of the Board: the Audit Committee, the Compensation Committee, and the Nominating/Corporate Governance Committee. Until December 31, 2018, the Board also had one special purpose committee, the Technology Risk Committee, which provided governance and oversight of the possible risks associated with the company’s technology, information systems, and migration to a new enterprise resource planning system during January 2018. Each committee is composed entirely of independent directors within the meaning of our director independence standards, which reflect the NYSE director independence standards and the audit committee requirements of the SEC.

Each committee operates under a written charter, all of which were reviewed by their respective committees during 2018. Our Nominating/Corporate Governance Committee updated its charter in February 2018 and the Corporate Governance Guidelines in February 2019. Our Board may, from time to time, establish certain other committees to facilitate oversight over the management of the company. The charters of each of our standing committees are available on our company’s website: www.realtyincome.com/investors/corporate-governance/board-committees.

Corporate Governance

We believe a company’s reputation for integrity and serving its stockholders responsibly is of critical importance. We are committed to managing the company for the benefit of our stockholders and are focused on maintaining good corporate governance.

Corporate Governance Guidelines

Our company has adopted Corporate Governance Guidelines, which were updated in February 2019, that promote the functioning of the Board of Directors and its committees and set forth expectations as to how the Board of Directors should operate. The guidelines include information about the composition of the Board of Directors, orientation and continuing education, director compensation, Board meetings, Board committees, management succession, evaluation and compensation of key executive officers (which includes all named executive officers), expectations of directors, and information regarding the annual performance evaluation of the Board of Directors. A current copy is available on our company’s website at www.realtyincome.com/investors/corporate-governance.

Code of Business Ethics

Anti-Hedging and Anti-Pledging Policy

To ensure proper alignment with our stockholders, we have established policies that prohibit our directors, officers, other employees, and their family members from engaging in any transaction that might allow them to realize gains from declines in our securities. Specifically, we prohibit our directors, officers, employees, and their family members from engaging in transactions using derivative securities, short selling our securities, trading in any puts, calls or covered calls, writing purchase or call options and short sales, or otherwise participating in hedging, “stop loss,” or other speculative transactions involving our securities. In addition, margin purchases of our securities and pledging any of our securities as collateral to secure loans is prohibited. This prohibition means that our directors, officers, employees, and their family members cannot hold our securities in a “margin account” nor can they pledge any of our securities for any loans or indebtedness.

Clawback Policy

Our Board of Directors has voluntarily adopted a formal clawback policy that applies to outstanding awards and will apply to future awards. Our clawback policy provides that the company may recover certain cash and/or equity-based incentive compensation paid or granted to an executive officer during the three-year period preceding a “triggering event.” A “triggering event” includes:

The requirement to repay the incentive compensation that is recoverable under this policy shall only exist if the Board of Directors has actively taken steps to evaluate restating the financials or operating results, or recalculating other associated metrics prior to the end of the fifth year following the year in question. The company will not be bound by the three-year recoupment period or this five-year limitation in cases involving fraud or intentional misconduct. As applicable SEC regulations are adopted, we will reassess our clawback policy and implement appropriate changes to ensure that our policy is fully compliant with SEC regulations.

Company Culture and Employees

We put great effort into cultivating an inclusive company culture. We are one team, and together we are committed to a culture that provides an engaging work environment and encourages respect, collaboration, humility, transparency, and integrity. Regular open communication is central to how we work, and our employees take pride in our 50-year history of providing monthly dividends to our stockholders. We hire talented employees with diverse backgrounds and perspectives, and work to provide an environment where capable team members have fulfilling careers in the real estate industry. We invest in our employees development and training, providing access to online learning, a mentorship program, and a leadership development program.

Environmental, Social and Governance Oversight

In connection with internal assessments and stockholder engagement, we prioritize environmental, social and governance (“ESG”) initiatives that matter most to our business and stockholders. Our areas of focus include the following:

Social Responsibility and Ethical Standards

We are committed to providing a positive and engaging work environment for our employees and taking an active role in the betterment of the communities in which our employees live and work. Our employees are awarded compensation that is in line with those of our peers and competitors, including generous healthcare benefits (medical, dental, vision) for all employees and their families, participation in a 401(k) plan with a matching contribution from the company, restricted stock awards based on company performance, competitive paid time-off benefits, a well-being program, continued education and development opportunities, up to 16 weeks of paid maternity leave, and an infant-at-work program for new parents. We also have a long-standing commitment to being an equal opportunity employer and adhere to all Equal Employer Opportunity Policy guidelines.

We believe that giving back to our community is an extension of our mission to improve the lives of our stockholders, our employees, and their families. The company and its employees have taken an active role in supporting communities through civic involvement with non-profit organizations and corporate donations. Our non-profit activities resulted in approximately 810 company-sponsored employee volunteer hours in 2018, principally through our partnership with San Diego Habitat for Humanity. We are proud of the efforts we have

made to date and look forward to continuing to strengthen our impact as part of the successful operations of The Monthly Dividend Company^®.

Environmental Responsibility

We place a high priority on the protection of our assets, communities, and the environment. Based on our business model, the properties in our portfolio are primarily net leased to our tenants, and each tenant is generally responsible for maintaining the buildings, including controlling their energy usage and the implementation of environmentally sustainable practices at each location.

Activities at our Headquarters

Our focus on environmental responsibility is demonstrated by how we manage our day-to-day activities at our corporate headquarters. Our headquarters was retrofitted according to the State of California energy efficiency standards (specifically following California Green Building Standards Code and Title 24 of the California Code of Regulations). We promote energy efficiency with features such as an automatic lighting control system with light-harvesting technology, a building management system that monitors and controls energy use, an energy-efficient PVC roof and heating and cooling system, LED lighting, and also by encouraging practices such as powering down office equipment at the end of the day, implementing file-sharing, adopting an electronic approval system, and encouraging a paperless environment.

Water conservation practices are important to the San Diego, California region. We partner with a leader in wireless, real-time irrigation for precise water management. This increase in water efficiency coupled with drought-tolerant landscaping helps us minimize water usage at our corporate headquarters. With the goal of lowering the carbon footprint of our employees’ day-to-day operations, we partner with two meal delivery services, provide on-site dry-cleaning services, and encourage carpooling to our headquarters.

We implement waste diversion strategies focusing on recycling paper waste, batteries, and light bulbs, adoption of compostable break room products, reduction of single-use petroleum products, and recycling education. The company also recycles or donates cell phones, wireless devices, and office equipment whenever possible. In 2018, we sent more than 28,500 pounds of paper to our off-site partner for recycling.

Realty Income also has an internal “Green Team” that encourages our employees to focus on environmentally-smart choices to further reduce our environmental impact as a company. The Green Team, which includes executive and officer-level employees, works to positively impact the environment through education and engagement within the company and local communities, focusing on waste, energy, and water management.

Activities within our Portfolio

Many of our tenants demonstrate focus on positive environmental and social impacts through their comprehensive Corporate Responsibility programs. We support their operations and work with them to promote environmental responsibility at the properties we own and to reiterate the importance of energy efficient facilities.

In 2018, we initiated engagement with our top 20 tenants based on revenue (representing over 50% of our annualized rental revenue) to better understand the strategic sustainability decisions being made in the operations of our properties. This ongoing dialogue confirms the long-term goal we share with our tenants to reduce the negative environmental effects of our portfolio.

Our Asset Management and Real Estate Operations team engages with renewable energy development companies to identify assets that would maximize energy efficiency initiatives throughout our property portfolio. These initiatives include solar energy arrays, battery storage, and charging stations. In addition, we continue to explore regional opportunities with our tenants in order to qualify for city and county renewable energy or energy efficiency programs.

In addition, Realty Income is a member of the National Association of Real Estate Investment Trusts (Nareit) Real Estate Sustainability Council. Our participation in this council allows us to share information and learn about the best practices of other REITs to further advance our efforts in this area.

Additional information on environmental and social responsibility initiatives can be found in the Corporate Responsibility section of the company’s website at www.realtyincome.com/corporate-responsibility.

Director Selection Process

Director Qualifications

Director qualifications are determined by what the Nominating/Corporate Governance Committee believes to be the essential competencies required to effectively serve on the Board of Directors. The Nominating/Corporate Governance Committee seeks to include on our Board of Directors a complementary mix of professionals with the following qualities, skills, and attributes:

Identifying and Evaluating Nominees for Directors

Our Corporate Governance Guidelines set forth the process by which our Nominating/Corporate Governance Committee identifies and evaluates nominees for our Board of Directors. The Nominating/Corporate Governance Committee first evaluates the current members of our Board of Directors to identify nominees for directors. Current members who are willing to continue service and who have qualifications and skills that are generally consistent with the Nominating/Corporate Governance Committee’s criteria for Board of Directors service are re-nominated.

As to new candidates, the Nominating/Corporate Governance Committee will generally poll members of our Board of Directors and members of executive management for their recommendations. The Nominating/Corporate Governance Committee has, at times in the past, retained a search firm to assist with identifying new candidates for membership on our Board of Directors, and in the future, may hire a search firm if deemed appropriate. An initial slate of candidates will be presented to the Chair of the Nominating/Corporate Governance Committee, who will then make an initial determination as to the qualification and fit of each candidate. Final candidates will be interviewed by one or more members of the Nominating/Corporate Governance Committee and other directors. The Nominating/Corporate Governance Committee will then approve final director candidates and, after review and deliberation of all feedback and data, will make its recommendation to our Board of Directors. Recommendations received from stockholders are subject to the same criteria as are candidates nominated by the Nominating/Corporate Governance Committee and will be considered and processed accordingly.

Board Refreshment

Our Board of Directors remains committed to active board refreshment to ensure optimal board structure and composition. We seek to add directors who contribute to diversity of background, expertise, perspective, age, gender and ethnicity. The Nominating/Corporate Governance Committee focuses on obtaining a desired mix of skills, experience, and diversity relevant to the company’s strategic direction while leveraging the deep institutional knowledge and valuable insight associated with the Board’s more tenured directors. Our focus is to have a board that continues to deliver a high standard of performance and governance expected by investors.

In 2018, we were pleased to welcome Sumit Roy, Reginald Gilyard, and Gerardo Lopez to our Board of Directors. Our new directors add extensive experience and knowledge regarding an array of industries and as further described in in this Proxy Statement under “Director Nominees” beginning on page 11.

Stockholder Recommendations

The Nominating/Corporate Governance Committee’s policy is to consider candidates recommended by our stockholders. The stockholder must submit proof of Realty Income stock ownership along with a detailed resume of the candidate and an explanation of the reasons why the stockholder believes the candidate is qualified for service on our Board of Directors. The stockholder must also demonstrate how the candidate satisfies our Board of Directors’ criteria and provide such other information about the candidate as would be required by the SEC rules to be included in a proxy statement, as well as our Bylaws. The consent of the candidate must be included along with a description of any arrangements or undertakings between the stockholder and the candidate regarding the recommendation. All communications are to be directed to the Chair of the Nominating/Corporate Governance Committee and sent to the address noted under “Communications with the Board” in this Proxy Statement on page 24.

A stockholder desiring to recommend a candidate for consideration by the Nominating/Corporate Governance Committee must deliver the recommendation along with the information noted above between November 3, 2019 and December 3, 2019 (not more than 150 days nor less than 120 days prior to the first anniversary of the date the company’s Proxy Statement is released to stockholders for the previous year’s annual meeting of stockholders) in order to be considered timely for consideration at next year’s annual meeting of stockholders. See “Stockholder Proposals for 2020 Annual Meeting” in this Proxy Statement on page 67. Properly submitted stockholder recommendations will be evaluated by the Nominating/Corporate Governance Committee using the same criteria used to evaluate other director candidates.

Proxy Access

The company’s stockholders also possess the right to nominate candidates for election to the Board through “proxy access” provisions of our Bylaws. We have adopted a proxy access right for stockholders, pursuant to which an eligible stockholder, or a qualifying group of up to 20 stockholders, owning at least 3% of our outstanding shares of common stock continuously for at least three years, may nominate up to the greater of two directors or the largest whole number that does not exceed 20% of the number of directors up for election as of the last day in which a proxy access nomination may be submitted under our Bylaws, for inclusion in our proxy materials, subject to complying with the requirements contained in Article III, Section 15 of our Bylaws.

Board Independence

Our Board of Directors has determined that each of our current directors, except for Mr. Roy, has no material relationship with us (either directly or indirectly through an immediate family member or as a partner, stockholder or officer of an organization that has a relationship with us) and is “independent” within the meaning of our director independence standards and NYSE director independence standards. Our Board of Directors established and employed categorical standards in determining whether a relationship is material and thus would disqualify such director from being independent, which standards mirror NYSE independence requirements.

Non-Executive Independent Chairman of the Board

The Nominating/Corporate Governance Committee also evaluates the Board of Directors leadership structure. Since 1997, the positions of Non-Executive Chairman of the Board of Directors and CEO have been separate in recognition of the differences between the two roles. Mr. McKee serves as our Non-Executive Chairman of the Board of Directors and presides as lead independent director, while Mr. Roy serves as our CEO. The Board of Directors believes this is the most appropriate structure because it enables the independent directors to participate meaningfully in the leadership of our Board of Directors while utilizing most efficiently the leadership skills of both our Non-Executive Chairman and our CEO. In addition, separating the roles of Non-Executive Chairman and CEO allows our Non-Executive Chairman to serve as a liaison between the Board of Directors and executive management, while providing our CEO with the flexibility and focus needed to oversee our operations.

Board Risk Oversight

Our Board of Directors has overall responsibility for risk oversight with a focus on the more significant risks facing our company. The Board of Directors reviews and oversees our enterprise risk management (ERM) program, which is a company-wide program designed to effectively and efficiently identify and assess management’s visibility into critical company risks and to facilitate the incorporation of risk considerations into decision making. The ERM program does this by clearly defining risks facing the company and bringing together executive management to discuss these risks. This promotes visibility and constructive dialogue around risk at the executive management and Board levels, and facilitates appropriate risk response strategies. Throughout the year, as part of the ERM program, management and the Board of Directors jointly discuss major risks that face our business.

In addition to the overall risk oversight that our Board of Directors provides, each of our committees exercises its own oversight related to the risks associated with the responsibilities of that committee:

By dividing responsibilities as such, the Board of Directors believes it can more effectively identify and address risk. Throughout the year, the Board of Directors, and the committees to which it has delegated responsibility, dedicates a portion of their meetings to review and discuss specific risk topics in greater detail. Given the importance of the CEO to the success of the company and generation of stockholder value, the Board of Directors ensures that the company is developing and nurturing a pipeline of senior talent, including one or more individuals capable of becoming the CEO. This process proved beneficial with Mr. Roy’s election to CEO during 2018.

Compensation Risk Assessment

The Compensation Committee reviews our company-wide incentive programs to assess whether the incentive programs for all employees, including our named executive officers, encourage desirable behavior as it relates to our long-term growth, and reflect our risk management philosophies, policies and processes.

Named Executive Officers and Executive Vice Presidents.  The total compensation is established after the Compensation Committee determines the appropriate performance metrics to best align the interests of management with those of our stockholders. The short-term incentive program metrics are based on financial, operational, and individual goals. The long-term incentive program metrics are primarily based on our TSR performance relative to our peers, and a value creation goal, and secondarily based on financial and operational goals. In addition, as previously discussed, we have adopted a clawback policy that enables us to recover incentive compensation awards in the event of negligence or misconduct directly related to a material restatement of our financial results, or miscalculated performance metrics that, if calculated correctly, would have resulted in a lower payment.

All Other Employees.  Other officer and non-officer employee compensation awards are unlikely to encourage the taking of unnecessary or excessive risks that could threaten long-term value creation. Management monitors the cash and equity incentive awards made to our employees and reviews those awards in light of the potential risks relative to the control environment, each respective employee’s responsibilities, and the general policies and procedures of our company. The Compensation Committee has sought to align the interests of our employees with that of our stockholders through grants of restricted stock and restricted stock unit awards, thereby giving employees additional incentives to protect and align with long-term value creation. Based on its evaluation, the Compensation Committee does not believe that the compensation programs give rise to any risks that are reasonably likely to have a material adverse effect on our company.

Meetings and Attendance

Our Board of Directors met 12 times during 2018. All directors attended at least 75% of the aggregate of (i) the total number of meetings of our Board of Directors while they were members of our Board of Directors, and (ii) the total number of meetings of the Committees of our Board of Directors on which such directors served during the period he or she served. Although we have no policy with regard to Board of Director members’ attendance at our annual meeting of stockholders, it is customary for, and we expect, all Board of Director members to attend. All of our Board of Director members attended our 2018 annual meeting of stockholders.

To ensure free and open discussion among the independent directors, only independent directors attend executive sessions of our Board of Directors and Committee meetings unless, under certain circumstances, management is invited. As the Non-Executive Independent Chairman of our Board of Directors, Mr. McKee presided at each of the five executive sessions held during 2018.

Communications with the Board

Stockholders and other interested parties may communicate with the Non-Executive Chairman of our Board of Directors or with the non-employee directors, as a group, by either of the following methods:

All appropriate correspondence will be promptly forwarded by the Corporate Secretary to the Non-Executive Chairman of our Board of Directors.

Director Compensation

The Nominating/Corporate Governance Committee is responsible for reviewing the compensation of the Board of Directors. Compensation for the independent directors of our Board of Directors for 2018 consisted of a base annual cash retainer, plus additional cash retainers for service as the Non-Executive Chairman or Chairperson of one of the committees of our Board of Directors in amounts as set forth below. In addition, each independent director receives an annual equity retainer based on a fixed number of shares provided for in the 2012 Incentive Award Plan.

Our directors received the following aggregate amounts of compensation for the year ended December 31, 2018:

Stock Awards for Directors

The 2012 Incentive Award Plan provides that upon the initial election to our Board of Directors, and at each annual meeting of stockholders thereafter, if the director continues to serve as a director after the meeting, each non-employee director is automatically granted 4,000 shares of restricted stock. This annual equity grant of 4,000 shares is specifically provided for in the 2012 Incentive Award Plan, which has been approved by our stockholders. The vesting schedule for restricted shares granted to non-employee directors is as follows and is subject to the director’s continued service through each applicable vesting date:

Other Payments for Directors

The members of our Board of Directors are also entitled to reimbursement of their travel expenses incurred in connection with attendance at Board of Director and committee meetings and conferences. Additionally, the members of our Board of Directors are reimbursed for expenses incurred in connection with attending continuing education programs to assist them in remaining abreast of developments in corporate governance and other critical issues relating to the operation of public company boards.

Director Stock Ownership Guidelines

Our non-employee directors are subject to stock ownership guidelines. Under these guidelines, each non-employee director is required to hold stock valued at no less than five times the amount of the annual cash retainer paid to such director for service as a member of the Board of Directors, without reference to committee service. The current stock ownership goal for each of our non-employee directors is five times their annual cash retainers as of December 31, 2018 of $25,000, or $125,000, divided by the closing price of our common stock as of December 31, 2018 of $63.04, which equals a minimum share ownership requirement of 1,983 shares.

All vested and unvested restricted stock awards qualify towards satisfaction of the requirement. For any new director, compliance with the guidelines will be required within five years after being elected to the Board of Directors. As of December 31, 2018, each director subject to the guidelines met or exceeded the stock ownership requirements.

Executive Officers of the Company

The following table sets forth certain information as of the record date of March 14, 2019 concerning our executive officers:

Executive Compensation

Compensation Discussion and Analysis

This section discusses the compensation policies and programs for the following executive officers and former executive officers of the company (the named executive officers or NEOs):

Mr. Case, our former CEO, departed from the company and resigned from the Board and all other employee and officer positions that he held with us during October 2018. In connection with Mr. Case’s departure from the company, he entered into a Severance Agreement and General Release with us (the “Severance Agreement”), as more fully described on page 45 under the caption “Severance Agreement and General Release with Mr. Case.” Upon Mr. Case’s departure from the company, Mr. Roy was elected as our Chief Executive Officer.

Executive Summary

The primary objectives of our compensation program are to:

We continue to adhere to balanced compensation and corporate governance practices as set forth in the following table:

2018 Performance

It is important to review and acknowledge the company’s performance results for the year and management’s execution of our strategy to support and grow monthly dividends for our stockholders. We focus on the following key areas when executing our strategy:

The company’s positive performance results, and successful execution of our strategy are significant contributors in determining the compensation awarded to our executives. Our compensation program is structured to effectively link compensation to the achievement of certain company performance metrics in order to create alignment with the interests of our stockholders. We believe our performance in 2018 demonstrates the effectiveness over time of the execution of our strategic business plan and the alignment of our compensation program with our philosophy of rewarding executives for enhancing long-term stockholder value.

In 2018, the company delivered total shareholder return of 15.9%, assuming reinvestment of dividends. The positive results for our stockholders in 2018 are a direct result of strong execution across all areas of the business. Prudent balance sheet management led to the company becoming one of only eight REITs at current date with at least two ‘A’ credit ratings, active asset management resulted in favorable occupancy and re-leasing results. In addition, healthy investment activity of $1.8 billion in high-quality real estate acquisitions was made possible through sourcing approximately $32 billion of transaction opportunities. Our business operations led to growth in earnings and dividends, delivering favorable returns for our stockholders.

Strategic Planning

Our goal is to continue managing the company in a manner that supports sustainable, long-term value creation for stockholders. The Board of Directors frequently reviews and discusses the company’s strategy as part of regularly scheduled Board meetings. The discussions allow the Board of Directors to assess further potential opportunities and threats to the business and properly position the company to continue to perform in the future. The company’s named executive officers and additional members of management, including the company’s in-house research and strategy departments, participate in the discussions on topics such as e-commerce and other disruptive technologies, changing demographics, the macroeconomic and political landscape, and their implications for our company. From time to time, experts on various topics are invited to the discussions to challenge thinking and invite healthy discourse at the meetings. The company also supports the Board of Directors’ participation at various conferences and speaking engagements in order to introduce new topics and materials for discussion and further broaden long-term views on the business. We will continue to incorporate similar strategic reviews in our Board of Director meetings and strive to stay in front of emerging trends by making adjustments to our strategy as needed.

Favorable Say-on-Pay Vote

We provide our stockholders with an annual advisory “say-on-pay” vote on the compensation of named executive officers. Our stockholders continue to express substantial support for the compensation of our named executive officers, with 91.7% of the votes case approving the advisory say-on-pay vote during 2018, and over 90% of the votes cast, approving the advisory say-on-pay vote during each year since say-on-pay has been effective in the US, dating back to 2011. This continued support of our compensation program, as demonstrated below, reflects a strong alignment with the company’s performance and long-term value creation for our stockholders.

Stockholder Engagement

During 2018, we continued to engage and interact with our stockholders through various means of communication, including in-person meetings, conferences, phone calls and emails. We believe engaging with our stockholders on an ongoing basis is important to understand what is important to them and ensure best practices.

Our outreach efforts for the 2019 proxy season included holding engagement calls with stockholders representing approximately 30% of our outstanding shares of common stock as of September 30, 2018. In addition to our internal engagement team, our Board’s Non-Executive Independent Chairman, Michael D. McKee, participated in engagement calls with our largest stockholders, which provided stockholders direct access to the Board of Directors. During our conversations with stockholders, we discussed various topics, including:

In general, stockholders were satisfied with our current compensation programs. We report the details of our conversations with stockholders to our Nominating/Corporate Governance Committee, Compensation Committee, and Board of Directors. This dialogue allows our Directors to hear what is most important to our stockholders and share perspectives on our compensation and governance processes. The Board of Directors considers the input provided by our stockholders and our advisors as it reviews and considers enhancements to its processes and disclosures.

While stockholders were satisfied with the company’s current programs, the Board of Directors considers stockholder feedback and responds in the best interests of the company. As a direct result of recent stockholder engagement efforts, the Board of Directors has taken the following actions:

Compensation Process

In addition to say-on-pay results and feedback from stockholders, the Compensation Committee also considers other factors in evaluating our executive compensation programs, including but not limited to:

Each factor is evaluated in the context of the Compensation Committee members’ responsibility to act in the company’s best interests.

Compensation Consultant

In 2018, the Compensation Committee retained FPL Associates, L.P. (FPL), a nationally-known independent executive compensation and benefits consulting firm specializing in real estate companies, to provide general executive compensation consulting services. In addition, the consultant performs special executive compensation projects and consulting services, as directed by the Compensation Committee.

The consulting services provided by FPL include:

FPL reports to the Compensation Committee and works with management as directed by the Compensation Committee. The Compensation Committee retains the right to terminate or replace FPL at any time. Pursuant to the Compensation Committee’s charter, the Compensation Committee has the power to engage other consultants and advisors as required.

Through review and consultation with FPL, the Compensation Committee assessed the independence of FPL in light of, among other factors, the independence factors established by the NYSE. As a result of this assessment, the Compensation Committee has determined that FPL’s work raised no conflict of interest currently or during the year ended December 31, 2018.

Peer Group Data

The Compensation Committee uses comparison data from various companies it considers peers as a guide in its review and determination of base salaries, cash payments, equity awards, and long-term performance awards. Prior to approving the 2018 incentive compensation program, the Compensation Committee reviewed peer group data to assist in its determination of total target direct compensation (on an aggregate and individual basis), as well as the appropriate mix of equity versus cash, short-term versus long-term, and performance-based versus time-based awards to be paid or granted for 2018 performance. The Compensation Committee evaluates whether the compensation elements and levels that are provided to our named executive officers are generally appropriate relative to the compensation elements and levels provided to their counterparts at peer companies, in light of our performance relative to peers and in light of each named executive officer’s contribution to performance. This approach allows us to respond to competitive dynamics in the market and provides us with the flexibility to maintain and enhance our named executive officers’ engagement, focus, and motivation.

2018 Peer Group for 2018 Compensation Decisions

The Compensation Committee, with the help of FPL, periodically reviews the composition of our peer group and the criteria and data used in compiling our peer group to ensure that each company’s size and operations remain comparable to ours. The peer group recommended by FPL and used by the Compensation Committee for 2018 compensation decisions (2018 Peer Group) remains unchanged from the group used for 2017 compensation decisions. Our 2018 Peer Group consists of the following 18 public real estate companies:

* Denotes a net lease peer

The companies in our 2018 Peer Group focus on a variety of asset classes with similar lease types, and those that are similar to us in size in terms of total market capitalization (common and preferred stock, partnership units convertible into stock and long and short-term debt) and equity market capitalization (common stock and convertible partnership units). The Compensation Committee believes that total market and equity market capitalization are the most relevant indicators of size for real estate companies, acknowledging that other industries may use different indicators like revenue. Using total market capitalization and equity market capitalization to determine peer groups is consistent with real estate industry practices. The companies were selected so that our total and equity market capitalization remained near the median of the peer group. All companies selected were less than 2.5x our size based on total market capitalization, and the majority of companies selected were below our size based on total market capitalization as further demonstrated in the 2018 Peer Group Comparison chart below. Larger companies included in the 2018 Peer Group balance the inclusion of our net lease peers, which generally are of significantly smaller size, such as Spirit Realty Capital, Inc. (approximately 35% of our total market capitalization) and National Retail Properties, Inc. (approximately 44% of our total market capitalization).

2018 Peer Group Comparison⁽¹⁾
(in billions)

The Compensation Committee evaluates our peer group periodically and may make adjustments to this peer group to reflect changes in the size or operations of the company or our peers.

Management Involvement

In setting compensation for named executive officers in 2018, the Compensation Committee solicited input from our Former CEO concerning each of the other named executive officers other than himself. In addition, from time to time, the Compensation Committee will direct management to work with the Compensation Committee’s consultant in providing proposals, program design, and compensation recommendations. After our Former CEO departed from the company in October 2018, our current CEO provided the Compensation Committee with a report of the company’s operating and financial results for the past fiscal year relative to the company’s performance metrics. He also discussed his personal assessment of individual performance of each of the other named executive officers. In addition, at the request of the Compensation Committee, our current CEO made recommendations regarding salary and incentive compensation awards for each named executive officer other than himself and discussed annual goals for the entire senior management team. The Compensation Committee considers these recommendations and other factors as discussed above in making the final determinations.

Elements of Compensation

In structuring executive compensation, the Compensation Committee considers how each component of compensation motivates performance, promotes retention, and creates long-term stockholder value. Base salaries are primarily intended to attract and retain highly qualified executives and to reward them for their continued service. Annual incentive cash payments, equity awards, and long-term performance shares are designed to (i) directly reward performance, (ii) achieve specific strategic and operating objectives, and (iii) provide incentives to create long-term stockholder value. All of our equity incentives are intended primarily to align named executive officers’ long-term interests with stockholders’ long-term interests although we believe they also play a role in helping us reward performance, attract, and retain top executives.

The following table outlines the primary elements of our 2018 executive compensation program:

Incentive Programs and Performance Metrics

Each year, the Compensation Committee, with input from FPL, reviews the metrics underlying the short-term and long-term incentive programs, and considers various industry performance indicators, including GAAP and non-GAAP earnings metrics. The Compensation Committee believes that the current mix of operational, liquidity, and financial earning metrics used for the 2018 performance year align with our strategy to attain long-term financial stability that will support sustained cash flows beneficial to our stockholders. In 2018, and consistent with peer group compensation practices, the Compensation Committee maintained STIP and LTIP programs with maximum payouts at 200% of target, and which required a corresponding level of rigor relative to projections to achieve maximum performance to further motivate and reward outstanding performance. The composition of our programs are weighted heavier in equity, along with a portion of compensation tied to long term, three-year performance.

Total Target Direct Compensation

The Compensation Committee worked with FPL, the Compensation Committee’s independent consultant, to determine the levels of total target direct compensation to achieve the appropriate balance between (i) cash and equity compensation, (ii) long-term and short-term compensation, (iii) performance-based and time-based equity, and (iv) fixed and variable compensation. As an initial reference point, the Committee reviewed the median benchmark of each executive as well as the aggregate level of total target direct compensation. This process allows the Committee to ensure pay is competitive for the individual and account for the individual’s tenure and experience, as well as ensure that the total amount for our executive team is reasonable. The Compensation Committee reviewed the median and aggregate total target direct compensation within our peer group based on market data provided in January 2018 by FPL. When establishing total target direct compensation levels for each named executive officer, the Compensation Committee gave consideration and special emphasis to individuals’ personal contributions to the organization, as well as skill sets, qualifications, and experience, seeking to incentivize high performing named executive officers with competitive pay, consistent with peer group median compensation levels. After review and consideration, the Compensation Committee approved the following total target direct compensation and structure for 2018 compensation. Total target direct compensation for 2018 was composed of (i) base salary, (ii) target annual short-term incentive opportunity (awarded in cash), (iii) performance shares, and (iv) the annual grant of restricted shares. In the aggregate, the 2018 total target direct compensation established for the named executive officers approximated the estimated peer group median.

(1) Mr. Case departed from the company on October 16, 2018.

For Mr. Roy, the Compensation Committee used the following structure for determining the various elements of direct compensation payable for 2018:

Set forth below is a table that illustrates the application of the structure for 2018 compensation decisions for Mr. Roy.

In 2018, Mr. Case’s total target direct compensation of $8,150,000 was structured as follows: (1) annual salary of $1,000,000, or 12%, (2) cash award under the STIP of $1,850,000, or 23%, (3) performance-based shares under the LTIP equivalent to $4,122,222, or 51%, and (4) annual restricted shares under the LTIP equivalent to $1,177,778, or 14%.

Total Target Direct Compensation for Mr. Roy

The Compensation Committee believes that a significant portion of executive compensation should be at risk and tied to our performance in order to best align management’s interests with those of our stockholders. In 2018, approximately 72% of Mr. Roy’s total target direct compensation consisted of compensation that is at risk based on achievement of certain objective performance metrics.

General Note to Discussion of Pay Components

Some of the components of 2018 compensation disclosed in the following sections of this “Compensation Discussion and Analysis” section differ from the Summary Compensation Table on page 49. SEC rules require that the Summary Compensation Table include equity compensation in the year granted, while in our case, the Compensation Committee awards time-based restricted stock equity compensation after the performance year,

upon the successful completion of the external year-end audit process. Therefore, time-based equity awards granted in February 2018 for the 2017 performance year are shown in the Summary Compensation Table as 2018 compensation. With the exception of Mr. Case, the time-based restricted stock equity awards for 2018 discussed in the following sections for all named executive officers will be included in the Summary Compensation Table in next year’s proxy statement.

Base Salaries

In connection with its review of fiscal 2017 performance, and in consideration of the increased responsibilities that come with the continued growth of the company, the Compensation Committee decided to increase the base salaries paid to certain of our named executive officers commencing on January 1, 2018. When making its decision to increase 2018 salaries, the Compensation Committee sought to incentivize high-performing named executive officers with competitive pay, consistent with peer group median compensation levels. The 2017 and 2018 annualized base salaries are reflected in the table below.

Short-Term Incentive Program (STIP)

During February 2018, the Compensation Committee approved the 2018 STIP, which is structured so that the named executive officers’ annual incentive awards closely align with the company’s operating and financial performance. The components of the 2018 STIP were as follows:

Objective Company Performance Criteria—70%

The company performance criteria, weightings, and amounts that can be earned under the 2018 STIP, in addition to our actual performance and amounts earned for 2018 performance, are set forth in the following table:

The Compensation Committee believes these annual targeted operating and financial goals align with our strategy to attain long-term financial stability that will support sustained cash flows beneficial to our stockholders. The goals for the AFFO per share metric were increased from 2017 with the maximum payout exceeding the top end of the company’s AFFO per share earnings guidance range for 2018. The goals for the fixed charge coverage ratio, a liquidity metric, were also increased from 2017. The target goal for portfolio occupancy, an operational metric, remained unchanged from 2017. These goals are established each year after reviewing the company’s financial and operating projections, including the level of upcoming lease expirations. For the fixed charge coverage ratio and portfolio occupancy ratio metrics, the company attained maximum-level payouts. The Compensation Committee believes that these goals remain rigorous, requiring the company to manage its capital structure thoughtfully, successfully access the capital markets, and actively resolve lease rollover to achieve payouts in excess of target for this metric.

2018 STIP Performance Goals

AFFO per share

Why we believe this metric is important: We believe that AFFO per share, a non-GAAP financial measure, provides useful information to investors because it is a widely accepted industry measure of the operating performance of REITs that is used by industry analysts and investors who look at and compare those companies. In particular, AFFO per share is included in the compensation program because it provides an additional measure to compare the operating performance of REITs without having to account for differing depreciation assumptions and other unique revenue and expense items which are not pertinent to measuring a particular company’s on-going operating performance. Therefore, we believe that AFFO per share is an appropriate supplemental performance metric, and that the most appropriate GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders per share.

How the Compensation Committee set the 2018 goal: In our 2018 initial public guidance, we projected AFFO per share in a range of $3.14 to $3.20. Our 2018 target performance was set as $3.16 per share, or the midpoint of our performance benchmark range. The range of $0.06 per share around target resulted in a threshold of $3.10 per share and a high of $3.22 per share. The high score was set at $0.02 per share above the high end of our initial public guidance. High performance would only be achieved if we exceeded the high end of such guidance. AFFO per share for 2018 was $3.19, resulting in an achievement of 150% of target. Our generation of $3.19 in AFFO per share outperformed target primarily due to higher-than-anticipated acquisition growth. Acquisition growth continues to be challenging due to lower cap rates and general market factors in the real estate industry; therefore, attaining $1.8 billion in acquisitions requires extensive research, discipline and a well-established strategy.

Fixed Charge Coverage Ratio

Why we believe this metric is important: The fixed charge coverage ratio measures the ability of our earnings to cover our fixed charges, such as debt payments and interest expense. This calculation, which is not based on

GAAP measurements, is one of our note covenants presented to investors to show our ability to incur additional debt under the terms of our senior notes and bonds, and is not a measure of our liquidity or performance. In particular, fixed charge coverage ratio is included in the compensation program because it is a measure of our balance sheet strength, and of our ability to effectively and conservatively manage our outstanding debt levels.

How the Compensation Committee set the 2018 goal: Our fixed charge coverage ratio was 4.8x at December 31, 2017, which was higher due to a one-time loss on extinguishment of debt of $42.4 million recorded in the fourth quarter of 2017. Factoring in this one-time loss on debt extinguishment and the challenges of maintaining a favorable ratio in a rising interest rate environment, the Compensation Committee set a high metric of 4.25x for 2018. The target (4.0x) and threshold (3.75x) metrics were separated by 0.25x. Fixed charge coverage ratio at December 31, 2018 was 4.4x, resulting in performance at the high end. Our metric exceeded the target primarily due to the availability of cheaper equity capital versus debt to fund our acquisition activity. At the beginning of 2018, maintaining a very favorable fixed charge coverage ratio seemed very challenging, due to market influences, including an expected rise in interest rates. However, we achieved a stronger ratio due to our discipline with raising funds through our ATM (at-the-market) equity program and our improved corporate credit ratings which enabled us to lower our debt costs.

Portfolio Occupancy

Why we believe this metric is important: The stability of operating revenue is fundamental to the business model of any dividend-paying entity. Within the REIT space, this takes the form of stability of rental revenue secured by tenants occupying the portfolio’s real estate assets. As a result, maintaining a sufficiently high occupancy rate is of vital importance to the health of the company’s business model and, as such, it is essential that the company orients its operating strategy towards maximizing asset utilization as measured by the portfolio occupancy metric.

How the Compensation Committee set the 2018 goal: The Compensation Committee set 2018 target performance for portfolio occupancy at 98%. Threshold was set at 96.75% portfolio occupancy, and high was set at 98.4% portfolio occupancy. In setting an occupancy target, the Compensation Committee considers many variables that impact the portfolio occupancy rate, including the lease expiration schedule, existing vacancy pool, industry trends, product mix of expiring and vacant properties, past vacant resolution activity, and expected market conditions. Given that some of these factors exhibit nonlinear variability, the company’s past occupancy rates are only partially descriptive of future occupancy rates. For example, historical variability in acquisition volume can lead to uneven clustering of expiration schedules, creating short-term fluctuations in occupancy rates that are not necessarily indicative of long-term trends. Additionally, market shifts at the industry and tenant levels may carry disproportionate occupancy impact at the portfolio level. Only by accounting for the dynamics affecting each of these variables and by reforecasting occupancy expectations on a regular basis can the company set reasonable targets that consider the primary drivers of resultant occupancy rates.

Individual Performance – 30%

As a component of the STIP, individual performance is used by the Compensation Committee to reward individual goals achieved. The Compensation Committee used the following process to establish individual performance goals and utilized discretion in assessing individual performance at the end of the performance year:

The Compensation Committee incorporated the recommendations provided by Mr. Roy for the individual performance percentages for the named executive officers other than himself. The percentages earned under the individual performance metric and the material factors considered are set forth below.

The incentive opportunities and the total actual incentive award earned by each named executive officer for 2018 under the STIP are set forth in the table below. Messrs. Roy and Case’s 2018 target incentive opportunities were established based on the total target direct compensation structure outlined on page 34. For our other named executive officers, the target incentive opportunities were intended to be between 23% and 28% of each individual’s 2018 total target direct compensation level. The earned incentive award was paid in cash in February 2019.

2018 Incentive Opportunities and Earned Incentive Compensation under the STIP

Long-Term Incentive Program (LTIP)

During February 2018, the Compensation Committee approved the grant of 2018-2020 performance shares to each named executive officer. The following is a summary of the key metrics criteria and terms:

January 1, 2022, subject to continued service with the company. Performance shares not earned as a result of the failure to achieve the applicable performance goals will be forfeited.

Specifically, the performance measures and weightings for the 2018-2020 performance shares are based on the following objective performance measures, each of which are measured over the three-year performance period:

We are a member of the MSCI US REIT Index, which is a broad REIT index, and the J.P. Morgan Net Lease Peer Group. Both groups are used to measure performance between REITs within and across the subsectors. The Compensation Committee selected the J.P. Morgan Net Lease Peer Group, a group of peers categorized as “triple net lease REITs” included in the J.P. Morgan REIT database published by J.P. Morgan North American Equity Research, in order to provide a set of companies that are more comparable to Realty Income in terms of lease type. There are many ways to compare our performance to each of these groups. The Compensation Committee analyzed the various methods and determined that comparisons on a percentile basis, was widely used in the marketplace and appropriate for evaluating our performance during the 2018-2020 performance period. The Compensation Committee believes that these goals remain rigorous, specifically the relative TSR metrics which require the company to outperform the indices to even achieve payouts at target. The relative TSR metric rewards management for outperformance relative to the Real Estate sector, which is targeted at the 55th percentile. Relative outperformance relative to the Real Estate and Net Lease benchmarks provides stockholders with value even during years where the company’s absolute TSR may be negative due to macroeconomic conditions outside of management’s control, such as rising interest rates. Accordingly, the metric is strictly relative TSR and does not include a provision limiting payout based on negative absolute TSR. The Debt-to-EBITDA ratio and dividend per share growth rate metrics require the company to manage its capital structure thoughtfully, and increase earnings to support the payment of monthly dividend in order to achieve payouts in excess of target for these metrics.

2018 LTIP Performance Goals

Dividend per share Growth Rate

Why we believe this metric is important: Part of our company’s annual mission statement is to increase the monthly dividend. Accordingly, management believes that increasing the dividend per share growth rate is a core metric for compensation. We have continued our 50-year policy of paying monthly dividends and have paid 85 consecutive quarterly dividend increases and increased the dividend 100 times since our listing on the NYSE in 1994.

How the Compensation Committee set the 2018 goal: The Compensation Committee set 2018 target performance for dividend per share growth rate at 6.0%, consistent with what it felt investors would seek in this market environment. Threshold was set at a 2.0% dividend growth rate and high was set at a 12.0% dividend per share growth rate. Balancing our dividend per share growth with our earnings projections is challenging, due to market factors, which can have a direct impact on how and to what extent our earnings and the dividend grows. High performance would only be achieved if we significantly grew the dividend.

Debt-to-EBITDA Ratio

Why we believe this metric is important: Management believes EBITDA to be a meaningful measure of a REIT’s performance because it is widely followed by industry analysts, lenders and investors. Management also believes the use of an annualized quarterly EBITDA metric is meaningful because it represents the company’s current earnings run rate for the period presented. EBITDA should be considered along with, but not as an alternative to, net income as a measure of our operating performance. Debt-to-EBITDA is included as a metric in our compensation program since management believes it measures our ability to pay off our debt and provides investors with a gauge of how long it would take for us to pay off our debt.

How the Compensation Committee set the 2018 goal: We considered the optimal level of leverage to achieve investor returns, while balancing that with leverage levels deemed appropriate for our credit ratings level. The threshold (6.3x), target (5.9x), and high (5.5x) performance metrics were separated by 0.4x. Debt-to-EBITDA for 2018 was 5.3x, resulting in performance at the high end. Our metric exceeded the target primarily due to the availability of cheaper equity capital versus debt to fund our robust acquisition activity. Similar to our fixed charge coverage ratio metric, maintaining a very favorable Debt-to-EBITDA metric is difficult in an unpredictable capital markets environment.

The long-term performance shares granted in February 2018 to our named executive officers are as follows:

Time-Based Restricted Shares

The Compensation Committee grants restricted share awards on an annual basis, which are designed to: (i) increase the named executive officers’ common stock ownership, (ii) motivate our named executive officers to improve long-term common stock price performance, (iii) align the named executive officers’ interests with the interests of stockholders, and (iv) operate as a retention mechanism for key members of management.

In connection with the determination of the 2018 compensation program, the Compensation Committee proposed initial 2018 annual restricted share award values to be granted in February 2019. The proposed annual award values for all NEOs were reviewed and approved on February 13, 2019 and will vest evenly over four years commencing on January 1 of the year following the grant. The time-based restricted shares granted are as follows:

Restricted Shares Granted in February 2018 for 2017 Performance

Our time-vesting, restricted share and restricted share unit awards are typically granted after fiscal year-end in recognition of the company’s prior year performance under the performance metrics for that year. For a discussion of restricted share awards granted in February 2018, which were intended to be compensation for 2017, see pages 31 to 35 of the company’s 2018 Proxy Statement filed with the SEC on April 2, 2018.

Restricted Share Vesting

Our restricted shares and restricted share units typically vest 25% per year on January 1, but are subject to accelerated vesting in the event of retirement, which is defined as a voluntary termination of employment by persons who are at least 60 years of age and who have provided at least ten years of service to the company. The Compensation Committee believes that this vesting approach is (i) consistent with market practices, (ii) easy to administer, and (iii) preserves the benefit of acceleration, which occurs only upon actual retirement.

Given that Mr. Pfeiffer is eligible for retirement prior to the end of the vesting period, he was granted RSUs in February 2017, February 2018, and February 2019 instead of restricted shares in order to preserve the deferral of his income taxation until the issuance of the shares upon vesting. The RSUs have dividend equivalents that pay out concurrently on the payment date of the dividend, regardless of the vested status of the RSUs. This provides the RSUs with the same economic rights as shares of restricted stock, which are entitled to cash dividends on the dividend payment date.

Promotional Grant for Mr. Roy

In connection with Mr. Roy’s promotion to Chief Executive Officer effective October 16, 2018, the Compensation Committee awarded Mr. Roy a one-time, time-based restricted share award with a long-term vesting period of four years, and valued at $2 million or 34,752 shares. The award was granted on October 16, 2018 and vests in 50% increments on each of October 16, 2021 and 2022, subject to Mr. Roy’s continued employment with the company through the applicable vesting dates. This amount was determined by the Compensation Committee as compensation for the additional duties and responsibilities that he assumed with the role of Chief Executive Officer while continuing in his role as President.

One-Time Restricted Stock Grant for Mr. Hagan

In connection with the commencement of his employment in May 2018, the Compensation Committee awarded Mr. Hagan a one-time, time-based restricted share award with a long-term vesting period of four years, and valued at $400,000 or 7,647 shares. The award was granted on May 21, 2018 and vests in twenty-five percent

increments on each of May 21, 2019 and 2020, 2021 and 2022, subject to Mr. Hagan’s continued employment with the company through the applicable vesting dates.

2016 LTIP Award Payout

In February 2019, the Compensation Committee certified percentage achievement for the 2016-2018 performance shares that were granted in January 2016, based on our performance relative to the following metrics during the three-year performance period ending December 31, 2018:

For purposes of these metrics, TSR was calculated by comparing the trailing 20-trading-day average stock price at the end of the performance period, December 31, 2018, assuming contemporaneous reinvestment of dividends, to the closing stock price on December 31, 2015. Based on overall achievement above target performance levels, each named executive officer other than Mr. Case received 138% of the target shares granted. Fifty percent of the performance shares earned were issued as common stock that immediately vested. The remaining 50% are units subject to time vesting through January 1, 2020. Based on actual performance levels at his date of departure from the company on October 16, 2018, Mr. Case received, consistent with his employment agreement, 110% of the target shares granted, which vested immediately. The following table sets forth the performance shares earned by each NEO under the 2016 LTIP. Mr. Hagan did not receive a 2016 LTIP award payout, as he was not an employee during that performance year.

2019 Incentive Programs

In February 2019, the Compensation Committee adopted the 2019 STIP and LTIP with the same performance goal categories and substantially similar weightings to those used in the 2018 program. The 2019 Peer Group used for 2019 compensation decisions is consistent with the 2018 Peer Group listed on page 32. In establishing 2019 executive compensation, our Compensation Committee largely considered the changes amongst our executive officers, which primarily resulted in an adjustment to Mr. Roy’s target compensation opportunity in light of his promotion to CEO. The Committee considered that as a newly promoted CEO, his compensation would be targeted at a lower relative pay level that generally aligned with the lower quartile of our peers. In doing so, we expect to make future adjustments to his pay, commensurate with his performance and as his tenure increases going forward. The Committee approved increases in several compensation components for certain of our executive officers, as follows:

Severance and Change in Control Arrangements

During calendar year 2018, each of the named executive officers had the right to receive severance compensation upon the occurrence of certain events pursuant to their employment agreements. Effective as of January 15, 2019, the Compensation Committee adopted the Company’s Executive Severance Plan (the “Severance Plan”), which provides severance compensation upon the occurrence of certain events. In connection with the adoption of the Severance Plan, the employment agreements between the company and Messrs. Roy, Meurer, Pfeiffer, Abraham and Hagan were terminated. In addition, our award agreements provide certain rights in connection with a change of control and certain terminations of employment.

The following is a list of the scenarios under which the named executive officers have rights to receive severance compensation.

Further detail surrounding the payments and benefits upon the occurrence of each scenario can be found in the section titled “Potential Payments Upon Termination or Change in Control” on page 53. The Compensation Committee believes these benefits are reasonable. The payments and benefit levels under the Executive Severance Plan did not influence and were not influenced by other elements of compensation. The Executive Severance Plan was designed to help (i) attract and retain key employees, (ii) preserve key employee’s morale and productivity, (iii) align with best practices, and (iv) promote continuity of management in the event of an actual or threatened change in control. These change in control benefits allow executives to assess takeover bids objectively without regard to the potential impact on their individual job security.

Severance Agreement and General Release with Mr. Case

In connection with his departure from the company, on October 16, 2018, the company and Mr. Case entered into the Severance Agreement. Pursuant to the terms of the Severance Agreement, which includes a general release of claims by Mr. Case in favor of the company, Mr. Case received: (a) a lump-sum cash severance payment of $8,290,792, and (b) group medical insurance paid for by the company through the earlier of October 31, 2019 or until Mr. Case is covered by another group medical insurance plan. Each outstanding company equity-based

award held by Mr. Case as of the date of his departure from the company was treated in accordance with the terms of the applicable award agreements as though Mr. Case incurred a termination of employment pursuant to Section 10(c) of Mr. Case’s employment agreement with the company.

The Severance Agreement also provided that Mr. Case will comply with certain existing confidentiality and non-solicitation covenants contained in his employment agreement with the company and will not disclose any information or provide any assistance or support to, or collaborate with, any person or entity that undertakes to effect a change in control of the company or that seeks to influence the management or policies of the company. The Severance Agreement also includes a mutual non-disparagement covenant between Mr. Case and the company.

Executive Severance Plan

On January 15, 2019, the company eliminated the use of employment agreements for NEOs, and instead adopted and approved the Severance Plan, and designated each of Messrs. Roy, Meurer, Pfeiffer, Abraham and Hagan as participants in the Severance Plan. In connection with the adoption of the Severance Plan, the company entered into a participation agreement with each such named executive officer with respect to his participation in the Severance Plan. Each such participation agreement provides that the employment agreement previously entered into between the company and the named executive officer is terminated.

Under the Severance Plan, if a participant’s employment with the company is terminated by the company without “cause” or by the participant due to a “constructive termination” (each as defined in the Severance Plan), then, subject to the participant’s execution and non-revocation of a severance agreement and general release of claims, the participant will be entitled to receive:

Each participant’s applicable cash severance multiple and healthcare continuation period is specified in his or her participation agreement and may vary depending on whether the participant’s termination of employment occurs in connection with a change in control of the company (i.e., on the date of, or during the twelve-month period immediately following, such change in control) (a “CIC Termination”). Pursuant to the terms of their participation agreements, (i) Mr. Roy’s cash severance multiple is two (or three in the event of a CIC Termination) and each other named executive officers’ cash severance multiple is one (or two in the event of a CIC Termination), and (ii) Mr. Roy’s healthcare continuation period is 18 months (whether or not such termination is a CIC Termination) and each other named executive officers’ healthcare continuation period is 12 months (or 18 months in the event of a CIC Termination).

If a participant’s employment with the company is terminated by reason of the participant’s death or disability, then each outstanding and unvested time-vesting restricted stock and restricted stock unit award held by the participant will fully vest as of the participant’s termination date.

A participant’s right to receive and retain the severance benefits payable under the Severance Plan is conditioned on the participant’s continued compliance with any restrictive covenants with respect to which the participant is bound and the participant’s timely return of all company property in his or her possession following his or her termination date. Each participation agreement entered into with the named executive officers contains certain restrictive covenants that apply to the named executive officer, including a confidentiality covenant that extends indefinitely.

Other Benefits and Policies

We provide medical and other benefits to our named executive officers that are similar to those benefits offered to all of our full-time employees, including a 401(k) plan with a matching contribution by the company and coverage under a health and disability insurance program.

Executive Stock Ownership Requirements

Effective January 1, 2013, the Board of Directors implemented stock ownership requirements for the company’s CEO and the other named executive officers to closely align the interests of these individuals with the interests of our stockholders. The minimum share requirement is five times base salary for our CEO and three times base salary for the other named executive officers using their salary on January 1, 2013 or the date they became subject to the guidelines. Each executive has five years from the later of the date of adoption or date of appointment to an executive-level position to achieve the requirement.

All vested and unvested restricted share and RSU awards, and earned performance share units subject to time vesting qualify towards satisfaction of the requirement. Performance shares do not qualify towards the requirement. Compliance is evaluated on an annual basis as of December 31 of each year. The following table sets forth the requirements for each of our named executive officers:

Tax Considerations

Section 162(m) of the Code disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees.” Prior to the Tax Cuts and Jobs Act of 2017, covered employees generally consisted of our Chief Executive Officer and each of the next three highest compensated officers serving at the end of the taxable year other than our Chief Financial Officer, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As part of the Tax Cuts and Jobs Act of 2017, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the definition of covered employees was expanded to generally include all named executive officers. The Board of Directors, after considering the potential impact of the application of Section 162(m) and future guidance of the new rules, reserves the right to provide compensation to executive officers that may not be tax deductible if it believes providing that compensation is in the best interests of the company and its stockholders.

Compensation Committee Report

The Compensation Committee of the Board of Directors of Realty Income Corporation, a Maryland corporation, or Realty Income, has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2019 Annual Meeting of stockholders and in Realty Income’s 2018 Annual Report on Form 10-K.

Submitted on March 12, 2019 by the members of the Compensation Committee of Realty Income’s Board of Directors.

Priya Cherian Huskins, Chair
Gerardo I. Lopez
Michael D. McKee
Gregory T. McLaughlin
Stephen E. Sterrett

The above report of the Compensation Committee will not be deemed to be incorporated by reference into any filing by the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the company specifically incorporates the same by reference.

Compensation Tables

Summary Compensation Table

The following table sets forth information concerning the compensation of our President and Chief Executive Officer, former Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers (collectively, the named executive officers), for the fiscal years ended December 31, 2018, 2017 and 2016. In general, non-equity incentive plan compensation aligns with the performance year noted; however, stock awards are included in the year of grant which may not align with the performance year to which they relate.