UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

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Filed by a Party other than the Registrant

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AvalonBay Communities, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):
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Dear Fellow Stockholders:

We invite you to join us and our Board of Directors at our 2023 Annual Meeting of Stockholders, which will be held at 10:00 a.m. Eastern Daylight Time on May 24, 2023. The meeting will be held in a virtual format via audio webcast only. Stockholders will not be able to attend the Annual Meeting physically but will be able to vote and submit questions online before and during the meeting.

At this year’s meeting we will vote on the election of 12 directors and the ratification of Ernst & Young LLP as the Company’s independent auditor. We will also conduct a non-binding, advisory vote to approve the compensation of the Company’s named executive officers and a non-binding, advisory vote on the frequency of future non-binding, advisory stockholder votes to approve the compensation of our named executive officers.

Your vote at the upcoming Annual Meeting is important. Whether or not you plan to attend the meeting, we want your shares to be represented. Please authorize a proxy to vote your shares as soon as possible. You can do so on a dedicated website, by telephone, or by completing, signing and returning the proxy card or voting instruction form enclosed with the Proxy Statement (if you received a printed copy of the proxy materials). For more detailed instructions on how to vote and attend the virtual meeting audio webcast, as well as how to submit questions before and during the meeting, see pages 77-79 of the Proxy Statement.

Our Board of Directors values your participation as a stockholder and appreciates your continued support of AvalonBay.

April 10, 2023

Sincerely,

Timothy J. Naughton Chairman of the Board

Benjamin W. Schall Chief Executive Officer and President

Holders of record of AvalonBay common stock may vote during the meeting. However, we suggest that you authorize a proxy to vote your shares in advance of the meeting, using one of the following three methods, in case you are unable to attend:
BY INTERNET	BY TELEPHONE	BY MAIL
Go to www.proxyvote.com and follow the instructions	Call 800-690-6903	Sign the enclosed proxy card and mail it promptly in the enclosed postage-prepaid envelope
For more information on how to vote, see “Some Questions You May Have Regarding This Proxy Statement.”

TABLE OF CONTENTS

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Proxy Summary

This summary highlights certain information about AvalonBay Communities, Inc., a Maryland corporation (“AvalonBay” or the “Company”), and its 2023 Annual Meeting of Stockholders and summarizes information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement before voting. This Proxy Statement and the accompanying Notice of Annual Meeting and proxy card are first being made available to stockholders on or about April 10, 2023. For more complete information regarding AvalonBay’s 2022 performance, please review the Annual Report on Form 10-K for the year ended December 31, 2022, and the 2022 Annual Report to Stockholders, both of which are available online at www.proxyvote.com and on our website at investors.avalonbay.com. Materials located on or through our website and referenced in this Proxy Statement are not deemed to be part of this Proxy Statement and are not incorporated herein by reference.

2023 Annual Meeting of Stockholders Information

Date and Time:	Virtual Meeting Site:	Record Date:
Wednesday, May 24, 2023, at 10:00 a.m., Eastern Daylight Time	www.virtualshareholdermeeting.com/ AVB2023	March 27, 2023

Meeting Agenda and Voting Matters

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Election of Directors

Our Board represents a broad range of ages, tenures, and experience, as shown below.

Name	Age	Director Since	Independent	Committees*
Glyn F. Aeppel	64	2013		IFC, NGCR
Terry S. Brown	61	2015		IFC (Chair), NGCR
Ronald L. Havner, Jr.	65	2014		AC (Chair), IFC
Stephen P. Hills	64	2017		CC, IFC
Christopher B. Howard	54	2021		AC, IFC
Richard J. Lieb	63	2016		AC, CC (Chair)
Nnenna Lynch	51	2021		AC, IFC
Charles E. Mueller, Jr.	59	2022		AC, IFC
Timothy J. Naughton**	61	2005		IFC
Benjamin W. Schall	48	2021		IFC
Susan Swanezy	64	2016		NGCR (Chair), IFC
W. Edward Walter***	67	2008		CC, NGCR
*  IFC = Investment and Finance Committee, AC = Audit Committee, CC = Compensation Committee, NGCR = Nominating, Governance and Corporate Responsibility Committee.   ** Mr. Naughton is the Chairman of the Board *** Mr. Walter is the Lead Independent Director

Tenure	Age	Diversity and Independence

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Skills, attribute or experience:

Corporate Governance, Cybersecurity and ESG Best Practices

	Commitment to Board refreshment, including guidelines on director and committee chairman tenure		No stockholder rights plan (“poison pill”) and policy regarding adoption of future plans
	Annual Board, committee and director evaluations		Double-trigger equity compensation vesting in the event of a change in control
	Annual election of all directors with a majority voting standard in uncontested elections		Policy on political contributions and government relations publicly available on website
	Lead Independent Director		Reimbursement policy for director education programs, subscription for each director to relevant newsletters, enrollment of each director as a member of the National Association of Corporate Directors
	Independent Audit, Compensation and Nominating, Governance and Corporate Responsibility Committees		Published a comprehensive sustainability and corporate social responsibility report every year for more than a decade
	Regular executive sessions of independent directors, including at each regularly scheduled Board meeting		Annual advisory vote to ratify independent auditor
	Director and senior officer stock ownership guidelines		Annual advisory vote on executive compensation
	Robust anti-hedging, anti-speculation and no pledging policies		Published diversity objectives
	Policy regarding stockholder approval of certain future severance agreements		Published EEO-1 data
	Bylaws contain provisions for stockholder rights relating to proxy access and Bylaw amendments		Published energy management and other ESG goals and regular reporting to Board and NGCR Committee
	Policy on recoupment of incentive compensation (clawback policy)		Board Audit Committee oversight of cybersecurity risks and preparedness, and oversight of the Company’s response to cybersecurity incidents, if any; the Committee meets with senior IT associates regularly
	When compiling a pool of candidates for a new director search, the NGCR Committee endeavors to include, and requests that any search firm it engages endeavor to include, candidates with a diversity of race, ethnicity and gender		During 2022, the full Board of Directors met with senior IT associates and external cybersecurity counsel
	Mandatory, regular cybersecurity training for all associates; maintain cyber security insurance		Annual evaluation of cybersecurity program by an independent external consultant, which results are reported to the Audit Committee

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Executive Compensation Highlights

Consistent with our total compensation philosophy, a substantial majority of the target pay for our named executive officers (“NEOs”) is variable and contingent on performance.

Target Total Compensation Mix

CEO 2022 Target Pay Mix		Other NEOs 2022 Average Target Pay Mix

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Proposal 1. Election of Directors

The Board of Directors (which we refer to as the “Board”) currently consists of 13 members. All of the current directors are nominated for re-election at the Annual Meeting, except for Alan B. Buckelew, who has served as a director since 2011 and will be retiring from the Board at the time of the Annual Meeting. The Board has reduced the size of the Board to 12 to eliminate the vacancy resulting from Mr. Buckelew’s retirement, effective at the time of the Annual Meeting. If elected, these 12 nominees will serve until the 2024 Annual Meeting of Stockholders and until their successors are elected and qualify. The Board anticipates that each of the nominees, if elected, will serve as a director. However, if any nominee is unable to serve or chooses not to serve, proxies will be voted for the election of such other person as the Board may recommend. You may not vote for more than 12 directors at the Annual Meeting.

Required Vote and Recommendation

Only holders of record of AvalonBay’s common stock as of the close of business on the Record Date are entitled to vote on this proposal. Proxies will be voted for all of the nominees unless contrary instructions are set forth on a properly executed proxy card. Under our Bylaws, a majority of the total votes cast as to each nominee is required to elect such nominee. Under Maryland law, abstentions and broker non-votes are not treated as votes cast, and will have no effect on the result of the vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL OF THE NOMINEES.

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Information

The Nominating, Governance and Corporate Responsibility Committee and the full Board are focused on ensuring that the composition of the Board continues to provide the diversity of background, experience, functional skills, expertise, and thought necessary to appropriately address the needs of AvalonBay and our stockholders.

The following table summarizes certain qualifications, skills and experiences of each director that the Board considered important in its decision to re-nominate that individual to the Board. Exclusion of a factor for a nominee does not necessarily mean the nominee does not possess that attribute. It means only that when the Nominating, Governance and Corporate Responsibility Committee considered skills and experiences in the overall context of the members of the Board of Directors, certain attributes were not considered critical with respect to certain individuals.

Skills, attribute or experience

Accounting/Financial Literacy

Real Estate Development

Board Diversity*

C-Level Management Experience

Financial/Capital Markets Experience

Marketing/Brand Management/Consumer Focus

Non-AVB Public Board Experience

Public Company CEO Experience

Real Estate Investment & Finance

Leadership in Non-Corporate Settings (e.g. Military, Academia, Public Sector)

Technology, Information Security and Innovation

* Representation of gender or ethnic perspectives that expand the Board’s understanding of the needs and viewpoints of our prospective and current residents, associates, and other stakeholders. The following directors have self-identified as female: Glyn Aeppel, Nnenna Lynch and Susan Swanezy. The following directors have self-identified as Black or African American: Christopher Howard and Nnenna Lynch.

The biographies below describe each director’s qualifications and relevant experience in more detail.

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Director Nominees

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Corporate Governance

Independence of the Board

The New York Stock Exchange (“NYSE”) has adopted independence standards for companies listed on the NYSE, which apply to AvalonBay. These standards require a majority of the Board of Directors to be independent and every member of the Audit Committee, Compensation Committee and Nominating, Governance and Corporate Responsibility Committee to be independent. NYSE standards provide that a director is considered independent only if the Board of Directors “affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company).” In addition, the NYSE prescribes certain other “independence” standards.

To determine which of its members is independent, the Board of Directors uses the standards prescribed by the NYSE and also considers whether a director had any other past or present relationships with AvalonBay that created conflicts or the appearance of conflicts. Based on its most recent review, the Board determined that all directors who served on the Board during 2022 and all nominees for director are independent, except for Mr. Naughton and Mr. Schall.

NYSE rules provide for additional independence standards that apply to members of the Audit Committee and the Compensation Committee. The Board has determined that each current and proposed member of these committees satisfies these additional standards.

Leadership Structure and Lead Independent Director

Timothy J. Naughton served as AvalonBay’s Chairman of the Board and Chief Executive Officer during 2021. He retired as Chief Executive Officer effective January 2, 2022 and remained as an officer and Executive Chair, and Mr. Schall assumed the role of Chief Executive Officer, reporting directly to the Board of Directors. On January 1, 2023, Mr. Naughton retired from being an officer of the Company and continues to serve on the Board as a non-executive Chair.

The Board believes that having Mr. Naughton transition from Chairman and Chief Executive Officer to Executive Chairman and now to non-executive Chairman, during which time Mr. Schall assumed the role of President and Chief Executive Officer, ensured a smooth transition of leadership, consistent with AvalonBay’s longstanding history of continuity of strategy and leadership. The Board believes that the Company is best served by having Mr. Naughton, our former Chief Executive Officer, serve as Chairman of the Board while we also have a separate Chief Executive Officer who joined the Company in 2021 and assumed his current role as Chief Executive Officer in January 2022. Mr. Naughton’s role as Chairman of the Board, working with the Lead Independent Director, assures continuity of leadership at the Board level while strengthening the bridge between the Board, our Chief Executive Officer, and management.

To help ensure sound corporate governance practices, the Board of Directors established the position of Lead Independent Director. Mr. Walter has served as the Lead Independent Director since May 2019. The Lead Independent Director presides at all meetings of the Board of Directors at which the Chairman is not present, serves as a liaison between the Chairman of the Board and the Chief Executive Officer, on the one hand, and the independent directors, on the other, establishes and approves meeting agendas for the Board, has the authority to call meetings of the independent directors, confers with the Chairman of the Board and the Chief Executive Officer regularly, and acts as a contact person for stockholders and others who wish to communicate with the independent directors.

Succession Planning for Directors and Board Refreshment

The Board considers a variety of factors when choosing candidates for Board appointment or nomination. While we value long-tenured directors who know AvalonBay and management well, the Board also believes it is important to ensure there are occasional vacancies that create opportunities for new directors who may bring different or more recent experiences or expertise to the Board. Consistent with this philosophy, we have recruited three new independent directors to join the Board in the past five years.

AvalonBay’s Corporate Governance Guidelines incorporate term expectations that reflect the Board’s view of the importance of succession planning. Specifically, the Corporate Governance Guidelines express an expectation that (i) an independent director will not be re-nominated after completing 12 full years of service or within the several years that follow; (ii) the Lead Independent Director will serve in that role for approximately three to five years; and (iii) committee chairs will serve for three to five years. In each case, the guideline is flexible and the exact timing for any transition will depend on the needs of the Board at the time and whether an appropriate successor has been identified and nominated.

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Evaluation and Nomination of Director Candidates

One of the key functions of the Nominating, Governance and Corporate Responsibility Committee (“NGCR”) is identifying and nominating candidates for service on the Board. In this regard, the NGCR considers the factors set forth in the Corporate Governance Guidelines, which include the nominee’s business and professional background; history of leadership or contributions to other organizations; functional skill set and expertise; general understanding of marketing, finance, accounting and other elements relevant to the success of a publicly-traded company; and service on other boards of directors. Given the current business, opportunities and challenges confronting our industry, the NGCR pays particular attention to the skills and experience described in the Director Skills/Experience Matrix provided above.

When recommending a slate of nominees for director and identifying new candidates for service, the NGCR considers whether the Board as a whole has and will continue to have an adequate distribution and representation of relevant skills, backgrounds and experience. In addition to professional history and expertise, the Board may consider diversity of background, experience and thought in evaluating and recommending candidates for election. The Board believes that diversity (including diversity of gender, race and ethnicity) is important because a variety of points of view can contribute to a more effective decision-making process.

The NGCR may employ a variety of methods for identifying and evaluating nominees for director. In considering whether to recommend re-nomination of a current director for another term, the NGCR considers whether the skills, commitment and performance of the individual director are such that the individual’s continued service on the Board is desirable. The NGCR also may assess the size of the Board, the need for particular expertise, and whether any vacancies are expected, due to retirement or otherwise.

The NGCR will consider potential candidates for director who come to the committee’s attention through current Board members, professional search firms, stockholders or other sources. When compiling a pool of candidates to review and interview for a new director search, the NGCR endeavors to include, and requests that any search firm it engages endeavor to include, candidates with a diversity of race, ethnicity and gender. AvalonBay has in the past and may in the future engage a third party firm to help identify and/or evaluate potential director nominees.

Nominees Recommended by Stockholders

The NGCR will consider candidates properly recommended by stockholders using the same criteria that apply to candidates from other sources. Following verification of the stockholder status of the party or parties proposing a candidate, the NGCR makes an initial analysis of the candidate’s qualifications based on the criteria summarized above to determine whether the candidate is suitable for service on the Board of Directors before deciding whether to undertake a complete evaluation of the candidate. If a stockholder provides any materials in connection with the nomination of a director candidate, such materials are forwarded to the NGCR as part of its review. The Board may also consider the specific information required to be provided by nominating stockholders pursuant to the requirements of AvalonBay’s Bylaws. Stockholders may also nominate directors in accordance with the proxy access provisions of AvalonBay’s Bylaws. For more information on stockholder nominations, see “Other Matters - Stockholder Nominations for Directors and Proposals for Annual Meetings.”

Board of Directors Risk and ESG Oversight

We have a number of practices with regard to Board oversight of risk management matters. The charter of each Board committee provides that the committee will, from time to time and to the extent the committee deems appropriate, review risk and compliance matters relevant to the committee and report the results of such review to the full Board. As required by NYSE rules, the charter of the Audit Committee states that the Audit Committee will assist with Board oversight of risk and compliance matters, and in any event will review AvalonBay’s perceived major financial risk exposures and the steps management has taken to monitor and control such exposures. At most regularly scheduled Board meetings, the Board reviews key matters relating to AvalonBay’s finances, liquidity, operations and investment activity. On an annual basis, the Board and/or the Audit Committee engages in a broader discussion about Company-wide risk management.

The Audit Committee (and on occasion the full Board in lieu of the Audit Committee) also reviews matters related to cybersecurity. The Board has delegated primary oversight of cybersecurity risks to the Audit Committee, including those related to data privacy and network security.  The Audit Committee’s charter provides that the Audit Committee shall meet no less frequently than annually with personnel from the Company’s information technology group and senior management (but in practice these meetings have occured more frequently) to discuss the Company’s strategy and standards to defend its IT networks, business systems and information against cyber-attacks, cyber intrusions, unauthorized disclosures of personally identifiable information or Company data,  and similar disruptions.  The Audit Committee also has oversight responsibility of management’s preparedness for and response to any cybersecurity incidents and, in connection therewith, the Committee may retain consultants and advisors and take and approve other actions and expenditures as deemed reasonable and appropriate by the Committee.

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Although it is not the primary reason the Board’s current leadership structure was implemented, AvalonBay and the Board believe the current leadership structure—including both a Chairman of the Board and a separate Lead Independent Director—helps facilitate these risk oversight functions by providing multiple channels for risk-related concerns and comments.

Stockholder Engagement and Responsiveness

We consider our relationship with our stockholders to be an important part of AvalonBay’s success and we value the outlook and opinions of our investors. During 2022 and early 2023, our management reached out to stockholders who collectively held approximately two-thirds of AvalonBay’s outstanding stock, and to stockholder advisory firms, to invite them to discuss with us our practices and policies with respect to environmental, social and governance (“ESG”) issues and other matters. Management (in conjunction with one or more independent directors in a number of cases) spoke with those who responded to that outreach regarding such issues. These discussions addressed matters such as Board composition and refreshment, stockholder rights, the structure for executive compensation, and sustainability efforts. The goal of these conversations was to ensure that management and the Board understood and considered the issues that are most important to our stockholders and to enable AvalonBay to address them effectively. The feedback received was conveyed to and discussed with the full Board and relevant committees.

In addition to conversations with our stockholders, AvalonBay management occasionally receives and responds to correspondence from stockholders and stockholder advocacy groups and, when appropriate, shares this correspondence with the NGCR and the full Board. The Board also considers the votes of stockholders at our Annual Meeting and discusses potential issues raised through that forum.

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Board and Committee Self-Evaluation

Each year the Board conducts a self-evaluation in which the Lead Independent Director talks to each director individually regarding his or her view of how the Board overall and each of our directors is performing. Topics discussed may include whether there are additional items that should be added to agendas, whether management is providing the Board with the information it needs to effectively review AvalonBay’s performance and risks, whether meetings feature a healthy level of debate and participation, whether the composition of the Board is appropriate, whether the Board is adequately monitoring AvalonBay’s strategic direction, and the performance and development of management. This feedback is then discussed in an executive session of the Board.

In addition, each of the Board’s committees annually conducts a review of its charter and a self-assessment of the performance of committee duties under its charter over the previous year. The review generally includes the role of the committee within AvalonBay, the committee’s structure and functioning, and the committee’s charter and fulfillment of delegated responsibilities.

During 2021 and 2022, the Board and its committees reviewed the committee charters to ensure there were clearly delineated responsibilities with respect to oversight of ESG matters and cybersecurity, and clarifying amendments were made to the charters in 2022.

Committees of the Board of Directors

The Board of Directors has four committees: the Audit Committee, the Compensation Committee, the Nominating, Governance and Corporate Responsibility Committee, and the Investment and Finance Committee. With the exception of the Investment and Finance Committee, the committees are made up entirely of independent directors. The charters for the Audit, Compensation, and Nominating, Governance and Corporate Responsibility Committees are available in the Investor Relations section of our website under “Corporate Governance Documents.”

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Meetings and Attendance

The Board of Directors met six times during 2022. The Board generally schedules regular executive sessions at each of its meetings during which the independent directors meet without management participation. The Lead Independent Director presides over executive sessions of the Board. The independent directors met in executive session four times during 2022.

During 2022, each director attended at least 75% of the total number of meetings of the Board and meetings of the Board committees of which he or she was a member. The Board’s policy is that every director should attend our annual meetings of stockholders. All of the directors attended the virtual 2022 Annual Meeting of Stockholders.

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Governance Documents

The Board has adopted a Code of Business Conduct and Ethics that applies to the Board of Directors and all AvalonBay executives and employees. In addition, the Board has adopted Corporate Governance Guidelines that govern many of its practices and policies. These documents are available on the Investor Relations section of our website (www.avalonbay.com) under “Corporate Governance Documents,” together with the following additional documents:

To the extent required by the rules of the SEC and the NYSE, we will disclose amendments and waivers relating to these documents in the same place on our website. Additional information on corporate governance policies is included in the Compensation Discussion & Analysis section of this Proxy Statement under the heading “Compensation Policies.” The information contained on, or available through, our website is not incorporated by reference into this Proxy Statement.

Contacting the Board

Any stockholder or other interested party may contact any of our directors, including the Lead Independent Director or our independent directors as a group, by writing to them at the following address. All communications addressed to one or more directors will be forwarded as addressed.

[Name of Director or Group of Directors]
c/o AvalonBay Communities, Inc.
4040 Wilson Boulevard, Suite 1000
Arlington, VA 22203
Attention: Corporate Secretary

Human Capital Management

Our purpose as a company is to create a better way to live, and all AvalonBay associates, from those based at our communities to those at our regional and corporate offices, have a role to play in bringing our purpose to life.

We believe that AvalonBay’s culture is a differentiator that leads to success in fulfilling our purpose. Our company culture centers around our core values and cultural norms, which are touchstones that help guide our behavior and decision-making.

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Our Workforce

As of January 31, 2023, we had 2,947 employees, of which approximately 97% were employed on a full-time basis. Approximately 66% of our associates work on-site at our operating communities and the remainder work at other sites. Approximately 40% of our associates self-identify as female and 63% self-identify as non-White or did not specify their ethnicities.

Inclusion and Diversity

Building a more inclusive and diverse AvalonBay begins with our purpose — creating a better way to live. Inspired by this purpose, AvalonBay’s Inclusion & Diversity (“I&D”) mission is to foster an environment where all associates feel welcome, are supported with opportunities to thrive and are represented by our leadership team. As we grow and innovate, it’s important that we recruit, develop, and promote associates with diverse identities, experiences and perspectives and create an environment that encourages idea flow and ensures all voices are heard, understood, and appreciated.

To help promote and provide an inclusive culture, we established associate resource groups and opportunities for associates with diverse backgrounds, experiences, and perspectives to connect with one another and continue to strengthen our culture. 

Current associate resource groups include:

The Company has also offered training in unconscious bias, inclusive culture and allyship to all associates and has broadened its talent acquisition efforts to include diverse interview slates and panels and outreach to student groups and associations that represent diverse populations.

Attracting, motivating, developing, and retaining our associates is critical to the long-term success of AvalonBay. We empower our associates to grow in their careers as they take on new roles or broaden existing roles, receive and provide candid feedback, and learn valuable skills. One way we support this is through our Mentorship Program.

The Company set a vision to increase gender and racial diversity at the management level by 2025 and every department is responsible for driving an action plan to support I&D across the organization. Additionally, we publish our latest EEO-1 report on our public ESG website. Annually, we review our diversity metrics, vision and efforts with our NGCR.

Mr. Schall, the Company’s CEO, is a signatory of the CEO Action for Diversity and Inclusion pledge and member of the Nareit Dividends Through Diversity, Equity & Inclusion CEO Council.

Company Workforce by the Numbers (as of January 31, 2023)

Ethnicities

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Training & Development

At AvalonBay we believe that our associates are our most important resource and support their professional development and career advancement. To support their progress, our managers and associates have ongoing career development conversations and memorialize them in a year-end performance review.

We train and develop our associates in a variety of ways, including online, instructor-led and on-the-job learning. Our learning management system, AvalonBay University, offers approximately 600 courses providing functional, technical, management, ethics, compliance, and cyber-awareness training. In addition, our tuition assistance program supports our associates by providing them with reimbursement for undergraduate and graduate degree programs or for coursework leading to professional certifications/designations.

Associate Engagement

Each year we conduct an Associate Perspective Survey, which enables AvalonBay to better understand how associates view the Company, their managers, and their overall experience. Based on the survey results, we endeavor to improve in areas that are deemed by associates as opportunities for growth. For the 2022 survey, we included questions across 11 categories, including Culture, I&D, Communication, and Manager Effectiveness, to help us understand how our associates feel about their experiences in those areas. The 2022 survey showed that our associates’ engagement increased slightly from the previous year. We implemented actions in response to their feedback, and we plan to measure the impact of these actions in the 2023 survey.

Health and Safety

We take workplace safety seriously at our construction sites, our operating communities and our offices. Through our Construction Site Safety Observation program and our dedicated safety team, we monitor project-level safety performance metrics at our construction sites, and elements of compensation for our construction group and our CEO are based on safety compliance performance. Our maintenance associates are required to take monthly safety training on a variety of subjects, and our risk management group monitors incident reports from our offices and communities.

Board Oversight of Human Capital

The Board of Directors, through its Compensation Committee, regularly reviews management’s human resources practices, including talent management and training. The NGCR regularly reviews diversity metrics and inclusion and diversity efforts. The Board actively supports activities that encourage an inclusive culture at AvalonBay, including in some cases participating in and contributing to programs sponsored by our associate resource groups.

Additional information on each of these areas relating to human capital management can be found in our ESG Report by visiting https://www.avaloncommunities.com/about-us/esg. Materials located on AvalonBay’s website and referenced herein are not deemed to be part of this Proxy Statement and are not incorporated herein by reference.

Transactions with Related Persons, Promoters and Certain Control Persons

Our Code of Business Conduct and Ethics prohibits employees, including executive officers and directors, from engaging in activities that create a conflict of interest with AvalonBay unless all relevant details have been disclosed and an appropriate waiver permitting the conduct has been received. An activity constitutes a conflict of interest under the Code if (i) the activity could adversely affect or compete with AvalonBay, (ii) any interest, connection or benefit to the employee or director from the activity could reasonably be expected to cause such employee or director to consider anything other than the best interest of AvalonBay when deliberating and voting on Company matters, (iii) any interest, connection or benefit to the employee or director from the activity could give such employee or director or a member of his or her family an improper benefit that was obtained on account of his or her position within AvalonBay, or (iv) the employee or director is placing his or her own interests above the Company’s interest. Waivers for executive officers or directors may only be granted by the Board or a designated committee of the Board, and any waiver granted to an executive officer or director will be disclosed to the extent required by law or NYSE rules. The NGCR (or any other committee of independent directors that is designated) is responsible for administering the Code for executive officers and directors.

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Director Compensation

The compensation for our non-employee directors is described below. Directors who are also employees do not receive additional compensation for serving on the Board. Our Board and NGCR periodically assess the total compensation for non-employee directors relative to the compensation provided by similarly sized REITs, by our multifamily peer group, and by a group of cross-industry similarly sized companies.

All shares of restricted stock (or deferred stock units) granted to non-employee directors vest in four quarterly installments over a one-year period, subject to accelerated vesting upon departure from the Board except in the case of a voluntary departure by the director during the director’s elected term that is not due to death or disability or the director’s removal for cause. If a director elects to receive a deferred stock award in lieu of restricted stock, the director will receive shares of stock in respect of the vested portion of the deferred stock unit award within 30 days following termination of service as a director.

Director Stock Ownership Guidelines

Under our Corporate Governance Guidelines, non-employee directors are generally required to hold shares of stock (or deferred stock units) having a value that equals or exceeds five times the annual cash retainer paid to non-employee directors. Directors have five years from the commencement of their service as a director to comply with such requirement. As of April 1, 2023, all the non-employee directors who have served on the Board for five years or more were in compliance with this requirement.

The following table sets forth the compensation for service as an AvalonBay director received by each non-employee director in 2022.

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Director Compensation Table

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Proposal 2. Non-Binding, Advisory Vote on Executive Compensation

Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a non-binding, advisory stockholder vote to approve the compensation of the Company’s named executive officers. The Compensation Discussion and Analysis as presented below describes AvalonBay’s executive officer compensation program and decisions made by the Compensation Committee and the Board of Directors with respect to the 2022 compensation of our named executive officers. We believe the compensation program achieves our goals of (i) attracting, motivating and retaining experienced and effective executives, (ii) directing the performance of those executives with clearly defined goals and measures of achievement, and (iii) aligning the interests of management with the interests of our stockholders.

We have held a non-binding, advisory vote on executive compensation (known as a say-on-pay vote) at each Annual Meeting of Stockholders since 2011. At this Annual Meeting we are also holding a non-binding, advisory vote regarding the frequency of future say-on-pay votes. See Proposal 3. Non-Binding, Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation.

While the vote on the following resolution is advisory and will not bind us to take any particular action, our Compensation Committee and our Board of Directors will carefully consider the stockholder say-on-pay vote in making future decisions regarding our compensation program. The Board of Directors is asking stockholders to adopt the following resolution:

“RESOLVED, that the compensation paid to AvalonBay’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and any related material disclosed in this Proxy Statement, is hereby APPROVED, on a non-binding, advisory basis, by the stockholders of AvalonBay.”

Required Vote and Recommendation

Only holders of record of AvalonBay’s common stock as of the close of business on the Record Date are entitled to vote on this proposal. Proxies will be voted for adoption of the resolution approving the compensation disclosed unless contrary instructions are set forth on the proxy card. A majority of the votes cast on the proposal at the Annual Meeting is required to provide non-binding, advisory approval of the compensation paid to AvalonBay’s named executive officers. Under Maryland law, abstentions and broker non-votes are not treated as votes cast. Accordingly, an abstention or broker non-vote will have no effect on the result of the vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RESOLUTION TO APPROVE, ON A NON-BINDING, ADVISORY BASIS, THE COMPENSATION PAID TO AVALONBAY’S NAMED EXECUTIVE OFFICERS.

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Proposal 3. Non-Binding, Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation

Section 14A(a)(2) of the Exchange Act requires us to submit a non-binding, advisory proposal to stockholders not less frequently than once every six years enabling stockholders to vote on whether advisory “Say-on-Pay” votes on named executive officer compensation, such as Proposal 2 of this Proxy Statement, should be held every one, two or three years. The prior vote on this matter was held in 2017, and the Board recommended that the non-binding, advisory vote on executive compensation be held every year (rather than every two years or every three years) and the stockholders elected, on a non-binding, advisory basis, to have such vote annually. Accordingly, the Board is again asking the stockholders to vote on whether future non-binding, advisory votes to approve the compensation of the Company’s named executive officers as set forth in the Company’s proxy statement should be held every one, two or three years. The Company believes that it is appropriate to continue to hold such a vote every year so that the Board receives feedback from the Company’s stockholders on executive compensation decisions in a timely manner. This feedback may then be considered by the Compensation Committee in its next annual decision-making process.

Required Vote and Recommendation

Only holders of record of AvalonBay’s common stock as of the close of business on the Record Date are entitled to vote on this proposal. Because there are three alternatives, it is possible that none of the three alternatives will receive a majority of votes cast. In that case, the results of the advisory vote regarding frequency of future non-binding, advisory votes on executive compensation shall be determined by whichever of the choices - every one, two, or three years - receives the greatest number of votes cast. Under Maryland law, abstentions and broker non-votes are not treated as votes cast. Accordingly, an abstention or broker non-vote will have no effect on the result of the vote. If no voting specification is made on a properly returned or voted proxy card, the proxies named on the proxy card will vote for a frequency of EVERY ONE YEAR for future advisory votes regarding executive compensation.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE FREQUENCY OF “EVERY ONE YEAR” FOR THE NON-BINDING, ADVISORY VOTE ON THE COMPENSATION OF AVALONBAY’S NAMED EXECUTIVE OFFICERS.

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Compensation Discussion and Analysis

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This Compensation Discussion and Analysis (“CD&A”) describes how the Board of Directors, the Compensation Committee and the Company think about compensation for the Company’s executive officers and what decisions were made in setting 2022 compensation, including how we established goals and aligned compensation with performance and stockholder interests.

Specifically, the CD&A describes the compensation of the following individuals, who were our named executive officers (“NEOs”) in 2022:

Executive Summary

Our Company Performance

The Company produced strong financial and operating results in 2022. Core Funds from Operations (“Core FFO”) per share increased by 18.5% in 2022 from 2021, and Same Store Residential rental revenue and Same Store Residential Net Operating Income (“NOI”) increased by 10.9% and by 13.2%, respectively, as compared to the prior year. Over the course of the year, we made considerable progress in transforming the way we operate and deliver services to prospects and residents. We continued to optimize the growth profile of our portfolio in 2022 by selling approximately $1.0 billion of wholly-owned real estate assets, primarily located in the Northeast, and recycled and rotated the proceeds into acquisitions and new developments in our existing and expansion regions. We also originated our Structured Investment Program (“SIP”) in 2022, which seeks to make mezzanine loans to or preferred equity investments in third-party multifamily developers, delivering attractive investment returns to the Company. Finally, we remained focused on ESG matters, which are of increasing importance to our employees, residents and stockholders.

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2022 KEY HIGHLIGHTS
Operating Activity Our Same Store Residential NOI increased by 13.2% and was driven by 10.9% Same Store Residential revenue growth year over year, which was supported by strong operating fundamentals and improved underlying bad debt trends. We continued our development and implementation of various operating initiatives designed to enhance the customer experience while creating operating efficiencies, including prospect website improvements, digitalization and automation of maintenance processes, and implementation of smart access and community wide Wi-Fi.	13.2% SAME STORE RESIDENTIAL NOI GROWTH OVER 2022
Development Activity We completed five new wholly-owned development communities containing 1,858 apartment homes for an aggregate total capitalized cost of approximately $692 million. We also started the development of five new apartment communities, which are expected to contain 1,845 apartment homes in total when completed for an aggregate projected total capitalized cost of approximately $729 million.	$692M TOTAL DEVELOPMENT COMPLETIONS
Dividend During 2022, we paid quarterly dividends at a rate of $1.59 per share, and in February 2023 we declared the first quarter dividend for 2023 at a rate of $1.65 per share, a 3.8% increase over the prior rate.	$6.36 TOTAL DIVIDENDS/SHARE PAID IN 2022 3.8% INCREASE IN QUARTERLY RATE TO $1.65 FOR 1Q 2023
Balance Sheet Management We raised approximately $1.45 billion of capital, including $350 million from the issuance of unsecured notes and approximately $1 billion from the sale of real estate. In addition, we amended and upsized our revolving credit facility from $1.75 billion to $2.25 billion and established a $500 million commercial paper program, which is backstopped by maintenance of available borrowing capacity under the credit facility (the “Commercial Paper Program”). At year-end, the Company’s Net Debt-to-Core-EBITDAre was 4.5x and unencumbered NOI was 95% as a percent of total NOI.   We also entered into an equity forward contract in April 2022 with respect to two million shares of common stock at an initial forward price of $247.30, after offering fees and discounts, which offers timing flexibility and provides an attractive source of capital.	NET DEBT-TO-CORE EBITDAre 4.5X 95% UNENCUMBERED NOI
Portfolio Management We sold nine wholly-owned communities, containing 2,062 apartment homes, for an aggregate sales price of approximately $924 million. The Company also acquired four wholly-owned communities, containing 1,313 apartment homes, for an aggregate purchase price of approximately $536 million. The four newly acquired communities were in our expansion regions of Charlotte, North Carolina, Southeast Florida, Dallas, Texas and Denver, Colorado.
Environmental, Social and Governance We earned an “A-” grade from the CDP (formerly known as the Carbon Disclosure Project) and outperformed all of our multifamily REIT peers, reflecting progress on our science-based emissions reduction targets and climate resiliency work. We ranked first in our sector globally and regionally for the Global Real Estate Sustainability Benchmark (“GRESB”) Standing Investments Score and were awarded Nareit’s Residential Leader in the Light award. We also increased our MSCI score to “A”. We continued to make progress on our Diversity in Leadership Vision, to increase the representation of women and people of color on our leadership team, which includes all associates at or above the Director level. Additional information our ESG efforts including targets, goals, and progress is published annually in our ESG Report, which can be found under the “About Us—ESG” section of our website at www.avalonbay.com. Our 2022 ESG Report will be published in mid 2023.

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Overview of our Executive Compensation Program

Consistent with our total compensation philosophy, a substantial majority of the target pay for our NEOs is variable and contingent on performance.

Target Total Compensation Mix CEO 2022 Target Pay Mix		Other NEOs 2022 Average Target Pay Mix

For the charts above, the CEO is Mr. Schall and the other NEOs include Mr. Naughton and the other NEOs.

The individual components of direct compensation for the NEOs are summarized below.

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Our Compensation Programs Incorporate Best Practices

The Board implements and maintains leading practices in the Company’s executive compensation programs.

What we do
Pay for performance		At least 50% of our NEOs’ target total direct compensation is performance-based and tied to pre-established performance goals aligned with our short-term and long-term objectives
Rigorous performance goals		We use rigorous, objective performance-based Company goals in our incentive plans
Annual say-on-pay vote		We have conducted an annual advisory say-on-pay vote on our NEO compensation since 2011
Annual compensation peer group review		We review competitive market information when considering executive pay
Caps on annual and long-term incentives		Performance-based incentive awards have maximum achievement levels to mitigate the risk that executives will make unwise decisions in pursuit of excessive rewards
Limited perquisites		We provide limited perquisites to officers in the Company
Limited employment agreements		We do not have employment agreements with officers except for our CEO, an external hire who joined us in January 2021 and whose agreement expires on the third anniversary of his start date without need for advance notice
Policy on recoupment of incentive compensation (clawback policy)		The Compensation Committee can require forfeiture or reimbursement of incentive compensation paid or awarded to any officer holding the title of senior vice president or above. In light of the SEC’s adoption of final clawback rules in October 2022 and the NYSE’s proposed rule in February 2023, we intend to update our clawback policy to comply with applicable NYSE listing rules when effective
Director and senior officer stock ownership guidelines		Our stock ownership guidelines require significant ownership of AvalonBay stock by officers holding the title of senior vice president or higher, and by our independent directors, to align the long-term interests of our officers and non-employee directors with those of our stockholders
Independent Compensation Committee consultant		The Compensation Committee engages its own independent compensation consultant to advise on executive and director compensation matters
Prohibition on certain transactions in Company stock by directors and officers		Our Anti-Hedging and Anti-Speculation Policy, which applies to all directors, officers and employees, prohibits hedging and the use of derivative securities and similar transactions relating to our securities. Our No Pledging Policy prohibits our directors and officers from holding AvalonBay securities in a margin account or pledging our securities as collateral for loans
What we don’t do
No single-trigger equity compensation vesting		We do not maintain any plans that require automatic acceleration of time-based vesting restricted share or option awards upon a change in control of AvalonBay
No excise tax gross-ups on change in control payments		We do not provide our NEOs with any excise tax gross-ups or other payment or reimbursement of excise taxes in connection with a change in control of AvalonBay
No tax gross-ups on perquisites		We do not provide our NEOs with any tax gross-ups on perquisites, other than in limited circumstances for expense reimbursement associated with approved business-related relocations
No discounting of stock options or repricing of underwater options		Our equity compensation plan expressly prohibits discounting the exercise price of stock options and repricing underwater stock options without stockholder approval
No guaranteed bonuses		Our annual incentive plan is entirely performance-based, and our NEOs are not guaranteed any minimum levels of payment under that plan

2022 Stockholder Advisory Vote on Executive Compensation

At the 2022 Annual Meeting of Stockholders, the Company’s executive officer compensation for 2021 was approved by approximately 94.8% of the votes cast on the matter. The Compensation Committee and the Company considered these results to be an endorsement by stockholders of the Company’s compensation structure, target levels and actual executive compensation.

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Chief Executive Officer 2022 Compensation at-a-glance

Benjamin W. Schall Chief Executive Officer

Fiscal 2022 Total Compensation

Fiscal 2022 Target Total Compensation: $8,000,000
Base Salary:	$1,000,000
Cash Bonus 2022 target:	150% of base salary
Stock Bonus 2022 target:	$1,375,000(1)
Performance award target for 2022-2024 performance period:	$4,125,000
Realized Performance award for 2020-2022 performance period:	For Mr. Schall’s 2020-2022 performance award, combined achievement was 65.7%, with a realized stock value of $2,304,438 (based on the February 23, 2023 closing stock price of $177.83 and payment of a cash amount representing accrued dividends on earned units) vs initial target value of $3,750,000, which was granted as part of his sign-on package.

Cash Bonus

Mr. Schall’s target cash bonus was 150% of base salary in 2022, with 80% of the target cash bonus based on corporate performance factors and 20% based on individual performance. The achievement levels for corporate performance and individual factors for 2022 were determined to be 137.9% and 115.0% of target, respectively, resulting in a final cash bonus for 2022 of $1,999,800.

Stock Bonus

Mr. Schall’s target stock bonus for 2022 was $1,375,000. The performance measures used in calculating the stock bonus reflect different elements of the Company’s performance and are not duplicative of the performance measures used to evaluate corporate performance under the annual cash bonus program. The quantitative achievement level for these stock bonus performance measures for 2022 was 107.1% of target, and the Compensation Committee assessed final payout at 110.0% of target after considering that changing capital market conditions properly resulted in the deferral of certain planned starts that were included in and impacted the stock bonus metrics. This resulted in a payout of $1,512,500. Mr. Schall has elected to receive 25% of the earned stock bonus value in the form of stock options and the remainder in the form of restricted stock. The restricted stock and stock options vest ratably over three years from the date of grant. Under applicable SEC rules these awards will be disclosed in the 2024 proxy statement Summary Compensation Table as the actual grant of stock and options, though based on 2022 achievement, occurred in 2023.

2022-2024 Performance Awards

Mr. Schall’s target performance award for the 2022-2024 performance period was $4,125,000, with 55% of the target award tied to relative three-year TSR metrics against REIT indices, and 45% of the target award tied to three-year relative financial operating metrics. Additional detail on Mr. Schall’s 2022-2024 performance award is provided later in the CD&A.

Settled Performance Awards

Mr. Schall’s target performance award for the 2020-2022 performance period was $3,750,000, which was awarded as part of his sign-on package when he joined the Company in January 2021. Fifty percent of the target award was tied to relative three-year TSR metrics comparisons, and 50% of the target award was tied to three-year relative financial operating metrics. The Compensation Committee determined achievement under the award at 65.7% of target payout for the 2020-2022 performance awards. Mr. Schall’s award was settled on February 23, 2023 in 11,703 shares of fully vested stock valued at $2,081,144 based on the closing price of the Company’s common stock on the NYSE on such date of $177.83, together with a cash amount of $223,293 representing cumulative dividends accrued on the earned units.

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Target Compensation

In February 2022, the Compensation Committee approved an increase to Mr. Schall’s 2022 target total compensation from $7,500,000 to $8,000,000, or 6.7%, after reviewing the Company’s and Mr. Schall’s performance and considering other factors such as Mr. Schall’s tenure in the position and compensation for CEOs at peer companies. Mr. Schall’s 2022 target pay increase took the form of increases to his target annual stock bonus and multi-year performance award. A substantial majority of Mr. Schall’s 2022 target total pay is in the form of performance-based compensation at 88% and the remainder is fixed at 12%.

Our Compensation Decision-Making Process

Who is Involved in Compensation Decisions

How We Review Market Compensation

In determining the total direct compensation for each NEO, the Compensation Committee generally considers a number of factors on a subjective basis, including:

Although the Compensation Committee reviews the officers’ compensation relative to the peer group, target compensation is not mechanically set at a particular percentage of the peer group average. An officer’s target compensation may vary from the peer group data for the following reasons:

The Compensation Committee believes that the ultimate decision as to appropriate target compensation for a particular officer should be made based on the full review described above.

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How We Select and Use Peer Groups

Peer Group for Market Compensation Purposes

The Compensation Committee uses the peer group described below when evaluating the appropriate levels of executive compensation. In determining the peer group composition, the Compensation Committee considers the following elements:

The peer group for 2022 compensation decisions consisted of the companies listed below.

Total Capitalization (Equity + Debt)

($ in millions as of Dec. 31, 2022)

The Compensation Committee regularly reviews the peer group to ensure the members of the peer group remain relevant to our business. For executive compensation set in 2022, the Compensation Committee removed Prologis and Host Hotels from the peer group. The total capitalization of Prologis was approximately 3.0x of AvalonBay, versus the Committee’s preferred peer range of 0.5x to 2.0x. Host Hotels & Resorts was significantly smaller than AvalonBay based on total capitalization, number of employees, and number of properties, and Host’s business and operating structure is different than AvalonBay’s. Simon Property Group and Sun Communities were added to the peer group for 2022. Simon Property Group is an S&P 500 REIT with a similar number of properties and employees as AvalonBay. Sun Communities is in the residential index/industry and has a similarly high employee and property count to AvalonBay. The Compensation Committee also believes that Simon Property Group and Sun Communities are peers in terms of executive recruitment and talent retention.

Peer Groups for Performance Award Measurement Purposes

The Compensation Committee uses a different peer group for determining performance under the executives’ performance awards. This peer group emphasizes multifamily peers rather than similarly sized REITs from varying sectors since the performance metrics—operating performance and shareholder return—are more appropriately compared with direct competitors in our specific sector of the real estate industry.

For the 2022-2024 performance awards that are earned based on three-year relative TSR, we used two indices. The FTSE Nareit Equity Apartments Index represents REITs in the U.S. multifamily housing industry. The FTSE Nareit Equity REITS Index represents a comprehensive group of REITs that spans the U.S. commercial real estate industry, and includes all investment and property sectors other than REITs that have been designated as Timber REITs or Infrastructure REITs.

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For the 2022-2024 performance awards that are earned based on operating metrics, the peer group consisted of the following multifamily REITs:

These companies were chosen primarily because they are publicly traded companies in the multifamily industry that are of a size and geographic presence comparable to AvalonBay. For Apartment Income REIT Corp., given recent spin-off activity, an analysis will be conducted whether to include that company for all or only part of the performance period based on when its leverage and operating metrics stabilize post-spinoff.

How We Establish Goals and Determine Achievement for Incentive Compensation

Setting Goals

At the beginning of each year, the Board of Directors reviews and approves the Company’s business plan and budget, and management proposes to the Compensation Committee corporate goals for that year for the annual cash bonus program and the multi-year performance program. The Compensation Committee reviews the budget and the proposed goals, adopts any revisions to the proposed goals it deems appropriate, and approves the final corporate goals. The approved targets are intended to be rigorous, and our annual goals are consistent with our business outlook provided to the investment community and our business plan.

Annual business unit goals are drafted by the head of each business unit and reviewed, modified, and approved by the Chief Executive Officer and presented to the Compensation Committee.

The individual goals for the annual bonus program are determined in a similar manner. The goals for the Chief Executive Officer are determined and approved by the Compensation Committee. Goals for the other NEOs are determined by the Chief Executive Officer and presented to the Compensation Committee.

Determining Achievement

At the end of each year, the CEO reviews and reports to the Compensation Committee his assessment of the achievement of the corporate goals for both the annual bonus program and the long-term incentive program, as well as achievement of the business unit and individual goals for the annual bonus program for the other NEOs. Actual bonus awards and compensation changes for the CEO, and all executive officers, are approved by the Compensation Committee.

Compensation Consultants

The Compensation Committee has engaged Steven Hall & Partners (“Steven Hall”), an executive compensation consulting firm, to provide general advice regarding trends and changes in executive and Board compensation, regulations, and governance practices. Steven Hall discusses the impact of these trends and changes on the Company, particularly in light of the Company’s compensation structure and levels, and provides general commentary regarding the Company’s executive compensation structure, goals and levels. The firm also reviews and, if appropriate, comments to the Committee on the work prepared by Ferguson Partners Consulting, L.P. (“FPC”), management’s compensation consultant. Steven Hall did not provide any services directly to the Company or management and after review, taking into account relevant factors in accordance with SEC guidelines, the Compensation Committee concluded that no conflicts of interest exist in connection with the services that Steven Hall provides to the Committee.

Management uses the services of FPC, another compensation consulting firm, to provide information about competitive pay practices and data that is shared with the Compensation Committee. In 2021 and 2022, an affiliate of FPC provided certain services to management and the Board of Directors, including with respect to recruitment of potential officer and director candidates. The Compensation Committee considered whether FPC’s work for the Company raised any conflict of interest, taking into account relevant factors in accordance with SEC guidelines, and determined that, in light of the nature of the advisory work that FPC does for the Company, the total fees paid to FPC and its affiliates for various services, and the policies that FPC and its affiliates have put in place to prevent compensation advisor conflicts of interest, the engagement of FPC does not create any material conflict of interest.

2022 Compensation Framework and Decisions

With respect to 2022 compensation matters for our NEOs, the Compensation Committee reviewed and approved the following: (i) base salaries, (ii) target cash and stock bonuses, (iii) criteria and metrics for the 2022 annual cash bonuses to be paid in 2023, and (iv) 2022-2024 multi-year performance awards. These reviews and determinations are discussed below.

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Base Salary

The Compensation Committee reviews the executive officers’ base salaries annually by considering the information from the relevant peer group, internal pay equity, and each executive’s position, experience, demonstrated abilities, and level of achievement. In establishing the base salary for each NEO, the Compensation Committee reviewed a reference market rate after considering comparator group company data and evaluated whether that rate should be adjusted up or down based on differences in the scope of the NEO’s position as compared to the scope of comparable positions in the industry and the comparator group companies. The reference market rate is for review purposes only and base salaries are not determined by the reference market rate. The table below sets forth the 2022 base salaries for the NEOs.

Annual Cash Incentive Program

Our annual cash bonus program emphasizes short-term goals. The performance measures we assessed to determine payouts under the 2022 Annual Cash Incentive Program are described below.

Annual Cash Incentive Mix

For each metric, the payout is as follows:

Payouts for achievement that is above threshold but that falls between two performance levels are determined by linear interpolation.

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Core FFO per Share

Core FFO per share is a key measure of the Company’s performance and is, with some variation among REITs, an industry-wide measure. For 2022, we increased the weighting of Core FFO per Share from 40% to 50%. Ranges for annual and quarterly target achievements were used given continued uncertainty around the continuation or expiration of eviction moratoria put in place during the pandemic, the amount and timing of rent relief collections, and uncertainty with the general economic and regulatory climate.

Development Yield

With stabilizing operating fundamentals for 2022, the development yield metric was added back as a goal for 2022. Development yield (i.e., projected NOI divided by total capitalized cost) performance for communities completed during the year is compared to our original budgeted yield for such developments. The target goal is based on meeting our pre-established budgeted yield for each development community. Performance is determined based on the weighted average of the stabilized development yields compared to the weighted average of the original budgeted yields for the basket of annual completions. The yields are weighted based on total capitalized cost. The original budgeted development yield is established at construction start for each property based on each property’s projected NOI divided by total capitalized cost. In this case, the actual variance in stabilized yield compared to original budgeted yield for the 2022 development communities was positive, resulting in above target payout with respect to that metric.

Performance Measure		Weight		Threshold	Target	Max		% of Target Payout
2022 Development Yield		15%						177.5%

GRESB

GRESB is an organization that provides ESG data, scores and benchmarks on the real estate and infrastructure industries. The GRESB score is an overall measure of ESG performance, including commitment, disclosure and implementation. Our ESG goals include reductions in Scope 1, 2 and 3 greenhouse gas emissions, reduction in waste, progress on inclusion and diversity initiatives, improvement in our score on associate engagement and satisfaction, and increase in our annual community investment.

For 2022, GRESB assigned AvalonBay a score of 89 (out of a possible 100). We believe this score reflects our continued progress on our science-based targets and our public commitment to a low-carbon and renewable energy future. At 89, the Company also outperformed the peer group that GRESB used for the review. AVB’s GRESB score resulted from improved overall data coverage of our energy consumption (utility usage), increased renewable energy production and consumption, and more properties in the portfolio that have a third-party environmental certification, among other factors.

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Performance Measure		Weight		Threshold	Target	Max		% of Target Payout
GRESB		7.5%						175.0%

Customer Satisfaction – Mid-Lease Net Promoter Score (“NPS”) and Online Reputation Sentiment

Mid-Lease NPS

Mid-Lease NPS measures customer feedback from residents who have an active six-month or longer lease agreement and are at the midpoint of that lease term. The NPS is calculated by determining the percentage of responding residents who would promote us (those who gave us a 9 or 10 rating) and subtracting the percentage of responding residents who rated us a 6 or below. Residents are surveyed by an independent third party.

At year-end 2022, our NPS was 26 at stabilized communities, which is slightly below the annual target range of 28-34, resulting in 66.7% achievement on this metric. Greater than normal renewal rental rate increases, which in part resulted from the decline in rental rates experienced during the pandemic and challenges related to the availability of labor in certain regions, contributed to mid-lease NPS being below target performance.

Online Reputation Sentiment

Online reputation sentiment measures the average rating of all reviews on all of our communities (including communities in lease-up or undergoing redevelopment) that are written during the calendar year and are still live on Google or Facebook as of the end of the calendar year. This information is monitored and scored by a third party.

Our online reputation sentiment was 4.4 out of 5.0 in 2022, which is above the target goal of 4.25. Our positive online reputation sentiment continued to be driven by the outstanding service of our maintenance teams and the responsiveness of on-site leasing staff through their interactions with prospects and residents.

Performance Measure		Weight		Threshold	Target	Max		% of Target Payout
Mid-Lease NPS		3.75%						66.7%
Online Reputation Sentiment		3.75%						130.0%

Qualitative Performance Metrics

The following metrics represent qualitative assessments of AvalonBay’s performance.

Strategic & Corporate Technology Initiatives

Determining our progress on strategic and corporate initiatives requires a qualitative judgment about the Company’s achievement on multi-year corporate investments and projects. Our 2022 strategic initiatives included:

We continued to make progress on our market expansion objective either through acquisition or ground-up development, and as of year-end 2022 we have eight communities in Denver (including two under construction), nine in Southeast Florida (including one under construction), two in Dallas, and five in North Carolina (including one under construction). We also have secured opportunities to develop an additional 10 communities in these markets. During 2022, we shifted our furnished housing strategy from pre-furnished inventory to on-demand, which better aligns with customer preferences for specific apartments. We continued our digitalization and automation efforts related to maintenance processes and various aspects of the customer journey, resulting in increased operating efficiencies. We continued with the deployment of high-speed internet and smart home technology to support our digital, self-service goals and to provide customers with an enhanced customer experience. We made substantial progress on the modernization of our technology infrastructure, including re-architecting and modernizing portions of our websites and increasing digitalization across our platforms. Based on the above

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and progress on other initiatives, the Compensation Committee determined that the achievement on Strategic & Corporate initiatives in 2022 was 115.0% of target.

Effectiveness of Management

This qualitative measure considers capital allocation, portfolio allocation, balance sheet management, and associate engagement. In 2022, we sold nine wholly owned assets for $924 million, eight of which were in New York/New Jersey, New England, and the Mid-Atlantic, as well as three fund assets, reducing our allocation to our established regions by over $1 billion in total. Approximately $536 million was deployed into acquisitions, all in our expansion markets, including new purchases in Denver, Charlotte, Dallas, and Southeast Florida. Our balance sheet ratios continue to remain strong with 4.5x Net Debt to Core EBITDAre, 95% unencumbered NOI, and no borrowings outstanding on our $2.25 billion unsecured credit facility as of year-end 2022, providing us with financial strength and flexibility. To measure and support associate engagement, we conduct an annual associate perspective survey that is administered by a third party and act on areas of opportunity identified by associates to support overall associate engagement. Our overall engagement score increased 0.3% relative to 2021. Additionally, we continued to make progress in our I&D goals, including creating departmental plans and providing bias and culture training for all interested associates. Based on review and assessment of management’s achievements with respect to the above, the Compensation Committee determined that achievement on this category was 110.0% of target.

Cash Bonus Performance Measures
Metric	Weight		Performance (% of target)	Weighted payout
Annual Core FFO per Share	20%		135.0%	27.0%
Quarterly Core FFO per Share	30%		137.5%	41.3%
Development Yield	15%		177.5%	26.6%
GRESB Score	7.5%		175.0%	13.1%
Mid-Lease NPS	3.75%		66.7%	2.5%
Online Reputation Sentiment	3.75%		130.0%	4.9%
Strategic and Corporate Initiatives	10%		115.0%	11.5%
Effectiveness of Management	10%		110.0%	11.0%
Total Payout	100.0%			137.9%

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Business Unit Component of the Bonus Program

Set forth below are descriptions of each NEO’s business unit responsibilities and achievements in 2022.

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