UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934 (Amendment No.      )

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KILROY REALTY CORPORATION

(Name of Registrant as Specified in Its Charter)

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

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KILROY REALTY CORPORATION

12200 W. Olympic Boulevard, Suite 200

Los Angeles, California 90064

April 12, 2018

To Our Fellow Stockholders:

On behalf of the entire Board of Directors of Kilroy Realty Corporation (NYSE: KRC), we are pleased to present you with KRC’s 2018 Proxy Statement and invite you to attend KRC’s 2018 annual meeting of stockholders to be held on May 23, 2018.

KRC had another exceptional year in 2017 dominated by strong leasing activity in both our stabilized and development portfolios. We ended the year 95% occupied for the third consecutive year and signed the largest single office lease in San Francisco history. At year-end, the office component of our $1.45 billion of development under construction was more than 60% leased and we believe that the Company is well-positioned to continue to create significant value for our stockholders.

We reported strong financial results. Total revenues increased 11.9% and, when adjusted for one-time items, funds from operations per share grew 3.8%. Mid-year, we increased our annual dividend by 13.3%, to $1.70 per share. For the year, our common stock delivered a 4.3% total return to stockholders, outperforming both the SNL US Office REIT and BBG REIT Office Property Indices.

We also continued to maintain a conservative balance sheet. We completed the early redemption of approximately $700 million in debt and preferred stock, issued $765 million in new debt and equity, and increased our unsecured credit facilities to $900 million, with an accordion feature that expands the facilities to $1.5 billion, all on more favorable terms. We also continued our strategy of capital recycling, selling $187 million of non-core assets during the year.

Our commitment to corporate social responsibility and sustainability remained firm. We updated our Board membership criteria to include diversity, specifically gender and ethnicity, formed a Corporate Social Responsibility and Sustainability Committee of the Board to address non-financial issues that are of significance to the Company and its stockholders, and continued to implement industry-leading sustainability practices, which again were recognized by the U.S. Green Building Council, the Global Real Estate Sustainability Benchmark (GRESB), the U.S. Environmental Protection Agency (EPA) and the National Association of Real Estate Investment Trusts (NAREIT), among others.

Since our 2017 annual meeting of stockholders, our senior management team, and in some cases our Lead Independent Director and Chair of our Compensation Committee, and the Chair of our Governance Committee, actively engaged with stockholders owning collectively more than 60% of our outstanding common stock. These meetings provide an important platform to receive feedback on a wide range of topics, including market conditions, corporate strategy and corporate governance practices. We appreciate this dialogue and the feedback we received and are committed to maintaining open lines of communication with investors.

The accompanying proxy materials contain detailed information about the matters on which you are being asked to vote at the 2018 annual meeting. We urge you to read the materials carefully and vote in accordance with the Board’s recommendations. Your vote is very important to us.

KILROY REALTY CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

By Order of the Board of Directors,

Tyler Rose

Executive Vice President,

Chief Financial Officer and Secretary

April 12, 2018

Los Angeles, California

VOTING MATTERS AND BOARD RECOMMENDATIONS

Our Board is soliciting your proxy to vote on the following matters at our Annual Meeting to be held at 8:30 a.m. local (Pacific) time on Wednesday, May 23, 2018 at our principal executive offices located at 12200 West Olympic Boulevard, Suite 200, Los Angeles, California 90064, and any adjournments or postponements of the Annual Meeting:

HOW TO CAST YOUR VOTE

On April 12, 2018, the proxy materials for our Annual Meeting, including this Proxy Statement and our 2017 Annual Report on Form 10-K (the “2017 Annual Report”), were first sent or made available to our stockholders entitled to vote at the Annual Meeting.

The Board presently consists of six directors. Each director is serving a term that continues until the Annual Meeting and until his or her successor is duly elected and qualified. As further described below, our Board has selected all six of our incumbent directors for re-election at the Annual Meeting.

NOMINEES FOR DIRECTOR

Upon the recommendation of the Nominating/Corporate Governance Committee (the “Governance Committee”), the Board nominated John Kilroy, Edward Brennan, PhD, Jolie Hunt, Scott Ingraham, Gary Stevenson and Peter Stoneberg for election to the Board for a term continuing until the annual meeting of stockholders to be held in 2019 and until their respective successors are duly elected and qualified. All of our director nominees are currently directors of the Company and were previously elected to serve on the Board by our stockholders. In this Proxy Statement, references to “John Kilroy” or our CEO are to John B. Kilroy, Jr.

Except as otherwise instructed, proxies solicited by this Proxy Statement will be voted “FOR” the election of each of the nominees to the Board. The nominees have consented to be named in this Proxy Statement and to serve as directors if elected. If any nominee of the Board is unable to serve, or for good cause will not serve, as a director at the time of the Annual Meeting, the persons who are designated as proxies intend to vote, in their discretion, for any other persons that may be designated by the Board. As of the date of this Proxy Statement, the Board has no reason to believe that any of the director nominees named above will be unable or unwilling to stand as a nominee or to serve as a director if elected.

BOARD COMPOSITION

Board Snapshot

The following provides a snapshot of our six director nominees:

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TENURE INDEPENDENCE AGE DIVERSITY 5 of 6 director nominees are independent 0-4 years 5-11 years 11+ years <60 years 60-65 years > 65 years Women 83% 17% Men

Director Nominee Skills, Experience and Background

We believe each of the six director nominees possess the professional and personal qualifications necessary for effective service as a director. In addition to each nominee’s specific experience, qualifications and skills, we believe that each nominee has a reputation for integrity, honesty and adherence to high ethical standards and has demonstrated business acumen and an ability to exercise sound business judgment. We believe all nominees have a commitment to the Company and to building long-term stockholder value. The following chart shows a summary of the director nominees’ skills and core competencies:

Target Tenant Industry Experience 6/6 directors Knowledge and experience with the top five industries that make up the majority of our tenant base (Technology; Life Science & Healthcare; Media; and F.I.R.E. — Finance, Insurance and Real Estate) Executive Leadership 6/6 directors Leadership role as company CEO or President Public Company Board Service 3/6 directors Experience as a board member of another publicly traded company REIT Experience 3/6 directors Knowledge of the REIT industry in which we compete and the issues facing REITs Investment Experience 5/6 directors Relevant investment, strategic and deal structuring experience Financial Literacy/Accounting Experience 4/6 directors Financial or accounting experience and an understanding of financial reporting, internal controls and compliance Finance/Capital Markets Experience 5/6 directors Experience navigating our capital-raising needs Risk Management Experience 6/6 directors Experience overseeing and managing company risk Advanced Degree/Professional Accreditation 4/6 directors Possesses an advanced degree or other professional accreditation that brings additional perspective to our business and strategy

DIRECTOR NOMINEES

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VOTE REQUIRED

Each director nominee will be elected at the Annual Meeting if he or she receives a majority of the votes cast with respect to his or her election (that is, the number of votes cast “FOR” the nominee must exceed the number of votes cast “AGAINST” the nominee). The majority voting standard does not apply, however, in a contested election where the number of director nominees exceeds the number of directors to be elected at an annual meeting of stockholders. In such circumstances, directors will instead be elected by a plurality of all the votes cast in the election of directors at the annual meeting at which a quorum is present. The election of directors at the Annual Meeting is not contested.

Under Maryland law, if an incumbent director is not re-elected at a meeting of stockholders at which he or she stands for re-election, then the incumbent director continues to serve in office as a holdover director until his or her successor is elected. To address this “holdover” issue, our Bylaws provide that if an incumbent director is not re-elected due to his or her failure to receive a majority of the votes cast in an uncontested election, the director will promptly tender his or her resignation as a director, subject to acceptance by the Board. The Governance Committee will then make a recommendation to our Board as to whether to accept or reject the tendered resignation, or whether other action should be taken. Our Board will act on the Governance Committee’s recommendation and publicly disclose its decision, along with its rationale, within 90 days after the date of the certification of the election results.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES.

We are asking our stockholders to provide advisory approval of the compensation of our NEOs (as identified in the CD&A) as such compensation is disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including in the compensation tables, the narratives accompanying those tables and the CD&A). This is commonly referred to as a “Say-on-Pay” vote.

Our executive compensation philosophy is designed to achieve the following objectives:

Our Compensation Committee approved the 2017 compensation arrangements for our NEOs. Below are highlights of the 2017 compensation arrangements for our NEOs from the CD&A section of this Proxy Statement.

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We also maintain a range of executive compensation and governance-related policies, listed beginning on page 45, that we believe reflect current best practices.

In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the related rules of the SEC, our Board requests your advisory Say-on-Pay vote to approve the following resolution at our Annual Meeting:

RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed in this Proxy Statement pursuant to the Securities and Exchange Commission’s executive compensation disclosure rules (which disclosure includes the “Compensation Discussion and Analysis” section, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.”

This vote is an advisory vote only and will not be binding on the Company, the Board or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Company, the Board or the Compensation Committee. However, the Compensation Committee will consider the outcome of this vote when making future compensation decisions for our NEOs.

The Company’s current policy is to provide our stockholders with an advisory Say-on-Pay vote to approve the compensation of our NEOs each year at the annual meeting of stockholders. It is expected that the next advisory Say-on-Pay vote will be held at the 2019 annual meeting of stockholders.

VOTE REQUIRED

The compensation of our NEOs will be approved, on an advisory basis, if a majority of the votes cast at the Annual Meeting are cast in favor of the proposal.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE RESOLUTION APPROVING, ON AN ADVISORY BASIS, THE COMPENSATION OF THE COMPANY’S NEOs.

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We are seeking stockholder ratification of our appointment of Deloitte & Touche LLP (“Deloitte”), an independent registered public accounting firm, as our independent auditor for the fiscal year ending December 31, 2018. Deloitte has served as our independent auditor since 1995 when the Company was privately held and has continued to serve as such since the Company’s initial public offering in January 1997 and, prior to the Annual Meeting, the Audit Committee is expected to re-appoint Deloitte as our independent auditor for the year ending December 31, 2018.

Additional information about Deloitte, including the fees we paid to Deloitte in fiscal years 2017 and 2016, can be found in this Proxy Statement under the caption “Audit and Non-Audit Fees.” The report of the Audit Committee included in this Proxy Statement under the caption “Audit Committee Report” also contains information about the role of Deloitte with respect to the audit of the Company’s annual financial statements.

A representative of Deloitte is expected to be present at our Annual Meeting, be available to respond to appropriate questions and will have the opportunity to make a statement, if desired.

Stockholder ratification of the appointment of Deloitte as our independent auditor is not required by our Bylaws or otherwise. However, the Board is submitting the appointment of Deloitte to the stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the appointment, the Audit Committee may reconsider whether or not to retain Deloitte. Even if the appointment is ratified, the Audit Committee, in its discretion, may appoint a different independent auditor at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and our stockholders.

VOTE REQUIRED

Ratification of the appointment of Deloitte as our independent auditor will be approved if a majority of the votes cast at the Annual Meeting are cast in favor of the proposal.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT AUDITOR FOR FISCAL 2018.

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The Company is committed to good corporate governance, which promotes the long-term interests of stockholders, strengthens accountability of the Board and helps build public trust in the Company. Highlights include the following:

BOARD COMPOSITION AND GOVERNANCE

Director Attendance

During 2017, the Board held four meetings. All directors who served on the Board during 2017 attended at least 75% of the total number of meetings of the Board and meetings of the Board committees on which each director served that were held during the period of the director’s service during the year. Directors are encouraged to attend in person the annual meeting of stockholders of the Company. All directors attended the 2017 annual meeting of stockholders.

Independent Directors

Under the corporate governance rules of the New York Stock Exchange (the “NYSE”), a majority of the members of the Board must satisfy the NYSE criteria for “independence.” No director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). The Board has determined that each of Dr. Brennan, Ms. Hunt and Messrs. Ingraham, Stevenson and Stoneberg is independent under the current listing standards of the NYSE. In addition, pursuant to our Bylaws, each of Dr. Brennan, Ms. Hunt and Messrs. Ingraham, Stevenson and Stoneberg, comprising at least a majority of the members of the Board, is not an employee, officer or affiliate of the Company or any of its subsidiaries or divisions, or a relative of a principal executive officer, and is not an individual member of an organization acting

as an advisor, consultant or legal counsel receiving compensation from the Company in addition to director’s fees. In this Proxy Statement, we refer to each of Dr. Brennan, Ms. Hunt and Messrs. Ingraham, Stevenson and Stoneberg as our “Independent Directors.”

Independent Director Meetings

The Independent Directors meet regularly in executive session without the presence of management. These meetings are generally held on the date of each regularly scheduled Board meeting and on an as-needed basis. Dr. Brennan, our Lead Independent Director, presides over these meetings.

Board Leadership Structure and Lead Independent Director

Our Corporate Governance Guidelines and our Bylaws permit the roles of Chair and CEO to be filled by the same or different individuals. Our Board believes it is important to select our Chair and our CEO in the manner it considers in the best interests of the Company and our stockholders at any given point in time. The Independent Directors on our Board assess the role of Chair and CEO annually to ensure that the Company’s leadership structure best fits the Company’s specific circumstances and short and long-term challenges.

At this time, our Board believes that the Company and our stockholders are best served by having Mr. Kilroy serve as our Chair and CEO. Mr. Kilroy’s combined role as Chair and CEO demonstrates clearer accountability and provides a single leader who speaks with one voice to our stockholders, tenants, partners, employees, other stakeholders and the public. The combined Chair and CEO role also enhances transparency between management and our Board by serving as an efficient and effective bridge for communication between the Board and management on significant business developments and time-sensitive matters, and provides unified leadership for carrying out our strategic initiatives and business plans. The combined Chair and CEO role is balanced by the number of independent directors serving on our Board, our independent committee Chairs and our Lead Independent Director.

Our Corporate Governance Guidelines provide that if the Chair is also our CEO, or if the Chair is not otherwise an Independent Director, the Independent Directors will appoint annually from amongst themselves a Lead Independent Director. Dr. Brennan is currently our Lead Independent Director and brings to this role considerable skills and experience, as described above in “Proposal 1 — Election of Directors.” The role of our Lead Independent Director is designed to further promote the independence of our Board and appropriate oversight of management and to facilitate free and open discussion and communication among the Independent Directors.

The responsibilities of our Lead Independent Director are clearly delineated in our Corporate Governance Guidelines and include:

We believe this current leadership structure with the combined Chair and CEO leadership role and a Lead Independent Director enhances our Board’s ability to provide insight and direction on important strategic initiatives and, at the same time, promotes effective and independent oversight of management and our business.

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Board Oversight of Risk

Our Board is actively involved in risk oversight and the Board as a whole directly oversees strategic, operating, financial and liquidity risks. Operational, financial and strategic presentations by management to the Board include consideration of the challenges and risks to our business, and the Board and management actively engage in discussion on these topics. In addition, our Board has delegated oversight for specific areas of risk exposure to committees of our Board as follows:

At each regular meeting of our Board, the Chair of each committee reports to the full Board regarding the matters reported and discussed at any committee meetings, including any matters relating to risk assessment or risk management. Our CEO, Chief Financial Officer, Chief Operating Officer, Chief Accounting Officer and Senior Vice President, Corporate Counsel regularly attend meetings of these committees when they are not in executive session and often report on matters that may not be otherwise addressed at these meetings. In addition, our directors are encouraged to communicate directly with members of management regarding matters of interest, including matters related to risk, at times when meetings are not being held.

Our Board believes that the process it has established to administer the Board’s risk oversight function would be effective under a variety of leadership frameworks and, therefore, does not have a material effect on our choice of the Board’s leadership structure described above under “Board Leadership Structure and Lead Independent Director.”

Code of Business Conduct and Ethics

Our Board has adopted a Code of Business Conduct and Ethics that applies to our directors, officers (including our CEO, Chief Financial Officer, Chief Accounting Officer and other members of senior financial management), employees, agents and consultants. This Code of Business Conduct and Ethics satisfies the requirements of a “code of business conduct and ethics” under the NYSE listing standards and a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and applicable rules of the Securities and Exchange Commission (the “SEC”). This Code of Business Conduct and Ethics is available in the Investors — Overview — Corporate Governance section of the Company’s website at http://www.kilroyrealty.com. Amendments to, or waivers from, a provision of this Code of Business Conduct and Ethics that apply to the Company’s directors or executive officers, including our CEO, Chief Financial Officer, Chief Accounting Officer, Controller and other members of senior financial management, may be made only by the Board or a Board committee and will be promptly posted on our website to the extent required by applicable SEC rules and NYSE listing standards.

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Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines, which provide the framework for the governance of our Company and represent the Board’s current views with respect to selected corporate governance issues considered to be of significance to our stockholders. The Corporate Governance Guidelines direct our Board’s actions with respect to, among other things, Board composition and director qualifications, selection of the Chair of the Board and the Lead Independent Director, establishment of the Board’s standing committees, director stock ownership guidelines, succession planning and the Board’s annual performance evaluation. A current copy of the Corporate Governance Guidelines is available in the Investors —Overview — Corporate Governance section of our website at http://www.kilroyrealty.com.

Succession Planning

Pursuant to our Corporate Governance Guidelines, our Board and our CEO review succession planning, management performance and management development on a regular basis. To facilitate this succession planning oversight by the Board, the Board has established an ad hoc Succession Planning Committee of the Board that is responsible for reviewing the Company’s succession planning and management performance and development. The members of the Succession Planning Committee are Messrs. Kilroy and Stevenson and Dr. Brennan, with Mr. Stevenson serving as its Chair. The Succession Planning Committee reviews potential internal candidates with our CEO, including the qualifications, experience and development priorities for these individuals, and provides recommendations to our Board regarding potential CEO successors and reviews their development plans. Directors also engage with potential CEO and key management personnel successors at Board and committee meetings and in less formal settings to allow directors to personally assess potential successor candidates.

Our Board also maintains an emergency CEO succession plan. The plan will become effective in the event our CEO becomes unable to perform his or her duties in order to minimize potential disruption or loss of continuity to the Company’s business and operations. The Succession Planning Committee reviews the emergency succession plan periodically and makes recommendations to the Board regarding any changes or updates to the emergency succession plan.

Corporate Social Responsibility and Sustainability

Operating in a responsible and sustainable manner plays an important role in our business. Management and our Board, through the Corporate Social Responsibility and Sustainability Committee established in April 2018, take seriously their responsibility to oversee and advance the Company’s corporate social responsibility and sustainability initiatives and recognize that community engagement and sustainable operations benefit all of our constituencies and are key to preserving our Company’s value and credibility. We believe that our governance foundation, coupled with our strong environmental and socially focused initiatives and accomplishments, stand out in our industry and create long-term value for our stockholders.

Commitment to Diversity at the Company and on the Board

We are focused on creating a diverse and inclusive workforce. Our priority is to attract, develop and retain the best talent, foster an inclusive culture and embrace diversity. Our employees are the foundation of our success and we strive to have a workforce that reflects the diversity of qualified talent that is available in the markets that we serve. As of December 31, 2017, women comprised 57% and minorities comprised 39% of the Company’s total workforce, and women comprised 51% of employees in supervisory roles at the Company. Additionally, the Company has several women in key leadership roles, including the EVP, Life Science, the EVP, Chief Accounting Officer, the Controller and the Treasurer, among others.

We are also committed to diversity at the Board level. Our Board will consider diversity, including gender and ethnicity, when considering nominations to the Board and will endeavor to include women and individuals from minority groups in the qualified pool from which new director candidates are selected the next time that the Board undergoes Board refreshment. The Board’s objective is to have a Board comprised of individuals who by occupation, background and experience are in a position to make a strong, positive contribution to the Company and its stockholders.

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Commitment to Sustainability

We continue to be recognized for our industry leading sustainability practices.

To learn more about the Company’s sustainability efforts, please view our 2017 sustainability report on the Company’s website, by visiting http://kilroyrealty.com/sites/default/files/kilroy-realty-corporation-sustainability-report-2017.pdf.

BOARD COMMITTEES

Our Board has four (4) standing committees: (i) the Audit Committee, (ii) the Compensation Committee, (iii) the Governance Committee and (iv) the Corporate Social Responsibility and Sustainability Committee (which we also refer to as the CSR&S Committee). All members of the Audit Committee, Compensation Committee and Governance Committee are Independent Directors. Our Audit Committee, Compensation Committee, Governance Committee and Corporate Social Responsibility and Sustainability Committee each operate under a written charter adopted by our Board, which is available in the Investors — Overview — Corporate Governance section of the Company’s website at http://www.kilroyrealty.com.

L		Lead Independent Director				Financial Expert
M		Committee Member		C		Committee Chair

Audit Committee

The Audit Committee’s purpose is to assist the Board in fulfilling its oversight responsibilities regarding (i) the quality and integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the independent auditor’s qualifications and independence; (iv) the Company’s accounting and system of internal controls; and

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(v) the performance of the Company’s internal audit function and independent auditor. Our Board has determined that each member of the Audit Committee satisfies the enhanced independence standards applicable to audit committees pursuant to Rule 10A-3(b)(1)(i) under the Exchange Act and the NYSE listing standards. In addition, each of Messrs. Ingraham and Stoneberg and Dr. Brennan is financially literate and each of Messrs. Ingraham and Stoneberg and Dr. Brennan is an “audit committee financial expert” as determined by the Board in accordance with the applicable rules of the NYSE and the SEC. The Board based its determination on the qualifications and business experience of each of Messrs. Ingraham and Stoneberg and Dr. Brennan described above under “Proposal 1 — Election of Directors.”

The Audit Committee held seven meetings during 2017. Additional information regarding the specific functions performed by the Audit Committee is set forth in the “Audit Committee Report” below.

Executive Compensation Committee

The purpose of the Compensation Committee is to formulate, evaluate and approve the compensation of our officers, as defined in the rules under Section 16 of the Exchange Act, and to discharge our Board’s duties and responsibilities relating to our compensation programs and practices, including its incentive and equity-based compensation plans and programs. The Compensation Committee is responsible for, among other things: (i) reviewing and making changes to our compensation philosophy; (ii) reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, evaluating the performance of our CEO in light of those goals and objectives, and determining and approving our CEO’s compensation level based on such evaluation; (iii) reviewing and approving the compensation for our other executive officers and all executive officers’ employment agreements, severance arrangements or any other compensation-related agreements; (iv) reviewing and making recommendations to the Board regarding compensation for non-employee members of our Board; (v) reviewing and making recommendations to the Board regarding the adoption, amendment or any discontinuation of any compensation plans under which Company securities may be issued or which otherwise requires stockholder approval, and approving award grants under any such plan and the terms of any such awards; and (vi) preparing the Compensation Committee Report included in this Proxy Statement. The Compensation Committee held six meetings in 2017.

Our Board has determined that each member of the Compensation Committee satisfies the additional independence requirements specific to compensation committee membership under the NYSE listing standards. In making this determination, the Board considered whether the director has a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a member of the Compensation Committee.

In fulfilling its responsibilities, the Compensation Committee may delegate any or all of its responsibilities to a separate committee of the Board or a subcommittee of the Compensation Committee. The Compensation Committee has not delegated any of its authority to set compensation levels of our executive officers or to grant equity awards, but has delegated certain limited administrative authority to management (i) with respect to the 2007 Deferred Compensation Plan, as amended; (ii) to address the settlement of fractional share interests arising under certain equity awards under our 2006 Incentive Award Plan; and (iii) to determine whether certain equity awards would be settled in cash or stock under such plan.

In accordance with the Compensation Committee’s charter, the Compensation Committee may retain independent compensation advisors and other management consultants. Such advisors and consultants may assist with, among other things, evaluating our various compensation programs, both individually and in the aggregate, including levels of salary, cash and long-term incentives, benefits and other perquisites and awards payable to our key personnel, as well as to advise the Compensation Committee with respect to the development of performance objectives that will contribute to our short-term and long-term profitability, growth and total return to stockholders. In 2017, the Compensation Committee retained Mercer (US) Inc. (“Mercer”) to assist it in reviewing our compensation programs and the evaluation of specific compensation-related matters. Mercer provided data on the compensation and relative performance of our peer group, advised and provided peer group data regarding our compensation arrangements for our non-employee directors, reviewed drafts of the CD&A and related compensation tables for inclusion in our Proxy Statement filed in 2017, provided advice as the Compensation Committee began its considerations of our executive compensation framework in 2018, and reviewed data in connection with the Compensation Committee’s determination of short-term incentive and performance-based incentive vesting levels for completed performance periods. Mercer also periodically meets privately in executive session with the Compensation

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Committee. As described further under “Compensation Discussion and Analysis — How We Make Compensation Decisions —Role of Independent Compensation Consultant” below, the Compensation Committee has assessed the independence of Mercer and has concluded that its engagement of Mercer does not raise any conflict of interest with the Company or any of its directors or executive officers.

At the request of the Compensation Committee, certain of our executive officers aid the Compensation Committee in reviewing and analyzing our executive compensation program. Specifically, our CEO provides recommendations to the Compensation Committee regarding the compensation of all other executive officers. Our CEO and Chief Financial Officer also present the overall results of the Company’s performance and achievement of historical and go-forward goals and objectives, and our CEO provides evaluations for other executive officers, reviews peer group information and compensation consultant recommendations and participates in certain Compensation Committee meetings at the invitation of the Compensation Committee. Our Chief Financial Officer evaluates the financial implications and affordability of the Company’s compensation programs. Other executive officers may periodically participate in the compensation process and Compensation Committee meetings at the invitation of the Compensation Committee to advise on performance and/or activity in areas with respect to which these executive officers have particular knowledge or expertise.

Nominating/Corporate Governance Committee

The purpose of the Governance Committee is to (i) identify individuals qualified to become Board members consistent with criteria approved by the Board; (ii) recommend director nominees for the next annual meeting of stockholders for approval by the Board; (iii) develop and annually review the Corporate Governance Guidelines and recommend any proposed changes to the Board; (iv) oversee the evaluation of the Board; and (v) generally advise the Board on corporate governance and related matters. The Governance Committee also serves as the Independent Committee of our Board pursuant to Article III, Section 7 of our Bylaws and approves all transactions between the Company and John B. Kilroy, Sr. (or his estate) or John B. Kilroy, Jr. and their respective affiliates. The Governance Committee held two meetings in 2017.

Additionally, the Governance Committee has the authority to engage any independent counsel or other outside expert or advisors it deems desirable or appropriate.

Corporate Social Responsibility and Sustainability Committee

The purpose of the Corporate Social Responsibility and Sustainability Committee, which was formed in April 2018, is to (i) generally advise the Board and management of the Company on matters related to the Company’s corporate social responsibility objectives, including but not limited to, sustainability, diversity and inclusion, philanthropy and community involvement, good corporate citizenship, health and wellness and other non-financial issues that are of significance to the Company and its stockholders and (ii) develop and oversee Company goals, policies and procedures, and initiatives to ensure alignment with, and promote the achievement of, such objectives. The Corporate Social Responsibility and Sustainability Committee held no meetings in 2017, as it was formed by the Board in April 2018.

DIRECTOR SELECTION, EVALUATION AND COMMUNICATIONS

Qualifications of Director Nominees

The Board is committed to having a membership comprised of individuals who by occupation, background and experience are in a position to make a strong, positive contribution to the Company and its stockholders, and will endeavor to include women and individuals from minority groups in the qualified pool from which director candidates are selected. In considering candidates for nomination or appointment to the Board, the Governance Committee and the Board seek director candidates who, both individually and collectively, have such knowledge, experience and education based on criteria determined by the Governance Committee to be appropriate in the context of the perceived objectives of the Company at a given point in time and to provide balance to the Board’s knowledge, perspective, experience and expertise. The Governance Committee has established board membership criteria (the “Membership Criteria”), which it uses as a guideline in considering nominations to the Company’s Board. The criteria include, but are not limited to, (a) commitment to promoting the long-term interests of the Company’s stockholders, (b) reputation and character, (c) knowledge, experience and education, (d) mature business judgment, (e) sufficient time, energy and attention to dedicate to the Company’s affairs, (f) diversity, in its broadest sense,

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reflecting, but not limited to, profession, geography, gender, ethnicity, skills and experience, (g) compliance with the Company’s stock ownership guidelines as set forth in the Corporate Governance Guidelines, (h) independence and (i) Board balance. In addition, the Company’s Bylaws and listing standards of the NYSE require the Board to be composed of a majority of directors who qualify as “independent directors” as defined therein. In considering director candidates, the Governance Committee and Board do not discriminate based on race, ethnicity, national origin, gender, religion or disability.

The Membership Criteria established by the Governance Committee are not exhaustive and the Governance Committee and the Board may consider other qualifications and attributes that they believe are appropriate in evaluating the ability of an individual to serve as a member of the Board. The Governance Committee reviews and assesses the Membership Criteria annually.

Process for Identifying Nominees for Director

At any appropriate time prior to each annual meeting of stockholders at which directors are to be elected, and whenever there is otherwise a vacancy on the Board, the Governance Committee will assess the qualifications and effectiveness of the current Board members and, to the extent there is a need, will seek other individuals qualified and available to serve as potential Board members. The Governance Committee will review each potential candidate’s qualifications in light of the Membership Criteria described above. In reviewing each potential candidate, the Governance Committee also considers the results of the annual Board and individual director evaluations for purposes of assessing the suitability of each Board member for continued service on the Board. See “Annual Board Evaluations” below for additional information regarding the annual Board evaluation process. The Governance Committee will select the candidate or candidates it believes are the most qualified to recommend to the Board for selection as a director nominee.

Stockholder-Recommended Director Candidates

The Governance Committee will consider director candidates recommended by stockholders of the Company. Candidates recommended by a stockholder are evaluated in the same manner as candidates identified by the Governance Committee. All recommendations must be directed to the Governance Committee c/o Secretary at 12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064. Recommendations for director nominees to be considered at the 2019 annual meeting of stockholders must be received in writing not later than November 30, 2018.

Each stockholder recommending a person as a director candidate must provide the Company with the following information for the Governance Committee to determine whether the recommended director candidate is independent from the stockholder, or each member of the stockholder group, that has recommended the director candidate:

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The recommending stockholder must also provide supplemental information that the Governance Committee may request to determine whether the recommended director candidate (i) meets the standards of independence established by the NYSE; (ii) satisfies the Membership Criteria described above; and (iii) is qualified to serve on the Audit Committee. In addition, the recommending stockholder must include the consent of the recommended director candidate and the recommended director candidate must make himself or herself reasonably available to be interviewed by the Governance Committee. The Governance Committee will consider all recommended director candidates submitted to it in accordance with these established procedures, although it will only recommend to the Board as potential nominees those candidates it believes are most qualified. However, the Governance Committee will not consider any director candidate if his or her candidacy or, if elected, Board membership, would violate controlling state or federal law.

Annual Board Evaluations

Pursuant to our Corporate Governance Guidelines and the charter of the Governance Committee, the Governance Committee oversees an annual evaluation of the performance of the Board. Each standing committee also conducts a separate evaluation of its own performance and of the adequacy of its charter and reports to the Board on the results of this evaluation. The evaluation process is designed to assess the overall effectiveness of the Board and its committees and to identify opportunities for improving Board and Board committee operations and procedures. The Governance Committee also reviews the qualifications and effectiveness of individual directors each year when the directors stand for re-nomination. The review of individual directors includes an assessment of each director’s skills and experience in relationship to the Membership Criteria and that director’s commitment to the Board as evidenced by preparation for, understanding of, and attendance at Board meetings. The results of the individual director evaluations and the Governance Committee’s recommendations regarding director nominations are reported to the Board. The annual evaluations are generally conducted in the fourth quarter of each year or in the first quarter of the following year.

Communications with the Board

Stockholders or other interested parties who wish to contact the Board, the Lead Independent Director, any Board committee, or our Independent Directors as a group may send written correspondence c/o Board of Directors at 12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064. The name of any specific intended Board recipients should be clearly noted in the communication. All communications will be received, processed and then forwarded to the appropriate member(s) of our Board, except that, certain items unrelated to the Board’s duties and responsibilities, such as spam, junk mail, mass mailings, solicitations, resumes and employment inquiries and similar items will not be forwarded. Board members receiving communications will respond as such directors deem appropriate, including the possibility of referring the matter to management of our Company, to the full Board or to an appropriate committee of the Board.

		18				Kilroy Realty Corporation

Deloitte has served as the Company’s independent auditor since 1995 when the Company was privately held and has continued to serve as such since the Company’s initial public offering in January 1997. Deloitte is expected to be reappointed by the Audit Committee for the current fiscal year at its meeting to be held during the second quarter, which will precede the Annual Meeting.

The Audit Committee of the Board has determined that Deloitte is independent with regard to the Company within the meaning of the Exchange Act and the applicable published rules and regulations thereunder and by the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee annually reviews and pre-approves certain audit and non-audit services that may be provided by Deloitte and establishes a pre-approved aggregate fee level for these services. Any proposed services not included within the list of pre-approved services or any proposed services that will cause the Company to exceed the pre-approved aggregate amount requires specific pre-approval by the Audit Committee. Additionally, the Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals, provided such pre-approvals are presented to the Audit Committee at a subsequent meeting. The Audit Committee has delegated this pre-approval authority to Mr. Ingraham, the Chair of the Audit Committee, although such delegation does not limit the authority of the Audit Committee to pre-approve in its discretion any specific services to be provided by Deloitte.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed to the Company by Deloitte for professional services rendered in fiscal years 2017 and 2016 are as follows:

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The Audit Committee of the Company’s Board is composed of Independent Directors who satisfy the requirements of Section 10A(m)(3) of the Exchange Act and Rule 10A-3(b)(1)(i) thereunder, and the current listing standards of the NYSE. The Audit Committee operates pursuant to a written charter.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. In fulfilling its oversight responsibilities, the Audit Committee appoints the Company’s independent auditors and reviews and discusses the audited financial statements included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K with management, including the reasonableness of significant judgments and the clarity of disclosures in the financial statements. Management has primary responsibility for the financial statements and the reporting process, including the Company’s internal control over financial reporting.

The Company’s independent auditors are responsible for performing an audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of those audited consolidated financial statements with generally accepted accounting principles. The Audit Committee reviewed and discussed the audited consolidated financial statements of the Company as of and for the year ended December 31, 2017 with management and the Company’s independent auditors. The Audit Committee discussed with the Company’s independent auditors their judgments as to the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under Auditing Standard 1301 (previously Auditing Standard No. 16), “Communications with Audit Committees,” as adopted by the PCAOB. In addition, the Audit Committee received the written disclosures and the letter from the independent auditors required by PCAOB regarding the independent auditors’ communications with the Audit Committee concerning the accountant’s independence, and it discussed with the Company’s independent auditors their independence from the Company. The Audit Committee also considered the compatibility of the independent auditors’ provision of audit, tax and non-audit services with the auditors’ independence.

The Audit Committee discussed with the Company’s independent auditors the overall scope of their respective audits. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting. In the performance of their oversight function, the members of the Audit Committee relied upon the information, opinions, reports and statements presented to them by the Company’s management and by the Company’s independent auditors. The Audit Committee held seven meetings during 2017.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited financial statements as of and for the year ended December 31, 2017 be included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 13, 2018.

Audit Committee

Scott Ingraham, Chair

Edward Brennan, PhD

Peter Stoneberg

The foregoing report of the Audit Committee is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.

INTRODUCTION

This CD&A describes the material elements of our executive compensation program, the compensation decisions made under the program and the factors considered in making those decisions for the NEOs listed below for 2017.

Our Business

We are a self-administered REIT that is active in the premier submarkets along the West Coast of the United States. With a more than 70 year history, we have built deep experience in the region through multiple business cycles and operating environments. In 1997, we became a publicly traded REIT and in 2013, we were added to the S&P MidCap 400 Index. We believe the following aspects of our business make us one of the leading office REITs in the United States:

STOCKHOLDER ENGAGEMENT

The Compensation Committee values input from the Company’s stockholders regarding the Company’s executive compensation program. At each annual meeting, we hold a non-binding advisory vote to approve the compensation of our NEOs, which is commonly referred to as a “Say-on-Pay” vote. At our 2017 annual meeting of stockholders, approximately 81.3% of the votes cast were in favor of our Say-on-Pay proposal. The Compensation Committee believes our 2017 Say-on-Pay vote demonstrates that stockholders generally endorse our executive compensation practices, though certain actions were taken to continue to improve our executive compensation practices. In particular, none of our NEOs received a 2017 base salary increase, an increase in target or actual short-term incentive for 2017, or an increase in the grant date value of their annual long-term incentive awards granted for 2017 (as these values are approved by the Compensation Committee and used to determine the number of shares subject to the awards). Since our 2017 annual meeting of stockholders, we engaged with and solicited input from stockholders who together own more than 60% of our outstanding common stock on a variety of topics, including market conditions, corporate strategy and corporate governance practices. Our Lead Independent Director and Chair of the Compensation Committee, and the Chair of our Governance Committee participated in certain meetings with our investors. Taking this feedback and our 2017 Say-on-Pay vote into account, the Compensation Committee approved our executive compensation program for 2017 without making any significant changes compared to our executive compensation program for 2016.

When making future compensation decisions for our NEOs, the Compensation Committee will continue to consider the views that stockholders express through annual Say-on-Pay votes and through direct communication with our Lead Independent Director, our Board and management.

2017 COMPANY PERFORMANCE

The Company achieved strong financial and operational results and further positioned the Company during 2017 for continued long-term growth, including adding to its highly experienced and market-proven leadership team. Below is a summary of our key achievements.

Outperforming Total Stockholder Return. We delivered excellent results across the Company’s platform in 2017. For the year, our common stock delivered a 4.3% total return for stockholders, solidly outperforming the SNL US REIT Office Index and the BBG REIT Office Property Index. Our TSR also greatly outperformed these indices and the MSCI US REIT Index, over a five-year period. The following chart shows the value of a $100 investment at market close on December 31, 2012 in the Company, the SNL US REIT Office Index, the BBG REIT Office Property Index and the MSCI US REIT Index over the five-year period ended December 31, 2017 (assuming dividend reinvestment):

Strong 2017 Financial Performance. During 2017, we generated strong year-over-year financial results, which included the following:⁽⁶⁾

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Strong Leasing Activity. During 2017, we generated strong leasing results, which included the following:

Efficiently Managed Development Projects and Positioned New Projects for Commencement. We continued to create significant value for our stockholders through our development program. Over the past six years, we delivered $1.6 billion of projects encompassing approximately 2.8 million square feet. These projects were 97% leased upon stabilization and generated a cash return on cost that averaged approximately 7.5% to 8%. In 2017, we continued to improve the status and scope of the projects in our development program as highlighted below.

Disciplined Approach to Property Acquisitions. We remained a disciplined buyer during 2017. Given a very competitive acquisitions market, we focused on allocating our capital to development and redevelopment opportunities that we believe will achieve higher returns.

Strong Execution of Capital Recycling Program. Capital recycling continues to play an important role in funding our activities and growth. Our general strategy has been to sell non-strategic assets and redeploy some or all of the capital into acquisitions, development and/or redevelopment where we can leverage our experience and add value to generate higher returns. In 2017, we sold 10 office buildings and one non-income producing land parcel in San Diego. The total gross proceeds from these dispositions were approximately $187 million and the sale generated a gain of approximately $40 million.

Prudent Balance Sheet Management. During 2017, we continued to build and maintain a strong and flexible balance sheet that enables us to fund our development program and respond quickly to attractive opportunities as they arise. Below is a list of key achievements:

Business Values Take into Account Non-Financial Objectives. We are committed to pursuing corporate social responsibility objectives, including sustainability, diversity and inclusion, philanthropy and community involvement, good corporate citizenship, health and wellness, and other non-financial issues that are of significance to the Company and its stockholders, as further described under “Corporate Governance — Board Composition and Governance — Corporate Social Responsibility and Sustainability” on page 13.

Maintained Leadership Position in Sustainability. We continue to be recognized for our industry leading sustainability practices. For a list of accomplishments, see “Corporate Governance — Board Composition and Governance — Corporate Social Responsibility and Sustainability — Commitment to Sustainability” on page 14.

Enhanced Company Leadership Capabilities. The Company’s leadership team is comprised of individuals that have extensive real estate experience, and is led by the award-winning Chair and CEO, John Kilroy. Most members of the Company’s executive leadership team have been with the Company for over 15 years. During 2017, we enhanced this team by bringing on Mr. Stephen Rosetta as Chief Investment Officer. Mr. Rosetta has over 20 years of commercial real estate experience and has a history of completing over $2 billion in annual transaction volume. This expertise will be critical as the Company continues to identify development, acquisition and disposition activities that we believe will generate meaningful long-term stockholder value over the coming years.

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DESIGN FEATURES OF THE 2017 EXECUTIVE COMPENSATION PROGRAM

We believe that the structure of our executive compensation program strikes an appropriate balance between the need to attract and retain executives with the expertise and talent required to execute on our active portfolio management strategy, and the need to link compensation with the performance of the Company, including stockholder return. Below is a summary of some of the key design features of our 2017 executive compensation program.

Short-term incentives are “at risk” because the final short-term incentive awards are based on Company and individual performance and subject to variation. Actual cash incentives could range from 0% to approximately 150% of each NEO’s target short-term incentive based on actual performance.

Annual long-term incentives (equity awards) are “at risk” because the final award value depends on our stock price, continued service over a three-year vesting period and the satisfaction of performance-based vesting conditions that include (1) the possibility of complete forfeiture if a minimum operating performance threshold is not achieved in the year in which the award is granted without the opportunity to vest in any future year and (2) relative TSR, average FAD per share growth and average ratio of debt to EBITDA goals that apply over the entire three-year vesting period. Nearly three-quarters of our CEO’s 2017 annual equity award (and approximately two-thirds of our other NEOs’ 2017 annual equity awards) are subject to these performance-based vesting conditions.

2017 Target Total Direct Compensation (CEO) 2017 Target Total Direct Compensation (other NEOs) At Risk 87% Annual Long-Term Incentive 59% Base salary 13% Annual cash Incentive 28% Performance Based 73% At Risk 81% Annual Long-Term Incentive 57% Base salary 19% Annual cash Incentive 24% Performance Based: 63%

COMPENSATION PHILOSOPHY AND OBJECTIVES

Our executive compensation philosophy is designed to achieve the following objectives:

WHAT WE PAY AND WHY: EXECUTIVE COMPENSATION ELEMENTS

The following table sets forth the key elements of our executive compensation program, along with the primary objective and key features associated with each element of compensation.

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2017 NAMED EXECUTIVE OFFICER COMPENSATION

The Compensation Committee reviews and authorizes each NEO’s compensation on an annual basis. Executive compensation is not established at any particular level against peer group data. Rather, the Compensation Committee generally considers the following factors:

Base Salary

General Description

As noted above, we provide base salaries as a regular source of income so employees can focus on day-to-day responsibilities and to recognize ongoing performance of job responsibilities.

Decisions for 2017

The Compensation Committee determined that, as to each NEO employed by us at the start of the year, the NEO’s 2017 base salary level would remain at the same level as in effect for 2016. The 2017 base salary for Mr. Rosetta was set by the Compensation Committee when he joined the Company in June 2017. The 2017 annual rate of base salary for each of our NEOs was as follows: $1,225,000 for Mr. Kilroy, $675,000 for Mr. Hawken, $600,000 for Mr. Rosetta, and $500,000 for each of Messrs. Rose and Smart.

Short-Term Incentives

General Description

Our short-term incentives (annual cash bonuses) are based on the annual performance of our Company, as measured by a performance measurement framework, and each individual’s contribution to the annual performance of our Company.

During the first quarter of the performance year, the Compensation Committee establishes a target short-term incentive amount for each NEO and approves a performance measurement framework for that year based on the Company’s business plan. The Compensation Committee selects the performance categories, metrics and goals that it believes will accurately assess the annual performance of the Company and strategic goals. The performance measurement framework is comprised of performance categories (e.g., operations, balance sheet management, acquisitions and dispositions, and development) and each category includes performance metrics and specific objective goals that relate to each metric.

During the first quarter following the end of the performance year, the Compensation Committee compares the Company’s actual performance results to the pre-established objective goals. The pre-established goals are based on the budgeted goals set forth in the Company’s business plan and are reviewed and approved or modified by the Compensation Committee at the beginning of each year. The Compensation Committee then rates performance as either “Extraordinary,” “Superior,” “On

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Target,” “Below Expectations” or “Well Below Expectations,” resulting in payouts approximating 150% of target, 125% of target, 100% of target, 50% of target or 0% of target, respectively. As a result, the Compensation Committee’s final short-term incentive determinations may be more or less than the targeted amount based on the Company’s actual performance and the ultimate rating assigned by the Compensation Committee.

Individual awards, however, may vary based on the Compensation Committee’s consideration of each NEO’s contributions or achievements. Awards may also vary based on a greater emphasis on certain categories, which may result in short-term incentive variations between executives who are principally responsible for those categories and those who are not. The Compensation Committee does not apply specific weighting to performance categories and final short-term incentive amounts are determined based on a holistic assessment of results achieved, including consideration of the Company’s TSR.

The Compensation Committee believes this approach reflects an appropriate balance between applying objective criteria to determine each NEO’s short-term incentive, on the one hand, and a desire to keep each NEO focused on strategic decisions that are in the long-term best interests of our stockholders, on the other hand. Since our business strategy requires us to actively manage our property portfolio, the Compensation Committee believes that a rigid short-term incentive formula could undermine opportunistic decisions that have a negative impact on short-term gains but create long-term stockholder value (e.g., midyear changes in our strategy or portfolio due to a shift in market conditions or unanticipated opportunities can significantly alter specific objective goals that are set early in the year).

Decisions for 2017; 2017 Key Operating and Financial Goal Setting and Performance

The Compensation Committee determined that, as to each NEO employed by us at the start of the year, the NEO’s 2017 target short-term incentive amount would remain at the same level as in effect for 2016. The 2017 target short-term incentive amount for Mr. Rosetta was set by the Compensation Committee when he joined the Company in June 2017.

Although our CEO’s employment agreement provides for a $3,000,000 target short-term incentive amount, our CEO’s 2017 target level was again reduced from $3,000,000 to $2,700,000 in order to place a greater emphasis on long-term incentives and enhance alignment with long-term stockholder returns. The 2017 target short-term incentive level for each of Messrs. Hawken and Rosetta was 200% of the executive’s base salary and the 2017 target short-term incentive level for each of our other NEOs was 100% of the executive’s base salary.

In developing the performance measurement framework and goals for 2017, the Company prepared a bottoms up, property-by-property budget that incorporated property specific assumptions for the Company’s stabilized portfolio. The Company then integrated those assumptions with the Company’s development and funding strategies against a backdrop of existing real estate conditions. As a result of this process, the Company created financial and operational goals that were directly tied to the Company’s existing portfolio and business objectives for 2017. The Compensation Committee then reviewed and approved the Company’s proposed 2017 financial and operational goals for inclusion in the Company’s 2017 performance measurement framework, each as described below. Goals are generally set at levels that are greater on an absolute basis than the performance levels achieved in the prior year. However, since the composition of the Company’s portfolio changes from year to year (e.g., the Company sold approximately 10% of its assets based on value in 2016) a year-over-year comparison of prior performance levels achieved and current performance goals set is not always helpful for evaluating the rigor of any one particular performance level because comparing two portfolios with different compositions makes a comparison less meaningful (for example, because of occupancy levels, scheduled lease expirations, capital expenditure budgets, development activity, product mix, or disposition timing). In these cases, the Compensation Committee may set performance goals at absolute levels that are the same or less than the performance results achieved in the prior year but at levels that, after taking into account the composition of the Company’s portfolio at the start of each year, the Compensation Committee believes are comparatively as, or more, rigorous. This was the case with the following 2017 metrics:

		30				Kilroy Realty Corporation

The design of the 2017 performance measurement framework is consistent with the design of the 2016 performance measurement framework. The following table shows the 2017 performance measurement framework and 2017 goals approved by the Compensation Committee in February 2017 and the Company’s actual 2017 performance. Adjusted FAD results came in lower than budget reflecting higher recurring capex spending driven by the Company outperforming its leasing budget by one million square feet in the stabilized portfolio.

2017 Performance Measurement Framework

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Based on the Compensation Committee’s review of the Company’s actual 2017 performance disclosed in the chart above, the Compensation Committee determined that the Company’s overall performance for 2017 was above “Superior” but below “Extraordinary.” In addition, and while the Company’s TSR performance is more directly taken into account through the value of, and applicable performance metrics under, the Company’s equity awards, the Compensation Committee also took the Company’s 2017 TSR performance into account in determining that it was appropriate to pay 2017 short-term incentive amounts for the NEOs at less than the maximum levels. As a result, the 2017 short-term incentive amounts exceeded target payout levels but were below the maximum payout level.

The Compensation Committee determined that each of the NEOs made significant contributions to the Company in 2017, although the level of impact each NEO had on the Company’s 2017 results varied somewhat. Differences between each NEO’s actual 2017 short-term incentive amount compared to each NEO’s 2017 target short-term incentive amount also reflect the Compensation Committee’s overall qualitative assessment of each NEO’s performance, and relative contribution to and responsibility for each of the performance categories and metrics.

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The 2017 target and actual short-term incentive amount determined by the Compensation Committee for each NEO is set forth in the chart below. Mr. Rosetta’s target short-term incentive amount was $1.2 million, but his target for 2017 (as reflected in the chart below) was pro-rated based on his start date with the Company in June 2017.

Long-Term Incentives

General Description

Our annual long-term incentives are structured as equity awards in the form of restricted stock units (“RSUs”) that vest over a three-year period. Each RSU is equivalent in value to and will be paid in one share of our common stock, subject to the satisfaction of applicable vesting conditions. Directly linking the value of RSUs to the Company’s stock price aligns our NEOs’ interests with those of our stockholders. RSU awards are typically granted to our NEOs, and all applicable performance goals are set, at the beginning of each performance year. The NEOs do not have the right to vote or dispose of any RSUs prior to vesting (or, with respect to RSUs as to which the executive has elected to defer the settlement date past vesting, the actual date the vested RSUs are paid in stock). Each RSU is granted in tandem with a corresponding dividend equivalent right that entitles the NEO to be credited with additional RSUs upon the Company’s payment of dividends to stockholders of outstanding shares of the Company’s common stock if the dividend equivalent right is or was outstanding on the Company’s common stock record date. Any such additional RSUs credited in respect of dividend equivalent rights are subject to the same vesting terms as the underlying RSUs and vest (if at all) together with the underlying RSU to which they relate. In addition to annual equity awards, we occasionally make grants of equity awards at other times at the discretion of the Compensation Committee, such as in connection with hiring or promoting executive officers.

Mr. Rosetta was not granted a 2017 annual equity award because he was not employed by the Company when the Compensation Committee approved the 2017 annual equity award grants for NEOs. In connection with the commencement of his employment, Mr. Rosetta was granted a make-whole RSU award with a grant date value of $2 million. Mr. Rosetta’s make-whole award vests ratably in annual installments over a four-year vesting period, subject to his continued service through the applicable vesting date. The Compensation Committee determined that the size of this award was appropriate to induce Mr. Rosetta to join the Company and to partially compensate him for certain compensation opportunities that he forfeited when leaving his prior employer. No other special equity awards were granted to our NEOs in 2017.

Decisions for 2017

The Compensation Committee determined that the grant date value of each NEO’s 2017 annual equity award (as approved by the Compensation Committee and used to determine the number of shares subject to the awards) would remain at the same level as in effect for 2016. Mr. Rosetta did not receive an annual equity award in 2017. The design of the annual equity awards granted to our NEOs in 2017 is consistent with the design of the annual equity awards granted to our NEOs in 2016, other than with respect to the performance-based vesting conditions as further described below. Based on the grant date fair value of each 2017 annual equity award granted to our NEOs, the 2017 annual equity awards consist of the following:

		34				Kilroy Realty Corporation

The Compensation Committee also believed that a majority of each NEO’s total 2017 annual equity award should be subject to performance-based vesting requirements to accomplish the following objectives:

2017 Annual Equity Award Values

In February 2017, the Compensation Committee granted each NEO (other than Mr. Rosetta) a number of time-based RSUs and a “target” number of performance-based RSUs, each expressed as a dollar value that was then converted into a number of RSUs by reference to the fair market value of the Company’s common stock on the date of grant. These dollar values are set forth in the chart below and are the same values that were used to determine the number of shares subject to the NEO’s annual equity award in 2016. The Compensation Committee determined that the aggregate dollar value for each NEO’s 2017 annual equity award was appropriate based on its consideration of the factors listed on page 29.