The election of fourteen (14) directors, nominated by the Board of Directors, each to hold office until the next annual shareholders’ meeting and until a successor shall be elected and qualified. Four (4) directors will be elected by holders of Class A Common Stock and ten (10) by holders of Class B Common Stock.

The approval (on an advisory, non-binding basis) of the compensation of the Company’s Named Executive Officers.

The vote (on an advisory, non-binding basis) on the frequency of which the Company’s shareholders will have an advisory, non-binding vote on the compensation of the Company’s Named Executive Officers.

The ratification of PricewaterhouseCoopers LLP as independent registered public accounting firm for the Company for the fiscal year ending January 31, 2012.

Such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

 

Outstanding Shares and Voting Rights

 

Election of Directors

 

Director Compensation

 

Principal Security Holders

 

Corporate Governance

 

Meetings and Committees of the Board of Directors

 

Compensation Committee Interlocks and Insider Participation

 

Compensation Discussion & Analysis

 

Compensation Committee Report

 

Potential Payments upon Termination or Change of Control

 

Executive Compensation Tables

 

Equity Compensation Plan Information

 

Proposal 2 - Approval (on an advisory, non-binding basis) of the compensation of the Company’s Named Executive Officers

 

Proposal 3 - Vote (on an advisory, non-binding basis) on the frequency of which the shareholders will have an advisory, non-binding vote on the compensation of the Company’s Named Executive Officers

 

Certain Relationships and Related Transactions

 

Section 16(a) Beneficial Ownership Reporting/Compliance

 

Proposal 4 - Ratification of Independent Registered Public Accounting Firm

 

Audit Committee Report

 

Independent Registered Public Accounting Firm Fees and Services

 

Shareholder Proposals for 2012 Annual Meeting

 

Other Business

 

Cost and Method of Proxy Solicitation

Max Ratner

 

 

Albert Ratner

 

 

Samuel H. Miller

 

Nathan Shafran

 

Ruth Miller

 

Total

 

Arthur F. Anton

 

Michael P. Esposito, Jr.

 

Deborah L. Harmon

 

Stan Ross

 

Scott S. Cowen

 

David J. LaRue ^(d)

 

Brian J. Ratner

 

Bruce C. Ratner

 

Charles A. Ratner

 

Deborah Ratner Salzberg

 

James A. Ratner

 

Ronald A. Ratner

 

Joan K. Shafran

 

Louis Stokes

 

Samuel H. Miller

 

Albert B. Ratner

 

OTHER NAMED EXECUTIVE OFFICER

 

Robert G. O’Brien ^(d)

 

ALL DIRECTORS, NOMINEES AND EXECUTIVE

OFFICERS AS A GROUP (19 in number)

Includes 2,531 shares of restricted stock.

(Includes 63,817 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Includes 5,476 shares of restricted stock and 12,630 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Includes 4,217 shares of restricted stock and 67,297 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Includes 5,919 shares of restricted stock and 61,311 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Includes 125,781 shares of restricted stock and 118,021 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Brian J. Ratner has beneficial ownership of 1,143,585 shares of Class A Common Stock held in trusts and foundations: 1,139,235 shares for which he is trustee and has shared power of voting and disposition and 4,350 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 33,800 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 17,152 shares of restricted stock and 64,759 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Brian J. Ratner’s beneficial ownership of these shares of Class B Common Stock reflects his status as a general partner of RMSLP. Does not reflect the following shares of which Mr. Ratner disclaims beneficial ownership: 1,386,206 shares of Class B Common Stock held in trusts for which he is trustee, of which these shares are held in the Max Ratner Family Branch of RMSLP. See discussion of RMSLP on page 2.

On February 28, 2011, Bruce C. Ratner and certain individuals and entities affiliated with Bruce C. Ratner held 3,646,755 Class A Common Units (“Units”) in Forest City Master Associates III, LLC that were obtained in a transaction designed to increase Forest City’s ownership interest in 30 properties and service companies that were owned jointly by us and Bruce C. Ratner. See “Transactions With Bruce C. Ratner and His Affiliates” under the “Certain Relationships and Related Transactions” section of this proxy statement for a more detailed description of the transaction. The Units may be exchanged for an equal number of shares of our Class A Common Stock or, at our option, for cash equal to the then-current market price of our Class A Common Stock. Bruce C. Ratner claims beneficial ownership in 982,452 Units held by him and 428,160 Units held in a trust for which he is trustee. Bruce C. Ratner disclaims beneficial ownership in 2,017,518 Units held in trusts in which he is not trustee and 218,625 Units held directly by others. Bruce C. Ratner claims beneficial ownership of 15,000 shares of Class A Common Stock held in a custodial account.

Charles A. Ratner has beneficial ownership of 2,244,637 shares of Class A Common Stock held in trusts and foundations: 2,221,442 shares for which he is trustee and has shared power of voting and disposition and 23,195 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 8,549 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 5,034 shares of restricted stock and 174,177 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Includes 4,050 shares of Class B Common Stock held in a trust for which Charles A. Ratner is trust advisor and has shared power of voting and disposition. Mr. Ratner’s beneficial ownership of the remaining 18,667,093 shares of Class B Common Stock reflects his status as a general partner of RMSLP. Does not reflect the following shares of which Mr. Ratner disclaims beneficial ownership: 247,812 shares of Class B Common Stock held in trusts for which he is trustee, of which these shares are held in the Albert Ratner Family Branch of RMSLP. See discussion of RMSLP on page 2.

Deborah Ratner Salzberg has beneficial ownership of 1,061,778 shares of Class A Common Stock held in trusts and foundations: 378,698 shares for which she is trustee and has shared power of voting and disposition and 683,080 shares for which she has sole power of voting and disposition. Ms. Ratner Salzberg has beneficial ownership of 41,152 shares held in trusts for which she is trust advisor and has shared power of voting and disposition. Includes 17,344 shares of restricted stock and 64,199 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

James A. Ratner has beneficial ownership of 3,701,827 shares of Class A Common Stock held in trusts: 3,685,035 shares for which he is trustee and has shared power of voting and disposition and 16,792 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 90,301 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 4,531 shares of restricted stock and 112,479 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Does not reflect the following shares of which James A. Ratner disclaims beneficial ownership: 4,001,733 shares of Class B Common Stock held in trusts for which he is trustee and 922,866 shares held in trusts for which he is trust advisor, of which 3,720,549 shares are held in the Max Ratner Family Branch of RMSLP and 1,204,050 shares are held in the Albert Ratner Family Branch of RMSLP. See discussion of RMSLP on page 2.

Ronald A. Ratner has beneficial ownership of 2,385,241 shares of Class A Common Stock held in trusts: 1,464,398 shares for which he is trustee and has shared power of voting and disposition and 920,843 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 28,408 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 4,531 shares of restricted stock and 112,479 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Includes 4,050 shares of Class B Common Stock held in a trust for which Ronald A. Ratner is a trustee and has shared power of voting and disposition. Mr. Ratner’s beneficial ownership of the remaining 18,667,093 shares of Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP on page 2.

Includes 163,324 shares of Class A Common Stock held in partnerships in which Joan K. Shafran has shared power of voting and disposition. Ms. Shafran has beneficial ownership of 67,746 shares of Class A Common Stock held in trusts and a foundation: 18,618 shares for which she is trustee and has shared power of voting and disposition and 49,128 shares for which she has sole power of voting and disposition.

Includes 13,500 shares of Class B Common Stock held in a partnership in which Joan K. Shafran has shared power of voting and disposition. Ms. Shafran’s beneficial ownership of the remaining 18,667,093 shares of Class B Common Stock reflects her status as a general partner of RMSLP. See discussion of RMSLP on page 2.

Includes 5,919 shares of restricted stock and 61,311 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

Samuel H. Miller has beneficial ownership of 1,210,020 shares of Class A Common Stock held in trusts and a foundation: 848,505 shares for which he has sole power of voting and disposition and 361,515 shares for which he is a trustee with shared power of voting and disposition.

Samuel H. Miller’s beneficial ownership of these shares of Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP on page 2.

Albert B. Ratner has beneficial ownership of 2,080,852 shares of Class A Common Stock held in trusts and foundations: 1,472,357 shares for which he is a trustee with shared power of voting and disposition and 608,495 shares for which he has sole power of voting and disposition. Mr. Ratner also has beneficial ownership of 183,925 shares held in trusts for which he is trust advisor and has shared power of voting and disposition.

Albert B. Ratner has beneficial ownership of 15,740 shares of Class B Common Stock held in a trust for which he is trustee and has sole power of voting and disposition. Does not reflect the following shares of which Albert B. Ratner disclaims beneficial ownership: 4,988,243 shares of Class B Common Stock held in trusts for which he is trustee and 275,112 shares held in trusts for which he is trust advisor, of which 2,353,414 shares are held in the Albert Ratner Family Branch of RMSLP and 2,909,941 shares are held in the Max Ratner Family Branch of RMSLP. See discussion of RMSLP on page 2.

Includes 130,440 shares of restricted stock and 129,321 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter.

These shares of Class A Common Stock represent all the shares in which beneficial ownership is claimed by these persons. Shares for which beneficial ownership have been claimed by more than one person have been counted only once in this category. Includes 356,333 shares of restricted stock and 1,134,889 shares that were issuable upon the exercise of stock options vested at February 28, 2011 or that will vest within 60 days thereafter, and 1,410,612 Class A Common Units (see note 22 above).

These shares of Class B Common Stock represent all the shares in which beneficial ownership is claimed by these persons. Included in this total are 18,667,093 shares of Class B Common Stock that are held by RMSLP. Shares for which beneficial ownership have been claimed by more than one person have been counted only once in this category.

Does not reflect potential conversion of Class B Common Stock to Class A Common Stock.

Reflects potential conversion of all Class B Common Stock held by the nominee or officer listed to Class A Common Stock. Shares of Class B Common Stock are convertible pursuant to their terms into shares of Class A Common Stock at any time on a one-for-one basis.

This column includes Class A stock options, if any, that were exercisable on February 28, 2011 or that will be exercisable within 60 days after such date.

Officer and/or director of various subsidiaries.

Annual Board Retainer

Annual Stock Award to Independent Directors ⁽²⁾

Annual Retainer to Independent Director Serving as “Presiding Director”

Annual Retainer to Committee Chairman for:

Audit Committee

Compensation Committee

Corporate Governance and Nominating Committee

Annual Retainer to Committee Members (other than Chairman) for:

Audit Committee

Compensation Committee

Corporate Governance and Nominating Committee

Other Fees for:

Attending other formal meetings in their capacity as directors not held on the same

day as a board meeting or board committee meeting, such as Executive Committee
and strategic planning meetings.

Attending special meetings or performing special services in their capacity as

members of a board committee, in each case as determined and approved by the
applicable committee.

Director Stock Ownership Requirement:

Independent directors have up to five years to accumulate ownership of at least 5,000 shares of our common stock. The shares may be acquired through direct acquisition, exercise of stock options, vesting of restricted stock or accumulation of phantom stock in their deferred compensation plan.

We pay annual retainers in quarterly installments.

Independent directors may choose between stock options and/or restricted stock in 25% multiples. The default selection is a 50%-50% mix if no choice is made. All grants have graded vesting over three years. The number of Class A Common Stock options granted is determined by dividing the amount of award allocated to stock options by the Black-Scholes fair value, and the number of shares of restricted Class A Common Stock is determined by dividing the amount of award allocated to restricted stock by the closing price of the Class A Common Stock on the date of grant.

Arthur F. Anton

Scott S. Cowen

Michael P. Esposito, Jr.

Deborah L. Harmon

Jerry V. Jarrett ⁽¹⁾

Stan Ross

Joan K. Shafran ⁽²⁾

Louis Stokes

Jerry V. Jarrett did not stand for re-election at the 2010 annual meeting of Shareholders on June 16, 2010 and is no longer a director.

Joan K. Shafran is a nonemployee director, but is not an independent director. She receives the annual cash retainer, but does not receive the annual stock award.

Restricted stock grants are valued at their grant-date fair value based on the closing price of the Class A Common Stock on the date of grant. During the year ended January 31, 2011, we granted restricted stock having a grant-date fair value of $15.89 per share ($15.80 for Mr. Anton’s shares) as follows: Mr. Anton, 2,531; Dr. Cowen, 5,034; Ms. Harmon, 5,034; Mr. Ross, 3,775; and Mr. Stokes 5,034. The aggregate number of unvested restricted stock outstanding at January 31, 2011 was as follows: Mr. Anton, 2,531; Dr. Cowen, 5,919; Ms. Harmon, 5,476; Mr. Ross, 4,217; and Mr. Stokes, 5,919.

Stock option grants are valued at their grant-date fair value that is estimated using the Black-Scholes option-pricing model. The assumptions used in the fair value calculations in 2010 are described in Footnote P, “Stock-Based Compensation,” to our consolidated financial statements for the year ended January 31, 2011, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2011. During the year ended January 31, 2011, we granted stock options having a grant-date fair value of $9.9902 per share ($9.9056 for Mr. Anton’s options) as follows: Mr. Anton, 4,038; Mr. Esposito, 8,007; Mr. Jarrett, 8,007 and Mr. Ross, 2001. The options have an exercise price of $15.89 ($15.80 for Mr. Anton’s options), which was the closing price of the underlying Class A Common Stock on the dates of grant. The aggregate number of stock options outstanding at January 31, 2011 was as follows: Mr. Anton, 4,038; Dr. Cowen, 64,966; Mr. Esposito, 72,810; Ms. Harmon, 16,285; Mr. Jarrett, 67,492; Mr. Ross, 72,286; and Mr. Stokes, 64,966.

Amounts deferred under the Deferred Compensation Plan for Nonemployee Directors earn interest at a rate equal to the average of the Moody’s Long-Term Corporate Bond Yields for Aaa, Aa and A, plus .5% (“Moody’s Rates”). The rate is updated every calendar quarter using the first published Moody’s Rates of the new quarter. Interest rates ranged from 5.24% to 6.11% during the last fiscal year. Interest is compounded quarterly. The amounts shown in this column represent the amount of above-market earnings on the director’s nonqualified deferred compensation balances. The amount of above-market earnings was computed to be the amount by which the actual earnings exceeded what the earnings would have been had we used 120% times the Federal Long-Term Rates published by the Internal Revenue Service in accordance with Section 1274(d) of the Internal Revenue Code.

All other compensation does not include our incremental cost for the use of our airplane by directors for attending board of directors meetings and committee meetings because such use is deemed to be a business expense. The total incremental cost of airplane usage by all directors amounted to $21,796 for the year ended January 31, 2011.

Third Avenue Management LLC

622 Third Avenue, 32nd Floor

New York, NY 10017

 

Cohen & Steers Capital Management, L.P.

280 Park Avenue, 10th Floor

New York, NY 10017

 

Morgan Stanley & Co. Incorporated

1585 Broadway

New York, NY 10036

 

Wellington Management Company, LLP

280 Congress Street

Boston, MA 02210

 

Horizon Asset Management, Inc.

470 Park Avenue South, 4th Floor

New York, NY 10016

 

Abraham Miller

Graffiti, Inc.

3111 Carnegie Avenue

Cleveland, OH 44115

 

Ratner, Miller & Shafran Family Interests

     (see page 2)

Terminal Tower

50 Public Square, Suite 1600

Cleveland, OH 44113

Third Avenue Management LLC (“TAM”), a Delaware limited liability company, is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. TAM has sole power of voting for 19,403,119 shares and sole power of disposition of 19,500,587 shares of Class A Common Stock. Various other Third Avenue investment companies registered under the Investment Company Act of 1940 have the right to receive dividends and sales proceeds from certain of the shares reported by TAM. Various separately-managed accounts for whom TAM acts as investment advisor have the right to receive dividends and sales proceeds from certain of the shares reported by TAM. The number of shares of Class A Common Stock beneficially owned represent shares beneficially owned at December 31, 2010 as disclosed in Schedule 13G filed with the Securities and Exchange Commission by the Principal Security Holder. The number of shares of Class B Common Stock beneficially owned represents shares beneficially owned at December 31, 2010 as disclosed in a Questionnaire for 5% Beneficial Owners provided to us by the Principal Security Holder.

Cohen & Steers Capital Management, Inc., an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, and its affiliates, Cohen & Steers, Inc. and Cohen & Steers Europe S.A., have sole voting power of 10,927,454 shares of Class A Common Stock and sole dispositive power of 13,832,155 shares of Class A Common Stock. The number of shares of Class A Common Stock beneficially owned represents shares beneficially owned at February 28, 2011 as disclosed in Schedule 13G filed with the Securities and Exchange Commission by the Principal Security Holder.

The securities being reported upon by Morgan Stanley & Co. Incorporated (“Morgan Stanley”), as a parent holding company, are owned or may be deemed to be beneficially owned, by Morgan Stanley Investment Management Inc., an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. Morgan Stanley Investment Management Inc. is a wholly owned subsidiary of Morgan Stanley. Morgan Stanley has sole voting power of 8,835,187 shares of Class A Common Stock and sole dispositive power of 12,099,114 shares of Class A Common Stock. The number of shares of Class A Common Stock beneficially owned represents shares beneficially owned at December 31, 2010 as disclosed in Schedule 13G filed with the Securities and Exchange Commission by the Principal Security Holder.

Wellington Management Company, LLP, an investment adviser registered under Section 203 of the Investment Advisers Act of 1940 has shared voting power of 11,084,649 shares of Class A Common Stock and shared dispositive power of 11,937,928 shares of Class A Common Stock. The number of shares of Class A Common Stock beneficially owned represents shares beneficially owned at December 31, 2010 as disclosed in Schedule 13G filed with the Securities and Exchange Commission by the Principal Security Holder.

Horizon Asset Management, Inc., an investment advisor registered under Section 203 of the Investment Advisers Act of 1940 has sole voting power of 8,907,222 shares of Class A Common Stock and sole dispositive power of 8,907,222 shares of Class A Common Stock. The number of shares of Class A Common Stock beneficially owned represents shares beneficially owned at December 31, 2010 as disclosed in schedule 13G filed with the Securities and Exchange Commission by the Principal Security Holder.

Abraham Miller is the son of Samuel H. Miller, Co-Chairman of the Board of Directors and Treasurer. Abraham Miller has beneficial ownership of 284,423 shares of Class A Common Stock held in trusts: 37,154 shares for which he is a trustee with shared power of voting and disposition and 247,269 shares for which he has sole power of voting and disposition. Abraham Miller’s beneficial ownership of the Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP under “Election of Directors” on page 2.

The Ratner, Miller and Shafran families have an ownership interest in the Company as reflected in the Principal Security Holders table. These securities are beneficially owned by members of these families either individually or through a series of trusts, foundations and custodianships. Of the shares of Class B Common Stock listed, RMSLP owns 18,667,093 shares, which represent 88.07% of the Class B Common Stock outstanding at February 28, 2011.

Certain members of the Ratner, Miller and Shafran families have been nominated for election to serve on our Board of Directors. (See information regarding nominees and directors previously disclosed for further information regarding the beneficial ownership of Common Stock by these individuals).

Does not reflect potential conversion of Class B Common Stock to Class A Common Stock.

Reflects potential conversion of all Class B Common Stock held by the principal security holder listed to Class A Common Stock. Shares of Class B Common Stock are convertible into shares of Class A Common Stock at anytime on a one-for-one basis.

our Corporate Governance Guidelines in general;

our current Board composition and compensation;

our Board and Board committee operation and charters;

certain procedures relating to our Code of Legal and Ethical Conduct;

our director nomination process;

our shareholder communications process; and

director continuing education.

The review and discussion of regular periodic reports to the Board and its committees on topics relating to the risks we face, including, among others, market conditions, cash projections, internal financial measures, occupancy rates, the status of current and anticipated development projects, compliance with debt covenants, management of debt maturities, access to debt and equity capital markets, existing and potential legal claims against us and various other matters relating to our business;

The required approval by the Board (or a committee thereof) of significant transactions and other decisions, including, among others, executive compensation plans, equity and capital transactions, strategic planning, budget and the appointment and retention of senior management;

The direct oversight of specific areas of our business by the Audit, Compensation, and Corporate Governance and Nominating Committees; and

Regular periodic reports from our auditors and other outside consultants regarding various areas of potential risk.

No director will qualify as “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with us, either directly or as a partner, shareholder or officer of an organization that has a relationship with us. We will identify which directors are independent and disclose these affirmative determinations.

No director can be independent if the director is, or has been within the last three years, our employee.

No director can be independent whose immediate family member is or has been an executive officer of ours within the last three years.

No director can be independent if the director received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from us, other than (a) director and committee fees, (b) compensation received by a director for former service as an interim chairman, chief executive officer or other executive officer, (c) compensation received by an immediate family member for service as our employee (other than an executive officer), and (d) pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).

No director can be independent if:

the director is our internal auditor or a current partner or employee of our independent registered public accounting firm;

the director has an immediate family member who is our internal auditor or a current partner of our independent registered public accounting firm;

the director has an immediate family member who is our internal auditor or a current employee of our independent registered public accounting firm and personally works on our audit; or

the director or an immediate family member was within the last three years our internal auditor or a partner or employee of our independent registered public accounting firm and personally worked on our audit within that time.

No director can be independent if the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee.

No director can be independent if the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of such other company’s consolidated gross revenues.

Payments made to a law firm where Louis Stokes is senior counsel and determined that the amount of such payments in each of the past three fiscal years was below the limits set forth in our independence standards; and

Charitable contributions to various non-profit organizations with which Messrs. Cowen, Esposito, Jarrett, Ross, or Ms. Harmon are affiliated and determined that the amount of the contribution to any such organization in each of the past three fiscal years was below the limits set forth in our independence standards.

audit and financial reporting;

management compensation; and

nominations, corporate governance and succession planning.

Arthur F. Anton ⁽¹⁾

Scott S. Cowen ⁽²⁾

Michael P. Esposito, Jr.

Deborah L. Harmon ⁽³⁾

Jerry V. Jarrett ⁽⁴⁾

Stan Ross

Louis Stokes ⁽⁵⁾

Mr. Anton joined the Board and was appointed to the Audit and Compensation Committees on October 1, 2010.

Dr. Cowen has served as the Compensation Committee Chairman since June 16, 2010 and served as the Chairman of the Corporate Governance and Nominating Committee through June 16, 2010.

Ms. Harmon served on the Audit Committee through October 1, 2010.

Mr. Jarrett did not stand for re-election to the Board at the 2010 annual meeting of shareholders and ceased to be a member of the Board on June 16, 2010. Mr. Jarrett served as Compensation Committee Chairman and member of the Audit Committee until June 16, 2010.

Mr. Stokes became Corporate Governance and Nominating Committee Chairman on June 16, 2010.

Former Committee Member

Former Chairman

the integrity of our financial statements, including our system of internal controls, accounting controls and disclosure controls;

our compliance with legal, ethical and regulatory requirements including, but not limited to, the requirements of the Sarbanes-Oxley Act of 2002;

the independent registered public accounting firm’s qualifications and independence;

the performance of the independent registered public accounting firm and our internal audit function; and

production of the Audit Committee’s report, made pursuant to the Securities Exchange Act of 1934, to be included in the proxy statement relating to our annual meeting of shareholders.

establishing and administering compensation of our executive officers and senior management;

reviewing, at least annually, the goals, objectives and policies of our executive compensation plans;

reviewing, at least annually, the succession plan for the Company and our senior executives;

reviewing the total compensation for the chief executive officer and the other most highly compensated individuals included in the “Summary Compensation Table” in this proxy statement as well as certain senior executive officers of important business units and subsidiaries in light of the executive compensation goals and objectives;

administering our equity and other incentive plans and approving all awards under such plans for our executive officers;

in accordance with federal securities laws, reviewing the Compensation Discussion & Analysis prepared by our management and recommending the inclusion of such disclosure in the proxy statement relating to our annual meeting of shareholders;

periodically reviewing and providing guidance pertaining to benefits strategy and/or plans;

assisting the Board in monitoring and oversight of administrative responsibilities associated with benefit plans, which have been delegated to Company management; and

annually reviewing and approving the Company’s salary increase budget.

identifying individuals qualified to become Board members and the director nominees for the next annual meeting of shareholders;

director nominees for each committee;

our organizational and governance structure, including developing and recommending to the Board the Corporate Governance Guidelines applicable to us;

our Code of Legal and Ethical Conduct;

appropriate procedures for the succession planning for our senior executive officer positions;

appropriate procedures to evaluate the performance of our chief executive officer;

evaluation of the Board and its committees;

nonemployee Board member compensation and stock ownership requirements;

determination of which members of senior management qualify as officers subject to Section 16 of the Securities Exchange Act of 1934;

related party transactions; and

the Audit Committee “financial expert” and the “financial literacy” of the Audit Committee members.

the name, age, business address and residence of the person recommended as a director candidate;

the principal occupation or employment of the person;

any information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended;

the written consent of the person being recommended as a director candidate to being named in the proxy statement as a nominee and to serving as a director if elected;

the name and record address of the nominating shareholder;

the number of shares and class of common stock beneficially owned, for at least one year, by the nominating shareholder; and

a statement disclosing whether such shareholder is acting with or on behalf of any other person and, if applicable, the identity of such person.

We designed our executive compensation program to meet the needs of our Company, our shareholders and our employees, and with the intent of achieving the following key objectives:

In order to achieve these objectives, our executive compensation program includes the following primary components:

•    Performance-based annual incentives that are tied to the attainment of specified business objectives at the corporate, business unit, and/or individual levels.

•    Benefits that meet the needs of our employees and their families at a reasonable shared cost.

Earnings Before Depreciation,
Amortization and Deferred
Taxes (“EBDT”)

EBDT per Share

Comparable Net Operating
Income (“NOI”) from Real
Estate Groups – pro-rata
consolidation

Stock Price – per Class A
share at fiscal year-end

Gain (loss) on disposition of rental properties, divisions and other investments (net of tax);

The adjustment to recognize rental revenues and rental expense using the straight-line method;

Non-cash charges for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes;

Preferred payment which is classified as non-controlling interest expense on our Consolidated Statement of Operations;

Impairment of real estate (net of tax);

Extraordinary items (net of tax); and

Cumulative or retrospective effect of change in accounting principle (net of tax).

Revenues (excluding straight-line rent adjustments) less operating expenses (including depreciation, amortization and amortization of mortgage procurement costs for non-real estate groups);

Plus interest income;

Plus equity in earnings (loss) of unconsolidated entities (excluding gain on disposition and impairment of unconsolidated entities); and

Plus depreciation and amortization of unconsolidated entities.

In early 2010, the Compensation Committee approved the use of a different approach in determining any awards to be earned under the executive version of the Short-Term Incentive Plan (“STIP”). We made this change to ensure any payments earned continue to qualify as performance-based compensation under Internal Revenue Code Section 162(m) (“Section 162(m)”). The Compensation Committee approved the use of a measure that will provide any eligible executive with a 2010 STIP award based on 1% of the excess of EBDT over $200 million for the performance period, but not to exceed $1.0 million. The Compensation Committee can apply negative discretion in determining the amounts, if any, to be earned by each executive eligible under the STIP and may consider other qualitative and/or quantitative factors in determining these awards. When assessing the amount of any award earned by each executive during 2010, the Compensation Committee also considered target award amounts for comparable executive jobs in the real estate, and where applicable, general industry using data provided by Mercer Human Resources Consulting (“Mercer”). Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Robert G. O’Brien and David J. LaRue (our “Named Executive Officers”) are participants in the executive version of the STIP. The amounts paid under the STIP to our Named Executive Officers for the 2010 performance period and the criteria used by the Compensation Committee in determining each award amount, is discussed in the “Short-Term Incentives” portion of the “Components of the Executive Compensation Program” section of this CD&A.

In light of the economic climate and business conditions, the Compensation Committee in 2009 began to assess whether the cash-based Long-Term Incentive Plan (“LTIP”) goals for the 2008 – 2011 performance cycle (“2008 – 2011 Cash LTIP”) were still relevant and attainable. As a result of this assessment, in early 2010, the Compensation Committee approved the establishment of a new two-year performance cycle under the cash-based LTIP (“2010 – 2011 Cash LTIP”) for certain executives including all of our Named Executive Officers. The Committee adopted a new two-year performance cycle in support of our goal to pay our Named Executive Officers competitively and in alignment with revised business objectives. This cycle coincides with a revised strategic planning period encompassing fiscal years 2010 and 2011. In light of economic and business conditions at the time, and our desire to qualify any payments earned under the cash-based LTIP as performance-based under Section 162(m), the Compensation Committee approved an award amount for each of these executives that would be equivalent to 1% of the excess of cumulative EBDT over $400 million for the performance period, but not to exceed $2.0 million per executive, and subject to the Compensation Committee’s exercise of negative discretion in determining any final award earned. The actual amounts, if any, earned by each eligible executive will be based on achievement of the aforementioned cumulative EBDT goal and may take certain other qualitative and/or quantitative factors as determined by the Compensation Committee, into account. When assessing the amount of any award earned by each executive, the Compensation Committee will also consider target award amounts for comparable executive jobs in the real estate, and where applicable, general industry using data provided by Mercer.

During 2008, the Compensation Committee approved the use of a value-based approach to granting shares to LTIP participants under the Forest City Enterprises, Inc. 1994 Stock Plan, as amended and restated (“Stock Plan”). Given the significant decline in our share price beginning in late 2008 and continuing into 2009, and the limited number of shares available for grant under the Stock Plan, we did not grant similar share values in 2009 or 2010. The number of shares granted to Named Executive Officers in 2010 represented approximately 80% of the targeted dollar value called for under our LTIP. This represented a run rate (defined as total shares issued divided by total common shares outstanding) of approximately 0.75%. In determining the total amount of shares granted, the Compensation Committee considered the number of remaining shares available under the Stock Plan, the current stock price and management’s outlook on business and economic conditions at the time, and concluded a reduced equity award value was appropriate for 2010 as it had been for 2009.

Similar to the cash-based LTIP and in light of the economic climate and business conditions, in early 2010, the Compensation Committee considered whether an additional two-year grant opportunity for performance shares was appropriate for our Named Executive Officers and select other senior executives. The 2008 – 2011 performance share grant opportunity was based on our strategic plan at the time using the measures under the 2008 – 2011 Cash LTIP. The Compensation Committee in early 2010 concluded that an additional award opportunity would be appropriate in light of these changes in business conditions and an assessment as to whether the original goals were still relevant and attainable. However, in lieu of a new two-year performance share grant opportunity, the Compensation Committee for 2010 approved the conversion of 80% of an annualized equivalent target performance share grant opportunity into the form of additional options and restricted shares for our Named Executive Officers. In making this decision, we considered the accounting treatment and tax deductibility of any additional performance share awards along with the retentive value of a two-year performance period and concluded at the time that a shift toward a mix of options and restricted shares, which vest over four years, was more appropriate for the 2010 grants.

At the annual meeting in June 2010, the Board sought and received approval from shareholders to increase the total number of shares available for issuance under the Forest City Enterprises, Inc. Stock Plan (the “Stock Plan”). The total number of shares available for issuance under the Stock Plan increased from 12,750,000 to 16,750,000. Of these shares, the total number of full value shares (e.g., restricted stock, performance shares) available for issuance increased to 5,400,000. In recommending these share increases management and the Board considered the current stock price and LTIP design target values, as well as the level of acceptable three-year run rates as determined by Institutional Shareholder Services for the real estate industry. Given current share prices and LTIP design, we project the increase in available shares under the Stock Plan will be sufficient to meet our needs for the next four years.

The Compensation Committee approved an Executive Officer Stock Ownership Requirement Policy (“Ownership Policy”) effective July 2010 that pertains to select senior executives, including our Named Executive Officers. In adopting the Ownership Policy, the Compensation Committee decided it was appropriate and necessary to have executives’ interests more closely aligned with those of the shareholders. The Compensation Committee also considered benchmarking data which showed an increased prevalence of such stock ownership policy requirements. The Ownership Policy requires covered executives including our Named Executive Officers, depending on their position, to attain a one to five times current base pay ownership level in company stock. The ownership requirement must be met by the fifth anniversary of the adoption of the Ownership Policy, or July 1, 2015. The Ownership Policy is discussed in further detail under the “Additional Executive Compensation Policies” section of this CD&A.

In December, 2010 the Compensation Committee approved the adoption of a Clawback Policy which applies to certain senior executives of the Company, including our Named Executive Officers. The Clawback Policy was approved by the Compensation Committee with the understanding that it may need to be revised in the future to conform to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), once the SEC provides final guidance, expected sometime in 2011. The Clawback Policy is discussed in further detail under the “Additional Executive Compensation Policies” section of this CD&A.

The Audit, Compensation and Corporate Governance and Nominating Committees collectively reviewed the results of a risk analysis during early 2011 and concluded our compensation programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. In making this determination the three committees used a compensation risk scorecard to evaluate our programs relative to a number of risk factors including pay mix, performance goals, metrics and targets, external reference to peers and market practices, use of appropriate checks and balances and adherence to governance best practices. The risk assessment is discussed in further detail under the “Plan Design as it Pertains to Risk” section of this CD&A.

Pay for Performance alignment: This principle is a critical component of our longstanding compensation philosophy. Our executive compensation program emphasizes variable incentive pay tied to challenging performance goals, with no awards earned for results below designated levels. Senior executives and managers can earn significant incentive awards when outstanding Company, business unit and/or individual performance results are achieved and little or no awards when performance is below expected levels.

A majority of pay for top executives should be performance contingent and tied to multiple time periods: Our executive compensation program promotes a pay for performance orientation, consistent with our high-performance culture, through the emphasis on incentive compensation. We provide incentive award opportunities to our Named Executive Officers. Awards earned under the STIP are tied to our annual business plan and structured to maximize the tax deductibility of any payments to Named Executive Officers, with the Compensation Committee taking Company, business unit and individual performance along with target award levels provided by Mercer, into account when determining any amounts earned. Similarly, the LTIP consists of multiple components tied to long-term value creation. Awards under the cash-based portion of the LTIP will only be earned if the Compensation Committee deems performance over a multi-year period of up to four years (generally consistent with our strategic planning cycle) warrants. Stock option awards under the LTIP will only have long-term value if our stock price appreciates between the time of grant and the time of exercise. Similarly, any performance share awards will only be earned if certain levels of performance are met. Actual pay levels will vary with our performance results.

The following chart illustrates the percentage of the target 2010 annualized equivalent total direct compensation opportunity (defined as base salary plus short-term and long-term incentives) for our Named Executive Officers. Benefits are excluded from the chart below since no formal target levels typically exist for these programs. As illustrated, approximately 40% to 50% of target total direct compensation is tied to long-term performance with roughly a quarter tied to annual business results. Overall, at least two-thirds of target total direct compensation is “at risk” or not guaranteed pay, since it is tied to performance.

As noted in the “Components of the Executive Compensation Program – Long-Term Incentives” section of this CD&A, because of their substantial equity ownership interests, the percentage of total direct compensation attributable to long-term incentives for Charles A. Ratner, James A. Ratner and Ronald A. Ratner is less than for our other Named Executive Officers.

The target mix of compensation has been in place since the 2008 fiscal year and was derived based on benchmarking data and recommendations from Mercer, which revalidated the mix and its appropriateness during a 2010 review of our pay practices. However, as noted earlier in this CD&A and in each section that follows, the actual amounts earned by each of our Named Executive Officers will vary based on Company, business unit and/or individual performance. Additionally, due to changes in the market value of our shares during the past two years coupled with share availability constraints under our Stock Plan, the Compensation Committee in 2010 approved short-term adjustments to the number of shares granted. Not reflected in the target amounts shown above are non-recurring bonuses or special equity awards granted to our Named Executive Officers. The “Short-Term Incentives” and “Equity” sections discussed later in this CD&A contain further discussion regarding these awards.

Long-term incentives are emphasized to align executive and shareholder interests: As illustrated above, our executive compensation program places greater emphasis on long-term incentives as compared with short-term incentives, to focus senior management on long-term strategic goals and shareholder value creation. We currently use a combination of equity-based and cash-based long-term award vehicles to minimize potential shareholder dilution resulting from the sole use of equity plans.

Total compensation should be fair, competitive and communicated: We operate in a highly competitive industry and must ensure that our executive compensation program allows us to attract and retain senior management talent for continued growth and success. Pay levels are periodically reviewed to determine if they are externally competitive and internally equitable. During 2010, Mercer benchmarked the total targeted and actual compensation levels earned by our Named Executive Officers using peer group proxy information and data from a number of surveys. We provide annual notification to participants of performance goals and corresponding award opportunities for the incentive compensation plans.

Our executive compensation program should not encourage the taking of excessive risks that could be detrimental to the interests of our shareholders: Our use of short-term and long-term incentives, the award of different types of equity compensation and the use of different performance criteria do not encourage our Named Executive Officers and other senior executives to take unreasonable risks relating to our business. As noted earlier in this document, our Audit, Compensation, and Corporate Governance and Nominating Committees believe our compensation program elements do not encourage inappropriate risk taking since overall pay is appropriately balanced between various components as outlined in the “Components of the Executive Compensation Program” section of this CD&A.

Compensation
Component

Base Salary – Direct
Compensation

Short-Term Incentives –
Direct Compensation

Long-Term Incentives –
Direct Compensation

Benefits & Perquisites –
Indirect Compensation

The benchmark percentage of pay target at the beginning of the performance period was 80% for each Named Executive Officer;

Historically, the maximum award opportunity under the STIP has been 200% of the target award amount;

Our overall financial results, including that our:

Significant progress was made in crafting our new four-year strategic plan which begins in 2012.

Placed significant emphasis on overall business results as noted above in his capacity as President and CEO of the Company;

Considered Mr. Ratner’s role in helping secure additional financing during the year and in deleveraging our balance sheet;

Noted the Company’s ability to overcome significant legal and financial obstacles during the year to break ground on the Atlantic Yards development in New York;

Took into the account the role Mr. Ratner’s leadership played in steering the organization during very difficult economic times and progress toward succession planning goals; and

The results from his oversight of the Commercial Business Unit and our international development efforts;

His successful leadership efforts to open two retail shopping centers, one in Florida and another in New York;

His partnering role in effectively dealing with commercial property mortgage maturities; and

His successful leadership efforts which resulted in Forest City Military Communities entering into exclusive negotiations to privatize military housing at four bases in the southeastern United States which will result in an end state of approximately 2,185 units;

His primary oversight role for the Presidio Landmark project which opened during the 2010 fiscal year;

His leadership efforts in commencing construction of an apartment community at The Yards, our mixed use project in Washington D.C.; and

Our Company closing on transactions totaling over $1 billion in non-recourse mortgage financings;

His efforts to significantly improve our capital position and development of a strategy to improve our balance sheet which included his leadership with regard to:

His oversight efforts which led to top quartile performance of our operating portfolio across each of our product classifications;

His leadership in appropriately raising cash and boosting our overall liquidity through selective sales of properties;

Named Executive Officer

Charles A. Ratner

James A. Ratner

Ronald A. Ratner

Robert G. O’Brien

David J. LaRue

Charles A. Ratner

James A. Ratner

Ronald A. Ratner

Robert G. O’Brien

David J. LaRue

Charles A. Ratner

James A. Ratner

Ronald A. Ratner

Robert G. O’Brien

David J. LaRue

The need to more closely align the incentive opportunities for our Named Executive Officers to revised longer-term business goals as outlined in the strategic business plan. Revised goals take into account significant changes in the business and economic conditions since early 2008, when the 2008 – 2011 Cash LTIP performance period began.

The likelihood that the goals established several years ago for the 2008 – 2011 Cash LTIP performance period may not be achieved. However, should the goals established for the 2008 – 2011 Cash LTIP performance period be achieved in addition the performance goals under the 2010 – 2011 Cash LTIP, the Compensation Committee could still choose to apply negative discretion to either award to ensure overall pay earned is appropriate relative to levels of performance achieved and consistent with market pay conditions at the time.

Our desire to pay our Named Executive Officers competitively aligned with achievement of business objectives. Our overall compensation program places significant emphasis on longer-term performance in determining overall pay opportunities for Named Executive Officers, and it is unlikely that the original goals set forth under different assumptions in early 2008 for the 2008 – 2011 Cash LTIP could be achieved, thus impacting the overall potential of offering a competitive pay package.

Charles A. Ratner

James A. Ratner

Ronald A. Ratner

Robert G. O’Brien

David J. LaRue

Charles A. Ratner

James A. Ratner

Ronald A. Ratner

Robert G. O’Brien

David J. LaRue

He/she meets the requirements on any of the anniversary dates during the initial five (or in the case of a change in responsibilities and/or promotion, a subsequent three) year period; AND

The covered executive at least maintains the same number of shares as when he/she first met the requirements.

The payment, grant or vesting of such compensation was based on the achievement of financial results that were subsequently the subject of a restatement of our financial statements filed with the SEC, or the amount of the award was based upon the achievement of metrics which subsequently were determined to have been misstated;

The Compensation Committee determines, in its sole discretion, exercised in good faith, that the officer engaged in fraud or misconduct that caused or contributed to the need for the restatement or caused or contributed to the misstatement of the metrics;

The misstatement was discovered within three years of the filing of the financials; and

The Compensation Committee determines, in its sole discretion, that it is in the best interests of our Company and its shareholders for the officer to repay or forfeit all or any portion of their compensation.

Scott S. Cowen (Chairman)

Deborah L. Harmon