Affirming Our Commitment

Affirming our commitmentAffirming our commitment

Our corporate governance policies and practices are the foundation of our business.

We are committed to operating within a strong corporate governance framework that includes a majority of independent directors on our Board, a strong Lead Independent Director, and highly effective Board committees with clearly defined responsibilities. We seek to ensure that our Board members possess the relevant and complementary mix of skills and qualifications for effective Board oversight and adhere to high standards of professional and personal conduct.

Toll Brothers Corporate HeadquartersToll Brothers Corporate Headquarterstoll brothers corporate headquarters    |    fort washington, pa

Toll Brothers Board of Directors

Douglas C. Yearley, JR.Douglas C. Yearley, JR.Chairman of the Board& Chief Executive Officer
Scott D. StowellScott D. StowellLead Independent DirectorPresident and CEO,Capital Thirteen LLC
Stephen F. EastStephen F. EastChair Public Debt and Equity CommitteeRetired Managing Director,Senior Consumer Analystsand Head of Homebuilding andBuilding Products Research,Wells Fargo & Company
Christine N. GarveyChristine N. GarveyChair Audit and Risk CommitteeRetired Global Head of CorporateReal Estate Services, Deutsche Bank AG
Karen H. GrimesKaren H. GrimesRetired Partner, Senior Managing Director,and Equity Portfolio Manager,Wellington Management Company
Derek T. KanDerek T. KanVice President, Operations, Shopify Inc.
John A. McleanJohn A. McleanChair Executive Compensation CommitteeSenior Managing Director,New York Life Investment Management
Wendell E. PritchettWendell E. PritchettPresidential Professor of Law and Education,University of Pennsylvania
Judith A. ReinsdorfJudith A. ReinsdorfRetired ExecutiveVice President and General Councel,Johnson Controls International
Katherine M. SandstromKatherine M. SandstromRetired Senior Managing Director,Heitman LLC
Paul E. ShapiroPaul E. ShapiroChair of Governance Committee, Chairman, Q Capital Holdings LLC

Strong Independent Leadership

A majority of our directors must be independent. Currently, all of our directors other than Douglas C. Yearley, Jr., our Chairman and Chief Executive Officer (CEO), are independent, and all of our committees consist exclusively of independent directors.

We have a strong and empowered Lead Independent Director position with specific responsibilities to provide independent oversight of management. Both the Lead Independent Director and the Chair of the Board are elected annually.

Thoughtful Board Composition

The Nominating and Corporate Governance Committee of our Board continually assess the composition of the Board, including a review of Board size, diversity, skills, and qualifications, as well as director tenure.

Our Board views diversity in a broad sense, taking into consideration not only racial, ethnic, and gender diversity, but also the mix of qualifications of our directors including tenure, experience levels, and types of experience, including both industry and subject matter expertise. Although we do not have a separate policy specifically governing diversity, when considering Board candidates, the Governance Committee takes into account whether an individual would bring a diverse viewpoint to the Board, including with respect to the candidate's gender, race, and ethnicity.

Recognizing the importance of continued Board refreshment, since March 2018, more than half our Board membership has turned over deepening the diversity of composition, thought, and experience with fresh perspectives. The Governance Committee intends to continue considering the diversity of experience and perspective, including racial, ethnic, and gender diversity, that future candidates may bring when nominating individuals to serve on our Board.

Shareholder and Stakeholder Engagement

Our Board and management team invest time in ongoing active dialogue with our stockholders to ensure a diversity of perspectives on a broad range of issues including strategy, business performance, corporate governance, risk, compensation practices, and other environmental, social, and governance concerns. We conduct annual outreach to our largest stockholders and proxy advisory firms to receive feedback regarding these matters. In addition to direct shareholder engagement, our Board and management team regularly engage with representatives of our key stakeholders.

Accountability to Shareholders

The Board and its committees regularly evaluate their performance and composition. These evaluations are led by the Nominating and Corporate Governance Committee and include assessments of the skills, qualifications, and diversity of our Board. In evaluating our Board's effectiveness, the Nominating and Corporate Governance Committee take into account the company's business strategy, operations, risks, and the anticipated makeup of the Board following potential director retirements to identify the desired characteristics of future Board members.

All directors are elected annually, and each director is elected by a majority of votes cast in uncontested director elections. To be elected, each director must receive more votes for his or her election than votes against.

Accountability to ShareholdersAccountability to ShareholdersThe Weston    |    Whitewing at Whisper Ranch    |    Queen Creek, AZ

Accountability to Shareholders

Our Board regularly reviews management development and succession planning, in particular with respect to the CEO role. It also devotes significant time and effort to understanding and reviewing enterprise risks. This includes oversight of risks relating to our company's strategy and reputation as well as a review of risks related to financial reporting and cybersecurity, which our Audit and Risk Committee reviews at least quarterly.

ESG Oversight

Our full Board generally oversees the company's Environmental, Social, and Governance (ESG) goals and objectives, and supports the implementation of the company's ESG priorities. Specific ESG topics are overseen by the Board committee generally responsible for the subject matter. For example, the Board's Governance Committee has oversight responsibility for the corporate governance aspects of ESG, and the Audit and Risk Committee generally oversees regulatory compliance matters, including with respect to environmental issues, cybersecurity, and compliance with the company's Code of Business Conduct and Ethics. The Board currently believes that it is the appropriate body to oversee the development and implementation of the company's sustainability efforts, which focus on the Company's efforts to positively impact both people and planet. It is anticipated that ESG will be a regular agenda item at Board meetings in the future.

Execution of the company's ESG strategy is overseen by the company's senior management team. The company has formed an ESG Committee, which includes members of senior management who report directly to the CEO. The ESG Committee is responsible for setting direction and driving accountability as we address important issues, work with key stakeholders, and measure and report our progress, including with respect to climate change. We are in the process of identifying and aligning our efforts to respond to the issues of climate change and sustainability using the guidelines issued by the Task Force on Climate-related Financial Disclosures (TCFD). We are working to more formally evaluate our land acquisition and land development processes for potential exposure to the following risks: sea level rise, increases in heavy rain and wind events, drought, extreme heat, and wildfire. We expect this process to enable us to more deliberately consider the potential impacts of climate change on the land that we acquire, how we develop our communities, the materials used in the construction of our homes, and how we design these homes. We expect this process will enhance how we manage and reduce potential climate-related financial impacts on our business.

We believe there are both risks and opportunities for our business related to climate change. Risks and opportunities that have been identified include the following:

Land acquisition and development: Climate change may increase the risk that federal, state and local governments act to limit the emission of greenhouse gases by, among other things, imposing stricter land use, building and zoning codes, and preventing the development of exurban areas, all of which could increase our costs. To date, we have not experienced a material impact on our business as a result of these impacts.

Land ownership: Over extended periods of time, climate change could make certain areas of the country less hospitable due to extreme weather conditions such as drought, excessive heat, and flooding events. This could result in migration out of these areas and the devaluation of land and communities in favor of more hospitable zones. This is both a risk and an opportunity. The time horizon over which we own land is generally limited to periods in which these factors are not reasonably expected to materially impact the value of our land or our operations.

Energy efficiency of homes: An increased focus on reducing greenhouse gas emissions, volatility in energy costs, and the potential to achieve savings by reducing or eliminating home energy costs through green technologies, may lead to a greater consumer appreciation for new homes, which are generally more energy-efficient than existing homes, which could increase consumer interest in our homes. These factors could also lead federal, state, and local governments to revise building and zoning codes to require more green technologies, such as solar panels, in new construction, which could increase new homeownership costs.

Resiliency of homes: Climate change could lead consumers to value newly built homes that incorporate the latest in resilient technologies—such as the use of fireproofing materials to protect against wildfires and greater wind proofing in hurricane-prone areas—over existing homes. These factors could also lead federal, state, and local governments to require these technologies in new construction, which could increase home ownership costs.

Compensation Governance

The majority of our CEO pay is long-term and at-risk with no guaranteed bonuses or salary increases. The Executive Compensation Committee of the Board has identified performance goals that underpin our strategy and has incorporated those goals into executive compensation plans to serve as drivers of incentive awards.

Stock ownership guidelines align executive and director interests with those of our shareholders. These guidelines were updated in December 2018 to require our CEO to retain qualifying equity equal to six times his annual base salary (three times for other executive officers), and for our Board members to retain equity in the amount of five times their annual base cash retainer.

We prohibit all hedging, pledging, and transactions in derivatives related to Toll Brothers securities for all directors and executives (with a limited pledging exception for our Chairman Emeritus).

We have a policy that requires reimbursement and/or cancellation of awards if it is determined by the Board that a payment was made based upon the achievement of specified financial results that was subsequently restated, if in the Board's view the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, or if a lower award would have been made to the executive based upon the restated financial results. We do not pay tax gross-ups on payments to executives.

Additional information about our corporate governance practices can be found on our Investor Relations website.