NEW YORK (Dow Jones)--Executive compensation policies at SL Green Realty Corp. (SLG) and Kilroy Realty Corp. (KRC) are increasingly coming under fire as investors in the real-estate investment trusts take it on the chin. Industry experts say executive compensation at the office property operators is excessive, particularly in a brutal market downturn, even citing the high pay as a contributing factor to the REITs' flagging share prices. Since the beginning of the year, SL Green's shares are down roughly 11%, while Kilroy's stock has tumbled 39%. Both companies are trading at a discount to their peers, in part because of the pay issue, said Michael Knott, an analyst at Green Street Advisors. "The two biggest offenders on the compensation front in the office sector are SL Green and Kilroy," he said. Glass Lewis & Co. also has hammered both companies on pay. In recent reports advising companies on annual meeting voting issues, the investor advisory firm gave both Kilroy and SL Green "D" grades based on 2008 compensation. The firm said the companies paid more in compensation to their top officers than the median compensation for similarly sized companies. In addition, the chief executives for both companies were paid above their peers, based on median compensation, even though there was little difference in performance between the two REITs and their peers. According to Glass Lewis, Kilroy paid a total of $13 million in executive compensation, including $6 million for the chief executive pay during fiscal year 2008. That's about $2 million and $5 million more than peers Alexandria Real Estate Equities and BioMed Realty and paid out respectively, Glass Lewis said. Similarly, SL Green paid out $29.5 million in total executive compensation, including $9 million to the chief executive in 2008. That's roughly $20 million more than what Brandywine Realty and Mack-Cali Realty paid. SL Green's "board believes it was deserving of $14 million in cash bonuses (to top five execs) during a year in which the share price declined by over 70%, a performance that was much worse than that of the average REIT," Knott wrote in a an analysis last month. "Whereas SLG's pay packages of the past were flawed and excessive, the '08 compensation is potentially even more troubling." In a statement, SL Green's Chief Executive Marc Holliday said that the board "deserves its share of the credit for the company's past, current and future successes." Operating results remain strong and the company is well positioned to capitalize on opportunities when the market recovers, he added. A Kilroy representative did not return phone calls seeking comment. To be sure, SL Green and Kilroy have been adversely affected by broad concerns about the trajectory of commercial real estate and rising vacancy rates in office property as unemployment rates inch higher, while companies downsize and cut expansion plans. SL Green, one of New York City's largest commercial landlord and Kilroy, focused in Southern California, are exposed to vulnerable markets. But Wall Street analysts believe governance issues are adding to the companies' difficulties. Stifel Nicolaus said in a report that while the firm is bullish on Manhattan over the long term and likes SL Green's management team, the five-member board lacks a critical mass "that can challenge management and provide the proper checks and balances." "The result is such things as outsized compensation and weak overall corporate governance," Stifel said. "These sort of issues affect the stock price, willingness of lenders to lend, access to joint-venture equity and an overall extra hurdle in day-to-day business activities." -By A.D. Pruitt, Dow Jones Newswires; 212-416-2197; angela.pruitt@dowjones.com (END) Dow Jones NewswiresJune 29, 2009 15:38 ET (19:38 GMT)