Document

DEF 14A 1 a2021proxystatement-def14a.htm DEF 14A Document

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. )

Filed by the Registrant [X]

Filed by a party other than the Registrant [ ]

Check the appropriate box:


[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under §240.14a-12

COSTAR GROUP, INC.

(Name of Registrant as Specified In Its Charter)

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

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April 19, 2021

Dear Stockholder:

You are cordially invited to participate in the 2021 Annual Meeting of Stockholders of CoStar Group, Inc. to be held at 10:00 a.m., Eastern Daylight Time, on Wednesday, June 2, 2021 (the “Annual Meeting”). The Annual Meeting will be held in a virtual format consisting of a live webcast. Stockholders will be able to participate from any geographic location with Internet connectivity. You may listen, vote and submit questions during the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/CSGP2021. More information regarding how you can participate in the virtual Annual Meeting is provided in the Proxy Statement. A webcast replay of the Annual Meeting’s audio will be available on the investor relations page of our website after the Annual Meeting.

At the Annual Meeting, you will be asked to (1) elect the eight directors named in the Proxy Statement, (2) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021, (3) approve, on an advisory basis, CoStar's executive compensation, (4) approve the adoption of CoStar’s Fourth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 1.2 billion, (5) approve the amendment and restatement of the CoStar Employee Stock Purchase Plan to increase the number of shares authorized for issuance thereunder, and (6) vote on one stockholder proposal, if properly presented. The accompanying Notice of 2021 Annual Meeting of Stockholders and Proxy Statement describe these matters in more detail.

The Board of Directors recommends that you vote FOR each of the director nominees, FOR Proposals 2, 3, 4 and 5, and AGAINST Proposal 6.

Important Notice Regarding the Availability of Proxy Materials

for the 2021 Annual Meeting of Stockholders To Be Held on June 2, 2021:

The Proxy Statement and our 2020 Annual Report are available at http://investors.costargroup.com/financials.

Whether or not you plan to attend the virtual Annual Meeting, please vote your shares as promptly as possible. Your participation will help to ensure the presence of a quorum at the meeting and save CoStar the extra expense associated with additional solicitation.


			Sincerely,

			ANDREW C. FLORANCE
			Founder, Chief Executive Officer, President and Director

COSTAR GROUP, INC.

April 19, 2021

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD WEDNESDAY, JUNE 2, 2021

The 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of CoStar Group, Inc. (“CoStar”, “we,” "us" or the “Company”) will be held online at www.virtualshareholdermeeting.com/CSGP2021 at 10:00 a.m., Eastern Daylight Time, on Wednesday, June 2, 2021, for the following purposes:

1.To elect the eight directors named in the Proxy Statement to hold office until the next Annual Meeting of Stockholders, or until their respective successors are elected and qualified;

2.To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021;

3.To approve, on an advisory basis, the Company’s executive compensation;

4.To approve the adoption of the Company’s Fourth Amended and Restated Certificate of Incorporation, which increases the total number of shares of common stock, par value $0.01 per share (the “Common Stock”), that the Company is authorized to issue from 60 million to 1.2 billion and correspondingly increases the total number of shares of capital stock that the Company is authorized to issue from 62 million to 1.202 billion, to, among other things, provide the Company with sufficient authorized but unissued shares of Common Stock to effect a forward stock split of the Common Stock;

5.To approve the amendment and restatement of the CoStar Employee Stock Purchase Plan (the "ESPP") to increase the number of shares authorized for issuance thereunder;

6.To vote on one stockholder proposal, if properly presented; and

7.To transact any other business properly presented before the Annual Meeting.

The Board of Directors has fixed Wednesday, April 7, 2021, as the record date for determining stockholders entitled to receive notice of and to vote at the Annual Meeting (or any adjournment or postponement of it). Only stockholders of record at the close of business on that date are entitled to notice of and to vote at the Annual Meeting. CoStar’s list of registered stockholders as of April 7, 2021 will be available for inspection for the 10 days prior to the Annual Meeting. If you want to inspect the registered stockholder list, please email Bill Warmington, Vice President of Investor Relations at wwarmington@costar.com to schedule an appointment. In addition, the list of registered stockholders will also be available during the Annual Meeting through the meeting website for those stockholders who choose to attend.

You may listen, vote, submit questions and view the list of registered stockholders during the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/CSGP2021. If you are a registered stockholder, to access, participate in and vote at the Annual Meeting, you will need the 16-digit control number included on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice”). If your shares are held in brokerage accounts and your voting instruction form or Notice indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, participate in, and vote at the annual meeting with the 16-digit control number indicated on that voting instruction form or Notice. Otherwise, stockholders who hold their shares in brokerage accounts should contact their bank, broker or other nominee (preferably at least 5 days before the annual meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the annual meeting. We have worked to offer the same ability to participate as previously provided during our past in-person annual meetings.

INTERNET AVAILABILITY

We are furnishing proxy materials to some of our stockholders through the Internet instead of through the mail. On or about April 19, 2021, we mailed to stockholders as of the record date a Notice Regarding the Availability of Proxy Materials (the "Notice"). The Notice tells you how to access this Proxy Statement and our 2020 Annual Report on Form 10-K, as well as how to submit your proxy, over the Internet. If you received the Notice and would still like to receive a printed copy of our proxy materials, please follow the instructions in the Notice.

WE INVITE YOU TO PARTICIPATE IN THE ANNUAL MEETING, BUT WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING ONLINE, PLEASE VOTE YOUR SHARES AS SOON AS POSSIBLE.


			By Order of the Board of Directors,

			JAYE S. CAMPBELL
			General Counsel and Secretary

NOTICE: Brokers are not permitted to vote on the election of directors, the amendment and restatement of the ESPP to increase the number of shares authorized for issuance thereunder, the advisory resolution to approve executive compensation or the stockholder proposal without instructions from the beneficial owner, as discussed in more detail in the Proxy Statement. If your shares are held through a brokerage firm, bank or other nominee, they will not be voted on these matters unless you affirmatively vote your shares in one of the ways described in the Notice.

Table of Contents


PROXY STATEMENT			1
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 2, 2021			1
OUTSTANDING SECURITIES, VOTING RIGHTS AND QUORUM			1
PROXY VOTING AND REVOCATION			2
Proposal 1 – ELECTION OF DIRECTORS			3
Board Composition			4
Nominees for the Board of Directors			5
Nominees’ Business Experience, Qualifications and Directorships			6
Proposal 2 – RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			10
Proposal 3 – ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION			11
Proposal 4 – APPROVAL OF THE ADOPTION OF THE COMPANY’S FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION			12
Proposal 5 – APPROVAL OF THE AMENDED AND RESTATED COSTAR GROUP, INC. EMPLOYEE STOCK PURCHASE PLAN			15
ADDITIONAL INFORMATION			19
Corporate Governance Matters			20
Board Meetings and Committees			22
Report of the Audit Committee			24
Director Compensation			25
Director Stock Ownership Policy			25
Executive Officers and Key Employees			28
Stock Ownership Information			31
Equity Compensation Plan Information			32
Compensation Committee Interlocks and Insider Participation			33
Compensation Committee Report			33
COMPENSATION DISCUSSION AND ANALYSIS			34
Executive Summary			34
Business Overview			34
Executive Compensation Plan and Performance Highlights			36
20 20 Variable Compensation Drivers and Outcomes			36
20 20 Stockholder Outreach and Say on Pay Response			40
Highlights of the Executive Compensation Program			41
Executive Compensation Practices			42
Executive Compensation Program Objectives			43
Determining Executive Compensation			43
Elements of Compensation			46
Performance Measures and Time Horizons			47
20 20 Base Salaries			47
20 20 Annual Cash Incentive Program			48
20 20 Annual Cash Incentive Awards			52
Equity Incentive Compensation			52
Target Equity Incentive Awards Granted in 2020			55


201 9 Performance-Based Restricted Stock Awards Granted in 2020			56
20 20 Multi-Year Performance Shares			57
20 20 Stock Option Awards			59
Target Equity Incentive Awards Granted in 2021			59
20 20 Performance-Based Restricted Stock Awards Granted in 2021			60
Management Stock Purchase Plan			62
Compensation Decision Process			62
Other Compensation Policies and Practices			64
Executive Stock Ownership Policy			64
Equity Grant Practices			64
Recoupment (or “Clawback”) Policy			64
Anti-Hedging Policies			64
Termination and Change of Control Payments			64
Policy on Deductibility of Compensation			65
EXECUTIVE COMPENSATION TABLES AND DISCUSSION			66
Summary Compensation Table			66
Grants of Plan-Based Awards for Fiscal Year 2020			68
NARRATIVES TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE			70
Employment Agreements and Arrangements			70
Chief Executive Officer Employment Agreement			70
Equity Awards			70
Outstanding Equity Awards at 20 20 Fiscal Year-End			71
Option Exercises and Stock Vested for Fiscal Year 2020			72
Nonqualified Deferred Compensation for Fiscal Year 2020			72
Potential Payments Upon Termination or Change of Control			73
CEO Pay Ratio Disclosure			77
Certain Relationships and Related Transactions			77
Delinquent Section 16(a) Reports			78
Other Information			79
Proposal 6 – SHAREHOLDER PROPOSAL			80
OTHER MATTERS			82
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTORS FOR THE 2021 ANNUAL MEETING			82
APPENDIX A – FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION			A-1
APPENDIX B – SECOND AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN			B-1
APPENDIX C – PROXY CARD			C-1

COSTAR GROUP, INC.

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON WEDNESDAY, JUNE 2, 2021

The Board of Directors (the “Board”) of CoStar Group, Inc. (“CoStar”, “we” or the “Company”) solicits your proxy for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 10:00 a.m., Eastern Daylight Time, on Wednesday, June 2, 2021, and at any adjournment or postponement of the Annual Meeting. The Annual Meeting will be held online as a live webcast via the internet at www.virtualshareholdermeeting.com/CSGP2021. The webcast replay of the Annual Meeting will be made available in the Investor section of CoStar Group's website after completion of the Annual Meeting and remain available for a period of time following the call.

We are mailing the Notice Regarding the Availability of Proxy Materials (the “Notice”) to our stockholders eligible to vote at the Annual Meeting on or about April 19, 2021. If you are a registered stockholder, to be admitted to the Annual Meeting, you will need to enter the 16-digit control number found on your Notice or proxy card or voting instruction form. If your shares are held in brokerage accounts and your voting instruction form or Notice indicates that you may vote those shares through the http://www.proxyvote.com website, then you may be admitted to the Annual Meeting using the 16-digit control number indicated on that voting instruction form or Notice. Otherwise, stockholders who hold their shares in brokerage accounts should contact their bank, broker or other nominee (preferably at least 5 days before the annual meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting. Only stockholders as of the record date or their proxies are permitted to attend the Annual Meeting online.

The Annual Meeting will include a question and answer session, and stockholders may submit questions appropriate to our business during the Annual Meeting. Questions may be submitted during the Annual Meeting through www.virtualshareholdermeeting.com/CSGP2021. Questions pertinent to meeting matters that comply with the meeting rules of conduct will be answered during the question and answer session, subject to time constraints. However, we reserve the right to exclude questions that are not pertinent to meeting matters, irrelevant to the business of the Company, derogatory or in bad taste, or relate to pending or threatened litigation, personal grievances or are otherwise inappropriate. Questions that are substantially similar may be grouped and answered once to avoid repetition. If there are any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints, management expects to post answers to those questions on the “Investor Relations” section of the Company’s website at http://investors.costargroup.com as soon as practicable after the meeting.

We encourage you to access the Annual Meeting 15 minutes before it begins to avoid any delay from technical issues. If you encounter technical issues accessing the virtual Annual Meeting, you can contact the technical support number posted on the log on page at www.virtualshareholdermeeting.com/CSGP2021. We will have technicians available to assist you.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 2, 2021

The Notice of Meeting and this Proxy Statement, as well as our 2020 Annual Report on Form 10-K, are available on our corporate website at http://investors.costargroup.com/financials.

OUTSTANDING SECURITIES, VOTING RIGHTS AND QUORUM

At the close of business on the record date, Wednesday, April 7, 2021, there were 39,444,356 shares of common stock outstanding and entitled to vote at the Annual Meeting. Each outstanding share of common stock is entitled to one vote on each of the eight director nominees and on each of the other proposals.

The presence at the Annual Meeting, online or by proxy, of a majority of the total issued and outstanding shares of common stock entitled to vote constitutes a quorum (the minimum number of shares required to take action) for the Annual Meeting. Both abstentions and broker non-votes will be counted as shares present for purposes of obtaining a quorum.

The required vote and the calculation method for each of the matters scheduled for consideration at the Annual Meeting are as follows:

Election of Directors. Each director will be elected if the number of shares voted “FOR” a director exceeds the number of shares voted “AGAINST” that director. If the votes cast for an incumbent director do not exceed the votes cast against the director, the director is required to tender his or her resignation pursuant to the Board’s director resignation policy, and our Board will consider whether to accept or reject such director’s resignation following the Nominating & Corporate Governance Committee’s recommendation.

Approval of the Adoption of the Fourth Amended and Restated Certificate of Incorporation. The affirmative vote of a majority of the outstanding shares of the Common Stock is required to adopt the Fourth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock.

Each of the Other Proposals. Each of the other proposals to be voted on at the Annual Meeting will be approved if the number of shares voted “FOR” the proposal exceeds the number of shares voted “AGAINST” the proposal.

Treatment of Abstentions

Abstentions will not affect the outcome of the election of directors or the other proposals because they are disregarded in calculating the total number of votes cast, except that abstentions will have the same effect as “Against” votes on the proposal to adopt the Fourth Amended and Restated Certificate of Incorporation. Abstentions will be counted as present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting.

Treatment of Broker Non-Votes

Beneficial owners whose shares are held in brokerage accounts have the right to direct their broker or other nominee how to vote their shares, and the broker or other nominee is required to vote those shares in accordance with their instructions.

Brokers or other nominees have the discretion to vote shares held in brokerage accounts on routine corporate matters, such as ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 2), without specific voting instructions from the beneficial owner. We also believe approval of the Fourth Amended and Restated Certificate of Incorporation (Proposal 4) is a “routine” matter and, as a result, brokers or other nominees will have the discretion to vote on Proposal 4 if the beneficial owner does not provide voting instructions, Brokers may not vote shares held in brokerage accounts on non-routine matters, such as the election of directors (Proposal 1), approval of the advisory resolution to approve executive compensation (Proposal 3), approval of an amendment and restatement of the ESPP (Proposal 5), and voting on a stockholder proposal (Proposal 6) without specific voting instructions from the beneficial owner (this is referred to as a “broker non-vote”). Broker non-votes will not affect the outcome of Proposals 1, 3, 5 or 6. Broker non-votes will have the same effect as “Against” votes on the proposal to adopt the Fourth Amended and Restated Certificate of Incorporation (Proposal 4). However, because we believe Proposal 4 is a “routine” matter we do not expect there to be any broker non-votes with respect to Proposal 4.

Broker non-votes will be counted as present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting.

PROXY VOTING AND REVOCATION

There are four ways you can vote:

1.By Internet:

a.Before the Meeting, at www.proxyvote.com: Follow the instructions provided in the Notice or, if you receive a complete set of proxy materials by U.S. mail, the instructions on your proxy card. If you are a beneficial owner whose shares are held in a brokerage account, the availability of online voting may depend on the voting procedures of the organization that holds your shares.

b.During the Meeting, at www.virtualshareholdermeeting.com/CSPG2021. Enter the control number included on your Notice, proxy card, or voting instruction form or otherwise provided by your broker or other nominee (as described above on page 1) and follow the instructions on the annual meeting website. If you are a beneficial owner whose shares are held in a brokerage account and have any questions about your control number or how to obtain one, please contact the broker or other nominee that holds your shares.

2.By Telephone: If you receive a complete set of proxy materials by U.S. mail, follow the instructions on your proxy card.

3.By Mail: If you receive a complete set of proxy materials by U.S. mail, complete, sign and return the accompanying proxy card in the postage-paid envelope provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

If you properly complete and execute your proxy card in one of the ways set forth above:

•Your shares will be voted in accordance with your instructions.

•If you sign, date and return your proxy card, and there are any proposals for which you do not provide instructions, your shares will be voted in accordance with the Board’s recommendations as follows: “FOR” the election of each of the director nominees, “FOR” ratification of the independent registered public accounting firm, “FOR” the approval of the advisory resolution to approve executive compensation, “FOR” adoption of the Fourth Amended and Restated Certificate of Incorporation, “FOR” amendment and restatement of the ESPP, and “AGAINST” the stockholder proposal.

You may revoke your proxy at any time before it is voted by:

•Delivering to the Corporate Secretary at our principal executive office written notice that you are revoking your proxy;

•Submitting a properly executed proxy bearing a later date;

•Voting again online before the meeting at www.proxyvote.com; or

•Before the electronic polls close, submitting a later-dated vote online during the Annual Meeting, via the Internet, at www.virtualshareholdermeeting.com/CSGP2021.

Simply attending the Annual Meeting online will not revoke your proxy. If you instructed a broker to vote your shares, you must follow your broker’s directions for changing those instructions.

PROPOSAL 1

ELECTION OF DIRECTORS

The Board has currently fixed the number of directors constituting the Board at eight. At the recommendation of the Nominating & Corporate Governance Committee, the Board has nominated the eight current directors for reelection, all of whom were last elected at the 2020 Annual Meeting of Stockholders.

Each director elected at the Annual Meeting will serve until the next Annual Meeting of Stockholders or until his or her successor is elected and qualified. We know of no reason why any nominee would be unable to serve. If any nominee becomes unable to serve prior to the Annual Meeting, the Board may reduce the size of the Board or designate substitute nominees, and proxies that do not withhold authority to vote for directors will be voted for such substitute nominees. In no event may proxies be voted for a greater number of persons than the number of nominees named. We did not receive any stockholder nominations for director in connection with the 2021 Annual Meeting.

BOARD COMPOSITION

Our Nominating & Corporate Governance Committee reviews and assesses with the Board the Board’s membership criteria. The criteria include independence; judgment; integrity; ability to commit sufficient time and attention to the activities of the Board; absence of potential conflicts with the Company's interests; business experience, skills and background, including an understanding of and experience with real estate, information services and technology industries; and finance and marketing expertise. The Nominating & Corporate Governance Committee seeks a diversity of occupational and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives. When identifying, screening, recruiting and recommending candidates to the Board, the Nominating & Corporate Governance Committee is committed to including in each search qualified candidates who reflect diverse backgrounds, including diversity of gender and race. The current composition of our Board is as follows:

In addition, the Nominating & Corporate Governance Committee evaluates the composition of the Board to assess the skills and experience that are currently represented on the Board, as well as the skills and experience that the Nominating & Corporate Governance Committee believes the Board will find valuable in the future, given the Company’s current standing and strategic plans. This evaluation enables the Nominating & Corporate Governance Committee to assess its effectiveness at achieving these Board membership objectives.

As a general matter, we expect that our Board members will have a diverse portfolio of skills, experiences and backgrounds and that each will contribute to the composition of the Board so that collectively, the Board will possess the necessary skills, experience and background to oversee our business and affairs in light of the Company's current standing and strategic plans. Below is a list of key skills and experience that our directors bring to our Board that we consider important in light of our current business and structure. The directors’ individual biographies below describe each director’s most relevant experience, qualifications and skills.


Directors’ Key Skills and Experience
Industry Expertise			Experience in the real estate, information services and technology industries areas is valuable in understanding our growth and development efforts, as well as the market segments in which we operate.
Financial Expertise			An understanding of accounting and financial reporting processes is important because it assists our directors in understanding, advising and overseeing our operating performance (which we measure by reference to financial targets), investing activities, financial reporting and internal controls. We expect all of our directors to be financially knowledgeable.
Mergers & Acquisitions Experience			Directors who have a background in mergers & acquisitions transactions can provide insight into developing and implementing strategies for growing our operations through business combinations and also provide relevant input regarding our business strategy. Relevant experience in this area includes experience identifying and valuing proposed transactions, analyzing the ‘fit’ of a proposed acquisition target with our strategy, and integrating acquired companies with our existing operations.
Business Development			Directors who have expertise in business development can provide insight into developing and implementing strategies for growing our business organically.
Public Company Board and Management Experience			Directors who have served on other public company boards and/or as executives of other public companies can offer advice and insight regarding the dynamics and operation of a public company board of directors, the relationship between a board and the Chief Executive Officer ("CEO") and other management personnel, and an understanding of good corporate governance practices and risk management.
Leadership Experience			Directors who have served in a leadership capacity or as executives at other companies provide valuable operational insight and can help the Board operate efficiently and effectively.

NOMINEES FOR THE BOARD OF DIRECTORS

The following table lists the eight director nominees and their current committee memberships:


Name	Employment	Years as a Director(1)	Committee Membership
Michael R. Klein	Chairman, CoStar Group, Inc.; Vice Chairman, Tutor Perini Corporation; Chairman, Gun Violence Archive	34	Compensation (Chairman); Nominating & Corporate Governance
Andrew C. Florance(2)	CEO & President, CoStar Group, Inc.	34	None
Laura Cox Kaplan	Adjunct Professor, American University	5	Nominating & Corporate Governance
Michael J. Glosserman	Trustee, JBG Smith Properties	13	Audit; Nominating & Corporate Governance
John W. Hill	Founder & CEO, J Hill Group	9	Audit (Chairman)
Robert W. Musslewhite	CEO, OptumInsight	2	None
Christopher J. Nassetta	CEO & President, Hilton Worldwide	19	Compensation; Nominating & Corporate Governance (Chairman)
Louise S. Sams	Retired EVP & General Counsel, Turner Broadcasting System, Inc.	2	Audit

(1) Years of service include the current year of service.

(2) Executive officer of the Company.

NOMINEES’ BUSINESS EXPERIENCE, QUALIFICATIONS AND DIRECTORSHIPS

Michael R. Klein has been the Chairman of our Board of Directors since 1987. Mr. Klein also currently serves as Chairman of Gun Violence Archive, a non-profit public education organization which he founded in 2014, and as Vice Chairman of the board of directors, Lead Director, Chairman of the Corporate Governance & Nominating Committees, and member of the Audit and Compensation Committees of Tutor Perini Corporation, a publicly-held construction company. Mr. Klein also serves as a director of ThinkFood Group, LLC, a privately held company. He also serves as Chairman of the board of directors of The Shakespeare Theatre Company, as a director and secretary of the American Himalayan Foundation, as a director of the NAACP Legal Defense and Education Fund, as Chairman of the Board of Trustees of the Aspen Music Festival and School and as a trustee of the Aspen Institute. Mr. Klein received a B.B.A. and a J.D. from the University of Miami and an L.L.M. from Harvard University. Mr. Klein is 79 years old.

As a result of his service on our Board since the Company’s inception, Mr. Klein has extensive knowledge of the commercial real estate, information services and technology industries, as well as the Company’s products, services and business strategies. Mr. Klein also brings to the Board extensive experience through his service over the past 30 years on the boards of directors of several other publicly-held companies, as well as several privately-held businesses and non-profit organizations, including in the roles of Chairman and Lead Director. Mr. Klein’s experience gained as a result of his involvement as a founder, director and/or investor in those entities over the past 30 years, including active participation in their business development and management, enables him to contribute significantly to the oversight and governance of the Company. Mr. Klein also has over three decades of service as a corporate and securities lawyer with significant participation in corporate financings and mergers & acquisitions, allowing him to provide valuable insight regarding the Company’s business and growth strategies.

Andrew C. Florance founded the Company in 1987. As President and CEO of CoStar Group, Mr. Florance has directed CoStar Group’s successful expansion from start-up, to its initial public offering in July 1998, to its market-leading position today with a staff of over 4,600 worldwide and a client base that includes the real estate industry’s leading brokerage firms, property owners, and lenders. He manages an international service platform that includes the United States, United Kingdom, France, Spain, Germany, Canada, and several other countries throughout Asia Pacific and Latin America and was utilized by an average of 60 million users a month in 2020. While leading CoStar Group, he has identified, negotiated, and closed more than 30 acquisitions across six countries. Mr. Florance is a recognized authority for analysis of the real estate markets. He co-authored a study about the utilization and usefulness of a massive data set to track apartment rents effectively, titled “What’s Really Happening With Apartment Rents.” The study received a 2016 Manuscript Prize Award from the American Real Estate Society ("ARES"), an association of real estate thought leaders. He conceived of and co-authored the study resulting in the 2010 launch of the CoStar Commercial Repeat-Sale Indices, which is believed to be the most comprehensive and thorough commercial real estate repeat-sale price index available in the market today. The study was recognized as “Best Manuscript” by the James R. Webb ARES Foundation. In addition, Mr. Florance is the recipient of numerous other awards recognizing his accomplishments as an entrepreneur and corporate leader. Mr. Florance was awarded a Doctor of Humane letters from Virginia Commonwealth University in 2019. He served on the board of directors of Walker & Dunlop, Inc. from November 2012 to May 2016 and previously served on the Governing Boards of Beauvoir, The National Cathedral Elementary School and of St. Albans School. Mr. Florance currently serves on several non-profit boards of directors, including the board of directors of ARES, and the governing board of Management Leadership for Tomorrow, a nonprofit working to develop diverse leaders and expand talent pipelines. Mr. Florance is the Chair of the Cathedral Chapter overseeing the Washington National Cathedral. Mr. Florance received a B.A. in economics from Princeton University. He is 57 years old.

As the founder of the Company and the only member of the Company’s senior management team who serves on our Board, Mr. Florance brings to the Board significant knowledge and understanding of the real estate and information services industries, unique expertise on the Company’s products and services, and extensive leadership experience. Over his tenure with the Company, Mr. Florance has served as the CEO and has been actively involved in all facets of the Company’s business, including developing the Company’s products and services, identifying and developing markets for the Company’s products and services and identifying and integrating acquisition targets. This

experience enables Mr. Florance to make significant contributions to the Company’s business development and strategy.

Laura Cox Kaplan is the former Principal-in-Charge of Government, Regulatory Affairs and Public Policy for the professional services and accounting firm PricewaterhouseCoopers ("PwC"), where she spent more than 11 years, from December 2004 to July 2016, managing the firm’s public policy engagement strategy, and almost a decade on the executive management team. In her role at PwC, she also provided advice to clients, particularly at the executive and board level, on developments in public policy and public policy strategy. Ms. Kaplan served on PwC’s Global Public Policy and Regulatory Board, which coordinated public policy strategies across the more than 150 countries in which PwC operates. She served as Chair of the American Institute of Certified Public Accountants’ (AICPA) Federal Legislative Task Force, which coordinated strategies for shaping legislative policy that impacts the accounting profession, and was a member of the Center for Audit Quality’s (CAQ) Executive Management Committee. Prior to joining PwC, Ms. Kaplan served in senior level positions at the U.S. Securities and Exchange Commission and the U.S. Department of the Treasury, where she focused largely on the legislative and regulatory response to corporate governance and accounting failures in the late 1990s and on the implementation of the Sarbanes-Oxley Act of 2002. Ms. Kaplan has been an adjunct professor at American University since January 2017, and currently serves as an External Board Member of Hunt Companies and on the following non-profit boards: Running Start, where she serves as Board Co-Chair of The Policy Circle; The Bush School of Government and Public Service; and the Women in Foreign Policy Group. She sits on the advisory boards for the U.S. Chamber of Commerce Foundation; and All In Together. Ms. Kaplan is the creator and host of the "She Said/She Said Podcast" and media platform that showcases women leaders and their impact, and provides personal and career development advice for women. Ms. Kaplan received a Master’s degree from American University and a B.A. from the University of Texas, Austin. She is 51 years old.

Ms. Kaplan has more than 25 years of experience in communications, corporate governance, stakeholder engagement and public policy strategy. She lends her experience and voice publicly to a range of topics important to the public and private sectors, including career and talent development, the importance of developing a diversified workforce and of the value of diversified teams, women’s leadership, and corporate governance. As a result of her experience, Ms. Kaplan brings to the Board valuable leadership, management and corporate governance experience.

Michael J. Glosserman served as a Managing Member of the JBG Companies ("JBG"), a formerly publicly traded real estate investment trust (“REIT”), from 1982 to 2017, and as Chairman of its Executive Committee from 2008 to 2017. In 2017, a newly formed public company, JBG Smith, acquired the management business and certain assets and liabilities of JBG, then the Washington Area’s largest commercial real estate company. He currently serves as a Board Member of JBG Smith Properties a publicly traded real estate investment trust. He began his career as a staff attorney with the U.S. Department of Justice, shortly thereafter moving into commercial real estate investment and development with the Rouse Company in 1972 and joined JBG in 1979. His non-professional affiliations include or have included: Trustee, The Better Angels Society; Board Chair and Honorary Trustee, National Building Museum; Trustee, Federal City Council; Advisory Board Member of the University of Pennsylvania Institute for Urban Research; Trustee, Georgetown Day School; and Trustee, Woodley House. He received a B.S. in Economics from the Wharton School at the University of Pennsylvania and received his J.D. from the University of Texas Law School. He is 75 years old.

Mr. Glosserman has over 46 years of experience investing in, developing and owning commercial real estate. As a result of his experience, Mr. Glosserman brings to the Board significant business development, financial and commercial real estate industry expertise. As a user of commercial real estate information, Mr. Glosserman also provides the Board with a client’s perspective on the Company’s business development and mergers & acquisitions strategies, including valuable insight into the potential ‘fit’ of acquisition targets and the development and marketing of products and services.

John W. Hill is Founder and CEO of J Hill Group, a professional services practice specializing in assisting clients in improving their management operations, which he started in 2012. He served as the Chief Financial Officer ("CFO") of the City of Detroit, Michigan on a personal services contract from November 2013 to December 2018. Prior to starting his consulting practice, from 2004 to 2012, Mr. Hill served as CEO of Federal City Council, a non-

profit, non-partisan organization dedicated to improving the Nation’s Capital. Mr. Hill has previously served in multiple other executive and financial leadership positions, including as Chief Executive Officer of In2Books, Inc. and as a Partner at Andersen, LLP. Mr. Hill previously served as a trustee of Chesapeake Lodging Trust, a publicly traded REIT, from 2010 to 2019, where he also had served as Chair of the Compensation Committee, as a member of the Nominating and Corporate Governance Committee and a member of the Audit Committee at various times, and he previously served as a member of the Audit Committee of Highland Hospitality Inc., a publicly traded company, and various private entities, including Prestwick Pharmaceuticals, Inc. Mr. Hill also serves as an emeritus trustee on The Shakespeare Theatre Company board of trustees, as a member of the board of directors of Step Afrika!, and as Chair of the board of directors of the National Minority AIDS Council. Mr. Hill received a B.S. in Accounting from the University of Maryland, passed the CPA exam and became a Certified Public Accountant in 1977. He is 66 years old.

Through his current and previous positions, Mr. Hill has gained over 40 years of experience in accounting, auditing and financial matters, as well as significant management expertise. As a result of his extensive experience, Mr. Hill brings to the Board valuable financial knowledge and executive management experience.

Robert W. Musslewhite has been the CEO of OptumInsight, Optum’s health services business connecting the health care system with services, analytics, and platforms designed to make clinical and administrative processes easier and more efficient, since August 2019. He joined Optum following Optum’s acquisition of The Advisory Board Company, a publicly traded company that provided best practices research and insight, technology, data-enabled services and consulting services, where he served as CEO from 2008 until 2017 and Chairman from 2013 to 2017. Prior to his appointment as CEO of OptumInsight, Mr. Musslewhite served as CEO of Optum360, a revenue cycle management provider for the healthcare industry from March 2019 until August 2019 and, prior to that, as CEO of Optum Analytics, data and analytics provider for the healthcare industry and CEO of Advisory Board Research, a provider of health care research and best practices from 2017 until March 2019. Prior to joining The Advisory Board Company, Mr. Musslewhite was an Associate Principal with McKinsey & Company, a global management consulting firm, in the Washington, D.C., Amsterdam, and Dallas offices. Mr. Musslewhite currently serves on the Board of Directors of Ascend Learning, a private company. Mr. Musslewhite received a J.D. from Harvard Law School and an A.B. in Economics from Princeton University. Mr. Musslewhite is 51 years old.

Through his current and previous positions, Mr. Musslewhite has gained over 20 years of experience in executive management and leadership; business operations and development; growth strategies; development of products and services; and research and technology.

Christopher J. Nassetta is the President and CEO of Hilton Worldwide (fka Hilton Hotels Corporation), a global hospitality company. He joined Hilton Worldwide in December 2007. Prior to joining Hilton Worldwide, Mr. Nassetta was President and CEO of Host Hotels & Resorts, Inc. (fka Host Marriott Corporation), a lodging REIT and owner of luxury and upscale hotels, from May 2000 to December 2007. Mr. Nassetta joined Host Hotels & Resorts, Inc. in 1995 as Executive Vice President and was elected Chief Operating Officer in 1997. Prior to joining Host Hotels & Resorts, Inc., Mr. Nassetta co-founded Bailey Capital Corporation in 1991, where he was responsible for the operations of the real estate investment and advisory firm. Prior to founding Bailey Capital Corporation, he spent seven years at The Oliver Carr Company, ultimately serving as Chief Development Officer. In that role, he was responsible for all development and related activities for one of the largest commercial real estate companies in the mid-Atlantic region. Mr. Nassetta serves as Chairman of the World Travel & Tourism Council, as a member of the Real Estate Roundtable, as an Advisory Board member for the McIntire School of Commerce at the University of Virginia, as a member of Federal City Council, and a member of the Economic Club of Washington, D.C. Mr. Nassetta received a degree in finance from the University of Virginia McIntire School of Commerce. Mr. Nassetta is 58 years old.

Through his current and previous positions, Mr. Nassetta brings to the Board significant operational and business development experience, mergers & acquisitions experience, public company board and management experience, leadership experience, as well as commercial real estate industry expertise. As a user of commercial real estate information, Mr. Nassetta also provides the Board with a client’s perspective on the Company’s business

development and mergers & acquisitions strategies, including valuable insight into the potential “fit” of acquisition targets and the development and marketing of products and services.

Louise S. Sams was the Executive Vice President and General Counsel of Turner Broadcasting System, Inc. ("Turner"), a television and media conglomerate, from 2000 until September 2019. Ms. Sams also served as President, Turner Broadcasting System International, Inc. from September 2003 until May 2012. As General Counsel, Ms. Sams oversaw legal work relating to all of the business activities of Turner and its subsidiaries worldwide. She managed a global legal department, overseeing licensing, clearance and production of content for the Turner television networks and related media services; the sale and distribution of those networks; protection of intellectual property; employment matters; litigation; and transactional work, such as acquisitions and joint ventures. Most recently, Ms. Sams’ focus was on issues related to technology, information security, use of data and consumer privacy, as well as enterprise-wide risk management. In her role as President, Turner Broadcasting System International, Inc., Ms. Sams was responsible for production, distribution and ad sales relating to all kids and entertainment television networks and media services offered by Turner outside of the U.S. and Canada; distribution and commercial operations of CNN’s international services; and Turner’s international joint ventures. Prior to joining Turner in 1993 as a corporate attorney, Ms. Sams was an associate at White & Case, specializing in mergers and acquisitions and securities law. Ms. Sams serves on the boards of the following public companies: LOOP Industries, Inc., where she is Chair of the Governance Committee and D & Z Media Acquisition Corp., where she is a member of the Audit and Compensation Committees. Ms. Sams currently serves on the following non-profit boards: Princeton University, where she is Chair of the Board of Trustees and Chair of the Executive Committee, Board Development Committee and Compensation Committee; High Museum of Art in Atlanta; Woodruff Arts Center; The Westminster Schools; and Meals on Wheels, Atlanta, where she chairs the Development Committee. Ms. Sams received a J.D. from the University of Virginia School of Law, and a B.A. from Princeton University, where she graduated magna cum laude. Ms. Sams is 63 years old.

Ms. Sams has over 25 years of experience as a media executive and over 34 years as a practicing attorney. As a result of her broad range of business and legal experience, Ms. Sams brings to the Board valuable business development, growth strategies, risk management, corporate governance, technology, and mergers and acquisitions experience.

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

PROPOSAL 2

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee recommended and approved the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021. As a matter of good corporate governance, the Board is asking stockholders to ratify this appointment. If stockholders do not ratify this appointment, the Board may, but is not required to, reconsider such appointment. Even if stockholders ratify this appointment, the Board may direct the appointment of a different independent auditor at any time during 2021 if, in its discretion, it determines that such a change would be in the Company’s best interests.

Ernst & Young LLP has served as the independent registered public accounting firm for the Company, its subsidiaries, and its predecessors since 1994. A representative from Ernst & Young LLP is expected to attend the Annual Meeting, and will have the opportunity to make a statement and to respond to appropriate questions.

For the years ended December 31, 2019 and 2020, Ernst & Young LLP billed CoStar the fees set forth below, including expenses, in connection with services rendered to CoStar:


	Year Ended December 31, 2019	Year Ended December 31, 2020
Audit Fees(1)	$1,724,943	$1,799,528
Audit Related Fees	—	$184,000
Tax Fees	—	$100,000
All Other Fees	—	—
Total	$1,724,943	$2,083,528

(1)Audit fees include fees in connection with CoStar’s: (1) annual consolidated financial statements; (ii) quarterly interim financial information; (iii) statutory audits required internationally; (iv) business acquisitions and (iv) S-8 registration statements.

AUDIT COMMITTEE PRE-APPROVAL POLICY

The Audit Committee’s policy is that all audit and non-audit services provided by CoStar’s independent registered public accounting firm shall either be approved before the independent registered public accounting firm is engaged for the particular services or shall be rendered pursuant to pre-approval procedures established by the Audit Committee. These services may include audit services and permissible audit-related services, tax services and other services. Pre-approval spending limits for services to be performed by CoStar’s independent registered public accounting firm are established on an annual (for audit services) or periodic (for permissible non-audit services) basis, detailed as to a particular service or category of services to be performed. Any audit or non-audit service fees that may be incurred by CoStar that fall outside the pre-approved limits must be reviewed and approved by the Chairperson of the Audit Committee or the Audit Committee as a whole prior to the performance of services. CoStar’s Chief Financial Officer or General Counsel reports to the Audit Committee on a quarterly basis on all services rendered by the independent registered public accounting firm that were pre-approved and all fees paid to the independent registered public accounting firm for such services since the previous quarter’s Audit Committee meeting. The Audit Committee may revise its pre-approval spending limits and policies at any time.

All fees paid to the independent registered public accounting firm in 2020 were pre-approved by the Audit Committee, and therefore no services were approved after the services were rendered pursuant to the “de minimis” exception established by the SEC for the provision of non-audit services.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR 2021.

PROPOSAL 3

ADVISORY RESOLUTION TO APPROVE

EXECUTIVE COMPENSATION

We are asking stockholders to approve, on an advisory basis, a resolution on the Company’s executive compensation as reported in this Proxy Statement.

We urge stockholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which describes in detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing in the sections titled “Executive Compensation Tables and Discussion” and “Narratives to Summary Compensation Table and Grants of Plan-Based Awards Table” in this Proxy Statement, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this Proxy Statement has supported and contributed to the Company’s recent and long-term success.

In accordance with Section 14A of the Securities and Exchange Act of 1934 (the “Exchange Act”), and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the Annual Meeting:

RESOLVED, that the stockholders of CoStar Group, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2021 Annual Meeting of Stockholders.

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. At the 2020 Annual Meeting, approximately 89% of the votes cast were for approval of the “say-on-pay” advisory vote. The Compensation Committee believes these results demonstrate that our stockholders support our compensation approach.

At our annual meeting of stockholders held on June 6, 2017, our stockholders voted to adopt the recommendation of our Board to vote on the say-on-pay proposal every year at our annual meeting. As a result, we expect to continue to submit our say-on-pay proposal to our stockholders at each annual meeting. We expect to ask our stockholders to vote, on an advisory basis, on a proposal regarding the frequency of the vote on the say-on-pay proposal at our 2023 Annual Meeting, as required by the Dodd-Frank Act.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION.

PROPOSAL 4

ADOPTION OF THE COMPANY’S FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OVERVIEW

Our Board has unanimously approved and declared advisable the Fourth Amended and Restated Certificate of Incorporation, which increases the total number of authorized shares of Common Stock that CoStar is authorized to issue from 60 million to 1.2 billion, and correspondingly increases the total number of shares of capital stock that CoStar is authorized to issue from 62 million to 1.202 billion (the “Fourth Restated Certificate”). The form of Fourth Restated Certificate is attached to this Proxy Statement as Appendix A. The Board recommends that the stockholders approve the adoption of the Fourth Restated Certificate.

Article Four of the proposed Fourth Restated Certificate provides for an increase in the authorized number of shares of Common Stock and shares of capital stock of CoStar as follows:

The total number of shares of all classes of stock which the Corporation shall have authority to issue is one billion two hundred and two million (1,202,000,000) shares, of which two million (2,000,000) shares, designated as Preferred Stock, shall have a par value of $0.01 per share (the "Preferred Stock"), and one billion two hundred million (1,200,000,000) shares, designated as Common Stock, shall have a par value of $0.01 per share (the "Common Stock").

The additional shares of Common Stock authorized by the proposed Fourth Restated Certificate, if and when issued, would have the same rights and privileges as the shares of Common Stock currently authorized under the Company's Third Amended and Restated Certificate of Incorporation. The Common Stock has no preemptive rights to purchase Common Stock or other securities. In addition, the par value of the Common Stock will not be affected by the Fourth Restated Certificate.

As of the record date, 60 million shares of Common Stock were authorized for issuance, of which 39,444,356 shares were issued and outstanding and approximately 1,916,230 shares are subject to outstanding grants or remain available for grant under our equity incentive plans. Therefore, as of the record date, only approximately 18,639,414 shares of Common Stock, or approximately 31% of our total authorized Common Stock, were available for issuance. In addition, as of the record date, two million shares of our preferred stock were authorized for issuance, none of which were issued and outstanding.

PURPOSE OF THE FOURTH RESTATED CERTIFICATE

On March 31, 2021, the Board unanimously approved a proposal to pursue a forward stock split, contingent upon stockholder approval of the adoption of the Fourth Restated Certificate, pursuant to which the holders of record of shares of Common Stock would receive a dividend of ten shares of Common Stock for each share of Common Stock held by each such holder (the “Stock Dividend”). In the event the Stock Dividend is declared and paid, we will make appropriate adjustments to our equity incentive plans and outstanding equity-based awards, including adjustments to the number of shares of Common Stock authorized for issuance under such plans, the number of shares of Common Stock subject to outstanding awards, the maximum number of shares of Common Stock that may be granted to an eligible participant in any year under such plans and to the terms of such awards, in accordance with the parameters of the Stock Dividend and the terms of such plans. The proposed Stock Dividend would significantly increase the number of shares of Common Stock issued and outstanding and the number of shares of Common Stock authorized for issuance under our equity incentive plans, necessitating an increase in the number of authorized shares under our current Third Amended and Restated Certificate of Incorporation.

If the Fourth Restated Certificate is filed with the Secretary of State of the State of Delaware and becomes effective, the shares of Common Stock authorized by the Fourth Restated Certificate that are in excess of those distributed pursuant to the Stock Dividend will be available for issuance at such times and for such corporate purposes as our Board (or an authorized committee thereof) may deem advisable, including, without limitation, potential acquisitions, equity financings, equity incentive grants to employees, payments of future stock dividends and other forms of recapitalizations, without further stockholder approval (except as may be required by applicable law or the rules of any stock exchange or stock market on which the Common Stock may be listed or traded). The Board believes that the proposed increase in CoStar’s authorized shares of Common Stock and shares of capital stock will make available sufficient shares of authorized but unissued shares of Common Stock, after taking into account the shares of Common Stock that would be distributed pursuant to the Stock Dividend, should the Board (or an authorized committee thereof) decide to use its shares for one or more of such previously mentioned purposes or otherwise. Except for the Stock Dividend and shares to be issued under the Company’s equity incentive plans for employees, the Company has no present arrangement, agreement, understanding or plan for the issuance of any additional shares of Common Stock proposed to be authorized by the Fourth Restated Certificate.

STOCK DIVIDEND

The trading price of our Common Stock has risen significantly since our initial public offering (“IPO”) in 1998 reflecting the consistently strong performance of our company. As the trading price of our Common Stock has risen, we have carefully evaluated the effect of the trading price of our Common Stock on the liquidity and marketability of our Common Stock. We believe the considerable price appreciation, together with the fragmentation of the U.S. equity markets, may have impacted the liquidity of our Common Stock, making it more difficult to efficiently trade and less affordable to certain classes of investors and, therefore, potentially less attractive, to these investors. The price at our IPO was $9.00 and the closing market price of our Common Stock on April 7, 2021 was $859.88 as reported on the Nasdaq Stock Market. The Board believes that declaring and paying the Stock Dividend may increase liquidity in the trading of our Common Stock and make the Common Stock more attractive to a broader range of investors. The Board believes it is in our and our stockholders’ best interests to increase the number of authorized shares of Common Stock for the purpose of, among other things, providing CoStar with sufficient authorized but unissued shares of Common Stock to declare and pay the Stock Dividend.

If our stockholders adopt the Fourth Restated Certificate, we expect that the Board (or an authorized committee thereof) will declare the Stock Dividend and fix a record date and distribution date for such Stock Dividend as soon as practicable thereafter. However, the decision of the Board (or an authorized committee thereof) as to whether and when to declare and pay the Stock Dividend will be based on a number of factors, including market conditions and existing and expected trading prices for the Common Stock. Even if the stockholders approve the adoption of the Fourth Restated Certificate, the Board (or an authorized committee thereof) may abandon the Stock Dividend without any action by stockholders, notwithstanding authorization of the Fourth Restated Certificate by the stockholders. If the Board (or an authorized committee thereof) does not declare the Stock Dividend following approval of the adoption of the Fourth Restated Certificate by the stockholders, the Board (or an authorized committee thereof) will abandon the Fourth Restated Certificate, in which case the Fourth Restated Certificate will not be filed with the Secretary of State of the State of Delaware or otherwise become effective.

The Stock Dividend will also result in a proportionate increase in the number of shares of Common Stock available for issuance under our equity compensation plans due to the adjustment provisions set forth in such plans. With respect to outstanding stock options to purchase shares of our Common Stock, the Stock Dividend would result in an increase in the number of shares subject to such outstanding stock options proportional to the ratio of the Stock Dividend and would also result in a proportionate decrease in the exercise price of such outstanding stock options due to the adjustment provisions set forth in such options. With respect to other outstanding awards to acquire shares of our Common Stock, the Stock Dividend would result in an increase in the number of shares subject to such outstanding awards proportional to the ratio of the Stock Dividend due to the adjustment provisions set forth in such awards.

If the Fourth Restated Certificate is not adopted by our stockholders, we cannot and will not declare and pay the Stock Dividend.

EFFECT OF THE FOURTH RESTATED CERTIFICATE

Although the number of authorized shares of Common Stock provided for in the proposed Fourth Restated Certificate significantly increases our existing authorized shares of Common Stock, the increase in the percentage authorized but unissued shares of Common Stock available for future use following the Stock Dividend would be substantially smaller. Following the proposed Stock Dividend, the percentage of our authorized shares of Common Stock available for issuance would be approximately 66%.

If the Fourth Restated Certificate is adopted and becomes effective and, if the proposed Stock Dividend is declared and paid, the aggregate number of shares of Common Stock either issued and outstanding or that may be issued upon exercise of outstanding stock options, vesting of restricted stock or restricted stock units or otherwise reserved for issuance under CoStar’s equity incentive plans would total approximately 413,605,860 (without giving effect to Proposal 5 discussed herein). If declared and paid, the Stock Dividend will affect all of our stockholders proportionally and will not affect any stockholder’s percentage ownership interest in CoStar or proportionate voting power. The Stock Dividend will not affect any rights, privileges or obligations with respect to the shares of Common Stock existing prior to the Stock Dividend. The shares of Common Stock outstanding following the Stock Dividend will remain fully paid and non-assessable.

Future issuances of shares of Common Stock could have a dilutive effect on the earnings per share, voting power and percentage shareholdings of current stockholders. In addition, the availability of additional shares of Common Stock for issuance could, under certain circumstances, discourage or make more difficult any efforts to obtain control of CoStar. We do not believe, however, that the Fourth Restated Certificate would have an anti-takeover effect and we have not proposed the increase in the authorized number of shares of Common Stock with the intention of using the additional shares for anti-takeover purposes.

RIGHT TO ABANDON FOURTH RESTATED CERTIFICATE AND STOCK DIVIDEND

We may abandon the Fourth Restated Certificate at any time before the effectiveness of the filing of the Fourth Restated Certificate with the Secretary of State of the State of Delaware and may also abandon the Stock Dividend, in each case without further action by our stockholders, notwithstanding the authorization of the Fourth Restated Certificate by our stockholders. If the Board (or an authorized committee thereof) does not declare the Stock Dividend following approval of the adoption of the Fourth Restated Certificate by the stockholders, the Board (or an authorized committee thereof) will abandon the Fourth Restated Certificate, in which case the Fourth Restated Certificate will not be filed with the Secretary of State of the State of Delaware or otherwise become effective.

NO APPRAISAL RIGHTS

Under the General Corporation Law of the State of Delaware, our stockholders are not entitled to appraisal rights in connection with the Fourth Restated Certificate or the proposed Stock Dividend.

VOTE REQUIRED

Approval of the adoption of the Fourth Restated Certificate requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon.

If you abstain from voting on this matter, your abstention will have the same effect as a vote “against” the approval of the adoption of the Fourth Restated Certificate. Abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum. If you hold your shares through a broker and you do not instruct

the broker on how to vote on this proposal within a specified period of time prior to the meeting, your broker has the authority to vote your shares.

THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE ADOPTION OF COSTAR’S FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.

PROPOSAL 5

APPROVAL OF THE SECOND AMENDED AND RESTATED

COSTAR GROUP, INC. EMPLOYEE STOCK PURCHASE PLAN

OVERVIEW

Our Board has unanimously approved the adoption of the amendment and restatement of the CoStar Group, Inc. Employee Stock Purchase Plan, which we refer to as the “ESPP,” to increase the number of shares authorized for issuance thereunder by 100,000 shares (from 200,000 shares to 300,000 shares). We adopted the ESPP for the benefit of eligible employees of the Company and its designated subsidiaries in order to allow them to purchase our common stock at a discounted price. We believe that the ESPP is in the best interest of stockholders, as it: enhances broad-based employee stock ownership; enables the Company to attract, motivate and retain the best employees with a market-competitive benefit; and does so at a reasonable cost to stockholders. We are proposing an increase in the number of shares authorized and reserved for issuance under the ESPP to enable us to continue providing this benefit to new and current employees. No other changes are being made to the ESPP. The adoption of the amendment and restatement of the ESPP by our Board is subject to the approval of our stockholders. In this proposal, we are asking our stockholders to approve the amendment and restatement of the ESPP to increase the number of shares authorized for issuance thereunder at the Annual Meeting.

Our Board believes that the Company’s interests are best advanced by aligning stockholder and employee interests. The ESPP is intended to provide the Company’s and its subsidiaries’ eligible employees with an opportunity to participate in the Company’s success by permitting them to acquire an ownership interest in the Company through periodic payroll deductions that will be applied towards the purchase of shares of our common stock at a discount from the market price.

As of April 1, 2021, there were 35,004 shares of common stock available for future awards under the ESPP, not including the 100,000 shares for which the Company is seeking stockholder approval. The proposed additional 100,000 shares represents potential dilution of approximately 0.25% as of December 31, 2020 (potential dilution for this purpose is determined by dividing the 100,000 additional shares by the total number of shares of the Company’s common stock outstanding as of December 31, 2020). The dilution attributable to the ESPP for fiscal 2020 was 0.03% (which was determined by dividing the number of shares issued under the ESPP during fiscal 2020 by the total number of shares of the Company’s common stock outstanding as of December 31, 2020). The Board believes that this is a reasonable amount of potential dilution and generally in line with, or even less dilution than, that of our peer companies.

We monitor our long-term dilution as a result of the ESPP by tracking the number of shares actually purchased and issued under the ESPP on an annual basis, expressed as a percentage of total shares outstanding and referred to as the "burn rate." Burn rate is another measure of dilution that shows how rapidly a company is depleting its shares reserved for equity compensation plans. Our average burn rate for each of fiscal years 2018, 2019 and 2020 was 0.03%.

Based upon the typical levels of participation in the ESPP over the last several years, we expect the additional 100,000 shares will be sufficient to cover purchases under the plan for at least the next seven years. In approving the increase to the share pool under the ESPP, the Board determined that reserving shares sufficient for approximately seven years of new purchases at historical rates is in line with the practice of our public peer companies.

The following description of the ESPP is a summary of its principal provisions and is qualified in its entirety by reference to the plan document, a copy of which is appended to this proxy statement as Appendix B. To the extent that there is a conflict between this summary and the actual terms of the ESPP, the terms of the ESPP will govern. References to “common stock” below mean the common stock, par value $0.01 per share, of the Company.

DESCRIPTION OF THE EMPLOYEE STOCK PURCHASE PLAN

Purpose. The purpose of the ESPP is to provide eligible employees of the Company and its designated subsidiaries with an opportunity to become owners of the Company through the purchase of shares of common stock of the Company at a discount. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code (the “Code”).

Effective Date, Term. The ESPP originally became effective on July 1, 2006 and was further amended by the Board, effective, January 1, 2010 and April 6, 2015. The amendment and restatement of the ESPP will become effective upon the approval of stockholders at the Annual Meeting. The ESPP may be terminated at any time by the Board.

Eligibility. Generally, employees of the Company and its designated subsidiaries who are employed on the first date of a given offering period are eligible to participate in such offering period under the ESPP provided that such employee is customarily employed for more than 20 hours per week and for more than five months in a calendar year. However, an employee will not be eligible to participate if, before commencing participation or as a result of participating, that employee holds or would hold five percent (5%) or more of the total combined voting power or value of the stock of the Company or any subsidiary. Further, no employee’s right to purchase common stock under the ESPP may accrue at a rate which exceeds the lesser of $25,000 per year of the fair market value of the stock or 100,000 shares of common stock in any offering period. As of April 1, 2021, approximately 3,300 employees were eligible to participate in the ESPP.

Administration, Amendment and Termination. The ESPP is administered by the Company’s Board of Directors or by a committee appointed by the board. The administrator may delegate day-to-day administration of the ESPP to one or more individuals. The administrator has the full power and authority to promulgate any rules and regulations which it deems necessary or advisable for the proper administration of the ESPP, to interpret the provisions and supervise the administration of the ESPP, to make factual determinations relevant to ESPP entitlements, and to take all action in connection with the administration of the ESPP as it deems necessary or advisable, consistent with any delegation from the Board. The administration, interpretation or application of the ESPP by the administrator is final and binding upon all participants and all other persons.

The Board may amend the ESPP at any time; provided, however, that stockholder approval must be sought for any amendment which requires stockholder approval pursuant to section 423 of the Code and no amendment may be made that would cause the ESPP to fail to comply with the provisions of Section 423 of the Code. The Board may also terminate the ESPP at any time. Upon termination, all amounts in participant accounts will be refunded.

Number of Shares of Common Stock Available under the ESPP. Subject to adjustment as provided below, if this proposal is approved by stockholders, a maximum of 300,000 shares will be available for issuance pursuant to the ESPP. Shares issued under the ESPP may be from authorized but unissued common stock, shares held in the treasury of the Company or any other proper source as determined by the administrator. If the maximum number of shares issuable or available under the ESPP is insufficient for the elections made with respect to any particular offering, the administrator will allot the shares then available on a pro rata basis. In the event the Company’s outstanding shares of common stock are increased or decreased, or are changed into or are exchanged for a different number or kind of shares, as a result of one or more reorganizations, restructurings, recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends or the like, upon authorization of the Board or the committee administering the ESPP, the Board may make appropriate adjustments in the number and/or kind of shares, and the per-share exercise price thereof, which may be issued in the aggregate and to any participant upon exercise of options granted under the ESPP.

Enrollment and Contributions. Eligible employees may elect to participate in the ESPP by providing a payroll deduction authorization to the Company using its stock plan administration platform and instructing the Company to withhold a specified percentage of the employee’s salary no later than 5:00 p.m., Eastern time, on the last business day prior to the commencement of the Offering Period. “Offering Periods” run from the second Saturday preceding each of the Company’s regular pay dates and ends on each of the Company’s regular pay dates. Unless an eligible employee files a new form or withdraws from the ESPP, the employee’s deductions and purchases will continue at

the same rate for future offerings under the ESPP for so long as the employee remains eligible to participate in the ESPP. An eligible employee may authorize a salary deduction of any whole percentage up to a maximum of fifteen percent (15%) of the employee’s compensation (as defined in the ESPP). Subject to any limitations imposed by the administrator, eligible employees can increase, decrease or discontinue their deductions and corresponding participation in the ESPP for subsequent Offering Periods by submitting a new authorization through the stock plan administration platform (or in such other manner as permitted by the administrator) no later than 5:00 p.m., Eastern time, on the last business day prior to the commencement of the applicable Offering Period. If a participant elects to discontinue payroll deductions but does not elect to withdraw his or her funds from the ESPP, funds deducted prior to such election to discontinue participation will be used to purchase shares on the last day of the Offering Period.

Purchase of Shares. On the last business day of each Offering Period, each participating employee’s payroll deductions are used to purchase shares for the employee at a 10% discount from the closing price of the common stock on the last business day of the Offering Period. If, on the last day of an Offering Period, the number of shares of common stock to be purchased by all participants exceeds the number of shares available for purchase during the Offering Period, the Company will make a pro rata allocation of the shares remaining available for purchase. Any excess payroll deductions not applied to the purchase of shares will be refunded to each participant; provided that any amount representing a fractional share will be carried forward and applied to the next Offering Period (unless requested otherwise by the participant pursuant to procedures established by the administrator). As of April 1, 2021, the fair market value of our common stock was $861.38 per share. During any single calendar year, no employee may purchase more than the lesser of (1) $25,000 of shares under the ESPP (based on market value as of each offering commencement date) or (2) 100,000 shares (determined as of the offering commencement date).

Withdrawal; Termination of Participation. Shares will be purchased automatically on the last day of the Offering Period for a participating employee who remains an eligible participant. Participation ends effective as of the first day of the Offering Period following a participant’s termination of employment with the Company for any reason, including retirement or death. After the purchase date of the Offering Period in effect as of the date of termination, no payroll deduction will be taken from any pay due and owing to such participant and the balance in the participant’s account will be paid to the participant or, in the case of death, to the participant’s beneficiary, executor of his or her estate or heir(s) or other persons as determined by the Company in accordance with law. During an Offering Period, an employee may withdraw from participation in the ESPP at any time prior to 5:00 p.m., Eastern time, on the fifth business day prior to the end of an Offering Period. Upon a participant’s withdrawal from the ESPP, all accumulated payroll deductions for the participant made prior to termination are returned, without interest, and no shares are purchased for that employee’s account. Partial withdrawals are not permitted, and an employee may not recommence participation during the remainder of an Offering Period from which the employee withdrew. Eligible employees who withdraw from an offering may participate in subsequent offerings in accordance with the terms and conditions established by the administrator.

Merger. In the event the Company merges or consolidates with another corporation and the holders of the capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 51% by voting power of the capital stock of the surviving corporation (“Continuity of Control”), the holder of each option then outstanding will thereafter be entitled to receive at the next purchase date the same securities or property to which a holder of one share Company common stock was entitled upon at the time of such merger or consolidation.

In the event of a merger or consolidation of the Company with or into another corporation, which does not involve Continuity of Control, or of a sale of all or substantially all of the assets of the Company while unexercised options remain outstanding under the ESPP, (i) subject to the provisions of clauses (ii) and (iii), after the effective date of such transaction, each holder of an outstanding option will be entitled, upon exercise of such option, to receive in lieu of shares of Company common stock, shares of such stock or other securities as the holders of shares of Company common stock received pursuant to the terms of such transaction; or (ii) all outstanding options may be cancelled by the administrator as of a date prior to the effective date of any such transaction and all payroll deductions paid out to the participants; or (iii) all outstanding options may be cancelled by the administrator as of the effective date of any such transaction, provided that notice of such cancellation will be given to each holder of an option, and each holder of an option will have the right to exercise such option in full based on payroll deductions

then credited to his or her account as of a date determined by the Board or a committee thereof, which date will not be less than three (3) business days preceding the effective date of such transaction.

Non-Transferability. Rights granted under the ESPP may not be transferred by a participant and may be exercised during a participant’s lifetime only by the participant.

New Plan Benefits. The actual number of shares that may be purchased by any individual under the ESPP is not currently determinable because the number is determined, in part, based on future contribution elections of individual participants and the purchase price of the shares, which is not determined until the last day of each offering period.

Aggregate Purchases under the ESPP. None of the individuals listed in the Summary Compensation Table in this Proxy Statement (whom we refer to collectively in this Proxy Statement as the “named executive officers”), purchased shares under the ESPP since the ESPP’s inception through December 31, 2020. Non-employee directors are not eligible to participate in the ESPP. The closing price of our common stock on December 31, 2020 was $924.28.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

The rules concerning the federal income tax consequences with respect to the purchase of shares under the ESPP are quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretations and applications, which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the U.S. federal income tax consequences with respect to such purchases. In addition, the following discussion does not set forth any gift, estate, social security or state or local tax consequences that may be applicable and is limited to the U.S. federal income tax consequences to individuals who are citizens or residents of the United States, other than those individuals who are taxed on a residence basis in a foreign country.

The ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. Under these provisions, no income generally will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of. Upon sale or other disposition of the shares, the participant will generally be subject to tax in an amount that depends upon how long the shares have been held by the participant. If the shares are sold or otherwise disposed of more than two years after the first day of the applicable offering period in which such shares were acquired and more than one year after the applicable date of purchase, the participant will recognize ordinary income equal to the lesser of (1) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price, or (2) an amount equal to 10% (or such lesser discount as the Committee may establish) of the fair market value of the shares as of the first day of the applicable offering period in which such shares were acquired. Any additional gain will be treated as long-term capital gain. If the shares are sold or otherwise disposed of before the expiration of the aforementioned periods (a “disqualifying disposition”), the participant will recognize ordinary income equal to the excess of (1) the fair market value of the shares on the date the shares are purchased over (2) the purchase price. Any additional gain or loss on such sale or disposition will be capital gain or loss, which will be long-term if the shares are held for more than one year. The Company generally is not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income recognized by participants upon a disqualifying disposition.

THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COSTAR GROUP, INC. EMPLOYEE STOCK PURCHASE PLAN

ADDITIONAL INFORMATION

CORPORATE GOVERNANCE MATTERS

Corporate Governance Guidelines

The Board, on the recommendation of the Nominating & Corporate Governance Committee, adopted the Company’s Principles of Corporate Governance, which directs our Board’s actions with respect to, among other things, Board composition, director membership criteria, composition of the Board’s standing committees, and the Board’s performance evaluations. The Company’s Principles of Corporate Governance can be found in the “Leadership” section of the Company’s website under Governance Documents located at http://investors.costargroup.com/leadership.

Identifying and Evaluating Nominees

The Nominating & Corporate Governance Committee identifies nominees for director on its own, as well as by considering recommendations from other members of the Board, officers and employees of CoStar, and other sources that the Nominating & Corporate Governance Committee deems appropriate, which may include professional search firms. The Nominating & Corporate Governance Committee will also consider Board nominees suggested by stockholders if such recommendations are submitted during the period, and include the required information, specified in our Amended and Restated Bylaws, as described under “Stockholder Proposals and Nominations for Directors for the 2022 Annual Meeting” above. The Company may require any proposed nominee to furnish other information as reasonably required to determine eligibility to serve as a director of the Company, including information regarding the proposed nominee’s independence. There is no difference in the manner by which the Nominating & Corporate Governance Committee evaluates prospective nominees for director based on the source from which the individual was first identified.

When evaluating nominees for director, the Nominating & Corporate Governance Committee considers, among other things, an individual’s business experience and skills, background, independence, judgment, integrity and ability to commit sufficient time and attention to the activities of the Board, as well as the absence of any potential conflicts with the Company’s interests. If the nominee is a director standing for reelection, that individual’s past contribution and future commitment to CoStar are also considered. The Nominating & Corporate Governance Committee evaluates the totality of the merits of each prospective nominee that it considers and does not establish minimum qualifications or attributes. Candidates are evaluated within the context of the perceived needs of the Board as a whole, so that the members of the Board collectively will possess the necessary skills, experience and background. While the Nominating & Corporate Governance Committee does not have a formal policy with respect to diversity, it believes that it is important that Board members represent diverse viewpoints and seeks to achieve a diversity of occupational and personal backgrounds on the Board. Accordingly, the Nominating & Corporate Governance Committee is committed to including diverse candidates whenever conducting a search for new Board members. The Nominating and Corporate Governance Committee assesses the effectiveness of its approach toward maintaining and encouraging diversity on the Board through on-going, informal feedback from Board members.

Board Leadership Structure

Currently, an independent director, Mr. Klein, serves as Chairman of the Board and a separate director, Mr. Florance, serves as CEO. The Board does not have a policy regarding the separation of the roles of CEO and Chairman of the Board, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board at the particular time. The Board has determined that this leadership structure currently is in the best interest of the Company’s stockholders. This structure provides a greater role for the independent directors in overseeing the Company and in setting agendas and establishing Board priorities and procedures; it also permits the CEO to focus on managing the Company’s day-to-day operations.

Independent Directors

The Board has determined that Messrs. Klein, Glosserman, Hill, Nassetta, Musslewhite, and Mses. Cox Kaplan and Sams are each independent as defined under Rule 5605(a)(2) of the Nasdaq listing rules, and that David J. Steinberg was similarly independent during his service on the Board in 2020. In assessing directors’ independence, the Board took into account certain transactions, relationships, and arrangements involving some of the directors and concluded that such transactions, relationships, and arrangements did not impair the independence of the relevant director. As part of this determination, the Board received information regarding Mr. Klein’s position as Chairman of the Shakespeare Theatre Company, a non-profit organization, and Mr. Hill’s position as an emeritus trustee of the Shakespeare Theatre Company. The Company expensed contributions to the Shakespeare Theatre Company of $100,000 in 2018, $200,000 in 2019, and $100,000 in 2020, which amounts are less than five percent of the consolidated gross annual revenues of the Shakespeare Theatre Company for those years. In addition, the Board considered Mr. Nassetta's service as an executive officer of a company that subscribes to the Company’s services. The Board also considered that Ms. Cox Kaplan serves as an External Board Member of a company that subscribes to the Company’s services and that Mr. Glosserman serves as a Trustee of a company that subscribes to the Company’s services. In each such case, the payments to the Company were less than one percent of the consolidated gross annual revenues of the Company in each of the last three fiscal years. Further, the services provided by the Company to Mr. Nassetta's company and to the companies for which Ms. Cox Kaplan and Mr. Glosserman serve as a board member and Trustee, respectively, are on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances.

The Board’s Role in Risk Oversight

One of the Board’s functions is oversight of risk management, which is administered both through the full Board and through Board Committees that oversee specific risks, as described below.

The Company faces a variety of risks, including macro-economic risks, such as inflation, economic downturns, or recession; business-specific risks related to strategic position, operations, financial structure, legal and regulatory compliance and corporate governance; and event-specific risks, such as natural disasters or wars. The Company believes that an effective risk management system should:

•Timely identify the material risks that the Company faces,

•Communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board Committee,

•Implement appropriate and responsive risk management strategies consistent with the Company’s risk profile, and

•Integrate risk management into Company decision-making.

The Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day operations. Management is responsible for identifying risk and risk controls related to significant business activities and developing programs and recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential reward, and the appropriate manner in which to control risk.

Management, typically the Chief Financial Officer or General Counsel, periodically discusses with the Board or appropriate Board committee the significant voluntary and involuntary risks that the Company faces and how the Company is seeking to control risk if and when appropriate. When appropriate, other members of management provide information to the Board or appropriate Board Committees with respect to a specific area of potential risk and how the Company manages or seeks to control the identified risk. The Board reviews the Company’s cybersecurity risk profile and is informed about the Company’s cybersecurity risk program in periodic presentations by the Company’s Chief Technology Officer. This program provides the Board with an overview of the cybersecurity risks and threats landscape as well as the Company’s risk posture. In some cases, as with risks related to product or service acceptance, risk oversight is addressed as part of the full Board’s engagement with the CEO and management. In other cases, a Board Committee is responsible for oversight of specific risk topics, in which

case management meets directly with the Board Committee. For example, the Audit Committee oversees issues related to internal control over financial reporting and auditor independence, and the Compensation Committee oversees the assessment of risks related to the Company’s compensation policies and programs applicable to officers and employees, as discussed in greater detail below. The Board also works with the Company’s management to assess, analyze and address the most likely areas of future risk for the Company.

Risk Assessment in Compensation Programs

Management assessed the Company’s executive and broad-based compensation and benefits programs to determine if the programs’ provisions and operations encourage or create undesired or unintentional risk of a material nature. The Compensation Committee also engaged its independent compensation consultant, Willis Towers Watson, to assess the Company’s executive compensation program. The risk assessment evaluated potential risk factors from three primary perspectives:

•CoStar’s compensation structure and philosophy;

•Pay program design and policies ; and

•Governance and the role of the Compensation Committee.

We reviewed all compensation programs, but focused on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout. The Company supports the use of base salary, performance-based compensation and retirement plans that are generally uniform in design and operation throughout the Company. In most cases, the compensation policies and practices are centrally designed and administered, and are substantially identical at each business unit, except that sales personnel are also eligible to receive sales commissions depending upon performance. Programs may differ by country due to variations in local laws and customs.

Based on the foregoing, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond our ability to effectively identify and manage significant risks; are compatible with effective internal controls and our risk management practices; and are supported by the Compensation Committee’s oversight and administration of executive compensation programs.

Stockholder Communications with the Board

Stockholders may communicate with our Board by sending written correspondence to CoStar Group, Inc., Attention: Corporate Secretary, 1331 L Street N.W., Washington, DC 20005. The Corporate Secretary opens and retains a copy of the contents of such correspondence, and promptly forwards such correspondence to the Chairman of the Nominating & Corporate Governance Committee and, if addressed to a particular committee or Board member, to that committee’s Chairman or such Board member. The Corporate Secretary, together with the Chairman of the Nominating & Corporate Governance Committee and his duly authorized agents, are responsible for collecting and organizing stockholder communications. Absent a conflict of interest, the Chairman of the Nominating & Corporate Governance Committee is responsible for evaluating the materiality of each stockholder communication and determining which stockholder communications will be presented to the full Board, individual directors or other appropriate body.

Policy Regarding Attendance at Annual Meetings

CoStar Group encourages, but does not require, directors to attend the Annual Meetings of Stockholders. In 2020, three directors attended the Annual Meeting of Stockholders.

BOARD MEETINGS AND COMMITTEES

Directors are expected to attend all meetings of the Board and the committees on which they serve. During 2020, the Board of Directors held eight meetings. The Audit, Compensation, and Nominating & Corporate Governance committees held four meetings, two meetings, and one meeting, respectively, in 2020. During 2020, each director attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by each committee of the Board on which the director served, during the period in which the director so served.

Board Committees

The Board has standing Audit, Compensation and Nominating & Corporate Governance committees, the composition of which as of the date of this Proxy Statement is set forth below.


Name	Audit Committee	Compensation Committee	Nominating & Corporate Governance Committee
Michael R. Klein		X*	X
Andrew C. Florance
Laura Cox Kaplan			X
Michael J. Glosserman	X		X
John W. Hill	X*
Robert W. Musslewhite
Christopher J. Nassetta		X	X*
Louise S. Sams	X

*Chairman of the Committee

Audit Committee. The Board has determined that each of the current members of our Audit Committee is independent under applicable Nasdaq and SEC rules for audit committee members and that Audit Committee members Hill and Glosserman are “audit committee financial experts,” as defined by SEC regulations, based on, among other things, the experience, qualifications and skills described above under “Proposal 1 - Election of Directors - Nominees’ Business Experience, Qualifications and Directorships.” Each of our Audit Committee members is financially literate. The Audit Committee assists the Board in fulfilling its oversight responsibilities as to accounting policies, internal controls, audit activities and reporting practices of the Company. The Audit Committee also produces the report of the Audit Committee included in the Company’s Proxy Statement. The Audit Committee operates under a written charter adopted by the Board and reviewed annually by the Audit Committee.

Compensation Committee. The Board has determined that each of the current members of our Compensation Committee is independent under applicable Nasdaq rules for compensation committee members. The Compensation Committee operates under a written charter adopted by the Board and reviewed annually by the Compensation Committee. The Compensation Committee discharges the Board’s responsibilities relating to compensation of the Company’s executive officers and directors, and produces the Compensation Committee report on executive compensation included in the Company’s Proxy Statement. In addition, the Board has designated the Compensation Committee as the Administrator of the Company’s 2007 Stock Incentive Plan, as amended (the “2007 Plan”), the Company’s 2016 Stock Incentive Plan (the “2016 Plan”), the Company’s 2016 Cash Incentive Plan, the Company's Employee Stock Purchase Plan, and the Company's Management Stock Purchase Plan (the "MSPP").

Nominating & Corporate Governance Committee. The Board has determined that each of the current members of our Nominating & Corporate Governance Committee is independent as defined under Rule 5605(a)(2) of the Nasdaq listing rules. The Nominating & Corporate Governance Committee identifies individuals qualified to become Board members, recommends to the Board director candidates and performs a leadership role in shaping the Company’s

corporate governance. The Nominating & Corporate Governance Committee operates under a written charter adopted by the Board and reviewed annually by the Nominating & Corporate Governance Committee.

All of the charters for the Company’s Board committees are available in the “Leadership” section of the Company’s website under Governance Documents located at http://investors.costargroup.com/leadership.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements to generally accepted accounting principles.

In this context, the Audit Committee has reviewed and discussed with management and the independent registered public accounting firm the Company’s audited consolidated financial statements for 2020. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent registered public accounting firm its independence from the Company and management. The Audit Committee has also considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with the auditors’ independence.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC.


			By the Audit Committee
			of the Board of Directors

			John W. Hill, Chairman
			Michael J. Glosserman
			Louise S. Sams

DIRECTOR COMPENSATION

The Compensation Committee of the Board annually reviews director compensation for service on the Board and for service on any Board committees and recommends director compensation and any changes to such compensation to the Board for approval. The Board annually reviews and approves director compensation for Board and committee service based on the recommendations of the Compensation Committee. The Compensation Committee engaged Willis Towers Watson in 2013 to assess the competitiveness of the non-employee directors’ compensation program. Based on the results of this assessment, in September 2013, the Compensation Committee and the Board approved an increase in director compensation to bring the annual, standard retainer and annual equity grants to non-employee directors in line with the median levels of peer company data provided by Willis Towers Watson, to provide compensation to committee members in line with median levels of peer company data and to make non-employee director compensation more competitive in the marketplace. No changes have been made to the non-employee directors’ compensation since September 2013. Non-employee director compensation for 2020 is set out below. Directors who are also employees of the Company do not receive any compensation for service on the Board in addition to their regular employee compensation.


Annual Cash Retainers(1)
Board Members (other than Chairman)			$50,000
Chairman of the Board			$120,000
Annual Equity Awards(2)
Board Members (including Chairman)			$175,000
Audit Committee Chairman			$30,000
Compensation Committee Chairman			$15,000
Nominating & Corporate Governance Committee Chairman			$15,000
Audit Committee Member			$15,000
Compensation Committee Member			$8,000
Nominating & Corporate Governance Committee Member			$6,000

(1)The Company reimburses all directors for reasonable travel and out-of-pocket expenses incurred in connection with their duties as directors, including attendance at meetings.

(2)Annual equity awards are granted on the date of the first regular Board meeting following the date of the annual meeting of stockholders, are payable in the form of restricted stock, are valued at the grant date, and vest in equal, annual installments over a 4-year period around the anniversary of the date of grant as long as the director is still serving on our Board on the respective vesting date. The number of shares of restricted stock granted pursuant to each such restricted stock grant to the directors is determined by dividing the total dollar amount awarded by the closing price of the Company’s common stock on the date of grant.

Pursuant to the Company’s 2016 Plan and related award agreements, upon a change of control, all restrictions on stock grants will lapse. For more detailed information, see “Change of Control Provisions under the Company’s 2016 Plan” in the section titled “Potential Payments Upon Termination or Change of Control” in this Proxy Statement. Recipients of restricted stock granted under the 2016 Plan are entitled to receive dividends and other distributions, if any, paid with respect to the common stock. The Compensation Committee determines if any such dividends or distributions will be automatically reinvested in additional shares of restricted stock and subject to the same restrictions as the restricted stock or whether the dividend or distribution will be paid in cash.

DIRECTOR STOCK OWNERSHIP POLICY

Under the Company’s Director Stock Ownership Policy, each non-employee director is required to own shares of the Company’s common stock with a value equal to five times the annual, standard director cash retainer. The current directors all currently meet this ownership requirement, with the exception of Mr. Musslewhite and Ms. Sams each of whom has until December 31, 2024 (the first December 31st following the fifth anniversary of their appointments to the Company's Board of Directors) to meet this requirement under our policy.

Director Compensation Table for Fiscal Year 2020

The following Director Compensation table shows the compensation we paid in 2020 to our non-employee directors.

Name

Fees Earned or

Paid in Cash(1)

($)

Stock

Awards(2)

($)

All Other Compensation

($)

Total

($)

Michael R. Klein, Chairman

$120,000

$196,596

SEC Form DEF 14A filed by CoStar Group, Inc.