Starwood 2009 Annual Report Download - page 33

year (the “EP Threshold”). The Executive Plan also specifies a maximum bonus amount, in dollars, that may
be paid to any executive for any 12-month performance period. When the threshold is established at the
beginning of a year, the achievement of the threshold is considered substantially uncertain for purposes of
Section 162(m), which is one of the requirements for compensation paid under the Executive Plan to be
deductible as performance-based compensation under Section 162(m). For 2009, the EP Threshold was
$680,000,000.
Generally, a Named Executive Officer will receive payment of a bonus award under the Executive Plan
only if he remains employed by the Company on the award payment date. However, subject to attaining the EP
Threshold in the relevant year, pro rata awards may be paid at the discretion of the Compensation Committee in
the event of death, disability, retirement or other termination of employment.
Once the EP Threshold is achieved, the maximum annual bonus amount specified in the Executive Plan
becomes available for each Named Executive Officer and the Compensation Committee may apply its
discretion to reduce such amount to the actual bonus amount for each individual. To determine the actual bonus
to be paid for a year under the Executive Plan, the Compensation Committee also establishes specific annual
Company financial and strategic/operational performance goals and a related target bonus amount for each
executive. These financial and strategic/operational goals are described below.
Additional Performance Criteria.
If the EP Threshold under the Executive Plan is met for a year, the Company’s performance in comparison
to the financial and strategic/operational goals for the year set by the Compensation Committee are then used
to determine a Named Executive Officer’s actual bonus, as follows:
Financial Goals.
The Company financial goals for Named Executive Officers under the Executive Plan consist of EBITDA
and earnings per share targets, with each criteria accounting for half of the financial goal portion of the annual
bonus. As the Company generally sets target bonus award opportunities above market median, the Company
financial and strategic/operational goals to achieve such award levels are considered challenging but
achievable, representing a superior level of performance. Consistent with maintaining these high standards
and subject to achieving the EP Threshold, the Compensation Committee retains the ability to consider
whether an adjustment of the financial goals for any year is necessitated by exceptional circumstances, e.g., an
unanticipated and material downturn in the business cycle that triggers, in response, an increased focus by the
Compensation Committee on the Company’s performance relative to the industry. This ability is intended to be
narrowly and infrequently used and, if applicable, the basis for its use would be detailed in the Company’s
annual meeting proxy statement.
Performance against the financial goals determined 60% of Mr. van Paasschen’s total target annual bonus
opportunity and 50% of the total target opportunities for the other Named Executive Officers. Subject to
achieving the EP Threshold, actual bonuses paid to Named Executive Officers for financial performance may
range from 0% to 200% of the pre-determined target bonus for this category of performance. For Named
Executive Officers, the Company financial performance portion is based 50% on earnings per share and 50%
on EBITDA of the Company.
As noted above, once the EP Threshold is achieved, the maximum annual bonus amount specified in the
Executive Plan becomes available and the Compensation Committee may apply its discretion to reduce such
amount to the actual bonus amount for each Named Executive Officer. Further, the bonus payout for the
applicable Company financial performance metric is limited to 200% of target (i.e., the “Maximum”). The
table below sets forth for each metric the performance levels for 2009 which would have resulted in 100%
bonus pool payout (i.e. “Target”), the minimum performance level (i.e., the “Minimum”) that would have
resulted in a 20% bonus pool payout following achievement of the EP Threshold and the Maximum that would
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