Starwood 2009 Annual Report Download - page 40

3. Additional Severance Arrangements
In 2007, the Company entered into a letter agreement with Mr. Prabhu clarifying that his severance included
the acceleration of 50% of unvested restricted stock and options in the event that his employment was terminated
without cause or by him for good reason. The clarification formally documented Mr. Prabhu’s existing severance
arrangements as part of his employment with the Company.
This additional severance arrangement is described in more detail beginning on page 41 under the heading
entitled Potential Payments Upon Termination or Change in Control.
C. Background Information on the Executive Compensation Program
1. Use of Peer Data
In determining competitive compensation levels, the Compensation Committee reviews data from several
major compensation consulting firms that reflects compensation practices for executives in comparable positions in
a peer group consisting of companies in the hotel and hospitality industries and companies with similar revenues in
other industries relevant to key talent recruitment needs. The executive team and Compensation Committee review
the peer group bi-annually to ensure it represents a relevant market perspective. The Compensation Committee
utilizes the peer group for a broad set of comparative purposes, including levels of total compensation, pay mix,
incentive plan and equity usage and other terms of employment. The Compensation Committee also reviews
Company performance against the performance of companies in this peer group. The Company believes that by
conducting the competitive analysis using a broad peer group, which includes companies outside the hospitality
industry, it is able to attract and retain talented executives from outside the hospitality industry. The Company’s
experience has proven that key executives with diversified experience prove to be major contributors to its
continued growth and success.
The peer group approved by the Compensation Committee for 2009 is set out below. We expect that it will be
necessary to update the list periodically.
Avon Products MGM Mirage
Carnival Corp. Nike, Inc.
Colgate Palmolive Corporation Simon Property Group Inc.
Estee Lauder Cos. Inc. Staples Inc.
Federal Express Corp. Starbucks Corp.
Host Hotels & Resorts Williams Sonoma Inc.
Kellogg Corporation Walt Disney Co.
Limited Brands Inc. Wyndham Worldwide Corporation
Marriott International, Inc. Yum Brands Inc.
McDonald’s Corp.
In performing its competitive analysis, the Compensation Committee typically reviews:
• base pay;
• target and actual total cash compensation, consisting of salary and target and actual annual incentive awards
in prior years; and
• direct total compensation consisting of salary, target and actual annual incentive awards, and the value of
option and restricted stock/restricted stock unit awards.
When establishing target compensation levels for 2009, the Compensation Committee reviewed peer group
data paid to named executive officers reported in proxy statements available as of February 2009 as provided by
Pearl Meyer & Partners.
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