Starwood 2010 Annual Report Download - page 35

level of compensation to Named Executive Officers in circumstances when achieving Company financial and
strategic/operational objectives becomes challenging and the level of incentive compensation is impacted. Salaries
for Named Executive Officers are generally based on the responsibilities of each position and are reviewed annually
against similar positions among a group of peer companies developed by the Company and its advisors consisting of
similarly-sized hotel and hospitality companies as well as other companies representative of markets in which the
Company competes for key executive talent. See the Background Information on the Executive Compensation
Program — Use of Peer Data section beginning on page 31 below for a list of the peer companies used in this
analysis. The Company generally seeks to position base salaries of our Named Executive Officers at or near the
median base salary of the Company’s peer group for similar positions.
Incentive Compensation. Incentive compensation includes annual cash bonus awards under the Company’s
Executive Plan and long-term incentive compensation in the form of equity awards under the Company’s LTIP.
Incentive compensation typically accounts for approximately 80% of total compensation at target (86% for
Mr. van Paasschen in 2010), with annual cash bonus compensation and long-term incentive compensation
accounting for 23% and 57%, respectively (29% and 57% for Mr. van Paasschen, respectively, in 2010). The
Company believes that this structure allows it to provide each Named Executive Officer with substantial incentive
compensation opportunities if performance objectives are met. The Company believes that the allocation between
base and incentive compensation is appropriate and beneficial because:
• it promotes the Company’s competitive position by allowing it to provide Named Executive Officers with
above-median total competitive compensation if targets are met;
• it targets and attracts highly motivated and talented executives within and outside the hospitality industry;
• it aligns senior management’s interests with those of stockholders;
• it promotes achievement of business and individual performance objectives; and
• it provides long-term incentives for Named Executive Officers to remain in the Company’s employ.
Annual Incentive Compensation. Annual cash bonuses are a key part of the Company’s executive
compensation program. The bonuses directly link the achievement of Company financial and strategic/
operational performance objectives to executive pay. Annual bonuses also provide a complementary balance to
equity incentives (discussed below). Each Named Executive Officer has an annual opportunity to receive an
incentive award under the stockholder-approved Executive Plan. If and when earned, awards are typically paid
to Named Executive Officers partly in cash and, unless the Compensation Committee otherwise elects, partly
as deferred stock awards (under the Executive Plan). The deferred stock awards generally vest over a three-
year period. See additional detail regarding these deferred stock awards in the Long-Term Incentive
Compensation section beginning on page 28 below.
Viewed on a combined basis once minimum performance is attained, the annual bonus payments
attributable to both Company financial and strategic/operational performance can range from 0% - 275% of
target for the Named Executive Officers, other than the Chief Executive Officer.
Minimum Threshold.
For the Named Executive Officers, an annual bonus award for 2010 was paid under the Executive Plan.
Under the Executive Plan, each year, the Compensation Committee establishes in advance a threshold level of
EBITDA that the Company must achieve in order for any bonus to be paid under the Executive Plan for that
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 2010, the EP Threshold was
$640,000,000.
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
23