Starwood 2011 Annual Report Download - page 31

A. Overview of Starwood’s Executive Compensation Program
1. Program Objectives and Other Considerations
Objectives. As a consumer lifestyle company with a branded hotel portfolio at its core, the Company
operates in a competitive, dynamic and challenging business environment. In step with this mission and
environment, the Company’s compensation program for our Named Executive Officers has the following key
objectives:
•Attract and Retain: We seek to attract and retain talented executives from within and outside the
hospitality industry who understand the importance of innovation, brand enhancement and consumer
experience. We are working to reinvent the hospitality industry, and one element of this endeavor is to
bring in key talent from other industries. Therefore, overall program competitiveness must take these
other markets into account.
• We broadly target total compensation opportunities at the median (50th percentile) of the market for
target performance levels; however, we also review the range of values around the median, including
the 25th and 75th percentiles. However, we believe that benchmarking alone does not provide a
complete basis for establishing compensation levels or design practices.
• Actual individual compensation may be above or below targeted levels based on Company and
individual performance, key responsibilities, unique market demands, and experience level.
•Motivate: We seek to motivate our executives to sustain high performance and achieve Company
financial and strategic/operational goals over the course of business cycles in various market conditions.
• However, our compensation programs are designed to not encourage excessive risk taking; we assess
compensated-related risk annually. In addition, we have a policy which allows us to recoup
incentives paid in the event of a financial restatement. See the section entitled Potential Impact on
Compensation for Executive Misconduct beginning on page 33 of this proxy statement.
•Align Interests: We endeavor to align the interests of stockholders and our executives by linking
executive compensation to the Company’s annual business results and stock performance. Moreover, we
strive to keep the executive compensation program transparent, in line with market practices and
consistent with the highest standards of corporate governance practices. The following changes were
designed to better align compensation with the creation and preservation of stockholder value:
• Tax gross-ups were eliminated for arrangements put in place in 2008 and thereafter.
• The structure for determining annual incentive compensation under the Company’s Executive Plan
was revised so that with respect to the goal based upon the Company’s financial performance, the
floor below which incentive compensation could not fall was removed, and with respect to bonus
pool funding, funding is based entirely on the Company’s financial performance.
What the Program Intends to Reward. Our executive compensation program is strongly weighted
toward variable compensation tied to the Company’s annual business results and stock performance. Specifically,
our compensation program for our Named Executive Officers is designed to ensure the following:
•Alignment with Stockholders: A significant portion of Named Executive Officer compensation is
delivered in the form of equity incentives with significant performance and/or vesting requirements,
ensuring that long-term compensation is strongly linked to stockholder returns. Further, our executive
officers, including our Named Executive Officers, are required to own a requisite amount of Company
shares. See the section entitled Share Ownership Guidelines beginning on page 35 of this proxy
statement.
•Achievement of Company Financial Objectives: A portion of Named Executive Officer compensation is
tied directly to the Company’s financial performance.
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