Starwood 2011 Annual Report Download - page 33

considered the strong support for our “say-on-pay” proposal as evidence of our stockholders’ support for the
named executive officer compensation decisions and actions that the Compensation Committee has been making.
As a result, the Compensation Committee made no material changes in the structure of our named executive
officer compensation program that were directly motivated by the results of our “say-on-pay” vote. We have,
however, continued to review and make adjustments to this program as necessary to achieve our objectives
described above.
3. Risk Assessment
In setting compensation, our Compensation Committee also considers the risks to our stockholders, and the
Company as a whole, arising out of our compensation programs. In February 2012, management held a special
meeting to discuss and assess the risk profile of our compensation programs. The Chief Human Resources
Officer, our Chief Administrative Officer, General Counsel and Secretary, our Vice Chairman and Chief
Financial Officer and the Company’s external legal counsel for compensation matters were among the
participants in the special meeting. Their review considered risk-determining characteristics of the overall
structure and individual components of our Company-wide compensation program, including our base salaries,
incentive plans (both at the executive and property management levels) and equity plans. A report of the findings
was provided to the Compensation Committee for its review and consideration. Following this assessment, we
believe that the Company has instituted policies that align our executive officers’ interests with those of our
stockholders without creating incentives for our executive officers or other employees to take risks that are
reasonably likely to have a material adverse effect on the Company. For example,
•Balance of Compensation: Across the Company, individual elements of our compensation program
include base salaries, incentive compensation, and for certain of our employees, equity-based awards. By
providing a mix of different elements of compensation which reward both short-term and long-term
performance, the Company’s compensation programs, as a whole, provide a balanced approach to
incentivizing and retaining employees, without placing an inappropriate emphasis on any particular form
of compensation.
•Objective Formula and Pre-established Performance Measures Dictate Annual Incentives: Under the
Executive Plan, payment of annual incentives to our Named Executive Officers is subject to the
satisfaction of specific company-wide annual performance targets determined under an incentive formula
established by our Compensation Committee within the first 90 days of each fiscal year. Similarly, the
Company’s employees other than the Named Executive Officers that are eligible to receive an annual
incentive receive such incentive subject to the satisfaction of specific company-wide annual performance
targets determined under an incentive formula established by our Compensation Committee. These
performance targets are directly and specifically tied to one or more of the following company-wide
business criteria: earnings before interest, taxes, depreciation and amortization (or EBITDA),
consolidated pre-tax earnings, net revenues, net earnings, operating income, earnings before interest and
taxes, cash flow measures, return on equity, return on net assets employed or earnings per share for the
applicable fiscal year.
•Minimum and Maximum Thresholds for Annual Incentives: Each year our Compensation Committee
establishes within the first 90 days of any fiscal year a threshold level of EBITDA that the Company must
achieve in order for any bonus to be paid to our Named Executive Officers or other Company employees
eligible to receive an annual incentive for any given year. The Executive Plan also specifies a maximum
incentive amount, in dollars, that may be paid to any executive officer for any 12-month performance
period. As a result of this threshold performance requirement and the design of our Executive Plan,
incentive compensation is payable under our incentive plans only upon the attainment of performance
targets related to business criteria that are in the interests of our stockholders.
•Use of Long-Term Incentive Compensation: Equity-based long-term incentive compensation that vests
over a period of years is a key component of total compensation of our executive employees. This vesting
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