Starwood 2011 Annual Report Download - page 36

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 section entitled Long-Term Incentive
Compensation beginning on page 30 of this proxy statement.
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% – 238% of
target, not to exceed 200% for the Named Executive Officers. See additional detail regarding targets in the
section entitled Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards
beginning on page 39 of this proxy statement.
Minimum Threshold.
For the Named Executive Officers, an annual bonus award for 2011 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 2011, the EP Threshold was $820,000,000.
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 determine 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 is 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. The Company deems EBITDA and EPS to be the most appropriate metrics to measure performance and
has consistently used these metrics since 2009. As the Compensation Committee generally sets target bonus
award opportunities above the median and monitors awards around the median, including the 25th and 75th
percentile, among the Company’s peer group, 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
26