Starwood 2011 Annual Report Download - page 44

C. Background Information on the Executive Compensation Program
1. Use of Peer Data
In determining competitive compensation levels, the Compensation Committee reviews data prepared by
Meridian, its executive compensation consultants, that reflect compensation practices for executives in direct
hotel and property management companies. Due to the to the limited number of direct competitors of similar
scale, a robust peer community requires expanding beyond these organizations to companies in related industries
with a strong brand focus, and/or with similar talent needs, e.g., hospitality/entertainment industries, brand-
dependent companies, companies of similar size, scale and complexity. To assess the appropriateness of
including the company in Starwood’s peer group, the following eight screening criteria was used: (i) revenue size
with stronger consideration given to companies within a range of one-third to three times Starwood’s revenue
(given Starwood’s unique role in managing property revenues beyond those captured in its financial statements, a
couple larger revenue companies were included); (ii) market capitalization with stronger consideration given to
companies within a range of one-third to three times Starwood’s market capitalization; (iii) EBITDA with
stronger consideration given to companies within a range of one-third to three times Starwood’s EBITDA;
(iv) financial performance with stronger consideration given to companies with financial results comparable to
Starwood in terms of 1-year, 3-year and 5-year annualized revenue growth, operating income and total
shareholder return; (v) direct competitors; (vi) related industries, e.g. cruise lines, entertainment; (vii) talent
competitors; and (viii) global complexity with stronger consideration given to companies with global scope,
where greater than 25% of revenues are generated outside U.S. The Compensation Committee along with
Company reviews 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 for executives and directors, pay mix, incentive plan design and equity usage and other terms
of employment. 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 2011 is set out below. We expect that it will
be necessary to update the list periodically.
Avon Products, Inc. NIKE, Inc.
Carnival Corporation and Carnival plc* Ralph Lauren Corporation
The Estée Lauder Companies Inc. Royal Caribbean Cruises Ltd.
H.J. Heinz Company Simon Property Group, Inc.
Host Hotels & Resorts, Inc. Starbucks Corporation
InterContinental Hotels Group PLC V.F. Corporation
Kellogg Company The Walt Disney Company
Limited Brands, Inc. Wyndham Worldwide Corporation
Marriott International, Inc. Yum! Brands, Inc.
MGM Resorts International
* Carnival Corporation and Carnival plc are public companies with separate listings and shareholders but
operate as if they are a single economic enterprise.
In comparison to the peer group used in 2010, H.J Heinz Company, InterContinental Hotels Group PLC,
Ralph Lauren Corporation, Royal Caribbean Cruises Ltd., and V.F. Corporation were added to the 2011 peer
group. The following companies from the 2010 peer group were deleted: Coach, Inc., Colgate-Palmolive
Company, FedEx Corporation, McDonald’s Corporation, Staples, Inc. and Williams-Sonoma, Inc.
In performing its competitive analysis for 2011, the Compensation Committee reviewed:
• base pay;
• target and actual total cash compensation, consisting of salary, target and actual annual incentive awards
in prior years;
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