Starwood 2012 Annual Report Download - page 46

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement40
EXECUTIVE COMPENSATION
• Stock Ownership Requirements—all of our executive offi cers,
including our named executive offi cers, were required to hold
a number of shares having a market value equal to or greater
than a multiple of each executive’s base salary.
• Formal Evaluation Process—the Compensation Committee
conducted a formal performance review of Mr. van Paasschen
and determined whether and to what extent our fi nancial
performance goals were achieved; Mr.van Paasschen, together
with the Chief Human Resources Offi cer and with oversight and
input from the Compensation Committee, conducted a formal
performance review of the other named executive offi cers
through the Performance Management Process.
• Compensation Consultants Retained—the Compensation
Committee retained Meridian to assist it in the review and
determination of compensation design and levels for the named
executive offi cers and to assist it in the annual assessment of
compensation risk, described in more detail in the section entitled
Risk Assessment beginning on page 53 of this proxy statement.
Consideration of 2012 Say-on-Pay Voting
Results
At both our 2011 and 2012 annual meetings, we provided our
stockholders with the opportunity to cast a non-binding advisory
vote regarding the compensation of our named executive offi cers
as disclosed in the proxy statements for those annual meetings of
stockholders. In 2012, our stockholders overwhelmingly approved
the proposal, and for a second straight year more than 96% of
the votes cast were in favor of the proposal. The Compensation
Committee considered the strong support for our say-on-pay
proposal in both 2011 and 2012 as evidence of our stockholders’
support for the named executive offi cer compensation decisions
and actions that the Compensation Committee has been making.
As a result, the Compensation Committee did not make any
material changes in the structure of our named executive offi cer
compensation program for 2012 that were prompted specifi cally
by the results of our 2012 say-on-pay vote.
In spite of this continuing majority stockholder support for our say-
on-pay proposals, in 2012 we noted the concerns expressed by a
small minority of shareholders about a perceived lack of alignment
between our named executive offi cers and our stockholders
due to the lack of performance-based equity vehicles in our
long-term equity incentive program. As part of a broader review
of our compensation program design conducted during 2012,
the Compensation Committee approved the introduction of
performance-based equity awards for our named executive
offi cers starting in 2013. The Compensation Committee believes
the introduction of performance share equity vehicles into our
program will enhance our already strong “pay for performance”
philosophy and serve to ensure that key executives’ interests
are closely aligned with long-term stockholder objectives and
expectations. We present more information about the changes
that we have made to the equity program design in the section
entitled Changes to Long-Term Incentive Compensation Design
in 2013 beginning on page 48 of this proxy statement.
Design and Operation of Starwood’s 2012 Executive Compensation Program
Program Objectives andOtherConsiderations
Objectives.As a consumer lifestyle company with a branded hotel
portfolio at its core, we operate in a competitive, dynamic and
challenging business environment. In step with this mission and
environment, our compensation program for our named executive
offi cers has the following key objectives for 2012:
• 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. To this end:
– We broadly target total compensation opportunities at the
median (50
th
percentile) of the market for target performance
levels; however, we also review the range of values around the
median, including out to the 25
th
and 75
th
percentiles. Despite
these initial actions, we believe that benchmarking alone does
not provide a complete basis for establishing compensation
levels or design practices.
–As a result, actual individual compensation may be above or
below our targeted levels based on company and individual
performance, key responsibilities, unique market demands,
and experience level, as further described below.
• Motivate: We seek to motivate our executives to sustain high
performance and achieve our fi nancial and strategic/operational/
leadership goals over the course of business cycles in various
market conditions. However, our compensation programs are
designed not to encourage excessive risk taking; we assess
compensated-related risk annually. In addition, we have a
clawback policy which allows us to recoup incentives paid in
the event of a fi nancial restatement. See the section entitled
Potential Impact on Compensation for Executive Misconduct
beginning on page 51 of this proxy statement for more information.
• Align Interests: We endeavor to align the investment interests of
stockholders and the compensation interests of our executives
by linking executive compensation to our 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