Starwood 2012 Annual Report Download - page 47

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement 41
EXECUTIVE COMPENSATION
of corporate governance practices. In 2012, we began to
eliminate tax gross-ups for arrangements put in place in 2008
and thereafter to better align compensation with the creation
and preservation of stockholder value.
What the Program Intends to Reward.Our executive compensation
program is strongly weighted towards variable compensation tied to
our annual business results and stock performance. Specifi cally, our
compensation program for our named executive offi cers is designed
to ensure the following:
• Alignment with Stockholders: A signifi cant portion of named
executive offi cer compensation is delivered in the form of equity
incentives with signifi cant vesting requirements, ensuring that
long-term compensation is strongly linked to stockholder
returns. Further, our executive offi cers, including our named
executive offi cers, are required to own a requisite amount of
company stock. See the section entitled Share Ownership
Guidelines beginning on page 52 of this proxy statement for
more information.
• Achievement of Company Financial Objectives: A portion of
named executive offi cer compensation is tied directly to our
fi nancial performance.
• Achievement of Strategic/Operational/Leadership Objectives: A
portion of our named executive offi cer compensation depends
on the achievement of specifi c individual objectives that align with
the execution of our business strategy, as well as demonstrated
performance tied to our core leadership competencies that
include team building and the development of future talent.
These objectives may be related to, among others, operational
excellence, brand enhancement, innovation, growth, cost
containment/effi ciency, customer experience and/or teamwork.
See the section entitled Strategic/Operational/Leadership
Goals beginning on page 44 of this proxy statement for more
information on the strategic, operational and leadership objectives
in effect for each of the named executive offi cers for 2012.
Roles and Responsibilities of Management
and the Compensation Committee
For 2012, the Compensation Committee established and reviewed
the compensation policies and programs for our executive offi cers,
including our named executive offi cers, to ensure that the executive
offi cers are compensated in a manner consistent with the objectives
and principles outlined above. The Compensation Committee
also reviewed and monitored our performance as it affected our
employees and the overall compensation policies for our employees.
The Compensation Committee made all compensation decisions
for 2012 with respect to our named executive offi cers. Our Chief
Executive Offi cer, together with the Chief Human Resources Offi cer,
reviewed the performance of each other named executive offi cer
and presented to the Compensation Committee in February2013
his conclusions and recommendations, including salary adjustments
and annual incentive compensation amounts for 2012 (as described
in more detail in the 2012 Annual Incentive Compensation
section beginning on page 43 of this proxy statement).
In February2013, our management provided reviews and
recommendations on named executive offi cer compensation levels
and program design for the Compensation Committee’s consideration.
In addition, our management managed operational aspects of our
compensation programs, policies and governance during 2012, and
their direct responsibilities included:
• providing an ongoing review of the effectiveness of the
compensation programs, including competitiveness, and
alignment with our objectives;
• recommending changes to better align all program objectives
during 2012; and
• recommending pay levels, payouts and/or awards for executive
offi cers other than the Chief Executive Offi cer.
Management also prepared tally sheets that described and quantifi ed
all components of total compensation for our named executive
offi cers, including salary, annual incentive compensation, long-term
incentive compensation, deferred compensation, outstanding
equity awards, benefi ts, perquisites and potential severance
and change in control payments. The Compensation Committee
reviewed and considered these tally sheets before making 2012
compensation decisions for our named executive offi cers, but this
review had no material impact on the Compensation Committee’s
compensation decisions.
The Compensation Committee directly engaged Meridian to assist
it in the review and determination of compensation awards to the
named executive offi cers (including the Chief Executive Offi cer) for
the 2012 performance period. Meridian worked with management
and the Compensation Committee in reviewing our compensation
structure and the compensation structure of the companies in the
peer group. Meridian does not provide any services to management.
The Compensation Committee has considered and assessed all
relevant factors, including but not limited to those set forth in Rule
10C-1(b)(4)(i) through (vi) under the Exchange Act, that could give
rise to a potential confl ict of interest with respect to Meridian. Based
on this review, we are not aware of any confl ict of interest that has
been raised by the work performed by Meridian.
Risk Assessment
In setting compensation, our Compensation Committee also
considers the risks to our stockholders, and to us as a whole,
arising out of our compensation programs. For more information
about our most recent risk assessment, see the section entitled
Risk Assessment beginning on page 53 of this proxy statement.