Starwood 2012 Annual Report Download - page 53

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement 47
EXECUTIVE COMPENSATION
In light of these accomplishments and impact on the Company, the
Compensation Committee awarded Mr. van Paasschen a payout
at 100% of target for the strategic/operational /leadership portion
of the annual bonus. Mr. Avril announced his retirement in April
2012 with transition of his direct report responsibilities effective
July 1, 2012; throughout the remainder of 2012, Mr. Avril also
worked with the Company and its key ownership relationships to
ensure an effective transition. Mr. Avril’s fi nal incentive award was
determined as described above, but reduced in light of his changed
responsibilities, with the strategic/operational/leadership portion of
the award determined based on the achievements described above
and this transition work. The Compensation Committee awarded
each of our other named executive offi cers participating in the
Executive Plan an “accomplished objectives” PMP performance
rating and a payout at 100% of target for their strategic/operational /
leadership portion of their annual bonus. While Mr. Rivera’s 2012
incentive was not technically paid under the Executive Plan, the
same evaluation structure was used for his award, and as a result he
was also awarded an “accomplished objectives” PMP performance
rating and a payout at 100% of target for the strategic/operational /
leadership portion of his annual bonus. The following table sets forth
for each named executive offi cer his salary, target award as both a
percentage of salary and a dollar amount, actual award and actual
award as a percentage of target award:
Name Salary ($)
Award Target
Relative to Salary
(%) Award Target ($) Actual Award ($) Actual Award (% of Target)
van Paasschen 1,250,000 200% 2,500,000 2,300,000 92%
Prabhu 766,785 100% 766,785 705,443 92%
Rivera 722,000 100% 722,000 664,240 92%
Siegel 638,490 100% 638,490 587,411 92%
Turner 766,785 100% 766,785 705,443 92%
Avril(1) 766,785 100% 766,785 352,722 46%
(1) Mr. Avril’s job responsibilities changed during 2012, as further described in our Current Report on Form 8-K filed with the SEC on April16, 2012.
Annual awards made to our named executive offi cers with respect to
2011 performance are refl ected in the 2012 Summary Compensation
Table on page 55 of this proxy statement.
As noted above, effective with the 2012 performance period,
deferrals from cash incentive awards were no longer allowed under
the Executive Plan.
2012 Long-Term Incentive Compensation.Like the annual
incentives described above, long-term incentives are a key part of
the Company’s named executive offi cer compensation program.
Long-term incentive compensation for our named executive
offi cers for 2012 consisted entirely of equity compensation awards
granted in February2012 following the announcement of our 2011
earnings under our LTIP. On average, approximately 60% of total
compensation at target award levels for 2012 was equity-based
long-term incentive compensation.
The Compensation Committee granted awards under the LTIP to
Mr. van Paasschen consisting of a combination of stock options
and restricted stock awards. The Compensation Committee granted
awards under the LTIP for 2012 to all other named executive offi cers
also consisting of a combination of stock options and restricted stock
awards. For the other named executive offi cers, this compensation
was also geared towards performance and long-term incentives,
but to a lesser degree than Mr. van Paasschen. The Compensation
Committee believed an emphasis on long-term equity compensation
was particularly appropriate for the leader of a management team
committed to the creation of stockholder value.
In 2012, for all named executive offi cers, the Compensation
Committee used a grant approach in which the long-term award
was articulated as a dollar value. Under this approach, an overall
award value, in dollars, was determined for each named executive
offi cer based upon our compensation strategy and competitive
market positioning taking into account company and individual
performance factors for the named executive offi cers described
in the section entitled 2012 Annual Incentive Compensation
beginning on page 43 of this proxy statement.
The Compensation Committee determined the appropriate mix of
restricted stock and stock options to be given to our named executive
offi cers. For 2012, the Compensation Committee determined that
a split of 75% of restricted stock awards and 25% of stock options
was the appropriate balance to maximize cost effectiveness and
encourage equity ownership among our management. The number
of shares of restricted stock was calculated by dividing 75% of
the award value by the fair market value of our stock for the grant
date. The number of stock options was determined by dividing
the remaining 25% of the award value by the fair market value of
our stock for the grant date and multiplying the result by two and
one-half, which we believe historically approximates the number of
options determined through formal lattice model option valuation
methods. The named executive offi cers were able to elect a greater
portion of options (up to 100%). During 2012, only Mr. Turner elected
a greater portion of options (50%). Based on the factors set forth
above, including our performance and individual performance of
each named executive offi cer in 2011, the Compensation Committee
believes that the equity award grants in 2012 were appropriate.
The exercise price for each stock option was equal to fair market
value of our common stock on the option grant date. See the
section entitled Equity Grant Practices beginning on page 53
of this proxy statement for a description of the manner in which
we determined fair market value for this purpose. Currently, most
stock options vest in 25% increments annually starting with the
fi rst anniversary of the date of grant. For stock options granted in
2012, awards granted to associates who were retirement-eligible,
as defi ned in the LTIP, vest in 16 equal quarterly periods. The only
named executive offi cer who currently meets the retirement criteria
is Mr. Siegel, our Chief Administrative Offi cer, General Counsel and
Secretary. Unexercised stock options expire eightyears from the
date of grant, or earlier in the event of termination of employment.