Starwood 2012 Annual Report Download - page 57

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement 51
EXECUTIVE COMPENSATION
Potential Impact on Compensation for Executive Misconduct
If the Board of Directors determines that an executive offi cer has engaged
in misconduct, the Board of Directors may take a range of actions
to remedy the misconduct. In 2011, the Compensation Committee
adopted an incentive recoupment policy that allows us to recover any
annual incentive payment or long-term incentive award to any individual
executive at the senior vice president level or above, including our
named executive offi cers, if the Board of Directors determines that:
• we are required to prepare an accounting fi nancial restatement
due to the material non-compliance of the Company with any
fi nancial reporting requirement under applicable securities laws
and the compensation payment previously made was based
on erroneous data; or
• the executive engaged in intentional misconduct that caused or
substantially caused the need for a fi nancial restatement and a
lower payment would have been made to the executive based
upon the restated fi nancial results.
In such circumstances we will, to the extent practicable, seek to
recover from the individual executive the amount by which the
individual executive’s payments for the relevant period exceeded the
lower payment that would have been made based on the restated
fi nancial results. In addition, our LTIP provides that the Compensation
Committee may cancel, suspend, withhold or otherwise restrict
or limit any long-term incentive award to any participant under the
LTIP, including executive offi cers, if the Compensation Committee
determines that such participant engaged in misconduct.
Background Information on the 2012 Executive Compensation Program
Use of Peer Data
In determining competitive compensation levels for 2012 compensation
decisions, the Compensation Committee reviewed data prepared
by Meridian, its executive compensation consultants, that refl ected
compensation practices for executives in hotel and property
management companies. Due to the limited number of direct
competitors of similar scale, a robust peer community required
expanding beyond these organizations to companies in related
industries with a strong brand focus, and/or with similar talent needs
(for example, hospitality/entertainment industries, brand-dependent
companies, and companies of similar size, scale and complexity). To
assess the appropriateness of including a potential peer company
in our peer group, the following eight screening criteria were used:
• revenue size with stronger consideration given to companies
within a range of one-third to three times our revenue (given
our unique role in managing property revenues beyond those
captured in our fi nancial statements, a couple larger revenue
companies were included);
• market capitalization with stronger consideration given to
companies within a range of one-third to three times our market
capitalization;
• EBITDA with stronger consideration given to companies within a
range of one-third to three times our EBITDA (given our unique
role in managing property revenues beyond those captured in
our fi nancial statements, a couple larger revenue companies
were included);
• fi nancial performance with stronger consideration given to
companies with fi nancial results comparable to ours in terms of
1-year, 3-year and 5-year annualized revenue growth, operating
income and total shareholder return;
•direct competitors;
• related industries (for example, cruise lines, entertainment, etc.);
•talent competitors; and
• global complexity with stronger consideration given to companies
with global scope, where greater than 25% of revenues are
generated outside the United States.
The Compensation Committee along with our management
frequently reviews the peer group to ensure it represents a relevant
market perspective. A review of the peer group was carried out
by Meridian in 2012, the results of which added Hyatt Hotels to
the group. The other constituents of the peer group remained
unchanged for use in 2012.
The Compensation Committee utilized the peer group for a broad
set of comparative purposes for 2012, including levels of total
compensation for executives and directors, pay mix, incentive
plan design and equity usage and other terms of employment.
We believe that by conducting the competitive analysis using a
broad peer group, which includes companies outside the hospitality
industry, we are able to attract and retain talented executives
from outside the hospitality industry. Our experience has proven
that key executives with diversifi ed experience prove to be major
contributors to our continued growth and success.