Starwood 2012 Annual Report Download - page 58

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement52
EXECUTIVE COMPENSATION
The peer group approved by the Compensation Committee for 2012 is set out below. We expect that it will be necessary to update
the list periodically.
Avon Products, Inc. MGM Resorts International
Carnival Corporation and Carnival PLC* NIKE, Inc.
The Estée Lauder Companies, Inc. Ralph Lauren Corporation
H.J. Heinz Company Royal Caribbean Cruises Ltd.
Host Hotels& Resorts, Inc. Simon Property Group, Inc.
Hyatt Hotels Corporation Starbucks Corporation
InterContinental Hotels Group PLC V.F. Corporation
Kellogg Company The Walt Disney Corporation
Limited Brands, Inc. Wyndham Worldwide Corporation
Marriott International, Inc. Yum! Brands, Inc.
* Carnival Corporation and Carnival PLC are public companies with separate listings and shareholders but operate as if they are a single economic enterprise.
In performing its competitive analysis for 2012, the Compensation
Committee reviewed:
•base pay;
• target and actual total cash compensation, consisting of salary,
target and actual annual incentive awards in prior years;
• direct total compensation consisting of salary, target and actual
annual incentive awards, and the expected value of total long-
term incentives; and
•retirement benefi ts.
When establishing target compensation levels for 2012, the
Compensation Committee reviewed peer group data on payments
to named executive offi cers as reported in proxy statements
available as of February2012 as provided by Meridian.
Tax Considerations
Section162(m) generally disallows a federal income tax deduction
to public companies for incentive compensation in excess of
$1,000,000 paid to the chief executive offi cer and to each of the
three other most highly compensated executive offi cers (other
than the chief fi nancial offi cer). Qualifi ed performance-based
compensation is not subject to the deduction limit if certain
requirements are met. We believe that compensation paid under the
Executive Plan for 2012 meets these requirements and is generally
fully deductible for federal income tax purposes. In addition, for
federal income tax purposes, compensation earned under option
grants is also fully deductible for federal tax purposes.
Although the Compensation Committee may continue taking actions
intended to limit the impact of Section162(m), the Compensation
Committee also believes that the tax deduction is only one of
several relevant considerations in setting named executive offi cer
compensation. The Compensation Committee believes that the tax
deduction limitation should not be permitted to compromise our
ability to design and maintain named executive offi cer compensation
arrangements that will attract and retain the executive talent to allow
us to compete successfully in our industry. Accordingly, achieving
the desired fl exibility in the design and delivery of compensation
may result in compensation that in certain cases is not deductible
for federal income tax purposes.
Share Ownership Guidelines
We have adopted share ownership guidelines for our executive
offi cers, including the named executive offi cers. Pursuant to the
guidelines, the named executive offi cers, including the Chief
Executive Offi cer, are required to hold that number of shares
having a market value equal to or greater than a multiple of each
executive’s base salary. For the Chief Executive Offi cer, the multiple
is six times base salary, and for the other named executive offi cers,
the multiple is four times base salary. This multiple is reduced one
times base salary, however, for executives that are retirement
eligible. A retention requirement of 35% is applied to restricted
shares upon vesting (net shares after tax withholding) and shares
obtained from option exercises until the executive meets the target,
or if an executive falls out of compliance, shares owned, stock
equivalents (vested/unvested restricted stock units) and unvested
restricted stock (pre-tax) count towards meeting ownership targets.
However, stock options and performance-based equity do not
count towards meeting the target. Offi cers have fi ve years from
the date of hire or, if later, the date they fi rst become subject to the
policy, to meet the ownership requirements. All named executive
offi cers were in compliance with share ownership guidelines as
of December31, 2012.