Starwood 2012 Annual Report Download - page 59

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement 53
EXECUTIVE COMPENSATION
Equity Grant Practices
Determination of Option Exercise Prices.The Compensation
Committee grants stock options with an exercise price equal to the
fair market value of a share on the grant date. Under the LTIP, for
2012, the fair market value of our common stock on a particular
date was determined as the average of the high and low trading
prices of a share on the NYSE on that date.
Timing of Equity Grants.For 2012, the Compensation Committee
made annual equity compensation grants to named executive
offi cers on February28, 2012 which followed its fi rst regularly
scheduled meeting that occurred after the release of our earnings
for 2011. The timing of this meeting was determined based on
factors unrelated to the pricing of equity grants. The Compensation
Committee (or its delegates), however, had discretion under
unusual circumstances to award grants at other times in the year.
The Compensation Committee approves equity compensation
awards to a newly hired executive offi cer at the time that the Board
of Directors meets to approve the executive’s employment package.
Generally, the date on which the Board of Directors approves the
employment package becomes the grant date of the newly-hired
executive offi cer’s equity compensation awards. However, if we
and the new executive offi cer enter into an employment agreement
regarding the employment relationship, we require the executive
offi cer to sign his employment agreement shortly following the
date of Board approval of the employment package; the later
of the date on which the executive offi cer signs his employment
agreement or the date that the executive offi cer begins employment
becomes the grant date of these equity compensation awards.
Compensation Committee Report
The Compensation and Option Committee of the Board of Directors
of Starwood Hotels& Resorts Worldwide, Inc. has reviewed and
discussed the Compensation Discussion and Analysis required by
Item402(b) of RegulationS-K with management and, based on such
review and discussions, recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in the Company’s
Proxy Statement for the 2013 Annual Meeting of Stockholders and
incorporated by reference into the Company’s Annual Report on Form
10-K for the fi scal year ended December31, 2012.
Compensation and Option Committee of the Board of Directors
Adam M. Aron, Chairman
Thomas E. Clarke
Clayton C. Daley, Jr.
Thomas O. Ryder
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. In February2013, management
held a special meeting to discuss and assess the risk profi le of our
compensation programs. The Chief Human Resources Offi cer, our
Chief Administrative Offi cer, General Counsel and Secretary, our Vice
Chairman and Chief Financial Offi cer and Meridian, who had been
asked to work with management to help with such risk assessment,
were among the participants in the special meeting. Their review
considered risk-determining characteristics of the overall structure and
individual components of our company-wide compensation program,
including our base salaries, incentive plans and equity plans. A report
of the fi ndings was provided to the Compensation Committee for its
review and consideration. Following this assessment, we believe that
we have instituted policies that align our executive offi cers’ interests
with those of our stockholders without creating incentives for our
executive offi cers or other employees to take risks that are reasonably
likely to have a material adverse effect on us. For example:
• Balance of Compensation: Across the Company, individual
elements of our compensation program include base salaries,
incentive compensation, and for certain of our employees,
equity-based awards. By providing a mix of different elements
of compensation which reward both short-term and long-term
performance, our compensation programs as a whole provide
a balanced approach to incentivizing and retaining employees,
without placing an inappropriate emphasis on any particular
form of compensation.
• Objective Formula and Pre-established Performance
Measures Dictate Annual Incentives: Under the Executive
Plan, payment of annual incentives to our named executive
offi cers is subject to the satisfaction of specifi c company-wide
annual performance targets determined under an incentive formula
established by our Compensation Committee within the fi rst 90
days of each fi scal year. Similarly, our employees other than the
named executive offi cers that are eligible to receive an annual
incentive receive such incentive subject to the satisfaction of
specifi c company-wide annual performance targets determined
under an incentive formula established by our Compensation
Committee. These performance targets are directly and specifi cally
tied to one or more of the following company-wide business
criteria: EBITDA, consolidated pre-tax earnings, net revenues,
net earnings, operating income, earnings before interest and
taxes, cash fl ow measures, return on equity, return on net assets
employed or EPS for the applicable fi scal year.