Starwood 2012 Annual Report Download - page 60

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement54
EXECUTIVE COMPENSATION
• Minimum and Maximum Thresholds for Annual Incentives:
Each year our Compensation Committee establishes within
the fi rst 90 days of any fi scal year a threshold level of adjusted
EBITDA that we must achieve in order for any bonus to be paid
to our named executive offi cers or other company employees
eligible to receive an annual incentive for any given year. The
Executive Plan also specifi es a maximum incentive amount, in
dollars, that may be paid to any executive offi cer for any 12-month
performance period. As a result of this threshold performance
requirement and the design of our Executive Plan, incentive
compensation is payable under our incentive plans only upon
the attainment of performance targets related to business criteria
that are in the interests of our stockholders.
• Use of Long-Term Incentive Compensation: Equity-based
long-term incentive compensation that vests over a period of
years is a key component of total compensation of our executive
employees. This vesting period encourages our executives to
focus on sustaining our long-term performance. These grants
are also made annually, so executives always have unvested
awards that could decrease signifi cantly in value if our business
is not managed for the long-term.
• Share Ownership Guidelines: Our share ownership guidelines
require our executive offi cers, including the named executive
offi cers, 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. See the section
entitled Share Ownership Guidelines beginning on page 52
of this proxy statement for a description of the securities that
count towards meeting the target and other considerations.
• Restrictions on Related Party Transactions: We have a
corporate opportunity and related person transaction approval
process regarding the review, approval and ratifi cation by our
Governance Committee of all transactions with related parties,
executive offi cers, and their respective family members and/or
corporate affi liates. See the section entitled Certain Relationships
and Related Transactions beginning on page 68 of this proxy
statement for a complete description of this policy.
• Incentive Recoupment Policy: We have an incentive recoupment
policy that allows us to recover any annual incentive payment
or long-term incentive payment to any individual executive at
the senior vice president level and above, including our named
executive offi cers, under certain circumstances. See the section
entitled Potential Impact on Compensation for Executive
Misconduct beginning on page 51 of this proxy statement for
more information.
• Anti-Hedging Policy: We have an anti-hedging policy that
restricts all offi cers and directors from engaging in short sales,
entering into any derivative transactions, such as swaps, straddles,
puts, or calls, or engaging in any hedging or monetization
transactions, such as collars or forward sale contracts, that
are directly linked to our shares.
• Internal Processes Further Restrict Risk: We have in place
additional processes to limit risk to us from our compensation
programs. Specifi cally, we have fi nancial policies that restrict the
amount of capital that any individual may deploy absent obtaining
internal approvals, which reduces the risk of inappropriate
expenditures by an individual. Further, the processes and controls
associated with respect to our compensation programs are
audited each year to insure that expenditures have been approved
within our guidelines and by required approval authorities. In
addition, we engage Meridian as an external compensation
consulting fi rm for design and review of our compensation
programs, as well as external legal counsel to assist us with the
periodic review of our compensation plans to ensure compliance
with applicable laws and regulations.