UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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☐ | Preliminary Proxy Statement |
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☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material under |
Host Hotels & Resorts, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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☒ | No fee required. |
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HOST HOTELS & RESORTS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND 2018 PROXY STATEMENT
April 3, 20176, 2018
Dear Fellow Stockholder:
I am pleased to invite you to our 20172018 Annual Meeting of Stockholders of Host Hotels & Resorts, Inc., which will be held at 11:00 a.m. on Thursday, May 11, 2017,17, 2018, at the Ritz-Carlton Hotel, Tysons Corner, Virginia. The doors will open at 10:30 a.m. Our directors and management team will be available to answer questions.
The attendance of stockholders at our annual meeting is helpful in maintaining communication and can improve stockholders’ understanding of our business. We hope you will be able to join us. Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone, or by Internet, or by completing, signing, dating and returning your proxy card. Instructions for these convenient ways to vote are set forth on the enclosed proxy card.
At the annual meeting we will ask you to elect our Board of Directors. We will also be considering ratification of the selection of KPMG LLP as our independent registered public accountants, an advisoryDirectors, vote to approve executive compensation and an advisory vote on the frequency of votes on executive compensation.one stockholder proposal. These proposals are described in detail in the attached Notice of 20172018 Annual Meeting of Stockholders and Proxy Statement. Our 20162017 Annual Report (including our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission) is also enclosed. Weenclosed, which we encourage you to read our 2016 Annual Report, which we hope you will find interesting and useful.read. Thank you for your continued interest in Host Hotels & Resorts and we look forward to seeing you at the meeting.
Sincerely,
Richard E. Marriott
Chairman of the Board
6903 Rockledge Drive, Suite 1500 Bethesda, Maryland 20817-1109 |
NOTICE OF 20172018 ANNUAL MEETING OF STOCKHOLDERS
Meeting Date: | Thursday, May | |
Meeting Time: | 11:00 a.m., Doors open at 10:30 a.m. | |
Location: | The Ritz-Carlton Hotel, Tysons Corner 1700 Tysons Boulevard, McLean, Virginia |
Agenda
1. | Election of |
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An advisory resolution to approve executive compensation; |
Transaction of any other business that may be properly brought before the annual meeting. |
The proxy statement more fully describes these proposals.
Record Date
You may vote if you were a holder of record of our common stock at the close of business on March 16, 2017,19, 2018, the record date.
By Order of the Board of Directors
Elizabeth A. Abdoo
Secretary
April 3, 20176, 2018
REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:
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| VIA THE INTERNET Go to the website address shown on your proxy card and vote via the Internet | BY MAIL Mark, sign, date and return the enclosed proxy card in the postage-paid envelope | ||||
| BY TELEPHONE Use the toll-free number shown on your proxy card (this call is toll-free if made in the United States or Canada) | IN PERSON Attend the Annual Meeting in McLean, Virginia |
TABLE OF CONTENTS |
PROXY STATEMENT
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TABLE OF CONTENTS |
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Securities Authorized for Issuance Under Equity Compensation Plans | 62 | |||
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REPORT OF THE COMPENSATION POLICY COMMITTEE ON EXECUTIVE COMPENSATION | ||||
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Pre-Approval Policy for Services of Independent Registered Public Accountants | ||||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||||
Policy on Transactions and Arrangements with Related Persons | ||||
Proxy Statement. The Board of Directors of Host Hotels & Resorts, Inc. is soliciting proxies to be voted at our 20172018 Annual Meeting of Stockholders on May 11, 201717, 2018 and at any adjournment or postponement of the meeting. We expect that this Proxy Statement will be mailed and made available to stockholders beginning on or about April 3, 2017.6, 2018.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on May 11, 2017. 17, 2018. The Company’s Proxy Statement for the 20172018 Annual Meeting, and our Annual Report to Stockholders for 20162017 are both available free of charge athttp:https://www.hosthotels.com/investor-relations/annual-meetingwww.proxydocs.com/HST. References in this Proxy Statement and accompanying materials to Internet web sites are for the convenience of readers. Information available at or through these web sites is not incorporated by reference in this Proxy Statement.
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PROXY SUMMARY |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
ANNUAL MEETING OF STOCKHOLDERS
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VOTING MATTERS
Matter | Board Recommendation | Page Reference (for more detail) | |||||||||
Election of Directors | ✓ For each director nominee | 19 | |||||||||
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Advisory Resolution to Approve Executive Compensation | ✓ For | 28 | |||||||||
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BOARD NOMINEES
The following table provides summary information about each director nominee. Directors are elected annually by a majority of votes cast.
Name, Age | Director | Principal Occupation | Committee | Other U.S. Public Company Boards | |||||||||||||
A | C | NCG | |||||||||||||||
Mary L. Baglivo, | 2013 |
| PVH Corp. Ruth’s Hospitality Group | ||||||||||||||
Sheila C. Bair, | 2012 | Former President of Washington College | Thomson Reuters | ||||||||||||||
Ann McLaughlin Korologos, | 1993 | Former Chair of RAND Corporation Board of Trustees | Michael Kors | ||||||||||||||
Richard E. Marriott, | Chairman of the Board | ||||||||||||||||
Sandeep L. Mathrani, | 2016 | Chief Executive Officer of GGP | GGP Inc. | ||||||||||||||
John B. Morse, Jr., | 2003 | Retired Vice President and CFO of The Washington Post Company | (F) | AES Corporation | |||||||||||||
Mary Hogan Preusse, 49 | 2017 | Founder and Principal of Sturgis Partners LLC | Digital Realty Trust Kimco Realty VEREIT | ||||||||||||||
Walter C. Rakowich, Lead Independent Director | 2012 | Retired Chief Executive Officer of Prologis | (F) | Iron Mountain Ventas, Inc. | |||||||||||||
James F. Risoleo, | 2017 | President and Chief Executive Officer | Cole Office & Industrial REIT | ||||||||||||||
Gordon H. Smith, | 2009 | President & CEO of the National Association of Broadcasters | |||||||||||||||
A. William Stein, 64 | 2017 | Chief Executive Officer of Digital Realty Trust | (F) | Digital Realty Trust |
* A | Audit Committee | C | Compensation Policy Committee | |||
| Chair of the Committee | NCG | Nominating and Corporate Governance Committee | |||
(F) | Audit Committee Financial Expert |
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Date and Time May 17, 2018 11:00 a.m. Eastern time Record Date March 19, 2018 Place Ritz-Carlton, Tysons Corner 1700 Tysons Boulevard, McLean, Virginia # Shares Eligible shares of common stock 27% >10 years 36% 0-2 years 18% 6-10 years 18% 3-5 years
PROXY SUMMARY |
Snapshot of Director Diversity and Experience
Our director nominees exhibit an effective mix of diversity, experience and perspective. All director nominees are independent other than our Chief Executive Officer (CEO) and Chairman. The Nominating and Corporate Governance Committee and the Board believe it is important for the Board to be “refreshed” by adding new directors from time to time and two new independent directors have been addedjoined the Board in the last year.2017. The Committee and the Board also believe that long-serving directors bring critical skills and historical perspective to the Board in a cyclical business such as the lodging industry. Therefore, theThe Committee seeksand Board seek a balanced mix of both new and experienced directors.directors and believes this balance is achieved with the current nominees.
AUDITOR REFRESHMENT Although ratification of the independent registered public accountants is not required by our Bylaws, the Company believes that submitting ratification of the selection of the independent accountants to a stockholder vote is a matter of good corporate practice. This year, however, the Audit Committee is strongly considering the selection of a new independent auditor as a means of refreshing the auditor relationship and has instructed management to solicit proposals from several accounting firms to serve as the Company’s independent auditor for 2018. That process is currently ongoing and for that reason no proposal is being submitted for stockholder vote. The Audit Committee’s evaluation of whether to change its independent auditor is not a result of any disagreement or dispute with KPMG LLP, the Company’s current independent registered public accounting firm, regarding the Company’s financial statements or accounting practices. For more information, see “AuditorFees—Re-assessment of the Audit Firm Relationship.” The Company intends to submit ratification of the selection of the auditor to a stockholder vote again in 2019.
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CORPORATE GOVERNANCE HIGHLIGHTS
The Company is committed to the values of effective corporate governance and high ethical standards. Our Board believes that these values are conducive to strong performance and creating long-term stockholder value. Our governance framework gives our highly experienced independent directors the structure necessary to provide oversight, advice and counsel to the Company. This framework is described in more detail in our Corporate Governance Guidelines and codes of conduct, which can be found in the governance section of our website.
Board Independence |
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Board Composition |
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Our Director nominees exhibit an effective mix of skills, experience, diversity and fresh perspective. Four of the last six Board members added are either women or bring diversity to the Board. Median Tenure 5.4 years Gender Diversity 36% Women
PROXY SUMMARY |
Board Committees |
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Leadership Structure |
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Risk Oversight |
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Open Communication |
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Director Stock Ownership |
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Accountability to Stockholders |
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Management Succession Planning |
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Sustainability and Corporate Responsibility |
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2016COMPENSATION PROGRAM
Our executive compensation programs are designed to:
PROXY SUMMARY |
We meet these objectives through the appropriate mix of compensation, including:
Component | Form | Description & Objective | ||||
Long-Term Incentive Performance Based | Equity | • Restricted stock units that are solely performance based and vest annually based on corporate objectives and over a three-year period based on relative total stockholder return • Representstwo-thirds of total long-term incentive award • Align executive officers’ compensation with returns delivered to Company stockholders and motivate performance against key corporate objectives | ||||
Long-Term Incentive Retention Based | • Restricted stock units that vest in annual installments over three years • Represents one third of total long-term incentive award • Align the interests of the executives with long-term stockholder value | |||||
Annual Incentive | Cash | • At-risk compensation with payments based on the Company’s achievement of key financial measures (adjusted funds from operations and return on invested capital) and objective individual performance goals • Formulaic with limited discretion and maximum amount capped | ||||
Base Salary | • Provides market-competitive pay relative of an executive’s role, experience and individual performance • Only component of compensation that is fixed |
Last year we made several key enhancements to our compensation programs to continue to improve the link between compensation and the Company’s business and strategy as well as the long-term interests of stockholders.
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removed individual performance measures from long-term incentive program modified mix of equity to 2/3rd performance based; and 1/3rd time based for retention purposes reweighted performance based long-term incentives to equally weight strategic measures and total stockholder return will utilize forward looking3-year total stockholder return measure (replacing previous historical approach) removed stock options
PROXY SUMMARY |
✓ 94% of the votescast on our 2017say-on-pay proposal were in favor of our executive compensation program and policies |
See “Compensation Discussion and Analysis—Our Compensation Program” beginning on page 32 for a further discussion of the Company’s compensation programs and the rationale for the changes in 2017.
2017 PERFORMANCE HIGHLIGHTS
20162017 was a year of continued growth for the Company. Revenues increased for the seventh year in a row to $5,430 million despite selling 10 hotels in the year. The Company’s comparable hotel revenue per available room (or RevPAR) increased 2.7% in 2016 as compared to 2015 on a constant U.S. dollar basis,$180, surpassing last year’s record and at $177 wasis the highest full year RevPAR in the Company’s history. RevPAR is a commonly used measure within the hotel industry to evaluate hotel operations. For more information on this measure and our 20162017 results, see the Company’s Annual Report on Form10-K.
We alsoWith a new management team in place, we undertook a number of initiatives in 20162017 to better position the Company for long-term, sustainable growth.growth and continued to execute on our strategy to decrease international exposure and improve the overall quality of the portfolio by recycling out of low RevPAR hotels into high RevPAR hotels.
New CEO as of January 1, 2017; New CIO as of September, 2017; New CFO as of November, 2017. Realigned investments and asset management under the CIO and enterprise analytics under the CFO to encourage collaboration and efficiencies to drive real estate value creation. | Achieved thestrongest balance sheet (in terms of leverage and interest coverage) in the Company’s Maintained our investment grade bond rating. |
activity:
$ Million
| Returned to stockholders in
$ Million
| Total one year stockholder return:
Based on increase in stock price from December 31, 2016 to December 31, |
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ATTENDANCE AND VOTING MATTERS |
What is a proxy?
It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. This proxy is being solicited by the Board of Directors, and we have designated Gregory J. LarsonMichael D. Bluhm and Elizabeth A. Abdoo as proxies for this annual meeting. When you properly sign your proxy card or vote via telephone or the Internet, you are giving the persons named on the card your direction to vote your shares of common stock at the annual meeting as you designate.
What is a proxy statement?
It is a document that summarizes information that we are required to provide you under the rules of the Securities and Exchange Commission, or SEC, when we ask you to vote your shares or designate a proxy. It is designed to assist you in voting.
What does it mean if I get more than one proxy card?
You should vote by completing and signing each proxy card you receive. You will receive separate proxy cards for all of the shares you hold in different ways, such as jointly with another person, or in trust, or in different brokerage accounts.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare Trust Company, N.A., or Computershare, you are considered the stockholder of record with respect to those shares, and the Notice of Annual Meeting, Proxy Statement and our 20162017 Annual Report were sent directly to you by the Company.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice of Annual Meeting, Proxy Statement and our 20162017 Annual Report were forwarded to you by that organization. The organization holding your shares is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.
Who is entitled to vote?
Anyone who owned common stock of the Company at the close of business on March 16, 2017,19, 2018, the record date, can vote at the annual meeting and is entitled to one vote for each share of common stock owned.
How can I manage the number of Annual Reports and Proxy Statements I receive?
The included glossy 20162017 Annual Report and our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC (which together comprise the 2016 Annual Report of the Company), is being mailed to stockholders with this Proxy Statement. If you share an address with any of our other stockholders, your household might receive only one copy of these documents. We will promptly deliver, upon oral or written request, individual copies of these documents to any stockholders at a shared address who received only one copy. To request individual copies for each stockholder in your household for this year and/or future years, please contact our Investor Relations department at240-744-1000, bye-mail to ir@hosthotels.com, or by mail to Host Hotels & Resorts, Inc., 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817, Attn: Investor Relations. To ask that only one set of the documents be mailed to your household, please contact your bank, broker or other nominee or, if you are a stockholder of record, please call our transfer agent, Computershare at866-367-6351 toll-free within the United States and Canada; outside the United States and Canada at781-575-4320, or by mail at P.O. Box 30170, College Station, TX 77842-3170.505000, Louisville, KY 40233.
ATTENDANCE AND VOTING MATTERS |
How do I vote?
Voting in Person at the Meeting. If you are a stockholder of record as of the close of business on March 16, 201719, 2018 and attend the annual meeting, you may vote in person at the meeting.meeting by presenting some form of government-issued photo identification. If your shares are held by a broker, bank or other nominee (i.e., in “street name”) and you wish to vote in person at the meeting, you will need to obtain a proxy form from the broker, bank or other nominee that holds your shares of record.record and present some form of government-issued photo identification.
Voting by Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares in your own name as a holder of record, you may authorize a proxy to vote your shares as follows:
• | Vote by |
• | Vote by Internet. You also have the option to vote via the Internet. The website for Internet voting is printed on your proxy card. Internet voting is available 24 hours per day until 11:59 p.m., Eastern Time, on Wednesday, May |
• | Vote by Mail. If you would like to vote by mail, mark your proxy card, sign and date it, and return it to Computershare in the postage-paid envelope provided. |
Voting by Proxy for Shares Registered in Street Name. If your shares are held in street name, you will receive instructions from your broker, bank or other nominee which you must follow in order to have your shares of common stock voted.
Who is acting as my proxy and how will they vote my shares?
The individuals named on the enclosed proxy card are your proxies. They will vote your shares as you indicate. If you sign and return your proxy card but do not indicate how you wish to vote and you hold your shares in your own name as a holder of record, all of your shares will be voted as recommended by the Board of Directors.
However, if you hold your shares in street name, it is critical that you cast your vote in order for your vote to count. In the past, if you held your shares in street name and you did not indicate how you wanted to vote those shares, your bank or broker was allowed to vote those shares on your behalf in the election of directors and other routine matters as they deemed appropriate. Now, due to regulatory changes, your bank or broker is no longer able to vote your shares on a discretionary basis in most matters. If you hold your shares in street name and do not instruct your bank or broker how to vote, then no votes will be cast on your behalf for all matters other than the ratification of the appointment of KPMG LLP as the Company’s independent registered public accountants for 2017 (proposal 2).behalf.
May I revoke my proxy?
You may revoke your proxy at any time before the annual meeting if you:
(1) | File a written notice of revocation dated after the date of your proxy with Computershare; or |
(2) | Send Computershare by mail a later-dated proxy for the same shares of common stock; or |
(3) | Submit a new vote by telephone or the Internet. The date of your last vote, by either of these methods or by mail, will be the one that is counted; or |
(4) | Attend the annual meeting AND vote there in person. |
The mailing address for Computershare is P.O. Box 30170, College Station, TX 77842-3170.505000, Louisville, KY 40202. The overnight delivery address for Computershare is: 211 Quality Circle,462 South 4th Street, Suite 210 College Station, TX 77845.1600, Louisville, KY 40202.
ATTENDANCE AND VOTING MATTERS |
What vote is required to approve each proposal?
In the election of directors (proposal 1), each nominee must receive more “for” votes than “against” votes in order to be elected as a director. The affirmative vote of a majority of votes cast at the meeting is required to ratify the appointment of KPMG LLP as the Company’s independent registered public accountants for 2017 (proposal 2) and to approve the advisory resolution on executive compensation (proposal 3). The frequency of2) and to approve the advisory vote on executive compensation (1, 2 or 3 years) receiving the greatest number of votes will be considered the frequency recommended by stockholdersstockholder proposal (proposal 4)3).
What constitutes a “quorum”?
A majority of the outstanding shares entitled to vote, present in person or by proxy, constitutes a quorum. We must have a quorum to conduct the annual meeting. If a quorum is not present or if we decide that more time is necessary for the solicitation of proxies, we may adjourn the annual meeting. We may do this with or without a stockholder vote. If there is a stockholder vote to adjourn, the named proxies will vote all shares of common stock for which they have voting authority in favor of the adjournment.
How are abstentions and brokernon-votes treated?
Shares of our common stock represented by proxies that are marked “abstain,” or which constitute broker non-votes,“abstain” will be counted as present at the meeting for the purpose of determining a quorum. Abstentions will have no effect on the results of the vote on the proposals to be acted upon at the annual meeting. Broker non-votes occur when a nominee holding shares of our common stock for a beneficial owner returns a properly executed proxy but has not received voting instructions from the beneficial owner and suchthe nominee exercises its discretionary authority to vote the shares on certain routine proposals, as permitted by New York Stock Exchange rules, but does not possess or does not choosehave authority to exercise discretionary authority with respect to such shares. Abstentions and broker non-votes will havevote the shares on other non-routine proposals. This year, there are no effect on the results of the vote on the fourroutine proposals to be acted upon at the annual meeting, so there will not be any broker non-votes at the annual meeting.
How can I obtain copies of documents referenced in this proxy statement?
Copies of the Company’s Corporate Governance Guidelines, code of conduct and other documents referenced in this proxy statement can be accessed in the “Governance” section of the Company’s website athttp://www.hosthotels.com. Copies of these documents are also available in print to stockholders upon request by writing to:
Host Hotels & Resorts, Inc.
6903 Rockledge Drive, Suite 1500
Bethesda, Maryland 20817
Attention: Investor Relations
How will voting on any other business be conducted?
Although we do not know of any other business to be considered at the annual meeting other than the proposals described in this proxy statement, if any other business is properly presented at the annual meeting your signed proxy card gives authority to Gregory J. LarsonMichael D. Bluhm and Elizabeth A. Abdoo, or either of them, to vote on such matters in their discretion. Unless otherwise required by our Charter or Bylaws or by applicable Maryland law, any other matter properly presented for a vote at the meeting will require the affirmative vote of a majority of the votes cast.
Who will count the votes?
Computershare Trust Company, N.A., our transfer agent, will act as the inspectors of election and will tabulate the votes.
Will there be a sign language interpreter at the meeting?
If you would like to have a sign language interpreter at the annual meeting, please send your request in writing to the Secretary, Host Hotels & Resorts, Inc., 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817. We must receive your request no later than May 8, 2018.
ATTENDANCE AND VOTING MATTERS |
Who pays the cost of this proxy solicitation?
We bear all expenses incurred in connection with the solicitation of proxies. We have hired the firm of MacKenzie Partners, Inc. to assist in the solicitation of proxies for a fee of $14,000, plus expenses. We will reimburse brokers, fiduciaries and custodians for their reasonable expenses related to forwarding our proxy materials to those beneficial owners.
Is this proxy statement the only way that proxies are being solicited?
No. In addition to mailing these proxy solicitation materials, our officers and employees may solicit proxies by further mailings or personal conversations, or by telephone, facsimile or other electronic means.
How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will be disclosed on a Current Report on Form8-K filed with the SEC within four business days of the date of the annual meeting, which will be available on the Company’s website athttp://www.hosthotels.com.www.hosthotels.com.
CORPORATE GOVERNANCE AND BOARD MATTERS |
CORPORATE GOVERNANCE AND BOARD MATTERS
Corporate Governance and Code of Business Conduct and Ethics
Our Board of Directors oversees the management of the Company and its business for the benefit of our stockholders in order to enhance stockholder value over the long-term. The Board has adopted Corporate Governance Guidelines which are reviewed annually and periodically amended as the Board enhances the Company’s corporate governance practices. The Board has also adopted a code of business conduct and ethics that applies to all directors, officers and employees of the Company. The purpose of the code of conduct is to promote honest and ethical conduct; to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by the Company; and to promote compliance with all applicable rules and regulations that apply to the Company and its officers, employees and directors. The Corporate Governance Guidelines, code of conduct and other documents describing the Company’s corporate governance practices can be accessed in the “Governance” section of the Company’s website athttp://www.hosthotels.com. Copies of these documents are also available in print to stockholders upon request.
Governance is a continuing focus of the Company. In 2016 the Board of Directors amended and restated the Company’s Bylaws to add ‘proxy access,’ a means for the Company’s stockholders to include stockholder-nominated director candidates in the Company’s proxy materials for annual meetings of stockholders. Also in 2016 the Board proposed, and stockholders approved, Charter amendments which strengthen the rights of stockholders by providing stockholders the concurrent power to amend the Bylaws and reducing the threshold needed for stockholders to call a special meeting. Over the years, the Board has implemented numerous other corporate governance enhancements to serve the long-term interests of all stockholders. These have included:
For more information on the Company’s corporate governance practices, see the Corporate Governance Guidelines posted on our website.
The Company invites stockholders and other interested parties to communicate any concerns they may have about the Company directly and confidentially with any of the full Board of Directors, the Lead Director or thenon-management directors as a group by writing to:
Host Hotels & Resorts, Inc. | ||||
Attention: Secretary | ||||
6903 Rockledge Dr., Suite 1500 | ||||
Bethesda, MD 20817 |
The Secretary will review and forward all stockholder communications to the intended recipient except those unrelated to the duties and responsibilities of the Board, such as junk mail and mass mailings, resumes and other forms of job inquiries, surveys, new business suggestions, business solicitations or advertisements. In addition, material that is hostile, threatening, illegal or similarly unsuitable or outside the scope of Board matters or duplicative of other communications previously forwarded to the recipient will also be excluded.
Stockholder Outreach and Engagement
Our relationship with our stockholders is an important part of our corporate governance program. Engaging with our stockholders helps us to understand how they view us, to set goals and expectations for our performance, and to identify emerging issues that may affect our strategies, corporate governance, compensation practices or
CORPORATE GOVERNANCE AND BOARD MATTERS |
and to identify emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations. Our stockholder and investor outreach generally includes investor road shows, analyst meetings, investor days, and investor conferences and meetings. In the last several years we have also expanded our stockholder outreach by engaging stockholders directly and seeking their views on governance and other matters, concentrating our efforts on our largest stockholders. In 2017 the Company’s new management team met with over 200 members of the investment community, reaching holders of approximately 65% of the Company’s actively managed shares (i.e., excluding holdings of passive investors such as index funds). We also communicate with stockholders and other stakeholders through various media, including our annual report and SEC filings, proxy statement, news releases, and our website. Our conference calls for quarterly earnings releases are open to all. These calls are available in real time and as archived webcasts on our website for a period of time.
Our governance framework provides the Board with the flexibility to select the appropriate leadership structure for the Company. This will be driven by the needs of the Company as well as the particular makeup of the Board at any point in time.
We have historically had a leadership structure that includes a Chairman of the Board, who is annually elected, a separate Chief Executive Officer, and an independent director serving as Lead Director. The CEO is responsible for setting the strategic direction of the Company and for the day to day leadership and management of the Company, while the Chairman of the Board provides guidance to the CEO, directs the agenda for Board meetings, and presides over meetings of the full Board.Board and participates in stakeholder outreach. This structure reflects the continued strong leadership, industry experience and energy brought to the Board by Richard E. Marriott, who has been elected and led the Company as Chair since its split with Marriott International in 1993. His over 50 year career at the Company uniquely provides him with a perspective and wealth of knowledge that is invaluable to the Board.
The Board also has the position of Lead Director who provides additional independent oversight of senior management and board matters in our current structure where the Chairman and CEO are not independent directors. The role of a lead directorLead Director is meant to facilitate, and not to inhibit, communication among the directors or between any of them and the Chairman and CEO. Accordingly, directors are encouraged to continue to communicate among themselves and directly with the Chairman and CEO, and under our Corporate Governance Guidelines each independent director may call an executive session. The BoardUpon recommendation of the Nominating and Corporate Governance Committee, our Lead Director is elected annually elects a lead director andfrom among the independent directors. Walter C. Rakowich has served in that roleas our Lead Director since May 2014. The duties of the Lead Director include: (i) presiding at executive sessions of the Board, and briefing the Chairman and CEO, as needed, following such sessions; (ii) presiding at meetings of the Board where the Chairman is not present; (iii) convening and acting as chair of meetings of the independent directors; (iv) providing input on Board agendas and meeting schedules; (v) providing feedback to and consulting with the Chairman and CEO on any concerns of the Board; and (vi) serving as the director to whom correspondence may be directed on behalf of thenon-management directors as a group, as described above under “Communications with Directors.”
Another component of our leadership structure is the active role played by our independent directors in overseeing the Company’s business, both at the Board and Committee level. EightNine of teneleven of our current directors and seven of nine of our director nominees are considered independent within the meaning of the rules of the New York Stock Exchange. Under our Corporate Governance Guidelines,non-management directors meet in executive session without the presence of the CEO, the Chairman of the Board or other executive officers. The purpose of these sessions is to promote open discussions among the independent directors concerning the business and affairs of the Company as well as matters concerning management, without any member of management present.
The Board believes that the separate roles of Chairman and CEO, coupled with an independent Lead Director, the use of regular executive sessions of thenon-management directors, and the substantial majority of independent directors comprising the Board, allows the Board to maintain effective oversight of the Company.
CORPORATE GOVERNANCE AND BOARD MATTERS |
At least annually, the Nominating and Corporate Governance Committee discusses the structure and composition of the Board of Directors and reviews the current leadership structure. This is discussed with the full Board as part of the Board’s annual evaluation to assess its effectiveness and takes into account our current business plans and long-term strategy as well as the particular makeup of the Board at that time.
It is the Board’s policy that a majority of the directors of the Company be independent. To be considered independent, a director must not have a material relationship with the Company that could interfere with a director’s independent judgment. To be considered independent, directors must also be “independent” within the meaning of the New York Stock Exchange’s requirements. To assist the Board in determining whether a director is independent, the Board has adopted standards for independence set forth in the Company’s Corporate Governance Guidelines.
In determining the independence of our directors, the Board considers all relevant facts and circumstances, including, but not limited to, whether the director receives any compensation or other fees from the Company, other than the fees described under “Director Compensation”, whether the director, or an organization with which the director is affiliated, has entered into any commercial, consulting, or similar contracts with the Company, and any charitable contributions the Company made tonon-profit organizations with which director nominees or their immediate family members are associated. Consistent with these considerations, the Nominating and Corporate Governance Committee reviewed directors’ responses to a questionnaire asking about their relationships with the Company, as well as those of their immediate family members, and other potential conflicts of interest. The Committee determined that all of the director nominees other than Mr. Marriott and Mr. Risoleo are independent and recommended to the Board that Messrs. Mathrani, Morse, Smith, Stein and Rakowich and Mmes. Korologos, Bair, Hogan Preusse and Baglivo have been determined to be independent. The Board approved the determination that sevennine of the Company’s nineeleven director nominees are independent. Messrs. Marriott and Risoleo are not independent because they are Company employees.
The Board’s Role in Risk Oversight
Our Board of Directors has overall responsibility for risk oversight with a focus on the most significant risks facing the Company. Reviews of certain areas are conducted by the relevant committees that report on their deliberations to the Board. Risks are considered in almost all business decisions and as part of the Company’s business strategy. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, appropriate risk-taking is essential for the Company to be competitive and to achieve its business objectives. The chart below summarizes the primary areas of risk oversight for the Board and its committees.
Risk Oversight
Board/Committee | Primary Areas of Risk Oversight | |
Full Board | Strategic, financial and execution risks and exposures associated with the annual business plan and strategic plan; major litigation and regulatory exposures, environmental and other current matters that may present material risk to the Company’s operations, plans, prospects or reputation; investments, acquisitions and divestitures; capital market and joint ventures; and senior management succession planning. | |
Audit Committee | Discusses guidelines and policies with respect to the Company’s risk assessment and risk management processes. Responsible for oversight of risks associated with financial matters, particularly the Company’s financial statements, tax, accounting, and disclosure; cybersecurity related risks; risks associated with derivatives and hedging strategy; risks associated with the independence, qualifications and performance of the Company’s outside auditor and internal auditors; and the Company’s compliance with legal and regulatory requirements. |
CORPORATE GOVERNANCE AND BOARD MATTERS |
Board/Committee | Primary Areas of Risk Oversight | |
Compensation Policy Committee | Exposures associated with compensation of the Company’s officers, stock ownership and incentive-compensation plans, executive retention, succession planning and employment related matters. As discussed in more detail in the Compensation Discussion & Analysis, the Committee reviews and approves compensation programs with features that are intended to mitigate risk without diminishing the incentive nature of compensation. | |
Nominating and Corporate Governance Committee | Risks and exposures relating to the identification of qualified candidates to become Board members; continuing oversight of Board composition; |
The Board and its committees implement their oversight responsibilities through management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These areas of focus include strategic, operating, financial, legal, compliance and reputational risk. Management communicates routinely with the Board, its committees and individual directors on the significant risks identified through this process and how they are being managed.
Political ContributionsContribution Policy and Trade Association Memberships
The Company has aUnder the Company’s longstanding policy, prohibitingCompany funds may not be used to contribute to candidates, political party committees, or political action committees. Company funds also may not be used to make direct contributionsindependent expenditures to support or oppose political parties, political committees, political candidates,campaigns, to contribute to “social welfare” organizations organized under Section 501(c)(4) of the U.S. Internal Revenue Code or organizations organized under Section 527 of the U.S. Internal Revenue Code.Code, or to support ballot measure committees. The Company does not have a political action committee.
The Company believes that participation in the public policy process is an important and essential means of enhancing stockholder value. To help us achieve this objective, the Company belongs to a number of trade associations (organized under Section 501(c)(6) of the Internal Revenue Code), which allows us to network, build business skills, advance our public agenda and related business goals and monitor industry policies and trends. Company participation in trade associations, including membership on a trade association board, does not mean that the Company agrees with every position a trade association takes on an issue. In fact, from time to time our positions may differ from those of the trade associations of which we are members.
The Company makes payments to these associations, including membership fees and dues. In 2016, sixPursuant to the Company’s code of business conduct and ethics, the Company’s legal department oversees compliance with the Company’s policy on political contributions. The Nominating and Corporate Governance Committee discusses the Company’s political spending policies and disclosures. The chart below lists organizations receivedreceiving dues and other contributions from the Company totaling $25,000 or more.more between 2017 and 2015. Based on each organization’s records, we have listed below the portion of Company dues and other amounts that are used by each organization for lobbying.
2016
CORPORATE GOVERNANCE AND BOARD MATTERS |
Trade Association Memberships
U.S. Trade Association | 2016 Company | Lobbying % (1) | Amount of | |||||||||
National Association of Real Estate Investment Trusts | $ | 126,740 | 25 | $ | 31,685 | |||||||
US Travel Association | 70,850 | 27 | 19,130 | |||||||||
Real Estate Roundtable | 30,000 | 65 | 19,250 | |||||||||
The Real Estate Board of New York | 29,000 | 7 | 1,960 | |||||||||
American Hotel & Lodging Association | 198,085 | (2) | 36 | 24,881 | (3) | |||||||
Federal City Council | 50,000 | 0 | 0 |
2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
U.S. Trade Association
| Company Dues and Contributions
| Lobbying
| Amount of
| Company Dues and Contributions
| Lobbying
| Amount of
| Company Dues and Contributions
| Lobbying
| Amount of
| ||||||||||||||||||||||||||||||||||||
National Association of Real Estate Investment Trusts
|
| $130,572
|
|
| 20
|
|
| $26,114
|
|
| $126,740
|
|
| 25
|
|
| $31,685
|
|
| $127,652
|
|
| 25
|
|
| $31,913
|
| ||||||||||||||||||
US Travel Association
|
| 72,500
|
|
| 27
|
|
| 19,575
|
|
| 70,850
|
|
| 27
|
|
| 19,130
|
|
| 104,286
|
|
| 38
|
|
| 39,629
|
| ||||||||||||||||||
Real Estate Roundtable
|
| 30,000
|
|
| 65
|
|
| 22,750
|
|
| 30,000
|
|
| 65
|
|
| 19,250
|
|
| 45,000
|
|
| 65
|
|
| 29,250
|
| ||||||||||||||||||
The Real Estate Board of New York
|
| 29,000
| (2)
|
| 9
|
|
| 2,520
|
|
| 29,000
| (2)
|
| 7
|
|
| 1,960
|
|
| 29,000
| (2)
|
| 7
|
|
| 1,960
|
| ||||||||||||||||||
American Hotel & Lodging Association(3)
|
| 74,072
|
|
| 36
|
|
| 26,665
|
|
| 198,085
|
|
| 36
|
|
| 24,881
| (4)
|
| 164,266
|
|
| 34
|
|
| 32,299
| (5)
| ||||||||||||||||||
Federal City Council | 50,000 | 0 | 0 | 50,000 | 0 | 0 |
(1) | Lobbying percentages obtained from the respective trade association. |
(2) | Of this amount, $28,000 were paid in dues and $1,000 were paid in contributions (no contributions were used for lobbying) |
(3) | In addition to |
AH&LA only uses dues (and not contributions) to fund its lobbying activities. The Company paid AH&LA $69,115 in dues in 2016. |
(5) | AH&LA only uses dues (and not contributions) to fund its lobbying activities. The Company paid AH&LA $94,996 in dues in 2015. |
Meetings and Committees of the Board
The Board met sevenfour times in 2016.2017. Each director attended at least 80% of the meetings of the Board and of the committees on which the director served. Under the Corporate Governance Guidelines, directors are expected to attend the annual meeting of stockholders, and all directors attended the annual meeting in 2016.2017. Under our Corporate Governance Guidelines, non-managementour independent directors meet in executive session without management and did so after each regularly scheduled Board meeting in 2016.2017. Mr. Rakowich, the Lead Director, presided over the executive sessions of thenon-management directors.
| ||||||||
meetings held by the Board of Directors | ||||||||
times the independent directors met in executive session without management present | ||||||||
total Board and Committee meetings | ||||||||
of the then current members of the Board attending the Annual Meeting held on May 11, 2017 |
The Board has established three standing committees to assist it in carrying out its responsibilities: the Audit Committee, the Compensation Policy Committee and the Nominating and Corporate Governance Committee. The Board has adopted a written charter for each committee, all of which are available on the Company’s website (http://www.hosthotels.com). Copies of these charters are also available in print to stockholders upon request. See“Attendance and Voting Matters—How can I obtain copies of documents referenced in this proxy statement?” Each committee consists entirely of independent directors in accordance with New York Stock Exchange rules. The Board generally makes committee assignments in May after the annual meeting of stockholders, upon recommendation of the Nominating and Corporate Governance Committee. The Board may from time to time appoint other committees as circumstances warrant. Any new committees will have authority and responsibility as delegated by the Board.
CORPORATE GOVERNANCE AND BOARD MATTERS |
Audit
Members & Meetings | Committee Functions | |
John B. Morse, Jr. (Chair) Sandeep L. Mathrani Walter C. Rakowich A. William Stein
Number of Meetings in | • Appoints and oversees the independent auditors;
• Approves the scope of audits and other services to be performed by the independent and internal auditors;
• Interviews, discusses and approves the selection of the lead audit partner of the independent auditor;
• Reviews and approves in advance the engagement fees of the outside auditor and allnon-audit services and related fees, and assesses whether the performance ofnon-audit services could impair the independence of the independent auditors;
• Reviews the work and findings, if any, of the internal auditors;
• Reviews the results of internal and external audits, the accounting principles applied in financial reporting, and financial and operational controls;
• Meets with the independent auditors, management representatives and internal auditors;
• Reviews interim financial statements each quarter before the Company files its Quarterly Report on Form10-Q with the SEC;
• Reviews audited financial statements each year before the Company files its Annual Report onForm 10-K with the SEC; and
• Reviews risk exposures and management policies. |
Each member of the Audit Committee, in the business judgment of the Board, meets the qualifications (including independence) and expertise requirements of the New York Stock Exchange and Mr. Morse, Mr. Rakowich and Mr. RakowichStein are “audit committee financial experts” within the meaning of SEC rules. Our independent and internal auditors have unrestricted access to the Audit Committee. The Report of the Audit Committee appears later in this proxy statement.
CORPORATE GOVERNANCE AND BOARD MATTERS |
Nominating and Corporate Governance
Members & Meetings | Committee Functions | |
Walter C. Rakowich (Chair) Sheila C. Bair Ann McLaughlin Korologos John B. Morse, Jr.
Number of Meetings in | • Makes recommendations to the Board on corporate governance matters and is responsible for keeping abreast of corporate governance developments;
• Oversees the annual evaluation of the Board, its committees and, in conjunction with the Compensation Policy Committee, management;
• Reviews periodically the compensation and benefits ofnon-employee directors and makes recommendations to the Board or the Compensation Policy Committee of any modifications;
• Reviews the composition and tenure of the Board and skills of directors and recommends nomination of Board members and addition of new members, as appropriate;
• Ensures that the Board maintains its diversity;
• Reviews policies and programs on matters of corporate responsibility and sustainability, including environmental, social and other matters; and
• Fulfills an advisory function with respect to a range of matters affecting the Board and its committees, including making recommendations with respect to:
— selection and rotation of committee chairs and committee assignments; and
— implementation, compliance and enhancements to the Company’s code of conduct and Corporate Governance Guidelines. |
Compensation Policy
Members & Meetings | Committee Functions | |
Mary L. Baglivo (Chair) Ann McLaughlin Korologos Sandeep L. Mathrani Gordon H. Smith
Number of Meetings in | • Oversees compensation policies, plans and benefits for the Company’s employees;
• Approves the goals and objectives for compensation of all executive officers of the Company and approves compensation for other members of senior management;
• Advises our Board on the adoption of policies that govern the Company’s annual compensation and stock ownership plans;
• Reviews and approves the Company’s goals and objectives relevant to the compensation of the CEO and evaluates the CEO’s performance in light of those goals and objectives;
• Reviews and advises the Company on the process used for gathering information on the compensation paid by other similar businesses;
• Reviews the Company’s succession plans relating to the CEO and other senior management and discusses with the full Board;
• Reviews periodic reports from management on matters relating to the Company’s personnel appointments and practices; and
• Reviews the demographics of the Company’s workforce as it relates to diversity. |
Role of the Compensation Consultant
Pursuant to its charter, the Compensation Policy Committee is authorized to engage, retain and terminate any consultant, as well as approve the consultant’s fees, scope of work and other terms of retention. Starting in 2010,
CORPORATE GOVERNANCE AND BOARD MATTERS |
the Committee retained Pay Governance LLC as its advisor. Pay Governance advises and consults with the Committee on compensation issues, compensation design and trends, and keeps the Committee apprised of regulatory, legislative, and accounting developments and competitive practices related to executive compensation. Pay Governance assisted the Committee in the design, structure and implementation of the current annual executive compensation program, the design and structure of the 2017 executive compensation program and reviews, at the direction of the Committee, compensation levels, trends and practices annually. Pay Governance does not determine the exact amount or form of executive compensation for any executive officers. See “Compensation Discussion and Analysis—Our Compensation Program.” Pay Governance reports directly to the Committee, and a representativerepresentatives of Pay Governance, when requested, attendsattend meetings of the Committee, isare available to participate in executive sessions and communicatescommunicate directly with the Committee Chair or its members outside of meetings. Pay Governance also served as a consultant retained by the Nominating and Corporate Governance Committee in late 2017 to assist the Committee with its review of the compensation of independent directors. Pay Governance is retained and conducts its work at the direction and request of the Board committees. It is not retained and does no other work directly for the Company.
In compliance with the disclosure requirements of the SEC regarding the independence of compensation consultants, Pay Governance addressed each of the six independence factors established by the SEC with the Compensation Policy Committee. Its responses affirmed the independence of Pay Governance on executive compensation matters. Based on this assessment, the Committee determined that the engagement of Pay Governance does not raise any conflicts of interest or similar concerns. The Committee also evaluated the independence of other outside advisors to the Committee, including outside legal counsel, considering the same independence factors and concluded their work for the Committee does not raise any conflicts of interest.
The Compensation Policy Committee may delegate any or all of its responsibilities to a subcommittee, but did not do so in 2016.2017. The Compensation Policy Committee’s Report on Executive Compensation appears later in this proxy statement.
The Compensation Policy Committee oversees theall of our compensation policies and plans for all employees.practices. Management, at the request of the Committee, has assessed the Company’s compensation programs and has concluded that they do not create risks that are reasonably likely to have a material adverse effect on the Company. This risk assessment process included a review of all material compensation policies and practices, which were discussed with the Committee. The compensation programs of the Company are all centrally designed and centrally administered. The elements of compensation for senior management and upper middle management are also the same: base salary, annual cash incentive awards and long-term incentives. The performance measures for the annual cash incentive awards are (i) Company financial metrics that are based on an annual business plan and budget reviewed and approved by the Board and (ii) personal performance goals that are derived from the annual business plan and budget and Company strategic plan, which tie to measures of long-term success of the Company. The business plan and budget are reviewed quarterly with theat each Board meeting and the strategic plan is addressed annually. The personal goals are drafted by each employee annually and approved by each manager with the intent that there is a common purpose and accountability throughout the Company. Performance measures for long-term incentives are currently personalstrategic goals corporate goals, whichof the Company, established annually and are tied to the business plan and budget, and total stockholder return measured over a three year period. Total compensation is capped throughout our compensation programs, and the Compensation Policy Committee reviews all senior management compensation and that of any employee earning more than $500,000 in annual target cash compensation, which would includeincludes salary bonus and equity awards.bonus. Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or excessive risk-taking.
Compensation Policy Committee Interlocks and Insider Participation
None of the members of the Compensation Policy Committee is or has been an officer or employee of the Company or had any relationship that is required to be disclosed as a transaction with a related person.
CORPORATE GOVERNANCE AND BOARD MATTERS |
Identification and Evaluation of Director CandidatesProcess for Selecting Directors
Each year theThe Nominating and Corporate Governance Committee reviews withscreens candidates and recommends candidates for nomination by the Board of Directorsfull Board. The Company’s Bylaws provide that the compositionsize of the Board asmay range from three to thirteen. The Board currently believes that an appropriate size is nine to eleven members, allowing, however, for changing circumstances that may warrant a whole and makes a recommendation whether to renominate directors and whether to consider any new persons to be added to the Board.higher or lower number. The Committee considers director candidates suggested by members of the Committee, other directors, stockholders (as discussed below) and management, and has engaged the services of third party firms to assist in identifying and evaluating director candidates. The Committee retained Ferguson Partners Ltd. in the fall of 2015 for this purpose.
We had three new directors in 2017, two of whom are independent. Mr. Risoleo, our CEO, became a Board member on January 1, 2017. Ms. Mary Hogan Preusse was identified as a candidate by Mr. Risoleo and elected to the Board effective in June 2017 on the recommendation of Committee. Mr. Stein was identified as a candidate by Ferguson Partners Ltd. and elected to the Board in July 2017 on the recommendation of the Committee.
Stockholder Nominations and Recommendation of Director Candidates
The Committee will also considerconsiders any written suggestions of stockholders for director nominees. The recommendation must include the name and address of the candidate, a brief biographical description and a description of the person’s qualifications. Recommendations should be mailed to Host Hotels & Resorts, Inc., 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817, Attn: Secretary. The Committee will evaluate
In addition, we amended our Bylaws in November 2016 to permit a stockholder (or group of up to 20 stockholders) who have owned at least 3% of our stock continuously for at least three years to submit director nominees for the same manner candidates suggestedgreater of two individuals or 20% of the Board for inclusion in accordance with this policyour proxy statement if the stockholder(s) and those recommended by other sources. The Committee has full discretion in considering all nominations tonominee(s) meet the Board. Alternatively, stockholdersrequirements of the Bylaws.
Stockholders who would like to nominate a candidate for director for inclusion in the Company’s proxy statement, (proxy access), in lieu of making a recommendation to the Nominating and Corporate Governance Committee, or who would like to nominate a director candidate that is not intended to be included in the Company’s proxy statement must in each case comply with the requirements described in this proxy statement and the Company’s Bylaws. See “Stockholder Proposals for our Next Annual Meeting.”
The evaluation of director candidates involves several steps, not necessarily in any particular order. Preliminary interviews of director candidates may be conducted by the Chair of the Committee or, at his or her request, any other member of the Committee, the CEO, Chairman of the Board, or other directors. Background material pertaining to director candidates is distributed to the members of the Committee for their review. References are checked and analyses are performed to identify potential conflicts of interest and appropriate independence from the Company. Director candidates who the Committee determines merit further consideration are interviewed by the Chair of the Committee and other Committee members, directors and executive officers as determined by the Chair of the Committee. The results of these interviews are considered by the Committee in its deliberations.
There are certain minimum qualifications for Board membership that director candidates should possess, including integrity and high ethical standards, mature and independent judgment, diverse business experience, familiarity with the issues affecting the Company’s business, and a commitment to full participation on the Board and its committees. The Committee has adopted guidelines in its charter to be used in evaluating candidates in order to ensure a diverse and highly qualified Board. In addition to the characteristics mentioned above, the guidelines provide that the Committee may consider the following criteria, including: experience in running a major enterprise, sound business acumen, experience as a board member of another publicly held company, academic expertise in an area of the Company’s operations, and a reputation, both personal and professional, consistent with the image and reputation of the Company. In addition, when considering new Board members, the Committee considers whether the candidate would qualify as an independent director under New York Stock Exchange rules and other applicable regulations.HOW WE BUILD A BOARD THAT IS RIGHT FOR HOST
This year, there are two new director nominees who have not previously stood for election to the Board by the stockholders, Mr. Sandeep L. Mathrani and Mr. James F. Risoleo. Mr. Mathrani was identified as a candidate by Ferguson Partners Ltd. and elected to the Board effective in July 2016 on the recommendation of the Nominating and Corporate Governance Committee. Mr. Mathrani qualifies as an independent director under New York Stock Exchange rules. Mr. Risoleo was appointed to the Board on January 1, 2017, in connection with his promotion to CEO.
The director nominees have served on our Board for an average of approximately 9 years. The median tenure of our director nominees is 5 years. The Nominating and Corporate Governance Committee and the Board believe it is important for the Board to be “refreshed” by adding new directors from time to time and three of the director nominees, or 33% of the Board, have served for less than four years, and as noted above two directors have been added within the last twelve months. However, the Committee and the Board also believe that long-serving directors bring critical skills to the Board. Among other things, such senior directors bring a historical perspective to the Board, which is highly relevant in a cyclical business such as the lodging industry. In addition, the Committee and the Board believe that long-serving directors have acquired extensive knowledge of the business that tends
The Board continuously identifies potential director candidates in anticipation of retirements, resignations, or the need for additional capabilities. The graphic below describes the ongoing Nominating and Corporate Governance Committee process to identify highly qualified candidates for Board service. | ||||
Consider current Board skill sets and needs | Ensure Board is strong in core competencies of strategic oversight, corporate governance, stockholder advocacy and leadership and has diversity of expertise and perspective | |||
Consider qualified candidates | Looking for exceptional candidates that possess integrity, independent judgment, broad business experience, diversity and a skill set to meet existing or future business needs | |||
Check conflicts of interest and references | All candidates are screened for conflicts of interest, and all directors are independent, except the CEO and Chairman | |||
Nominating and Corporate Governance Committee | To consider shortlisted candidates; after deliberations, Committee recommends candidates for election to the Board | |||
Board dialogue and decision—Commitment to refreshment and diversity | Added four highly qualified directors in the past two years; four of the last six Board members added are either women or bring diversity to the Board |
PROPOSALS REQUIRING YOUR VOTE |
make them less dependent upon management for information and perspectives. Accordingly, while the Committee considers tenure as a factor in determining the nominee slate, it is not a critical or determinative factor.
The Board is also committed to a diversified membership, in terms of both the individuals involved and their experience. As stated in the Committee’s charter, the Committee may take into account the overall diversity of the Board, including professional background, experience, thought, perspective, age, tenure, gender, and ethnicity. The Board is satisfied that the current nominees reflect an appropriate diversity, but is committed to continuing to consider diversity issues in evaluating the composition of the Board.
Proposal One—Election of Directors
Our Board of Directors has nominated 11 directors for election at this Annual Meeting to hold office until the next Annual Meeting and the election of their successors. All the nominees are currently consists of ten members, although there are only ninedirectors. Each nominee has consented to serve if elected, but should any director nominees standingnominee be unavailable to serve (an event which our Board does not now anticipate), the proxies named on your proxy card will vote for election. In February 2017, Mr. Terence C. Golden expressed his intention to retire froma substitute nominee recommended by the Board. Alternatively, should such circumstances arise, the Board, and accordingly his term will end aton the conclusionrecommendation of the 2017 annual meeting. The Board determined that, effective at the conclusion of the 2017 annual meeting,Nominating and Corporate Governance Committee, may decide to reduce the size of the Board will be decreased from ten to nine directors.and the number of nominees.
Each director nominee stands for election every year. Except in a contested election, each director will be elected only if he or she receives more votes “for” than votes “against”. As set forth in the Company’s Corporate Governance Guidelines, any director nominee who is not elected by the vote required and who is an incumbent director must immediatelypromptly tender his or her resignation to the Board for consideration. The Nominating and Corporate Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation, or whether other action is recommended. The Board will act on the tendered resignation within 90 days and will promptly disclose its decision and rationale as to whether to accept the resignation or the reasons for rejecting the resignation. If a director’s resignation is accepted by the Board, or if a nominee for director is not elected and is not an incumbent director, the Board may fill the resulting vacancy or decrease the size of the Board.
It is the responsibility of theBoard Skills, Qualifications, Diversity and Tenure
The Nominating and Corporate Governance Committee to identify, evaluate and recommend prospective director candidates for the Board, in accordance with the policy and procedures described in the Committee’s charter and the Company’s Corporate Governance Guidelines. The Committee regularly reviews the composition of the Board in light of the Company’s changing requirements and its annual assessment of the Board’s performance. The Committee seeks to includeand Board seek a complementary mix of individuals with diverse backgrounds and skills reflecting the broad set of challenges that the Board confronts. For more information on this process, see “Corporate Governance and Board Matters—Identification and Evaluation of Director Candidates.”
In assessingThere are general qualifications for nominees, the Committee expectsthat all candidates to meet the qualificationsDirectors must have, which are described in the Committee’s charter and the Company’s Corporate Governance Guidelines, including integrity and high ethical standards, mature and independent judgment, diverse business experience, familiarity with the issues affecting the Company’s business, and a commitment to full participation on the requisite timeBoard and abilityits committees. The Committee also considers other criteria, including: experience in running a major enterprise, sound business acumen, experience as a board member of another publicly held company, academic expertise in an area of the Company’s operations, and a reputation, both personal and professional, consistent with the image and reputation of the Company.
The Board and the Committee are also committed to attend meetingsa diversified membership, in terms of both the individuals involved and fully participatetheir experience. As stated in the activitiesCommittee’s charter, the Committee may take into account the overall diversity of the Board.Board, including professional background, experience, thought, perspective, age, tenure, gender, and ethnicity.
19
Proposal 1 Election of 11 Directors The Committee believes thatBoard recommends a vote FOR each of the director nominees possesses these key attributes thatDiverse slate of directors with broad leadership experience Four of the last six Board members added are importanteither women or bring diversity to an effective Board. Each director nominee holds or has held senior executive positionsthe Board All candidates highly successful executives in large organizations or the government with relevant skills and has experience relevantexpertise Commitment to the Company’s business. Ourrefreshment—4 directors also serve on the boards of other public and private companies and have an understanding of corporate governance practices and trends. The Committee also takes into account diversity considerations in determining the slate of directors and believes that, as a group, the nominees bring a broad range of perspectives to Board deliberations. In addition to the above, the Committee also considered the specific experiences describedadded in the last two years Median director tenure 5.4 years
PROPOSALS REQUIRING YOUR VOTE |
The Board and the Nominating and Corporate Governance Committee believe it is important for the Board to be “refreshed” by adding new directors from time to time. However, the Committee and the Board also believe that long-serving directors bring critical skills to the Board. Among other things, such senior directors bring a historical perspective to the Board, which is highly relevant in a cyclical business such as the lodging industry. In addition, the Committee and the Board believe that long-serving directors have acquired extensive knowledge of the business that tends to make them less dependent upon management for information and perspectives. Accordingly, while the Committee considers tenure as a factor in determining the nominee slate, it is not a critical or determinative factor. | 2016 & 2017 BOARD REFRESHMENT |
The Committee believes that each of the nominees possesses the key attributes that are important to an effective Board. Each director nominee holds or has held senior executive positions in large organizations or the government and has experience relevant to the Company’s business. Our directors also serve on the boards of other public and private companies and have an understanding of corporate governance practices and trends. The Committee has also taken into account diversity considerations in determining the slate of directors and believes that, as a group, the nominees bring a broad range of perspectives to Board deliberations. The director nominees have served on our Board for an average of approximately 8.5 years. The median tenure of our director nominees is 5.4 years. Four of the director nominees, or 36% of the Board, have served for less than two years, and three directors were added in 2017. The Committee also considered the specific experiences described in the biographical details that follow in determining to nominate the individuals set forth below for election as directors. | INDEPENDENCE TENURE |
Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that follow in determining to nominatecovers the individuals set forth belowassessment for election as directors.the full Board.
DIVERSITY OF BACKGROUND
The Board of Directors unanimously recommends that you vote FOR each of the nominees for director.
NOMINEES FOR DIRECTOR
MARY L. BAGLIVO | Ms. Baglivo is Vice Chancellor Communications and Marketing for Rutgers University and formerly was the Vice President for Global Marketing and Chief Marketing Officer for Northwestern
Skills and Expertise:
• in depth global marketing, advertising and consumer branding experience
• strategic planning expertise
• extensive business and leadership experience of large complex companies, including as Chair and CEO of the Americas at Saatchi & Saatchi Worldwide
• understanding of growth strategies in worldwide branded businesses
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Age: Director since:2013
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Committees: Compensation (Chair)
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Public Boards: PVH Corp. Ruth’s Hospitality Group
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SHEILA C. BAIR | Ms. Bair is the former President of Washington College. She is also the former Chair of the Federal Deposit Insurance Corporation, where she served in that capacity from 2006 to 2011. From 2002 to 2006 she was the Dean’s Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst. She also served as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury (2001 to 2002), Senior Vice President for Government Relations of the New York Stock Exchange (1995 to 2000), Commissioner of the Commodity Futures Trading Commission (1991 to 1995), and as counsel to Kansas Republican Senate Majority Leader Bob Dole (1981 to 1988). She continues her work on financial policy issues as chair emeritus of the Systemic Risk Council, a public interest group which monitors progress on the implementation of financial reforms. She is also an accomplished author and has written several books on financial issues, including educational writings on money and finance for children. She is on the board of the Thomson Reuters
Skills and Expertise:
• extensive expertise in banking and finance as a result of her services as Chair of the FDIC
• recognized leader and author on financial policy issues
• broad government and regulatory experience both from her service at the FDIC as well as prior service in senior positions at the NYSE, CFTC and the U.S. Department of the Treasury
• audit committee financial expert
• familiarity with aspects of managing and providing leadership to complex business organizations • familiarity and experience with global financial systems as an independent director for China’s largest bank, an advisor to the China Bank Regulatory Commission, and as a former board member and current advisor to Grupo Santander, one of Europe’s largest banks | |
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Age:64
Director since:2012
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Committees: Nominating and Corporate Governance
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Public Boards: Thomson Reuters
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MARY HOGAN PREUSSE | Ms. Hogan Preusse was formerly at APG Asset Management US, the New York subsidiary of the Netherlands-based firm from 2000 to 2017. At APG she served as the Managing Director andco-head of Americas Real Estate where she was responsible for managing all of APG’s public real estate investments in North and South America. She also served on the Executive Board of APG Asset Management US from 2008-2017. Prior to joining APG in 2000, she spent eight years as a sell side analyst covering the REIT sector, and began her career at Merrill Lynch as an investment banking analyst. Her industry memberships include the International Council of Shopping Centers and NAREIT where she serves on the steering committee of the Investor Advisory Council. She is also a member of the board of directors of Digital Realty Trust, where she is a member of its audit committee, Kimco Realty, where she is a member of its audit, executive compensation and nominating and corporate governance committees, and VEREIT, where she is a member of its nominating and corporate governance and compensation committees. Ms. Hogan Preusse is a member of the Bowdoin College Board of Trustees and a member of the Real Estate and Infrastructure Advisory Board of the Carey Business School at Johns Hopkins University. Skills and Expertise: • over 25 years of real estate experience, including managing a $13 billion portfolio in real estate investment trusts and other public real estate securities • brings valuable investment focus to the Board • recognized expertise and leadership in the real estate sector and in 2015 received NAREIT’s E. Lawrence Miller Industry Achievement Award for her contributions to the industry • board oversight expertise, serving on the boards of three other public real estate companies | |
Age:49 Director since:2017 | ||
Committees: Nominating and | ||
Public Boards: Digital Realty Trust Kimco Realty VEREIT | ||
SANDEEP L. MATHRANI | Mr. Mathrani is the Chief Executive Officer and a director of GGP Inc. Prior to GGP, he served as the President of Retail at Vornado Realty Trust from 2002 to
Skills and Expertise:
• significant experience as CEO and a director of GGP, a large real estate investment trust focused on retail real estate
• real estate industry veteran with over 20 years of experience
• extensive familiarity with all aspects of managing and providing leadership to a complex business organization | |
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Age: Director since:2016 | ||
Committees: Audit Compensation | ||
Public Boards: GGP Inc.
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PROPOSALS REQUIRING YOUR VOTE |
ANN MCLAUGHLIN | Ms. Korologos served as the Chair of the Board of Trustees of the RAND Corporation, an international public policy research organization from April 2004 to April 2009. From October 1996 to December 2005 she served as Senior Advisor to Benedetto, Gartland & Company, Inc., a private investment banking firm in New York. She formerly served as President of the Federal City Council from 1990 until 1995 and as Chairman of the Aspen Institute from 1996 until 2000. Ms. Korologos has served in several United States Administrations in such positions as Secretary of Labor from 1987 to 1989 and Under Secretary of the Department of the Interior from 1984 to 1987. She also serves as a director of Michael
Skills and Expertise:
• significant experience as a director of large, diversified, global public companies
• recognized expertise and leadership in the oversight of public companies (including specific experience in compensation, audit, diversity, governance, and social responsibility oversight)
• through her
• public policy, social responsibility and succession issues expertise
• vast knowledge of and long-term experience with the Company, serving as a director since 1993 | |
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Age:76
Director since:1993
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Committees: Compensation Nominating and
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Public Boards: Michael Kors | ||
RICHARD E. MARRIOTT | Mr. Marriott is our Chairman of the Board. He is Chairman of the Board of First Media Corporation, the Chairman and a director of the J. Willard Marriott and Alice S. Marriott Foundation and a director of the Richard E. and Nancy P. Marriott Foundation. Mr. Marriott also serves on the Federal City Council and the National Advisory Council of Brigham Young University. He previously served on the Board of Marriott International, Inc. and is a past President of the National Restaurant Association and a past director of the Polynesian Cultural Center. In addition, Mr. Marriott is the President and a Trustee of the Marriott Foundation for People with Disabilities.
Skills and Expertise:
• comprehensive knowledge of the Company and unique perspective and insight into the hospitality industry based on a
• during his tenure, Mr. Marriott has served in various executive capacities and has served as our Chairman since 1993
• long history of successful management of the Company | |
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Chairman of the Board
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Age:79
Director since:1993
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PROPOSALS REQUIRING YOUR VOTE |
JOHN B. MORSE, JR. | Mr. Morse served as Vice President, Finance and Chief Financial Officer of The Washington Post Company (now Graham Holdings Company) from November 1989 until his retirement in December 2008. He also served as President of Washington Post Telecommunications, Inc. and Washington Post Productions Inc., both subsidiaries of The Washington Post Company. Prior to joining The Washington Post Company, Mr. Morse was a partner at PricewaterhouseCoopers. Mr. Morse is a director of AES Corporation, where he is on the strategy and investment committee and chairman of the financial audit committee. He previously served on the board of HSN, Inc., where he was chairman of both the compensation and audit committees. He is a former Trustee and President of the College Foundation of the University of
Skills and Expertise:
• substantial financial expertise that includes extensive knowledge of the complex financial and operational issues facing large companies
• in-depth understanding of accounting principles and financial reporting rules and regulations acquired in the course of serving as the CFO of The Washington Post Company and his years as a partner at PricewaterhouseCoopers
• board oversight expertise as an audit committee financial expert and a member of the audit committees of other public company boards | |
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Age:71
Director since:2003
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Committees: Audit (Chair) Nominating and
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Public Boards: AES Corporation
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WALTER C. RAKOWICH | Mr. Rakowich is the retired Chief Executive Officer of Prologis, where he also served as a director of its board upon completion of the merger with AMB Property Corporation in 2011, and prior to that merger, as a trustee of the board since 2004. At Prologis, Mr. Rakowich served asCo-Chief Executive Officer from 2011 to 2012; Chief Executive Officer from 2008 to 2011; President and Chief Operating Officer from 2005 to 2008, and was a Managing Director and Chief Financial Officer from 1998 to 2005. Prior to joining Prologis, Mr. Rakowich was a partner with real estate provider Trammell Crow Company, where he worked for nine years; before that he was a senior audit and tax consultant for Pricewaterhouse. Mr. Rakowich is also a director of Iron Mountain Incorporated where he is a member of its audit and governance committees, and is a director of Ventas, Inc. where he is a member of its audit and compliance committees. He is also on the board of trustees of The Pennsylvania State University and is the Chairman of its audit and risk committee and is on the board of the Global Food Exchange, a private
Skills and Expertise: • significant real estate and financial experience, including extensive knowledge of the issues facing large international real estate investment trusts
• from 1998 to 2012, Mr. Rakowich served, over time, as chief financial officer, chief operating officer and chief executive officer of Prologis, a real estate investment trust focused on industrial real estate with extensive international operations
• brings valuable experience to the Board on issues facing the Company’s international portfolio, risk assessment and leadership development
• extensive experience in accounting through his years at Pricewaterhouse
• audit committee financial expert | |
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Age:60
Director since:2012 Lead Director
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Committees: Audit Nominating and (Chair)
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Public Boards: Iron Mountain Ventas, Inc.
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PROPOSALS REQUIRING YOUR VOTE |
JAMES F. RISOLEO | Mr. Risoleo became our President and Chief Executive Officer in January 2017. He joined our Company in 1996 as Senior Vice President for Acquisitions, and was appointed Executive Vice President and Chief Investment Officer in 2000. In 2012, he became Executive Vice President and Managing Director of the Company’s European business activities and, in 2015, Mr. Risoleo assumed leadership for all of the Company’s West Coast investment activities in addition to Europe. Prior to joining our Company, Mr. Risoleo was Vice President, Development at Interstate Hotels Corporation and a Senior Vice President at Westinghouse Electric Corporation. Mr. Risoleo serves as thenon-executive Chairman of Cole Office & Industrial REIT, a
Skills and Expertise:
• extensive business and leadership experience
• significant expertise in finance, capital markets, real estate and the hospitality industry
• extensive international experience, including leading the Company’s European investment strategy
• extensive knowledge of the Company as a member of senior management for over 20 years, serving in various roles within the Company and culminating in his current service as CEO | |
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President and Chief Executive Officer
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Age: Director since:2017 | ||
Public Boards: Cole Office & | ||
GORDON H. SMITH | Senator Smith is President and
Skills and Expertise:
• high-level U.S. government experience and leadership as a United States Senator
• extensive knowledge of public policy, international affairs and trade and law
• significant business experience and knowledge of finance, accounting and marketing obtained through his management of Smith Frozen Foods, a leading producer of frozen foods | |
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Age:65
Director since:2009
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Committees:
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RETIRING DIRECTOR
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A. WILLIAM STEIN | Mr. Stein is the Chief Executive Officer and a director of Digital Realty Trust. Prior to being named CEO in 2014, he served as Chief Financial Officer and Chief Investment Officer. Before joining Digital Realty in 2004, Mr. Stein was with GI Partners, a private equity fund of which Digital Realty was a portfolio company. Past positions include serving asCo-Head of VentureBank@PNC and Media and Communications Finance at The PNC Financial Services Group; President and Chief Operating Officer of TriNet Corporate Realty Trust (acquired by iStar Financial) and a variety of senior investment and financial management positions with Westinghouse Electric, Westinghouse Financial Services and Duquesne Light Company. In addition, Mr. Stein practiced law for eight years, specializing in financial transactions and litigation. Mr. Stein serves on the Executive Board and as Treasurer of NAREIT and is a member of the Fisher Center for Real Estate & Urban Economics Policy Advisory Board. He is also a member of the University of Pittsburgh Chancellor’s Global Advisory Council. Skills and Expertise: • over 30 years of investment, financial and operating management experience • in-depth understanding of the real estate industry and the issues facing real estate investment trusts • extensive leadership experience including as CEO of Digital Realty Trust, a real estate investment trust focused on data centers, and has overseen a doubling of the company’s total enterprise value, as well as its inclusion in the S&P 500 Index • audit committee financial expert | |
Age:64 Director since: 2017 | ||
Committees: Audit | ||
Public Boards: Digital Realty Trust | ||
PROPOSALS REQUIRING YOUR VOTE |
Summary of 20172018 Director Qualifications and Experience
The Nominating and Corporate Governance Committee and the full Board believe a complementary mix of diverse skills, attributes, and experiences will best serve the Company and its stockholders. The director skills summary that appears below, and the related narrative for each director nominee, notes the specific experience, qualifications, attributes, and skills for each director that the Board considers important in determining that each nominee should serve on the Board in light of the Company’s business, structure, and strategic direction. The absence of a “•” for a particular skill does not mean the director in question is unable to contribute to the decision-making process in that area.
Proposal Two—Ratification of Appointment of Independent Registered Public Accountants
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accountants retained to audit the Company’s financial statements. The Audit Committee has unanimously approved and voted to recommend that the stockholders ratify the appointment of KPMG LLP as independent registered public accountants of the Company for 2017. Representatives of KPMG LLP will be at the annual meeting and will be given the opportunity to make a statement, if they desire to do so, and to respond to questions.
KPMG LLP has been retained as the Company’s independent registered public accountant since 2002. In determining whether to reappoint the independent accountant, the Audit Committee considers the length of time the firm has been engaged, the quality of the discussions with the independent accountant and its annual assessment of the past performance of both the lead audit partner and KPMG LLP. A new lead audit partner is designated at least every five years as required by the SEC to ensure independence, and to provide a fresh perspective. The Audit Committee and its Chair are directly involved in the selection of the lead audit partner. The Audit Committee is responsible for the negotiation of audit fees associated with the Company’s retention of KPMG LLP.
Although ratification is not required by our Bylaws, the Board is submitting the selection of KPMG LLP to our stockholders for ratification as a matter of good corporate practice. The members of the Audit Committee and the Board believe that the continued retention of KPMG LLP to serve as the Company’s independent registered public accountants is in the best interests of the Company and its stockholders.
If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
The Board of Directors unanimously recommends a vote FOR ratification of the appointment of KPMG LLP as independent registered public accountants of the Company for 2017.
Proposal Three—Advisory Resolution to Approve Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the Company seek anon-binding advisory vote from its stockholders to approve executive compensation. Since the required vote is advisory, the result of the vote is not binding upon the Company or the Board.
We urge stockholders to read the “Compensation Discussion and Analysis”, which describes how our executive compensation policies operate and how they are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative which provide detailed information on the compensation of our named executive officers. Our executive compensation program is designed to provide the opportunity to earn a competitive level of compensation necessary to attract, motivate and retain talented and experienced executives and to motivate them to achieve short-term and long-term corporate goals that enhance stockholder value. Highlights of the Company’s compensation programs include the following:
The Compensation Policy Committee and the Board believe that these policies are effective in implementing our compensation philosophy, in achieving its goals, and have been effective at incenting the achievement of the Company’s strong financial performance.
For the reasons stated above, the Board of Directors unanimously recommends a vote FOR“FOR” approval of the following resolution:
“RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as described in the Compensation Discussion and Analysis and in the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.”
Effect of Proposal
This advisory resolution to approve named executive officer compensation, commonly referred to as a “say-on-pay”“say-on-pay” resolution, isnon-binding on the Board of Directors. The approval or disapproval of this proposal by stockholders will not require the Board, the Compensation Policy Committee or the Company to take any action regarding the Company’s executive compensation practices. Althoughnon-binding, the Board and the Compensation Policy Committee will carefully review and consider the voting results when evaluating our future executive compensation program.
Set forth below is a stockholder proposal submitted by UNITE HERE, 275 Seventh Avenue, New York, New York 10001, the beneficial owner of Advisory Vote339 shares of the Company’s common stock, along with its supporting statement. The stockholder proposal is required to be voted upon at the annual meeting only if properly presented at the annual meeting by UNITE HERE.
Proposal:
“Shareholders request Host Hotels & Resorts (“Host”) issue an annual sustainability report with due diligence about operations at Host’s properties, including the impact on Executive Compensationinvestors of hotel operators’ environmental, human rights, and labor practices. The reports should be prepared at reasonable cost, omitting proprietary information, and the first report should be available to shareholders in advance of the 2019 annual meeting.
We recommend Host ask its hotel operators to use the Global Reporting Initiative’s (“GRI”) Sustainability Reporting Standards to prepare the report(s). The Standards cover environmental impacts, human rights, and labor practices, and provide a flexible reporting system that allows omission of content irrelevant to company operations.”
UNITE HERE’s Supporting Statement:
“The GRI provides the mostwidely adopted global standards for sustainability reporting. According to GRI, “[t]he practice of disclosing sustainability information inspires accountability, helps identify and manage risks, and enables organizations to seize new opportunities. Reporting with theGRI Standards supports companies, public and private, large and small, protect the environment and improve society, while at the same time thriving economically by improving governance and stakeholder relations, enhancing reputations and building trust.”
The Dodd-Frank Wall Street ReformUN Principals of Responsible Investment (UNPRI) has over 1750 signatories, with ~$70 trillion in assets, including many of Host’s own investors, who publicly commit to “seek appropriate disclosure on ESG [environmental, social and Consumer Protection Act requiresgovernance] issues by the entities in which [they] invest” and to “incorporate ESG issues into investment analysis and decision making.” This type of diligence generates value for shareholders.
Hotel owners are reporting on the environmental footprint of hotel operations, but pay less attention to the human capital dimensions of these operations—the thousands of people providing hospitality services. Host does not presently require hotel operators to provide reporting on social or governance factors, a notable diligence gap given the centrality of guest services to Host’s business.
Host has acknowledged that, although it does not directly employ workers, it is “subject to many of the costs and risks generally associated with the hotel labor force,” and that it [is] subject to risk when hotel operations are disrupted. (2016 Form10-K at27-28.) Through their taxable subsidiaries, real estate investment trusts like Host are able to collect income from operations within their properties, which go beyond income from lease payments (see 26 USC §§856-857).
After the Starwood merger, 78% of Host’s properties were managed or franchised by Marriott. As Host has acknowledged, “[a]ny adverse developments in Marriott’s business and affairs or financial condition… could have a
PROPOSALS REQUIRING YOUR VOTE |
material adverse effect on us.”(10-Kat least once every six27.) Marriott International’ssustainability reporting, which ceased using the GRI sustainability framework after 2014, provides much less detail to investors than Starwood Hotels’premerger reporting, which used the GRI framework.
We urge shareholders to recommend Host provide comprehensive disclosure about its sustainability practices, including reporting from hotel operators about environmental, human rights, and labor practices, by committing to using, and requiring its operators to use, the GRI sustainability framework.”
Board of Directors Statement Opposing the Stockholder Proposal
After careful consideration, our Board and its Nominating and Corporate Governance Committee believe that the above-described stockholder proposal is not in the best interests of the Company and its stockholders. The Board recommends a vote “Against” adoption of this stockholder proposal for the following reasons.
Host Hotels & Resorts has a demonstrated commitment to corporate responsibility and sustainability. Over the past 10 years, our properties, communities and stakeholders have benefited from the Company’s proper focus on environmental, social and governance issues and initiatives. We have spent hundreds of millions of dollars on improvements at our properties, which have reduced their environmental impact and contributed positively to stockholder value. Our team of hospitality and sustainability professionals work with our hotel managers to constantly improve business operations and reduce the impact of our properties on the environment, as evidenced by projects including renewable solar power installations, LED lighting,in-room energy management systems, water saving fixtures and core building infrastructure upgrades to heating and cooling. We are also committed to the communities in which we do business. In the past two years the Company submitand its 200 employees contributed to over 145 charities and organizations, and volunteered more than 1,000 hours of community service. The Company likewise is committed to fostering human rights, employee health and safety, and compliance with local wage and labor regulations and practices.
In addition, we are committed to transparency and keeping our stockholders informed of our progress. Accordingly, the corporate responsibility section of our website(https://www.hosthotels.com/corporate-responsibility/strategy-and-themes) thoroughly communicates our approach and activities on environmental, social and governance matters.
The leadership demonstrated by our corporate responsibility program has been confirmed by the recognition we have received, including:
• | 1st position in the Hotels sector and1st position in the U.S. for listed companies from Global Real Estate Sustainability Benchmark (GRESB), a leading sustainability benchmark for the real estate industry; and Green Star designation recipient, which recognizes outstanding management and implementation of key sustainability issues; |
PROPOSALS REQUIRING YOUR VOTE |
In addition, the Company was also featured in the Sustainability Accounting Standard Board’s “The State of Disclosure: An Analysis of the Effectiveness of Sustainability Disclosure in SEC Filings 2017” in the “Overview—Standout Reporting Demonstrates Leadership” section.
The proposal requests that we produce a non-binding resolution to determine whethervery specific form of sustainability report based on the advisory stockholder vote on executive compensation shall occur every one, two or three years.
Whenguidelines published by the Global Reporting Initiative (“GRI”), which requires the assessment of nearly 100 indicators of performance in various areas of the Company’s initial executive compensation frequency vote was held atoperations. The proposal does not recognize or explain the burden that this reporting would impose on the Company. We believe that preparing a report in compliance with GRI’s complex and technical guidelines would require a substantial commitment of time and money without adding any meaningful benefit to our 2011 annual meeting,management team in the way we currently run our stockholders votedbusiness. We further believe that restricting the form of sustainability reporting to these guidelines is too limiting and that such reporting would not add any measurable stockholder value.
Additionally, the proposal does not take into consideration reporting done by an overwhelming marginthe Company’s largest operators, all of which already publishGRI-aligned indices and reports. This includes, despite UNITE HERE’s assertions to accept the recommendationcontrary, Marriott International which has available on its website “Serve 360: Doing Good in Every Direction Sustainability and Social Impact Platform” as well as its55-pageGRI-aligned 2017 Marriott Sustainability and Social Impact Report. More information can be found at: http://www.marriott.com/corporate-social-responsibility/performance.mi. Having the Company prepare a full-scale GRI sustainability report that includes reporting from hotel operators would be largely duplicative of information already available through their websites and not further stockholder value.
In summary, the Board to vote on executive compensation every year. Accordingly, the Board decided to hold an advisory resolution to approve named executive officer compensation annually. The Board believes that the current annual votes on executive compensation continue to beCompany has in place the appropriate for the Companypolicies, practices and disclosure concerning environmental, social and governance matters, and its stockholders at this time. The annual votesmajor operators have provided stockholders the opportunity to promptly provide feedback whichGRI-aligned sustainability reports available on their websites. As such, the Board andbelieves that the Compensation Policy Committee have used in evaluating executive compensation decisions each year. In addition, annual votespreparation of a formal GRI sustainability report would not provide stockholders the opportunity to quickly react to emerging trends in compensation.any meaningful additional value or information for our stockholders.
For the reasons stated above, the Board of Directors unanimously recommends a vote for a frequency of “1 year” with respect to“Against” the following resolution:proposal
“RESOLVED, that the stockholders of the Company advise that a non-binding resolution with respect to executive compensation should be presented every one, two or three years as reflected by their votes for each of these alternatives in connection with this resolution.”
In voting on this resolution, you should mark your proxy for one, two or three years based on your preference as to the frequency with which an advisory vote on executive compensation should be held. Alternatively, you may abstain from voting.
Effect of Proposal
This advisory resolution, commonly referredThe affirmative vote of a majority of all the votes cast on the stockholder proposal at the annual meeting is necessary for approval of the proposal. If approved, the stockholder proposal would be anon-binding recommendation to as a “say-when-on-pay” resolution, is non-binding on the Board of Directors. Stockholder approval of a specific frequency vote will not require the Company to implement an advisory vote on executive compensation every one, two or three years. The final decision on the frequency of the advisory vote on executive compensation remains with the Board and the Compensation Policy Committee. Although non-binding, the Board and the Compensation Policy Committee will carefully review and consider the outcome of the frequency vote when making future decisions regarding the frequency of executive compensation votes.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) provides you with information on the Company’s executive compensation programs and practices, and the decisions that the Compensation Policy Committee of the Board of Directors (the “Compensation Committee”) has made under the program. The CD&A focuses on our named executive officers for 2016,2017, who were:
James F. Risoleo | President and Chief Executive Officer | |
Executive Vice President, Chief Financial Officer (effective November 2017) | ||
Former Executive Vice President, Chief Financial Officer | ||
Nathan S. Tyrrell | Executive Vice President, | |
Elizabeth A. Abdoo | Executive Vice President, General Counsel & Secretary | |
Joanne G. Hamilton | Executive Vice President, Human Resources |
Effective December 31, 2016, Mr. Walter stepped down from his positions as President and Chief Executive Officer and as a member of the Board of the Directors of the Company. The Board appointed Mr. Risoleo President and Chief Executive Officer and a member of the Board effective January 1, 2017. Mr. Walter remained with the Company until January 31, 2017 to assist with the management transition. As discussed below, he received severance in accordance with the Company’s Severance Plan for executives. As previously disclosed on the Form 8-K filed with the SEC on January 18, 2017, Mr. Abji will retire from his position as Executive Vice President, Asset Management effective April 30, 2017. Mr. Abji will continue to work for the Company through October 31, 2017.
20162017 Company Performance Highlights
Revenues2017 was a year of continued growth for the CompanyCompany. The Company’s comparable hotel revenue per available room (or RevPAR) increased forto $180, surpassing last year’s record and is the seventhhighest full year in a row despite the sale of 10 hotelsRevPAR in the year, and we returned substantial capital to our stockholders in the form of dividends and share repurchases.Company’s history. Our stockholders were rewarded aswith 10% total stockholder return for the year was 29%.year. We also undertookaccomplished a number of initiatives in 20162017 to better position the Company for long-term, sustainable growth. Some of the highlights for 20162017 include:
• | We continued to be recognized as a leader for corporate action on climate change and again achieved a position on the 2017 Climate “A” List and Climate Disclosure Leadership Index (CDLI) by CDP. We also achieved thetop position in the U.S. among public companies in the 2017 Global Real Estate Sustainability Benchmark (GRESB) survey. We were the winner of the NAREIT “Leader in the Light” award and were the “Best in Industry” in Newsweek’s 2017 Green Rankings for equity real estate investment trusts and thetop-ranked real estate company on the U.S. 500 list. |
For more complete information about our 20162017 performance, please review the Company’s Annual Report onForm 10-K included in our mailing to stockholders. Adjusted FFO per diluted share used by the Compensation Committee as a performance measure is also used by the Company as a non-GAAP supplemental measure of operating performance in its earnings releases, financial presentations and SEC filings. For more information on this measure and a reconciliation to the comparable GAAP measure, see the Company’s Annual Report on Form 10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Host Inc. Reconciliation of Net Income to NAREIT and Adjusted Funds From Operations per Diluted Share” on page 94.
Results of 20162017 Advisory Vote
Each year, the Compensation Committee considers the outcome of the stockholder advisory vote on executive compensation when making decisions relating to the compensation of the named executive officers and our executive compensation program design, structure and policies.
In 2016,2017, stockholders continued their significant support for our executive compensation program with approximately 92%94% of the votes cast for approval of the “say on pay” proposal at the 20162017 Annual Meeting of Stockholders. The Compensation Committee believes that the voting results, together with the 92% or better approval received since the inception of the advisory vote, conveyed our stockholders’ strong support of the philosophy, design and structure of our executive compensation program. The Committee considers the results of the stockholders’ advisory votes on executive compensation when making decisions about our executive compensation program.
The Compensation Committee has approved the design and structure of our annual compensation programs, which provide for more flexibility in light of changing times and stockholder involvement. Our long-standing compensation philosophy, which has supported our business and talent needs over the past decade and the various economic cycles we have experienced is:
Elements of 2016 Program
There were no changes to the design or structure of the annualOur compensation program in 2016. It has three key elements, elements—base salary, annual cash incentive, and long-term incentives. Importantly, it also:
|
The mix of target total direct compensation for 2017 for our CEO and the average of our other named executives is shown in the chart below:
Elements of
CHIEF EXECUTIVE OFFICER
AVERAGE OF OTHER NAMED
EXECUTIVE OFFICERS
Our 2017 Compensation Program
Over the course of 2016, we conductedprogram has several enhancements from prior years based on anin-depth review of our executive compensation program conducted in 2016, including how it compared with peers and best practices, and how it was supporting our talent needs. For 2017, weWe elected to retain ourthe design and structure of the annual incentive program design andprogram. We did, however, make changes to our long-term incentive program, which are described below.
2017 Long-Term Incentive Program
COMPENSATION DISCUSSION AND ANALYSIS |
2017 Long-Term Incentive Program
Changes:
• | Reasons for Changes:
• Stock options previously represented only 10% of an executive’s target long-term incentive opportunity
• Few peers
| |||||||||||||
• | • | |||||||||||||
• | • Focus all of the executives on the same company-wide • Individual measures are included in the annual incentive plan | |||||||||||||
• | • Relative TSR performance is a commonly used and understood metric that compares our relative success at driving stockholder value compared to the S&P 500, an index of North American Real Estate Investment Trusts (“NAREIT”) and publicly-traded lodging companies
• Our | |||||||||||||
• | •
• Better reflect typical and best practice of utilizing forward-looking goals | |||||||||||||
COMPENSATION DISCUSSION AND ANALYSIS |
The following table summarizes the key elements of target direct compensation for our 2017 executive compensation program. Our incentives are designed to drive overall corporate performance, achieve strategic goals, and individual performance using measures that correlate to stockholder value.
Summary of 2017 Executive Compensation Program Design
In addition to these structural changes to our long-term incentive program, we also enhanced our stock ownership guidelines by adding a mandatory retention ratio. Executives must hold 75% of their after-tax vested equity awards until their guideline is met. See “Additional Policies and Benefits—Stock Ownership and Retention Policy” in this CD&A.
CASH COMPENSATION
EQUITY COMPENSATION
Base Salary
Annual Cash Incentive
Awards
Performance Based Long-
Term Incentive
Awards
Retention Based Long-
Term Incentive
Awards
Key
Characteristics
• Fixed compensation component payable in cash.
• Reviewed annually and adjusted when appropriate.
• At risk compensation component payable annually in cash.
• Amount payable is based on actual performance against annually established goals.
• Two-thirds of the value of annual equity awards is performance based.
• One-half of the performance-based equity award vests annually based on achievement of corporate objectives.
• One-half of the performance-based equity award vests over three years based on relative TSR performance compared to three indices.
• One-third of the value of annual equity awards is retention-based.
• Equity award that vests in annual installments over three years.
Why We Pay
This Element
• Provide a base level of competitive cash compensation for executive talent.
• Only component of compensation that is fixed.
• Motivate and reward executives for performance based on the Company’s achievement of key financial measures and objective individual performance goals.
• Motivate and reward executives for performance on key measures.
• Align the interests of executives with long-term stockholder value.
• Align the interests of executives with long-term stockholder value.
• Retain executive talent.
How We
Determine
Amount
• Experience, job scope, market data, and individual performance.
• Senior executive base salaries, including those of the named executive officers, are approved by the Compensation Committee.
• Payments based on corporate performance related to:
• Adjusted funds from operations
• Return on invested capital
• Formulaic determination with limited discretion and a limit on the maximum amount payable.
• Target awards are based on job scope, market data, and individual performance.
• Amount of the awards that ultimately vest is based on performance against corporate objectives and relative TSR measures.
Best Practices
Our compensation programsprogram for 2016 and 2017 continuecontinues to incorporate our best practices:
What We Do
• Compensation Committee comprised solely of independent directors;
• An independent compensation consultant retained exclusively by the Committee and which has no ties to the Company;
• Annual advisory vote on executive compensation;
• Stock ownership and retention requirements for senior management and directors;
• Regular reviews of our compensation and relative TSR peer groups and indices;
• Regular briefings from the independent consultant regarding key trends in executive compensation and regulatory developments;
• An annual review of the performance of the chief executive officer;
• Market-aligned severance policy for executives with a double trigger for any change in control payments under the plan;
• A policy authorizing recoupment of compensation that results from a misstatement of financial results;
•
• The vast majority of total compensation is tied to performance; and
• Cap on performance-based compensation.
| What We Don’t Do
• No employment contracts with executive officers;
• No individual change in control agreements;
• No tax gross up on change in control payments or severance payments;
• No pledging, hedging or short sales of Company securities by directors, officers or employees;
• No pension plans or supplemental executive retirement plans;
• No dividends paid on unvested restricted stock or restricted stock unit awards unless the awards actually vest;
• No counting of performance vesting restricted stock toward our stock ownership guidelines; and
• No option repricing without stockholder approval. | |||||||||||||
Target Compensation for 20162017
The Compensation Committee annually reviews and sets total target direct compensation for senior executives. This consists of salary, an annual cash incentive based on the “target” level of performance, an award of restricted stock units valued based on the “target” level of performance and retention-based restricted stock options.units that vest over three years. The Committee’s decisions on this are informed with the assistance of its independent consultant, Pay Governance. The Committee reviews compensation levels, trends and practices every year, and has historically requested that Pay Governance conduct a thorough review every two years. This is because pay practices and market pay ranges generally do not change dramatically over a one year period, and the Committee prefers to take a broad view of the compensation landscape.
By way of background, Pay Governance, atThe last comprehensive compensation review was conducted in 2015 to inform compensation decisions for 2016. However, given the direction ofCompany’s and industry performance in 2015, management recommended, and the Committee last conducted a comprehensive competitive review of the compensation provided to senior management for 2014, which was based on 2013 data. For 2015 compensation, the Committee determinedagreed, that as expected, there had not been much change in year over year compensation from 2014 to 2015, and the increases that had been approved for 2014 generally aligned the Company’s compensation levels with the data that had been considered at that time. Accordingly,would be modest increases in 2015 total target compensation were modest.for executives in 2016, which included base salary increases of 3% consistent with all employees in the Company.
For
COMPENSATION DISCUSSION AND ANALYSIS |
The detailed review conducted in 2016 the Committee requested that Pay Governance conduct a comprehensive review which would involve confirming the data sources and involved:
In July 2015,May 2016, the Committee reviewed compensation design elements, trends and data sources for the compensation review. No changes inThe Committee has historically relied on various sources of compensation information to ascertain the data sources were made, which meant that, ascompetitive market for the executives’ compensation. As in the past, data from three sources were approved by the Committee tofor use toin generally assessassessing and comparecomparing pay levels at the Company. These were (1) proxy pay data reported in recent proxy filings for 21 peer companies, (2) general industry survey data of companies fornon-real estate specific functions, size adjusted based on revenues, and (3) NAREIT survey data focused on companies of similar size in terms of total capitalization. The proxy peer group did not change from 2015. Thoseis generally 15-25 companies, had been screened based on operatingwhich is a sufficient number to provide robust market data and minimize year over year changes to the extent possible. The companies primarily operate in the real estate and/or hospitality industry comparable size to the Company,and with North American operations or a similar business operations asmodel to that of the Company and/or having a global portfolio, andCompany. The companies are generally competitors for talent andand/or investment capital. They are screened as to size and generally fall within a range of a market capitalization that is 0.5 times to 3 times that of the Company or with revenues in the range of 0.4 times to 2.5 times that of the Company. The Committee approved changes in the peer group from 2015, and removed (i) Public Storage, a self storage REIT with a different business model and market capitalization four times larger than the Company and (ii) Apartment Investment and Management Co., which had the smallest market capitalization of the Company’snon-hotel related peers. The Committee added Essex Property Trust and UDR, Inc., each of which was in the S&P 500 and had a similar market capitalization to that of the Company. The proxy peer group consisted of:of the following 21 companies:
COMPENSATION PEER GROUP | ||
AvalonBay Communities, Inc. Boston Properties, Inc. Duke Realty Corporation Equity Residential Essex Property Trust, Inc. Federal Realty Investment Trust General Growth Properties, Inc. HCP, Inc.
Hilton Worldwide Holdings, Inc. Hyatt Hotels Corporation Kimco Realty Corporation | The Macerich Company Marriott International, Inc. Prologis, Inc.
SL Green Realty Corp. Starwood Hotels & Resorts Worldwide, Inc. * UDR, Inc. Ventas, Inc. Vornado Realty Trust Welltower, Inc. (formerly known as Health Care REIT, Inc.) Wyndham Worldwide Corporation | |
* acquired by Marriott International, Inc. in September 2016 |
The NAREIT survey data would provideprovided the Committee with industry specific references for a broad range of companies. It also would reflect companies against which the Company competes directly for talent and investment capital. The general industry database would presentpresented information from a broader market than the real estate industry and is consistent with the Company’s inclusion in the S&P 500 Index.
AtThe Committee generally compared the October 2015 meeting, there was no changecompensation of each executive in our philosophy or methodology, butrelation to multiple percentiles of each data source. In addition, the Committee basedtook into consideration the characteristics of each executive’s position, scope of responsibilities, experience, performance and internal equity. Compensation levels for an executive officer who is new to a position tended to be at a lower end of the competitive range, while seasoned executives would tend to be positioned at the higher end of the competitive range.
Based on discussions with management and its consultant, determined thatreview, the planned comprehensive market reviewCommittee approved target total compensation for the named executive officers, other than Mr. Risoleo, in 2015 for 2016 should be postponed until 2016 givenJanuary 2017. Mr. Risoleo became Chief Executive Officer of the Company and industry performance conditions, which were down for the year. In February 2016, Mr. Walter discussed with the Committee the proposed 2016effective
January 1, 2017. In December 2016, the Committee recommended, and the Board approved, his total target direct compensation. Pay Governance and the Executive Vice President, Human Resources assisted the Committee in its determination. Mr. Risoleo’s total target compensation for senior management.2017 was $5,300,000, which includes a base salary of $850,000, target annual incentive of $1,062,500 and target long-term incentive of $3,387,500. The Committee established the compensation package based on market data and reflective of Mr. Risoleo’s being new to the role.
September 2017 Leadership Appointments
The Company made additional organizational changes during 2017, continuing the evolution that began at the beginning of the year with the appointment of Mr. Risoleo as the new Chief Executive Officer effective as of January 1, 2017. In September 2017, the Company announced several changes, including the streamlining of asset management and investments functions to facilitate a corporate culture that is more nimble, dynamic and decisive. As part of this transition, Mr. Tyrrell was promoted to Executive Vice President, Chief Investment Officer, effective in 2015,September 2017, and oversees both the recommendationasset management and investment groups. In addition, Mr. Larson retired from his position as Executive Vice President, Chief Financial Officer, effective in November 2017, but will remain an employee of the Company until July 31, 2018. He did not receive any severance in connection with his retirement. Mr. Bluhm was announced as his successor in October 2017 and was appointed Executive Vice President, Chief Financial Officer in November 2017.
In connection with his appointment as Executive Vice President, Chief Financial Officer, Mr. Bluhm was hired with an annual base salary of $560,000, a target annual cash incentive of $560,000 and long term equity incentive with a target value of $1,880,000. Mr. Bluhm was also reimbursed for expenses associated with temporary housing and travel, up to $100,000. Mr. Bluhm did not receive an annual cash incentive for performance year 2017 (which is typically targeted at 100% of salary for executive vice presidents). However, in lieu thereof, Mr. Bluhm received a cash bonus of $450,000, which was payable 50% on his start date with the Company and 50% in April 2018 (thesix-month anniversary of his start date). In addition, to compensate him for remuneration that Mr. Bluhm forfeited from his former employer, he received a long-term equity grant with a target value of $3,000,000 and vesting provisions consistent with the Company’s executive compensation program. This grant is described in more detail below.
In connection with his promotion to Executive Vice President, Chief Investment Officer and assumption of oversight of both asset management and investments, Mr. Tyrrell’s annual base salary was an increaseincreased from $500,000 to $530,000 effective September 11, 2017. His annual target annual cash incentive remained at 100% of 3%, consistent withsalary, but was based on his prorated salary after taking into account the increase for all employees at the Company. Mr. Walter recommended no increase in compensation for himself and Mr. Marriott. The Committee considered management’s recommendations and approved modest increasesbase salary. He did not receive any additional long term incentives in total target direct compensation.connection with his promotion in 2017.
The chart below shows the elements of total target direct compensation for 20162017 and provides a comparison of the total to 2015.2016. It does not include other benefits.
20162017 Target Direct Compensation
Salary | Annual Cash Incentive | Long-Term Incentives (1) | Total Target Compensation 2016 | Total Target Compensation 2015 | Salary
| Annual Cash Incentive
| Long-Term Incentives (1)
| Total Target Compensation 2017
|
| Total Target Compensation 2016
| |||||||||||||||||||||||||||||||||||||||||
Mr. Walter(2) | $ | 952,750 | $ | 1,429,125 | $ | 4,500,000 | $ | 6,881,875 | $ | 6,881,875 | |||||||||||||||||||||||||||||||||||||||||
Mr. Risoleo | 576,800 | 576,800 | 830,000 | 1,983,600 | 1,950,000 | $
| 850,000
|
| $
| 1,062,500
|
| $
| 3,387,500
|
| $
| 5,300,000
|
| $
| 1,983,600
|
| |||||||||||||||||||||||||||||||
Mr. Bluhm(2)
|
| 560,000
|
|
| 560,000
|
|
| 1,880,000
|
|
| 3,000,000
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||
Mr. Larson | 503,950 | 503,950 | 1,200,000 | 2,207,900 | 2,178,500 |
| 590,000
|
|
| 590,000
|
|
| 1,900,000
|
|
| 3,080,000
|
|
| 2,207,900
|
| |||||||||||||||||||||||||||||||
Mr. Abji | 546,400 | 546,400 | 1,670,000 | 2,762,800 | 2,730,900 | ||||||||||||||||||||||||||||||||||||||||||||||
Mr. Tyrrell(3)(4)
|
| 509,205
|
|
| 509,205
|
|
| 1,000,000
|
|
| 2,018,410
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||
Ms. Abdoo | 488,050 | 488,050 | 980,000 | 1,956,100 | 1,927,600 |
| 550,000
|
|
| 550,000
|
|
| 1,225,000
|
|
| 2,325,000
|
|
| 1,956,100
|
| |||||||||||||||||||||||||||||||
Ms. Hamilton(4) |
|
400,000 |
|
|
400,000 |
|
|
650,000 |
|
|
1,450,000 |
|
|
— |
|
(1) | This column reflects the “target” level value of long-term incentives. These are equity-based |
COMPENSATION DISCUSSION AND ANALYSIS |
(2) | Mr. |
(3) | Mr. Tyrrell’s salary amount reflects his prorated salary increase to $530,000 effective September 11, 2017 in connection with his promotion to Executive Vice President, Chief |
(4) | Mr. Tyrrell and Ms. Hamilton were not named executive officers in 2016. |
Realized Pay
The table below, which supplements the Summary Compensation Table that appears on page 44,54, shows the compensation that might be realized for 20162017 by each named executive officer other than Mr. Walter, who stepped down from his positions as President and Chief Executive Officer, and as a member of the Board of Directors of the Company, as of December 31, 2016.officer. Our compensation program allows the named executive officers to earn variable compensation (except salary) at “threshold”, “target” and “high” levels based on performance on:
RealizedPerformance was above “target” against each of the measures used to assess performance noted above. However, realized compensation in 20162017 was generally below total target direct compensation (which excludes amounts indicateddue to the structural change to use a forward looking performance period for our performance-based restricted stock unit grants based on relative TSR under the column “All Other Compensation”) becauselong-term incentive program discussed above. Under the new program, 2017 was a transition year (with performance periods of the Company’s performance on the relative TSR measures, which was below “threshold”one, two and three years). Relative TSR performance, which is measured overThis resulted in a three year period, represents 50% of the target value of the restricted stock award to executives, and no restricted stock vested based on performance at that level. Senior management did benefit from the one-year increase“gap” in the Company’s stock price as the value of options increased and the valuenumber of restricted stock that did vest increased.units vesting in 2017. The Compensation Committee believes that the program functioned as designed with pay tied to performancemajority of the Company and aligned with stockholder interests. As we describe later in this CD&A, key performance results included:
20162017 Realized Pay Table(1)
Name | Salary | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation | All Other Compensation | 2016 Total Compensation Realized | Salary(2) | Bonus | Equity Awards(3) | All Other Awards (4) | Non-Equity Incentive Plan Compensation | All Other Compensation | 2017 Total Compensation Realized | |||||||||||||||||||||||||||||||||||||||
James F. Risoleo | $ | 576,800 | $ | 494,378 | $ | 48,920 | $ | 637,100 | $ | 92,997 | $ | 1,850,195 |
| $850,000
|
|
| $ —
|
|
| $2,190,713
|
|
| 416,635
|
|
| $1,427,000
|
|
| $116,163
|
|
| $5,000,510
|
| |||||||||||||||||||
Michael D. Bluhm
|
| 107,397
|
|
| 225,000
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| 332,397
|
| |||||||||||||||||||||||||||||||
Gregory J. Larson | 503,950 | 714,788 | 107,281 | 556,600 | 110,395 | 1,993,005 |
| 590,000
|
|
| —
|
|
| 1,228,744
|
|
| 233,674
|
|
| 789,500
|
|
| 137,363
|
|
| 2,979,281
|
| |||||||||||||||||||||||||
Minaz B. Abji | 546,400 | 923,685 | 149,301 | 576,200 | 98,774 | 2,294,360 | ||||||||||||||||||||||||||||||||||||||||||||||
Nathan S. Tyrrell
|
| 509,205
|
|
| —
|
|
| 646,706
|
|
| 122,976
|
|
| 686,500
|
|
| 65,801
|
|
| 2,031,189
|
| |||||||||||||||||||||||||||||||
Elizabeth A. Abdoo | 488,050 | 600,417 | 87,612 | 548,800 | 60,318 | 1,785,198 |
| 550,000
|
|
| —
|
|
| 792,206
|
|
| 150,655
|
|
| 757,900
|
|
| 62,650
|
|
| 2,313,412
|
| |||||||||||||||||||||||||
Joanne Hamilton
|
| 400,000
|
|
| —
|
|
| 420,356
|
|
| 79,934
|
|
| 559,200
|
|
| 109,444
|
|
| 1,568,935
|
|
(1) | Amounts shown for the |
(2) | Mr. Bluhm’s salary amount reflects his prorated annual salary of $560,000 from his date of hire, October 23, 2017. Mr. Tyrrell’s salary amount reflects his prorated salary increase to $530,000 effective September 11, 2017. |
(3) | Amounts shown represent the value of the |
Amounts represent time-based restricted units that vested on February 13, 2018. The value |
The difference between this supplemental table and the Summary Compensation Table is as follows:primarily relate to the treatment of the long-term equity incentive award, reflected in the “Stock Awards” column of the Summary Compensation Table and the “Equity Incentive Awards” and “All Other Equity Awards” columns of the Realized Pay
COMPENSATION DISCUSSION AND ANALYSIS |
Table above. In general, the amount of realized pay was significantly lower than the amounts reflected in the Summary Compensation Table because the amounts shown in the Summary Compensation Table for stock awards reflect the grant date fair value of entire stock awards at the time the stock awards were deemed to be granted for accounting purposes, which was February 13, 2017. In contrast, Realized Pay Table values the actual shares received based on fair market value of the Company’s common stock on the dates of vesting, February 8, 2018 and February 13, 2018. It therefore excludes forfeitures and units that may vest in future years. There was some price appreciation in the Company’s common stock which resulted in higher values being assigned to the Realized Pay Table amounts, but not enough to offset the value of the full award included in the Summary Compensation Table values.
For a detailed description of the grant date fair value of the stock awards and optionunit awards, please see footnotes 2 andfootnote 3 to the Summary Compensation Table. This table is not a substitute for the Summary Compensation Table and is intended to provide additional information that the Company believes is useful in facilitating an understanding of 20162017 realized compensation amounts to executive officers.
Mr. Walter’s Severance
On December 14, 2016 the Company announced that Mr. Walter would step down from his positions as President and Chief Executive Officer and a member of our Board effective December 31, 2016. Mr. Walter was entitled to, and received, severance under the Company’s Severance Plan when he left the employment of the Company on January 31, 2017. Under that plan, in exchange for a one year non-solicitation and non-competition
agreement, Mr. Walter received a payment of $5,279,500, which was two times his annual base salary plus two times the average of the annual incentive bonus for the three years 2013-2015, and continued coverage of group medical, vision and dental benefits for 18 months, for which the Company will pay the premium costs of $38,417. Under the restricted stock agreement, Mr. Walter vested in 250,681 shares of common stock, which represented shares that would vest at the “target” level of performance for 2016 (50% of his annual award). Mr. Walter also will receive his distribution under the Executive Deferred Compensation Plan, in which he has fully vested, in accordance with the terms of that plan. Mr. Walter was not entitled to receive a separate annual cash bonus for performance year 2016 under the Company’s annual incentive plan, which requires employment on the date of payment, and did not receive any amounts other than those pre-determined under the terms of the Company’s Severance Plan and the terms of his restricted stock award.
Salary
Base salary is set at an annual rate, and, as discussed above, increases were 3% in 2016 other than for Mr. Walter. This was the same percentage increase in 2015 and the same percentage increase as for all other employees.rate. Salary as a percentage of the named executive officers’ total target compensation ranged between 14% and 29%28% in 2016.2017. These increases are larger than those typically provided in prior years and reflect the significant organizational changes during 2017.
Name | Salary 2016 | Salary 2015 | Increase % | Salary 2017
| Salary 2016
| Increase%
| |||||||||||||||||||||
Mr. Walter | $ | 952,750 | $ | 952,750 | 0 | ||||||||||||||||||||||
Mr. Risoleo | 576,800 | 560,000 | 3 | ||||||||||||||||||||||||
Mr. Risoleo(1)
|
| $850,000
|
|
| $576,800
|
|
| 47
|
| ||||||||||||||||||
Mr. Bluhm(2)
|
| 560,000
|
|
| —
|
|
| —
|
| ||||||||||||||||||
Mr. Larson | 503,950 | 489,250 | 3 |
| 590,000
|
|
| 503,950
|
|
| 17
|
| |||||||||||||||
Mr. Abji | 546,400 | 530,450 | 3 | ||||||||||||||||||||||||
Mr. Tyrrell(3)
|
| 530,000
|
|
| —
|
|
| —
|
| ||||||||||||||||||
Ms. Abdoo | 488,050 | 473,800 | 3 |
| 550,000
|
|
| 488,050
|
|
| 13
|
| |||||||||||||||
Ms. Hamilton(3) | 400,000 | — | — |
(1) | Mr. Risoleo became Chief Executive Officer January 1, 2017 and the increase reflects his transition to this position from his prior position as Executive Vice President, Managing Director, Investments-Europe & West Coast. |
(2) | Mr. Bluhm was hired on October 23, 2017. Amount reflects his annualized base salary. |
(3) | Mr. Tyrrell and Ms. Hamilton were not named executive officers in 2016. |
Annual Cash Incentive
All employees participate in the annual cash incentive program. Any awards earned are based on (1) the Company’s performance against two annual financial metrics, Adjusted FFO per diluted share (“Adjusted FFO”), and Return on Invested Capital (“ROIC”, defined below), and (2) performance on individual objectives. The annual cash incentive was weighted as follows for the named executive officers:
COMPENSATION DISCUSSION AND ANALYSIS |
The financial performance measures of Adjusted FFO and ROIC are key metrics for the Company and the most significant portion of executives’ annual cash bonus is tied to the Company’s financial performance for the year. FFO per diluted share is the predominant measure of operating performance used by real estate investment trusts and the Company uses the measure in accordance with National Association of Real Estate Investment TrustsNAREIT guidelines, with certain adjustments, as a supplemental measure of operating performance in its earnings releases and financial presentations.presentations and SEC filings. For more information on this measure and a reconciliation to the applicable GAAP measure, see the Company’s Annual Report on Form10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Host Inc. Reconciliation of Net Income to NAREIT and Adjusted Funds From Operations per Diluted Share” on page 85. ROIC provides an emphasis on investing capital effectively. In the cyclical real estate / hospitality market, this focus on using capital effectively enhances the opportunity for longer term stability and growth.
The individual performance goals create line of sight and motivate behaviors that support the Company’s annual business plan and long-term strategy. These goals represent the smallest component of the named executive officers’ annual incentive award opportunity, reflecting the Committee’s continued belief that the incentive emphasis for senior executives should be primarily based on Company performance.
TheIn 2017 the target annual cash incentive represents 20%-29%represented14%-28% of the named executive officers’ total target compensation. The total amount that a named executive officer may earn depends on: (1) salary or eligible earnings, because the award is calculated and paid as a percentage of the annual salary or amount earned, and (2) the level of performance achieved on Adjusted FFO and ROIC, and (3) the level of performance achieved on individual goals. Performance levels are set at “threshold”, “target” and “high” and results are interpolated between these levels. There is no bonus if performance is “below threshold”, and bonuses are capped at the “high” level. The chart below shows the target annual incentive award as a percentage of salary for each named executive officer other thanin 2017. Mr. Walter,Bluhm was hired in 2016. Mr. WalterOctober 2017 and because his hire date was late in the year he was not entitledeligible to receive a separatean annual cash incentive bonus for performance year 2016 under the Company’s annual incentive bonus plan, which requires employment on the date of payment.2017.
Target Annual Incentive
Name | Salary | Target as % of Salary | Target Annual Incentive | Salary
| Target as % of Salary
| Target Annual Incentive
| ||||||||||||||||
Mr. Risoleo | $ | 576,800 | 100 | $ | 576,800 | $
| 850,000
|
| 125
| $
| 1,062,500
|
| ||||||||||
Mr. Bluhm
|
| 560,000
|
| N/A
|
| N/A
|
| |||||||||||||||
Mr. Larson | 503,950 | 100 | 503,950 |
| 590,000
|
| 100
|
| 590,000
|
| ||||||||||||
Mr. Abji | 546,400 | 100 | 546,400 | |||||||||||||||||||
Mr. Tyrrell
|
| 530,000
|
| 100
|
| 530,000
|
| |||||||||||||||
Ms. Abdoo | 488,050 | 100 | 488,050 |
| 550,000
|
| 100
|
| 550,000
|
| ||||||||||||
Ms. Hamilton | 400,000 | 100 | 400,000 |
COMPENSATION DISCUSSION AND ANALYSIS |
20162017 Results on Financial Measures.The “threshold”, “target” and “high” goals for Adjusted FFO and ROIC were established in February 20162017 by the Compensation Committee based on, and subject to review and approval of, the Company’s 20162017 business plan and budget by the Board of Directors. The chart below shows these measures and the Company’s actual results for 2016,2017, which were determined by the Compensation Committee in February 2017.2018.
20162017 Actual Results on Financial Measures
(1) | ROIC is calculated as comparable property-level EBITDA divided by the invested capital for all comparable consolidated properties. Property-level EBITDA is defined as the earnings before interest, taxes, depreciation and amortization of our comparable, owned hotels after eliminating corporate-level costs and expenses related to our capital structure. Invested capital is defined as the purchase price of a property plus all capital expenditures, excluding the furniture, fixture and equipment reserve contributions, which are typically 5% of gross revenues. |
20162017 Results on Individual Performance Goals.At the beginning of each year, senior management proposes and drafts performance goals based on the annual business plan of the Company, long-term strategic objectives and individual department objectives. The Compensation Committee reviewed these proposed goals at its February 20162017 meeting, adopted any revisions it deemed appropriate and approved the named executive officers’ goals. Since they are tied to the Company’s plans and strategy, the goals are designed to be attainable at a “target” level. The Compensation Committee also conducted amid-year review of the personal goals at its July 20162017 meeting to ensure that they were still appropriate. No changes were made.made at that time. The Compensation Committee discussed each executive’s performance at its February 20172018 meeting. Its assessments of the named executive officers were based, in part, on each executive’s written assessment of his or her performance as well as discussions with Mr. Risoleo. The Committee discussed each of the named executive officer’s performance and its recommendations with the independent directors in an executive session.
Mr. Risoleo’s individual goals included (i) implementingobjectives for 2017 were to lead the disposition plan; (ii) managing the redevelopment plan at The Phoenician and developing strategic plans for several identified assets; (iii) implementing the 2016 European investment strategy; and (iv) enhancing the strength and developmentimplementation of the Company’s West coast office.strategy, both domestic and international; communicate, meet and engage with key external stakeholders; guide the Company’s transition on its leadership changes and implement activities to further align the executive team; actively participate with trade associations such as NAREIT, AH&LA, and the Real Estate Roundtable to address issues of importance to the Company. Target for individual goals was 25% of base salary. Actual performance for individual goals was 32.50%.
Mr. Larson’s 2017 objectives were to prepare, organize and participate in investor outreach introducing a new chief executive officer; implement the creation of the new Enterprise Analytics group, which would report to the chief financial officer; and complete the senior notes offering, the recast of the Company’s credit facility and the refinancing of a loan secured by one the European joint venture assets. Target for individual goals was 20% of base salary. Actual performance for individual goals was 24.00%25.50%.
Individual goals
COMPENSATION DISCUSSION AND ANALYSIS |
Mr. Tyrrell’s 2017 objectives included the completion of franchise conversions and other management or brand changes; pursuing the extension and purchase of certain ground leases and excess land; completing the sale of the disposition targets; overseeing and negotiating key agreements with operators and enhancing the relationship and partnership with them; and implementing and leading the organizational plan for Mr. Larson included (i) implementing the Company’s 2016 finance plan; (ii) directing the strategic planning process; (iii) overseeing the enhancementintegration of efficiency processes in finance, taxasset management and accounting; and (iv) updating the investor strategy.investments. Target for individual goals was 20% of base salary. Actual was 24.00%.
Mr. Abji’sperformance for individual goals in 2016 included (i) achieving budgeted operatingwas 26.50%.
Ms. Abdoo’s objectives in the U.S. and Europe on RevPAR growth and other metrics; (ii) achieving operating budgets for repositioned assets and assets with new operators; (iii) implementing new operating strategies2017 were to improve profitability; and (iv) assistingassist in the executive and senior management transition and organizational changes; oversee and provide legal support and analyses of strategic planning process.portfolio initiatives; oversee the assessment of the legal support function to enhance efficiency and technology utilization; oversee the legal analysis and negotiation of key investment and operational matters with major operators; and resolve several claims arising from tax, acquisition and contract-related matters. Target for individual goals was 20% of base salary. Actual performance for individual goals was 19.06%29.50%.
Individual goalsMs. Hamilton’s 2017 objectives were to develop and implement plans to internally communicate strategy and rationale for Ms. Abdoosenior management and organizational changes and set workforce expectations for cultural change;co-lead the workplace strategy project to identify and then design future office space; oversee the corporate responsibility program and continue to refine charitable contribution practices and policies; and oversee completion of the IT strategy project and develop plans for next steps in 2016 included (i) resolving key open litigation matters and claims; (ii) overseeing analyses and any negotiations arising from industry consolidations; and (iii) overseeingimplementation of the negotiation of franchise and independent operator agreements.ERP platform. Target for individual goals was 20% of base salary. Actual performance for individual goals was 26%31.50%.
Summary of Annual Cash Incentive. Based on the Committee’s review and determinations discussed above, the named executive officers received the following annual cash incentive:
Results 2016 Annual Incentive | Results 2017 Annual Incentive | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Target as % of Salary | Target Bonus | FFO Award | ROIC Award | Individual Performance | Total Bonus (1) | Target as % of Salary | Target Bonus | FFO Award | ROIC Award | Individual Performance | Total Bonus(1) | ||||||||||||||||||||||||||||||||||||||||||
Mr. Risoleo | 100 | $ | 576,800 | $ | 348,848 | $ | 149,732 | $ | 138,432 | $ | 637,100 |
| 125
|
|
| $1,062,500
|
|
| $842,917
|
|
| $307,759
|
|
| $276,250
|
|
| $1,427,000
|
| |||||||||||||||||||||||||
Mr. Bluhm
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||
Mr. Larson | 100 | 503,950 | 304,788 | 130,821 | 120,948 | 556,600 |
| 100
|
|
| 590,000
|
|
| 468,067
|
|
| 170,896
|
|
| 150,450
|
|
| 789,500
|
| ||||||||||||||||||||||||||||||
Mr. Abji | 100 | 546,400 | 330,462 | 141,841 | 103,816 | 576,200 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Tyrrell
|
| 100
|
|
| 530,000
|
|
| 403,970
|
|
| 147,494
|
|
| 134,939
|
|
| 686,500
|
| ||||||||||||||||||||||||||||||||||||
Ms. Abdoo | 100 | 488,050 | 295,172 | 126,693 | 126,893 | 548,800 |
| 100
|
|
| 550,000
|
|
| 436,334
|
|
| 159,310
|
|
| 162,250
|
|
| 757,900
|
| ||||||||||||||||||||||||||||||
Ms. Hamilton
|
| 100
|
|
| 400,000
|
|
| 317,334
|
|
| 115,862
|
|
| 126,000
|
|
| 559,200
|
|
(1) | Total |
Long-Term Incentives
The long-term incentives are equity-based awards, and provide 90% of the target valuewhich, in 2017, were made entirely in the form of performance vesting restricted stock and the remaining 10% in the form of stock options. In combination, theseunits. These awards represent the largest component of the named executive officers’ total target compensation, representing between 42%44% and 65%73% in 2016.2017. Dividends accrue on unvested shares,awards, but are paid only when, and if, the restrictions on the awards lapse, that is, the shares vest based on performance. The treatment of Mr. Walter’s restricted stock award is described above in the section entitled “Mr. Walter’s Severance.”
lapse.
AllThe majority of our long-term incentive compensation is performance-based. Performance sharesPerformance-based restricted stock units vest based onupon achievement of relative TSR and corporate and individual performance.performance goals. These measures provide a link to stockholder value, with recognition of the other companies that Host may be competing against for capital. Stock options provide a link to absolute stockholder value creation through a sole focus on stock price appreciation.
Restricted Stock
Our long-term incentiveUnder the 2017 compensation program, provides an annual award of performance based restricted stock at the beginning of each year to more regularly incorporate stockholder feedback. Further, to remain consistent with our desire to maintain strong alignment with stockholder results, we grant the maximum number of shares that an executive may earn over the performance period.
In this structure, if our high performance goals are not achieved, the executive forfeits the right to earn the full number of shares granted. We believe this approach better communicates the “loss” an executive incurs in his/her earning opportunity if our goals are not achieved.
All awards of restricted stock units are eligible to vest based on performancethe following:
• | Corporate strategic objectives(34% of the long-term incentive opportunity) that are drivers of long-term value. These annual objectives based on the Company’s budget and strategic plan are approved by the Compensation Committee at the beginning of the year; |
COMPENSATION DISCUSSION AND ANALYSIS |
• | Relative TSR measures(33% of the long-term incentive opportunity) that compare the Company’s performance to the performance of each of the following indices: NAREIT Equity Index; S&P 500 Index; and select hospitality companies against whom the Company competes for capital (the “Lodging Index”); and |
• | Retention based(33% of the long-term incentive opportunity) restricted stock units that vest ratably over a three-year period. |
Achievement levels for the corporate and individual objectives approved by the Compensation Committee at the outset of the year and on three relative TSR measures. The program design uses a three-year performance period for relative TSR, and the grant for 2016 vests based on the three-year (2014-2016) cumulative relative TSR performance.
The vesting of the restricted shares awarded in 2016 was dependent upon:
2016 Restricted Stock Vesting
Achievement levelsmeasures are set for “threshold” at which 25% of shares may be earned, “target”, at which 50% of the shares may be earned and “high” performance, at which all shares are earned. No shares are earned if performance is below threshold, and results will be interpolated between the levels of threshold, target and high.
2016 Results on Individual Performance. Individual goals represent 16.67%The vesting of the targetrestricted stock awardunits is summarized below:
2017 Restricted Stock Unit Vesting
The primary changes from the prior long-term incentive program and the resultsreasons for the changes were consistentnoted above in “Our Compensation Program.” The prior program used a mostly historical look back period for assessing relative three-year TSR performance (i.e., 2016 awards vested based on relative performance for 2014—2016). In 2017 we transitioned to using a forward looking performance period to align the executives with those described above under “Annual Cash Incentive”future stockholder value creation and to better reflect best practices. An implication of the change was that it would result in a three-year gap in the vesting of any relative TSR performance units. To address this issue, 2017 was a transition year for the program and the 2017 relative TSR units granted were divided into three separate tranches with the following one, two, and three-year performance periods
By providing this transition, a certain number of relative TSR units continue to be eligible to vest each year, albeit a smaller amount during transition, subject to meeting the vesting requirements. For future years, and in accordance with the program design, solely three-year relative TSR restricted stock units are intended to be granted (i.e., the grants awarded in 2018 utilized a solely forward looking performance period of 2018—2020). The chartSet forth in the table below showsis a summary of the 2017 restricted stock units that were granted and eligible to vest for each of the named executive officer,officers. The performance-based restricted stock units are granted at “high”, reflecting the total sharesmaximum number of restricted stock units that were eligible to be earned for individualan executive may earn over the performance the “target” level of shares, the actual shares earned and the shares forfeited by each named executive officer.period.
Individual Performance Shares | ||||||||||||||||
Shares Granted (High) | Shares Granted (Target) | Shares Earned | Shares Forfeited | |||||||||||||
Mr. Risoleo | 15,412 | 7,706 | 9,247 | 6,165 | ||||||||||||
Mr. Larson | 22,283 | 11,142 | 13,370 | 8,913 | ||||||||||||
Mr. Abji | 31,010 | 15,505 | 14,730 | 16,280 | ||||||||||||
Ms. Abdoo | 18,198 | 9,099 | 11,829 | 6,369 |
2017 Restricted Stock Units Granted
TSR Units for Performance Period | ||||||||||||||||||||||||||||||
Name | 3 Year Time Based | 2017 Performance | Jan 1, 2017 - Dec 31, 2017 | Jan 1, 2017 - Dec 31, 2018 | Jan 1, 2017 - Dec 31, 2019 | Total Restricted Units | ||||||||||||||||||||||||
Mr. Risoleo
|
| 64,032
|
|
| 131,944
|
|
| 42,687
|
|
| 42,687
|
|
| 42,689
|
|
| 324,039
|
| ||||||||||||
Mr. Bluhm(1)
|
| 81,032
|
|
| —
|
|
| —
|
|
| 81,030
|
|
| 81,030
|
|
| 243,092
|
| ||||||||||||
Mr. Larson
|
| 35,914
|
|
| 74,005
|
|
| 23,943
|
|
| 23,943
|
|
| 23,943
|
|
| 181,748
|
| ||||||||||||
Mr. Tyrrell
|
| 18,902
|
|
| 38,950
|
|
| 12,601
|
|
| 12,602
|
|
| 12,602
|
|
| 95,657
|
| ||||||||||||
Ms. Abdoo
|
| 23,155
|
|
| 47,714
|
|
| 15,435
|
|
| 15,438
|
|
| 15,438
|
|
| 117,180
|
| ||||||||||||
Ms. Hamilton
|
| 12,286
|
|
| 25,318
|
|
| 8,190
|
|
| 8,190
|
|
| 8,193
|
|
| 62,177
|
|
(1) | Because Mr. Bluhm was hired late in 2017, his restricted stock unit grant was subject to slightly different vesting conditions, namely that no portion of his grant was eligible to vest based on total stockholder return for the one year period of January 1, 2017 to December 31, 2017, and his award did not include a 2017 corporate performance goals component. |
20162017 Results on Corporate Performance Objectives. Corporate objectives represent 33.33%34% of the target stock award. As with individual performance goals, these are proposed by senior management at the beginning of the year and reviewed by the Compensation Committee at its February 2016 meeting. The goalsThese objectives are tied to the annual business plan and strategy of the Company with an emphasis on encouraging the objectives and results that the Company believes will ultimately drive long-term stockholder value creation and preservation. The objectives are reviewed and approved by the Compensation Committee in February 2017. Summarized below is an assessment of our Company’s performance against the corporate level objectives established for 2016,2017, the indicated level of achievement, plus the appropriate percentage award.
Operations
Weighting | Target | Achieved | Achievements | |||||||||
20 | % | 6.6 | % | 5.0 | % | We had lower revenue growth for our Company hotel operations than budgeted but solid expense savings which offset the revenue shortfall. In Europe, we had expected a slight decline in RevPAR, as we anticipated that tourist travel would drop off in France and London, and had assumed that we would have negligible revenue growth. Ultimately, similar to what we experienced in the US, our revenues fell short of expectations, but the decline in our expenses matched the revenue decline. As expected, the portfolio benefitted from less construction disruption in 2016, as market share for the full year increased slightly. In addition to the performance of the overall portfolio, we were slightly below our goal of meeting or exceeding our projections for our major redevelopments and the properties that had experienced a change in operators. |
Redevelopments
Weighting | Target | Achieved | Achievements | |||||||||
20 | % | 6.7 | % | 10 | % | Our redevelopment objectives for 2016 focused on two major objectives: successfully completing the construction of our three hotel redevelopment projects and the ballroom at the Marriott Marquis San Diego Marina, plus beginning the development process for several potential value enhancement projects we had identified in the portfolio. We completed three of the four projects on time and within or under budget. In San Diego, we completed the ballroom/exhibit hall on schedule and below our budget target. At The Phoenician, A Luxury Collection Resort, we completed a comprehensive renovation of all of the rooms in the main building, the casitas and the luxury Canyon Suites. At the Hyatt Regency San Francisco Airport, we completed rooms and meeting space renovations, as well as transforming the atrium area, and repositioning food and beverage outlets. At the Denver Marriott Tech Center, we completed a comprehensive rooms and meeting space renovation. We also advanced several value enhancement projects during the course of the year. |
Investments/Investments & Dispositions
Weighting | Target | Achieved | Achievements | |||||||||
20 | % | 6.7 | % | 10.0 | % | We continued to strategically sell assets that we believed would experience lower growth and/or higher capital expenditures requirements. During 2016, we sold 10 properties for proceeds of approximately $467 million. Since we announced our strategy to exit the Asia-Pacific market in September 2015, we have sold all seven of our New Zealand hotels for a total of approximately NZ$257 million ($174 million), including the repayment of NZ$105 million ($72 million) of mortgage debt. We purchased the ground lease at the Key Bridge Marriott. We were able to place the 277 room Don CeSar hotel, located in the Tampa Florida metro area, under a binding contract, which closed in February 2017. |
Weighting
| Target
| Achieved
| Achievements
| ||||||||||||
|
20 |
% |
|
6.8 |
% |
|
10.2 |
% |
The Company completed its objective to sell or refinance assets in the Asia Pacific region with the sale of the Hilton Melbourne. It achieved its acquisition target with the purchase of the Don CeSar and the W Hollywood. The evaluation of opportunistic sales of assets resulted in the sale of the Sheraton Memphis and Sheraton Indianapolis. |
Finance/StrategyOperations
Weighting | Target | Achieved | Achievements | |||||||||
20 | % | 6.7 | % | 6.7 | % | Our focus in 2016 was largely devoted to our international and joint venture debt obligations. During the course of the year, we refinanced the debt of the Hyatt Place Nashville, extended the loan on the Sheraton Stockholm until 2021, extended the loan on the Sheraton Berlin to 2021 and extended the term of the loans on our New Zealand and Australian assets to allow for the orderly disposition of the assets. We also acquired 13.8 million shares of stock, for a total purchase of approximately $218 million, which reflects an average share price of $15.79 for the full year. We continued to enhance our investor communications by updating and improving our corporate presentation and holding an investor day in November. We began work on the strategic plan which continued throughout the year. |
Weighting
| Target
| Achieved
| Achievements
| ||||||||||||
|
25 |
% |
|
8.5 |
% |
|
12.75 |
% |
The Company completed negotiation of targeted management contract opportunities at Costa Mesa Marriott, Westin Waltham and Westin Buckhead, which were converted to franchise and at The Ritz Carlton Buckhead, which was rebranded and franchised as The Whitley. Advanced land sales and alternative uses at The Phoenician, which received its planned unit development approval in October, and the Key Bridge Marriott which sale closed in January 2018 at a value exceeding expectation. |
OrganizationalFinance and Investor Relations
Weighting | Target | Achieved | Achievements | |||||||||
20 | % | 6.6 | % | 6.6 | % | We completed a series of initiatives designed to improve the organization’s performance going forward. These included a complete redesign of our corporate website, completion of an enhanced efficiency assessment of processes in finance, tax and accounting, leadership development training and a comprehensive associate survey to develop a set of organizational opportunities and recommended actions. |
Weighting Target Achieved Achievements 20 % 6.8 % 10.2 % The Company enhanced its investor relations outreach by engaging with over 200 investors and sell side analysts to more clearly communicate our strategy and promote transparency. Completed bond offering and extended and restructured credit facility.Totals for All Corporate Objectives
Weighting | Target | Achieved | ||||||||||
100 | % | 33.3 | % | 38.3 | % |
The chart below shows for each named executive officer, the total shares that were eligible to be earned on corporate objectives, the “target” level of shares, the actual shares earned and the shares forfeited by each named executive officer.
Corporate Performance Shares | ||||||||||||||||
Shares Granted (High) | Shares Eligible (Target) | Shares Earned | Shares Forfeited | |||||||||||||
Mr. Risoleo | 30,824 | 15,412 | 17,724 | 13,100 | ||||||||||||
Mr. Larson | 44,565 | 22,283 | 25,625 | 18,940 | ||||||||||||
Mr. Abji | 62,020 | 31,010 | 35,662 | 26,358 | ||||||||||||
Ms. Abdoo | 36,395 | 18,198 | 20,927 | 15,468 |
Corporate Strategy & Organizational
Weighting
| Target
| Achieved
| Achievements
| ||||||||||||
|
20 |
% |
|
6.8 |
% |
|
10.2 |
% |
Senior level transitions and reorganizations were implemented because of departures and retirements. A new Enterprise Analytics group was formed, which included business intelligence, revenue management, corporate finance, strategic insight, capital financial services, and feasibility. Asset management and investments were combined under a new chief investment officer to drive further partnership and alignment. Continued research, analyses and discussion with the Board on long term corporate strategy. |
Technology Strategy
Weighting
| Target
| Achieved
| Achievements
| ||||||||||||
|
15 |
% |
|
5.1 |
% |
|
5.1 |
% |
With a cross departmental IT steering committee, selected appropriate ERP platform and developed and executed on implementation timeline. |
Totals for All Corporate Objectives
Weighting
| Target
| Achieved
| Equity as a Percentage of Target
| |||||||||||||||||||
|
100 |
% |
|
34 |
% |
|
48.45 |
% |
142.50% |
The chart below shows for each named executive officer, the total number of restricted stock units that were eligible to be earned on corporate objectives, the “target” level of such restricted stock units, the actual number of such restricted stock units earned and the number of such restricted stock units forfeited by each named executive officer.
Corporate Performance Units | ||||||||||||||||||||
Restricted Granted (High) | Restricted (Target) | Restricted Earned | Restricted Forfeited | |||||||||||||||||
Mr. Risoleo
|
| 131,944
|
|
| 65,972
|
|
| 94,010
|
|
| 37,934
|
| ||||||||
Mr. Bluhm
|
| —
|
|
| —
|
|
| —
|
|
| —
|
| ||||||||
Mr. Larson
|
| 74,005
|
|
| 37,003
|
|
| 52,729
|
|
| 21,276
|
| ||||||||
Mr. Tyrrell
|
| 38,950
|
|
| 19,475
|
|
| 27,752
|
|
| 11,198
|
| ||||||||
Ms. Abdoo
|
| 47,714
|
|
| 23,857
|
|
| 33,996
|
|
| 13,718
|
| ||||||||
Ms. Hamilton
|
| 25,318
|
|
| 12,659
|
|
| 18,039
|
|
| 7,279
|
|
COMPENSATION DISCUSSION AND ANALYSIS |
20162017 Results on Relative TSR Measures. The Company’s relative TSR was comparedOne-third of the performance-based restricted stock unit awards that were granted in 2017 were eligible to the three market references for the three-year period January 1, 2014 through December 31, 2016. Shares vestedvest based on the performance of the Company’s relative TSR (measured as a percentile) compared to each reference.the three market indices for the period January 1, 2017 through December 31, 2017. No sharesrestricted stock units are earned if performance is “below threshold”below “threshold”.
20162017 Actual TSR Results(1)
(1) | TSR is the increase in the price of the Company’s common stock at |
(2) | The Lodging Index is comprised of the following companies: Chesapeake Lodging Trust, Diamondrock Hospitality Co., Hyatt Hotels Corporation, LaSalle Hotel Properties, Pebblebrook Hotel Trust, Ryman Hospitality Properties, Inc., RLJ Lodging Trust, and Sunstone Hotel Investors, Inc. |
The Company’s relative TSR results were below threshold compared to all indices. As a result, all TSR shares were forfeited. The chart below shows for each named executive officer, the amountactual number of sharesrestricted stock units earned and forfeited by each named executive officer.officer that were eligible to vest based on the Company’s relative TSR in 2017.
| ||||
| ||||
| ||||
|
NAREIT Index Units Earned Lodging Index Units Earned S&P Index Units Earned Restricted Earned Restricted Forfeited Mr. Risoleo Mr. Bluhm Mr. Larson Mr. Tyrrell Ms. Abdoo Ms. Hamilton Summary of Restricted Stock Results. The chart below summarizes the shares earned and forfeited by the named executive officers in 2016. Total shares earned were substantially below “target” due to the Company’s results on the relative TSR measures. 2017TSR-Based Restricted Stock Units Total
Stock Units
Stock Units 10,957 5,232 6,639 22,828 19,859 — — — — — 6,146 2,934 3,724 12,804 11,139 3,235 1,544 1,960 6,739 5,862 3,962 1,892 2,401 8,255 7,180 2,102 1,004 1,274 4,380 3,810
Total Shares Granted (Target) | Total Shares Earned | Total Shares Forfeited | ||||||||||
Mr. Risoleo | 46,237 | 26,971 | 65,502 | |||||||||
Mr. Larson | 66,848 | 38,995 | 94,701 | |||||||||
Mr. Abji | 93,031 | 50,392 | 135,669 | |||||||||
Ms. Abdoo | 54,593 | 32,756 | 76,429 |
Shares would also vest in the event of an executive’s death or disability or, under certain circumstances, under the Severance Plan. Please see the discussion under “Additional Policies and Benefits—Severance Plan.” As
described under “Additional Policies and Benefits—Perquisites and Other Individual Benefits,” Mr. Walter agreedSummary of Performance-Based Restricted Stock Units Results. The chart below summarizes the target number of performance-based restricted stock units that were eligible to accept proceeds under life insurance policies to offset long-term incentive compensation that would vest in 2017 and the eventnumber of his death.
Stock Options
Stock options represent 10% of the total target equity value. Grants are made annuallyperformance-based restricted stock units earned and vest at the end of the calendar year in which the grants were made. Stock options are valued using the binomial options pricing model. Options have a 10-year maximum life and no cash dividends accrue or are paid on options. The Compensation Committee awarded the following stock options toforfeited by the named executive officers in 2017. The total number of performance-based restricted stock units earned was slightly above “target” due to the Company’s results on February 4, 2016 at an exercise price of $14.20 per share, which was the closing pricecorporate performance objectives (above “target”) and relative TSR measures for 2017 (overall above “target”). A substantial portion of the Company’s common stock on the dateaward was nevertheless forfeited because performance was not at “high” for either of the award. All options vested on December 31, 2016, at which time the Company’s closing stock price was $18.84.corporate performance objectives or relative TSR measures for 2017.
| ||||
| ||||
| ||||
| ||||
|
Total Stock Units Eligible to | Total Stock Units Earned in | Total Stock Units Forfeited in | |||||||||||||
Mr. Risoleo
|
| 174,631
|
|
| 116,838
|
|
| 57,783
|
| ||||||
Mr. Bluhm
|
| —
|
|
| —
|
|
| —
|
| ||||||
Mr. Larson
|
| 97,948
|
|
| 65,533
|
|
| 32,415
|
| ||||||
Mr. Tyrrell
|
| 51,551
|
|
| 34,491
|
|
| 17,060
|
| ||||||
Ms. Abdoo
|
| 63,149
|
|
| 42,251
|
|
| 20,898
|
| ||||||
Ms. Hamilton
|
| 33,508
|
|
| 22,419
|
|
| 11,089
|
|
Both priorPrior to continuingadopting the annual compensation program in 20162017 and prior to making its determinations on results and payments under the program, the Compensation Committee considered whether the design and structure created incentives for senior management to engage in unnecessary or excessive risk taking. The executive compensation program is designed to rewardcompensate the named executive officers and other members of senior management for reaching or exceeding financial, personal and corporate goals approved by the Compensation Committee. The Committee considered the following factors:
The Compensation Committee has full responsibility for approving the goals and the resulting payouts and retains the discretion to reduce awards as appropriate. Based on these factors, the Company believes that the program appropriately focuses on executive performance and does not create an incentive for management to engage in unnecessary and excessive risk taking.
Additional Policies and Benefits
While the key elements of the executive compensation program and compensation actions are described above, the named executive officers are also eligible to participate in the Company’s health and welfare programs, ourtax-qualified Retirement and Savings Plan (401(k)), and other programs on the same basis as all other employees. There are also additional benefits and policies that apply only to the named executive officers and other senior executives, which are described here.
Stock Ownership and Retention Policy
All members of senior management must comply with the Company’s equity ownership and retention policy which ensures that senior executives have a meaningful economic stake in the Company, while allowing for appropriate portfolio diversification.
The policy, which was amended effective January 1, 2017, provides that members of senior management should own and retain stock equal to the following respective multiple of their annual salary rate:
CEO—six times annual salary rate;
Executive Chair—six times annual salary rate;
Executive Vice Presidents—three times annual salary rate;
Managing Directors—three times annual salary rate; and
Senior Vice Presidents (Department Heads)—two times annual salary rate.
Members of senior management are expected to satisfy the minimum stock ownership levels required by the policy and, once achieved, remain at, or above, their required ownership level as long as they remain employed by the Company.
In order to progress toward the stock ownership requirement, employees must retain 75% of “Covered Shares” until the equity ownership level is attained. For the purposes of the policy, “Covered Shares” are the netafter-tax shares received upon the vesting of each stock award under any Company equity compensation plan or other written compensation arrangement.
Only certain types of equity are counted when determining compliance with the policy: (a) stock owned directly; (b) stock purchased through the Company’s stock purchase or deferred stock plans; and (c) stock acquired as a result of vesting of stock under the Company’s equity compensation program. Vested and unvested stock options or stock options exercised and held are not included in the calculation.
Senior management is prohibited from selling any shares (other than shares to satisfy tax obligations) if they are not in compliance with the policy or if the sale would result in holdings below the guidelines. None of senior management has a plan in place by which they sell Company stock on a periodic basis (referred to as a10b5-1 plan). The Compensation Committee reviews compliance with the policy, and all named executive officers are in compliance.
COMPENSATION DISCUSSION AND ANALYSIS |
Recoupment Policy
The Company adopted a policy, effective January 1, 2012, that requires the reimbursement of excess incentive compensation payments in the event that the Company is required to make a material restatement of its financial statements. The policy applies to all members of senior management and ensures that any fraud, intentional misconduct or illegal behavior leading to a restatement of the Company’s financial result would be properly addressed. Under the policy, the Board would review all incentive plan compensation that was paid on the basis of having met or exceeded specific performance targets for performance periods in question. If the cash incentive awards or stock compensation received under the program would have been lower had they been calculated based on such restated results, it is the general policy of our Board to seek to recoup, for the benefit of the Company, the portion of the excess compensation that was received by any individual who engaged in fraud, intentional misconduct or illegal behavior in connection with the financial results that were restated. The Board will, in its reasonable business judgment, decide whether to pursue such recoupment from an individual based on those factors that our Board believes to be reasonable. The policy will be revised under the Dodd-Frank Act once regulations implementing the recoupment policy requirements of that law are finalized.
Insider Trading Controls, Hedging, Short Sales and Pledging
Because we believe it is improper and inappropriate for any Company personnel to engage in short-term or speculative transactions involving our stock, or other securities, the Company’s Insider Trading Policy Statement, which was adopted in 2001, provides that directors, officers and employees, and family members sharing the same household, shall not engage in any ofabide by the following activitiespolicies with respect to Company securities:
(1) “In and out” trading in Company securities; Company securities purchased in the open market must be held for a minimum of six months and ideally longer; (2) Short sales, including “selling against the box” transactions; (3) Buying or selling puts or calls (options) or other derivatives on our stock or other securities or entering into hedging transactions on Company securities; this does not pertain to the exercise of stock options granted by the Company to its employees, the terms of which prohibit such trading; and (4) Margin Accounts or Stock Pledges; the Company prohibits employees and directors from purchasing Company securities on margin or holding Company securities in a margin account or otherwise pledging Company securities as collateral for loans.
• | No “In and out” trading in Company securities; Company securities purchased in the open market must be held for a minimum of six months and ideally longer; |
• | No short sales; these sales, including “selling against the box” transactions, are prohibited; |
• | No buying or selling puts or calls; options or other derivatives on our stock or other securities or entering into hedging transactions on Company securities are prohibited; and |
• | No Margin Accounts or Stock Pledges; the Company prohibits employees and directors from purchasing Company securities on margin or holding Company securities in a margin account or otherwise pledging Company securities as collateral for loans. |
Executives and directors annually certify that they have complied with the policy, and no Company securities are currently pledged nor will executives and directors be permitted to pledge them in the future.
Perquisites and Other Personal Benefits
We provide executive officers with perquisites that we believe to be fair, reasonable and primarily based on our business. They consist of (1) dining, complimentary rooms and other hotel services when on personal travel at hotels that we own or that are managed by our major operators, (2) financial planning and tax services, and (3) reimbursement for taxes associated with these benefits. We are in the lodging industry and we believe that it is appropriate to encourage our executives to continually enhance their understanding of our properties and the operations of our key managers at our properties and other hotels in the same class as our portfolio. This assists in portfolio development and improvements. In addition, we believe that offering financial planning and tax services represents a minimal cost while ensuring that executives are in compliance with tax requirements. Since we encourage our executives to use these perquisites and the Company gains benefits from their knowledge and feedback on our managers and properties, we feel that it is appropriate to reimburse them for the taxes incurred upon such benefits.
In connection with the restricted stock award, at the Company’s request, Mr. Walter agreed to purchase a life insurance policy and to accept the proceeds under the policy to offset some or all of the stock compensation that would vest and be payable in the event of his death. The Company believes that it benefits from this policy because the proceeds from the life insurance policy would mitigate the effect on the Company’s financial statements of the accelerated vesting of the restricted stock award, which would occur upon an executive’s death. The Company reimbursed Mr. Walter for the cost of the policy and the taxes payable as a result of the reimbursement. As of January 1, 2017, the Company no longer requests executives to purchase, or reimburses executives for, any such policies.
Executive Deferred Compensation Plan
Our Executive Deferred Compensation Plan allows participants to save for retirement in excess of the limits applicable under our Retirement and Savings Plan. It is not a tax qualified plan. Eligible employees, including the named executive officers, may defer up to 100% of their cash compensation (that is, salary and bonus) in excess of
COMPENSATION DISCUSSION AND ANALYSIS |
the amounts first deferred into the Retirement and Savings Plan. We provide a match of $.50 for each $1.00 deferred under the plan, up to a maximum of 6% of the participant’s compensation less the amount credited to the Retirement and Savings Plan. In addition, we may make a discretionary matching contribution of up to $.50 on each $1.00 up to 6% of the participant’s compensation. The maximum percentage was increased from 6% to 8% effective January 1, 2018 to mirror the increase from 6% to 8% under the Company’s Retirement and Savings Plan. This is the onlynon-qualified retirement plan offered to senior executives. The Company does not have a pension plan and does not have a supplemental executive retirement program.
Severance Plan
The Company has a severance plan that has been in effect since 2003 and applies to employees at the level of senior vice president and above. The Compensation Committee believes that a severance plan allows the
Company to provide properly designed severance benefits on a consistent basis, which promotes stability and continuity of senior management. The Committee annually reviews the terms of the severance plan. The provision of severance upon a change in control aligns the Company’s interests with its stockholders by eliminating distractions that arise with the uncertainty of these transactions and avoiding the loss of key members of management during a critical period. The severance plan requires a “double trigger” for payment in the context of a change in control, that is, there must be both a change in control and a termination by the Company without “cause” or by the executive for “good reason” in the period beginning 30 days prior to the change in control and ending one year after the change in control. Significantly, theThe severance plan does not provide for taxgross-ups on any payments made in connection with a termination or a change in control. The cost of any excise tax that a member of senior management might incur related to a payment under the plan would be borne by the individual. The Company believes the severance plan is appropriate, and the Compensation Committee reviews annually trends in severance practices for executives. In addition, prior to its annual compensation determinations, the Compensation Committee reviews the level of severance pay and benefits that the named executive officers would receive under the plan and under stock and option agreements. Under the restricted stock agreements and stock optionunit agreements a change in control coupled with a triggering event would result in the acceleration and vesting of all long-term incentive awards.
For additional information regarding the severance plan, including an estimate of payments the named executive officers would have been entitled to receive on December 31, 20162017 upon various termination events, see “Executive Officer Compensation—Severance and Change in Control Payments.”
Tax and Accounting
Section 162(m) of the Internal Revenue Code precludesprovides that a publicpublicly held corporation from takingmay not claim a deduction for compensation in excess of $1 million forpaid to its chiefprincipal executive officer, its principal financial officer and its three other highest paid executive officers (other than the Chief Financial Officer), unless such compensationofficers. Effective for tax years beginning after December 31, 2017, there generally is performance based and certain specific and detailed criteria are satisfied.no longer an exception from this rule for performance-based compensation. Our executives, and all other employees, are employed by Host Hotels & Resorts, L.P., the operating partnership through which we conduct all operations, and its subsidiaries, and not directly by the Company. As a result, we believe that none of our employees are subject to the $1 million compensation deduction limit under Section 162(m).
However, in the event that some portion of employee compensation is subject to Section 162(m) but fails to beand is not deductible, our taxable income would increase to the extent of the disallowed deduction and we could be required to make additional dividend distributions to our stockholders or to pay tax on the undistributed income provided that we have distributed at least 90% of our adjusted taxable income. In such event, the Compensation Committee may consider the anticipated tax treatment to the Company and the executive officers in its review and establishment of compensation programs and payments. However, the deductibility of some types of compensation payments can depend upon the timing of an executive’s vesting or exercise of previously granted rights. Interpretations of, and changes in, applicable tax laws and regulations as well as other factors beyond the Committee’s control also may affect deductibility of compensation. Accordingly, the Committee may determine that it is appropriate to structure compensation packages in a manner that may not be deductible under Section 162(m).
All restricted stock unit awards to senior executives have been classified as liabilityequity awards due to settlement features that allowfor accounting purposes and the recipient to have a percentage of the restricted stock awards withheld to meet tax requirements in excess of the statutory minimum withholding. The Company therefore recognizes compensation expense over the requisite service period based on the fair value of the award atas of the balance sheet grant
COMPENSATION DISCUSSION AND ANALYSIS |
date. The value of all restricted stock awards is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). The Committee makes its assessments on the appropriate value of the restricted stock unit awards for target compensation based on the fair market value of the common stock on the date of grant orusing a 60 day calendar average of closing stock prices of the Company’s common stock on the New York Stock Exchange and also considers the closing price of the stock on the date of grant. The Committee believes that an average price over a period of time is a better gauge of value as it mitigates volatility.
The grant date fair value of the awards is calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, which is the methodology the Company uses to expense the awards for accounting purposes on its financial statements and is also the methodology used for valuing the awards on the Summary Compensation Table that follows. These values would not beare based, in part, on the grant date stock price. Because the Compensation Committee typically uses a60-day average in determining the fair market value of the restricted stock unit award, and did so in 2017, differences between the grant date stock price value and the60-day average price will result in differing valuations. For that reason, the values reflected in the Company’s financial statements because liability awards are re-measured to2017 Target Compensation Table may be higher or lower than the grant date fair value each reporting period.of the award for accounting purposes and as reflected on the Summary Compensation Table.
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table for Fiscal Year 20162017
Name | Year | Salary (1) | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation (4) | All Other Compensation (5) | Total | |||||||||||||||||||||
Richard E. Marriott (6) Chairman of the Board |
| |||||||||||||||||||||||||||
2016 | $ | 396,777 | $ | — | $ | — | $ | 316,800 | $ | 45,124 | $ | 758,701 | ||||||||||||||||
2015 | 396,777 | — | — | 306,400 | 189,696 | 892,873 | ||||||||||||||||||||||
2014 | 385,220 | — | — | 382,400 | 60,957 | 828,577 | ||||||||||||||||||||||
W. Edward Walter (7) President and Chief Executive Officer |
| |||||||||||||||||||||||||||
2016 | 952,750 | 2,633,820 | 384,406 | — | 5,428,498 | 9,399,474 | ||||||||||||||||||||||
2015 | 952,750 | 4,866,801 | 449,999 | 1,471,500 | 225,660 | 7,966,710 | ||||||||||||||||||||||
2014 | 925,000 | 4,060,574 | 439,446 | 1,878,100 | 245,313 | 7,548,434 | ||||||||||||||||||||||
James F. Risoleo President and Chief Executive Officer effective January 1, 2017 and formerly Executive Vice President, Managing Director, Investments - Europe & West Coast |
| |||||||||||||||||||||||||||
2016 | 576,800 | 485,792 | 70,903 | 637,100 | 92,997 | 1,863,591 | ||||||||||||||||||||||
2015 | 551,580 | 738,408 | 74,863 | 610,100 | 90,553 | 2,065,505 | ||||||||||||||||||||||
Gregory J. Larson Executive Vice President, Chief Financial Officer |
| |||||||||||||||||||||||||||
2016 | 503,950 | 702,350 | 102,509 | 556,600 | 110,395 | 1,975,804 | ||||||||||||||||||||||
2015 | 489,250 | 1,297,825 | 119,998 | 518,500 | 86,570 | 2,512,143 | ||||||||||||||||||||||
2014 | 475,000 | 1,082,799 | 117,184 | 650,100 | 74,416 | 2,399,499 | ||||||||||||||||||||||
Minaz B. Abji Executive Vice President, Asset Management |
| |||||||||||||||||||||||||||
2016 | 546,400 | 977,437 | 142,657 | 576,200 | 98,774 | 2,341,467 | ||||||||||||||||||||||
2015 | 530,450 | 1,806,144 | 166,999 | 559,500 | 149,831 | 3,212,923 | ||||||||||||||||||||||
2014 | 515,000 | 1,506,928 | 163,085 | 701,000 | 93,756 | 2,979,769 | ||||||||||||||||||||||
Elizabeth A. Abdoo Executive Vice President, General Counsel |
| |||||||||||||||||||||||||||
2016 | 488,050 | 573,585 | 83,714 | 548,800 | 60,318 | 1,754,468 | ||||||||||||||||||||||
2015 | 473,800 | 1,059,865 | 97,998 | 503,300 | 71,918 | 2,206,881 | ||||||||||||||||||||||
2014 | 460,000 | 884,312 | 95,704 | 677,300 | 62,764 | 2,180,079 |
Name
| Year
| Salary(1)
| Bonus (2)
| Stock Awards(3)
| Option Awards(4)
| Non-Equity Incentive Plan Compensation (5)
| All Other Compensation (6)
| Total
| ||||||||||||||||||||||||||||||||
Richard E. Marriott(*) Chairman of the Board
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
| $
| 396,777
|
| $
| —
|
| $
| —
|
| $
| —
|
|
| $ 381,800
|
|
| $ 93,918
|
| $
| 872,495
|
| |||||||||||||||||
| 2016
|
|
| 396,777
|
|
| —
|
|
| —
|
|
| —
|
|
| 316,800
|
|
| 45,124
|
|
| 758,701
|
| |||||||||||||||||
| 2015
|
|
| 396,777
|
|
| —
|
|
| —
|
|
| —
|
|
| 306,400
|
|
| 189,696
|
|
| 892,873
|
| |||||||||||||||||
James F. Risoleo President and Chief Executive Officer
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
|
| 850,000
|
|
| —
|
|
| 3,831,102
|
|
| —
|
|
| 1,427,000
|
|
| 116,163
|
|
| 6,224,265
|
| |||||||||||||||||
| 2016
|
|
| 576,800
|
|
| —
|
|
| 485,792
|
|
| 70,903
|
|
| 637,100
|
|
| 92,997
|
|
| 1,863,591
|
| |||||||||||||||||
| 2015
|
|
| 551,580
|
|
| —
|
|
| 738,408
|
|
| 74,863
|
|
| 610,100
|
|
| 90,553
|
|
| 2,065,505
|
| |||||||||||||||||
Michael D. Bluhm Executive Vice President, Chief Financial Officer (effective November 2017)
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
|
| 107,397
|
|
| 225,000
|
|
| 3,635,586
|
|
| —
|
|
| —
|
|
| —
|
|
| 3,967,983
|
| |||||||||||||||||
Gregory J. Larson Former Executive Vice President, Chief Financial Officer
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
|
| 590,000
|
|
| —
|
|
| 2,148,806
|
|
| —
|
|
| 789,500
|
|
| 137,363
|
|
| 3,665,669
|
| |||||||||||||||||
| 2016
|
|
| 503,950
|
|
| —
|
|
| 702,350
|
|
| 102,509
|
|
| 556,600
|
|
| 110,395
|
|
| 1,975,804
|
| |||||||||||||||||
| 2015
|
|
| 489,250
|
|
| —
|
|
| 1,297,825
|
|
| 119,998
|
|
| 518,500
|
|
| 86,570
|
|
| 2,512,143
|
| |||||||||||||||||
Nathan S. Tyrrell Executive Vice President, Chief Investment Officer
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
|
| 509,205
|
|
| —
|
|
| 1,130,949
|
|
| —
|
|
| 686,500
|
|
| 65,801
|
|
| 2,392,455
|
| |||||||||||||||||
Elizabeth A. Abdoo Executive Vice President, General Counsel
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
|
| 550,000
|
|
| —
|
|
| 1,385,413
|
|
| —
|
|
| 757,900
|
|
| 62,650
|
|
| 2,755,963
|
| |||||||||||||||||
| 2016
|
|
| 488,050
|
|
| —
|
|
| 573,585
|
|
| 83,714
|
|
| 548,800
|
|
| 60,318
|
|
| 1,754,468
|
| |||||||||||||||||
| 2015
|
|
| 473,800
|
|
| —
|
|
| 1,059,865
|
|
| 97,998
|
|
| 503,300
|
|
| 71,918
|
|
| 2,206,881
|
| |||||||||||||||||
Joanne Hamilton Executive Vice President, Human Resources
|
| |||||||||||||||||||||||||||||||||||||||
| 2017
|
|
| 400,000
|
|
| —
|
|
| 735,113
|
|
| —
|
|
| 559,200
|
|
| 109,444
|
|
| 1,803,757
|
|
* | Mr. Marriott is not a named executive officer under the SEC rules, but summary compensation information is provided in the interest of full disclosure. |
Salary (1)
Salary is established at an annual rate, determined on the basis of a52-week year, and is paidbi-weekly. The amount listed in the salary column includes amounts deferred at the election of the named executive officer under our Executive Deferred Compensation Plan in any such year. Mr. Bluhm’ s salary amount reflects his prorated annual salary of $560,000 from his date of hire, October 23, 2017. Mr. Tyrrell’s salary amount reflects his prorated salary increase to $530,000 effective September 11, 2017 in connection with his promotion to Executive Vice President, Chief Investment Officer. |
Bonus (2)
The only amount in this column is asign-on bonus paid to Mr. Bluhm; the above amount reflects the first $225,000 installment which was paid upon hire. The remaining $225,000 installment was paid in April 2018. |
Grant Date Fair ValueStock Awards (3)
The amounts in this column reflect the aggregate grant date fair value of restricted stock unit awards calculated in accordance with FASB ASC Topic 718, based upon the probable outcome of the performance conditions as of the grant date, excluding the effect of estimated forfeitures, which is the methodology that the Company uses to expense the awards for accounting purposes. These amounts do not reflect the number or value of the common shares that were actually earned. For a chart of 2017 realized pay for each of the named executive officers, see page 40 of the Compensation Discussion & Analysis (“CD&A”). |
The CD&A explains the |
Total Fair Value | ||||||||||||||||||||
Performance-based Awards | Market-based Awards | Assumes earned at Target | Assuming All Awards earned at High | |||||||||||||||||
Target level (a) | High level (a) | High Level (b) | ||||||||||||||||||
W. Edward Walter | $ | 1,779,835 | $ | 3,559,670 | $ | 853,985 | $ | 2,633,820 | $ | 4,413,655 | ||||||||||
James F. Risoleo | 328,276 | 656,551 | 157,516 | 485,792 | 814,067 | |||||||||||||||
Gregory J. Larson | 474,621 | 949,242 | 227,729 | 702,350 | 1,176,971 | |||||||||||||||
Minaz B. Abji | 660,513 | 1,321,026 | 316,924 | 977,437 | 1,637,950 | |||||||||||||||
Elizabeth A. Abdoo | 387,610 | 775,221 | 185,975 | 573,585 | 961,195 |
Grant Date Fair Value of Market-based Awards
February 4, 2016
NAREIT Equity Index Shares | Lodging Index Shares | S&P Index Shares | ||||||||||||||
Closing stock price on grant date | $ | 14.20 | Closing stock price on grant date | $ | 14.20 | Closing stock price on grant date | $ | 14.20 | ||||||||
1-year Volatility of Host | 29.6 | % | 1-year Volatility of Host | 29.6 | % | 1-year Volatility of Host | 29.6 | % | ||||||||
Risk free interest rate | 0.52 | % | Risk free interest rate | 0.52 | % | Risk free interest rate | 0.52 | % | ||||||||
Stock Beta Compared to NAREIT Equity Index | 1.25 | Stock Beta compared to Lodging Equity Index | 1.09 | Stock Beta compared to S&P Equity Index | 1.19 | |||||||||||
Grant date fair value | $ | 1.42 | Grant date fair value | $ | 5.60 | Grant date fair value | $ | 3.20 |
Balance Sheet Date Fair Value
Balance sheet fair value | ||||
W. Edward Walter | $ | 4,722,830 | ||
James F. Risoleo | 435,543 | |||
Gregory J. Larson | 629,708 | |||
Minaz B. Abji | 876,343 | |||
Elizabeth A. Abdoo | 514,266 |
Option Awards (4)
Non-Equity Incentive Plan Compensation (5)
These amounts reflect the annual cash incentive awards paid to each named executive officer, or deferred, under the Executive Deferred Compensation Plan. |
All Other Compensation (6)
All Other Compensation consists of: Company contributions to the Retirement and Savings Plan (“401(k) Plan”), which is available to all employees, and the Executive Deferred Compensation Plan; perquisites and other personal benefits; and tax reimbursements. The amounts are as follows: |
Mr. Marriott
| Mr. Risoleo
| Mr. Bluhm
| Mr. Larson
| Mr. Tyrrell
| Ms. Abdoo
| Ms. Hamilton
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Marriott | Mr. Walter | Mr. Risoleo | Mr. Larson | Mr. Abji | Ms. Abdoo | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial and Tax Planning | $ | — | $ | 2,000 | $ | 2,000 | $ | — | $ | 1,500 | $ | 850 | $
| —
|
| $
| 2,000
|
| $
| —
|
| $
| —
|
| $
| —
|
| $
| —
|
| $
| —
|
| ||||||||||||||||||||||||||
Dining, rooms & hotel services | 1,440 | 5,636 | 9,542 | 25,714 | 14,425 | — |
| 25,092
|
|
| 11,880
|
|
| —
|
|
| 33,717
|
|
| 6,347
|
|
| 2,882
|
|
| 32,513
|
|
2x Annual Salary | $ | 1,905,500 | ||
2x Annual Incentive Award (average of the prior 3 years ) | 3,374,000 | |||
Value of Health Benefits | 38,417 | |||
Total Severance Benefit | $ | 5,317,917 |
Grants of Plan-Based Awards in Fiscal Year 20162017
The following table provides information about the possible payments under our annual cash incentive award in 20162017 and the awards of options and restricted stock units in 2016.2017.
Estimated Possible Payments Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payments Under Equity Incentive Plan Awards (2) | All Other # | Exercise Price of Option Awards | Full Grant | Estimated Possible Payments UnderNon-Equity Incentive Plan Awards(1) | Estimated Future Payments Under Equity Incentive Plan Awards(2) | All Other Stock Awards (3) # | Full Grant Date Fair Value(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold $ | Target $ | Maximum $ | Threshold # | Target # | Maximum # | Grant Date | Threshold $ | Target $ | Maximum $ | Threshold # | Target # | Maximum # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard E. Marriott | 4-Feb-16 | 148,791 | 297,583 | 595,166 |
| 8-Feb-17
|
|
| 148,791
|
|
| 297,583
|
|
| 595,166
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
W. Edward Walter(5) | 4-Feb-16 | 714,563 | 1,429,125 | 2,858,250 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James F. Risoleo
|
| 8-Feb-17
|
|
| 531,250
|
|
| 1,062,500
|
|
| 2,125,000
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 125,341 | 250,681 | 501,362 | $ | 2,633,820 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 152,542 | $ | 14.20 | $ | 384,406 |
| 13-Feb-17
|
|
| 65,002
|
|
| 130,004
|
|
| 260,007
|
| $
| 2,642,668
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James F. Risoleo | 4-Feb-16 | 288,400 | 576,800 | 1,153,600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13-Feb-17
|
|
| 64,032
|
| $
| 1,188,434
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael D. Bluhm
|
| —
|
|
| —
|
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6-Nov-17
|
|
| 40,515
|
|
| 81,030
|
|
| 162,060
|
| $
| 2,031,962
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 23,118 | 46,237 | 92,473 | $ | 485,792 |
| 6-Nov-17
|
|
| 81,032
|
| $
| 1,603,623
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 28,136 | $ | 14.20 | $ | 70,903 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory J. Larson | 4-Feb-16 | 251,975 | 503,950 | 1,007,900 |
| 8-Feb-17
|
|
| 295,000
|
|
| 590,000
|
|
| 1,180,000
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 33,424 | 66,848 | 133,696 | $ | 702,350 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 40,678 | $ | 14.20 | $ | 102,509 |
| 13-Feb-17
|
|
| 36,459
|
|
| 72,917
|
|
| 145,834
|
| $
| 1,482,242
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minaz B. Abji | 4-Feb-16 | 273,200 | 546,400 | 1,092,800 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13-Feb-17
|
|
| 35,914
|
| $
| 666,564
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nathan S. Tyrrell
|
| 8-Feb-17
|
|
| 254,603
|
|
| 509,205
|
|
| 1,018,411
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13-Feb-17
|
|
| 19,189
|
|
| 38,378
|
|
| 76,755
|
| $
| 780,128
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 46,515 | 93,031 | 186,061 | $ | 977,437 |
| 13-Feb-17
|
|
| 18,902
|
| $
| 350,821
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 56,610 | $ | 14.20 | $ | 142,657 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Elizabeth A. Abdoo | 4-Feb-16 | 244,025 | 488,050 | 976,100 |
| 8-Feb-17
|
|
| 275,000
|
|
| 550,000
|
|
| 1,100,000
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 27,296 | 54,593 | 109,185 | $ | 573,585 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4-Feb-16 | 33,220 | $ | 14.20 | $ | 83,714 |
| 13-Feb-17
|
|
| 23,506
|
|
| 47,013
|
|
| 94,025
|
| $
| 955,656
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13-Feb-17
|
|
| 23,155
|
| $
| 429,757
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joanne Hamilton
|
| 8-Feb-17
|
|
| 200,000
|
|
| 400,000
|
|
| 800,000
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13-Feb-17
|
|
| 12,473
|
|
| 24,946
|
|
| 49,891
|
| $
| 507,085
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13-Feb-17
|
|
| 12,286
|
| $
| 228,028
|
|
(1) | As described under “Annual Cash Incentive” in the CD&A, these are amounts that may be earned based on the financial performance of the Company, which is measured by Adjusted FFO and ROIC, and on the personal performance by each executive on objectives approved by the Compensation Policy Committee. The |
(2) | Under our |
(3) |
(4) | The amounts reflect the grant date fair value of restricted stock unit awards |