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This excerpt taken from the WYN DEF 14A filed Mar 13, 2007. Determining
Executive Compensation
An important aspect of the Compensation Committee’s annual
work relates to the determination of compensation for our senior
executives.
Annual Evaluation. The Compensation Committee
will meet each year to evaluate the performance of the named
executive officers, to consider and review their base salaries
for potential annual increases and to consider and approve any
grants to them of long-term incentive compensation.
Table of Contents
Performance Compensation and
Objectives. Performance-based compensation for
our named executive officers generally includes cash annual
incentive compensation for achievement of specified performance
objectives and stock-based compensation whose value is dependent
upon long-term appreciation in stock price. The “Non-Equity
Incentive Plan” column of the Summary Compensation Table
below lists the annual incentive compensation we paid our named
executive officers for 2006.
Performance objectives for 2006 annual incentive compensation
paid in 2007 were established on the basis of corporate
and/or
business unit Earnings Before Interest and Taxes (EBIT), a
measure of our profitability. The EBIT targets for 2006 were
adjusted for separation and related costs and other special
items. The 2006 adjusted EBIT targets and funding models for the
corporation and business units were set by management based on
approved operating budgets and represented a specified growth
rate over the prior year’s EBIT consistent with our
strategic plan. We used these operating budgets to set the
ranges for our published 2006 earnings guidance.
An executive’s annual incentive compensation may be higher
or lower than the target payment (down to zero) depending on
corporate and business unit performance. For example, the annual
incentive payment could be as high as 125% of the target if the
operating unit results exceed 106% of the 2006 adjusted EBIT
target or as low as zero if the operating unit results are less
than 95% of the 2006 adjusted EBIT target.
For our CEO and CFO, the 2006 annual incentive payment was based
on a corporate target. For our business unit chief executives
other than Mr. Hanning, the 2006 annual incentive payment
was weighted 50% for the corporate target and 50% for the
business unit target. For Mr. Hanning, the 2006 annual
incentive payment was weighted 100% for the business unit target.
We link performance to our long-term incentives by basing the
size of the aggregate pool of shares available for grant on
business unit and corporate performance and, for individual
grants, on individual performance assessment and future
potential. The long-term incentive awards we made to our named
executive officers in 2006 are described below in the Grants of
Plan-Based Awards Table.
Targeted Compensation Levels. We believe that
information regarding compensation practices at other companies
is useful in evaluating compensation of our named executive
officers. We recognize that our compensation practices must be
competitive in the market. In addition, this market information
is a key factor that we consider in assessing the reasonableness
of compensation. Accordingly, we review compensation levels for
our CEO against compensation levels at the companies in the peer
group deemed appropriate by our Compensation Committee for
benchmarking purposes.
At the request of Cendant’s Compensation Committee,
Cendant’s compensation consultant provided Cendant with
information regarding CEO compensation levels at the
50th and 75th percentiles among a group of
representative hospitality, travel and gaming companies.
For our 2007 compensation arrangements, our compensation
consultant provided our Compensation Committee CEO compensation
levels of base salary, annual incentive awards and long-term
incentive awards at the 50th and 75th percentile among
those companies that we consider to be our most directly
comparable peer hospitality companies.
The Compensation Committee also reviewed general industry market
survey data from the 2006 Hewitt Associates Total Compensation
Measurement (TCM) database. The general industry peer group
consists of 54 companies with revenues between $2.5 and
$5 billion with a median of $3.3 billion.
We and Cendant used the comparable data to determine
compensation levels for our CEO, and in turn, our other named
executive officers as described below.
Table of Contents
Policies and Practices for Pricing and Timing of Equity
Grants. We expect to make equity grants to our
named executive officers in May of each year. We expect to
observe the following relating to the timing of equity grants:
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