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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement | |||
| ¨ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
| x | Definitive Proxy Statement | |||
| ¨ | Definitive Additional Materials | |||
| ¨ | Soliciting Material Pursuant to §240.14a-12 | |||
HYATT HOTELS CORPORATION | ||||
| (Name of Registrant as Specified in Its Charter) | ||||
| (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) | ||||
| Payment of Filing Fee (Check the appropriate box): | ||||
| x | No fee required. | |||
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11. | |||
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| ¨ | Fee paid previously with preliminary materials: | |||
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | |||
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| (2) | Form, Schedule or Registration Statement No.:
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71 South Wacker Drive, 12th Floor, Chicago IL 60606 • Tel: 312.750.1234
www.hyatt.com
April 22, 2013
Dear Stockholder:
You are cordially invited to attend the 2013 Annual Meeting of Stockholders (the “Annual Meeting”) of Hyatt Hotels Corporation to be held at Hyatt Lodge at McDonald’s Campus, 2815 Jorie Boulevard, Oak Brook, Illinois, 60523, on Monday, June 10, 2013, at 11:00 a.m., local time.
At the Annual Meeting you will be asked to (a) elect four directors to our board of directors, (b) ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm, (c) approve the Second Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan, (d) approve the Amended and Restated Hyatt Hotels Corporation Executive Incentive Plan, (e) approve, on an advisory basis, the compensation paid to our named executive officers and (f) transact any other business as properly may come before the Annual Meeting or any adjournment or postponement thereof.
It is important that your shares be represented and voted whether or not you plan to attend the Annual Meeting in person. You may vote on the Internet, by telephone or by completing and mailing a proxy card. Voting over the Internet, by telephone or by written proxy will ensure your shares are represented at the Annual Meeting. If you do attend the Annual Meeting, you may withdraw your proxy should you wish to vote in person. Please read the enclosed information carefully before voting.
| Sincerely, | ||||
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| Thomas J. Pritzker Executive Chairman of the Board |
Mark S. Hoplamazian President and Chief Executive Officer | |||
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HYATT HOTELS CORPORATION
71 South Wacker Drive, 12th Floor
Chicago, Illinois 60606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 10, 2013
NOTICE HEREBY IS GIVEN that the 2013 Annual Meeting of Stockholders (the “Annual Meeting”) of Hyatt Hotels Corporation (“Hyatt”) will be held at Hyatt Lodge at McDonald’s Campus, 2815 Jorie Boulevard, Oak Brook, Illinois, 60523, on Monday, June 10, 2013, at 11:00 a.m., local time, for the following purposes:
| 1. | To elect four directors to hold office until the 2016 annual meeting of stockholders; |
| 2. | To ratify the appointment of Deloitte & Touche LLP as Hyatt’s independent registered public accounting firm for the fiscal year ended December 31, 2013; |
| 3. | To approve the Second Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan; |
| 4. | To approve the Amended and Restated Hyatt Hotels Corporation Executive Incentive Plan; |
| 5. | To conduct an advisory vote to approve the compensation paid to our named executive officers; and |
| 6. | To transact any other business as properly may come before the Annual Meeting or any adjournment or postponement thereof. |
Information relating to the above matters is set forth in the attached proxy statement. Stockholders of record at the close of business on April 15, 2013 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.
This Notice of Annual Meeting of Stockholders, proxy statement and proxy card are being sent to stockholders beginning on or about April 22, 2013.
By Order of the Board of Directors
Rena Hozore Reiss
Executive Vice President, General Counsel
and Secretary
Chicago, Illinois
April 22, 2013
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on June 10, 2013.
The proxy statement for the Annual Meeting and Annual Report
for the fiscal year ended December 31, 2012 are available at http://wfss.mobular.net/wfss/h/.
PLEASE CAREFULLY READ THE ATTACHED PROXY STATEMENT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, EXECUTE, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES. YOU MAY ALSO VOTE ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. IF YOU VOTE BY INTERNET OR TELEPHONE, THEN YOU NEED NOT RETURN A WRITTEN PROXY CARD BY MAIL. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY SO DESIRE.
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HYATT HOTELS CORPORATION
71 South Wacker Drive, 12th Floor
Chicago, Illinois 60606
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 10, 2013
The board of directors of Hyatt Hotels Corporation (referred to herein as “Hyatt,” “we,” “us” or the “Company”) solicits your proxy to vote at the 2013 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Monday, June 10, 2013, beginning 11:00 a.m., local time, at Hyatt Lodge at McDonald’s Campus, 2815 Jorie Boulevard, Oak Brook, Illinois 60523, and at any adjournments or postponements thereof. This proxy statement is first being released to stockholders by the Company on or about April 22, 2013.
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on June 10, 2013.
The proxy statement for the Annual Meeting and Annual Report
for the fiscal year ended December 31, 2012 are available at http://wfss.mobular.net/wfss/h/.
ARTICLE I: PROXY MATERIALS AND ANNUAL MEETING
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
| Q: | Why am I receiving these materials? |
| A: | We are furnishing the enclosed Notice of Annual Meeting of Stockholders, proxy statement and proxy card to you, and to all stockholders of record as of the close of business on April 15, 2013, because the board of directors of Hyatt is soliciting your proxy to vote at the Annual Meeting and at any adjournment or postponement thereof. Also enclosed is our Annual Report for the fiscal year ended December 31, 2012, which, along with our proxy statement, is also available online at http://wfss.mobular.net/wfss/h/. |
| Q: | When and where is the Annual Meeting? |
| A: | The Annual Meeting will be held at Hyatt Lodge at McDonald’s Campus, 2815 Jorie Boulevard, Oak Brook, Illinois 60523, on Monday, June 10, 2013 at 11:00 a.m., local time. |
| Q: | What is the purpose of the Annual Meeting? |
| A: | At our Annual Meeting, stockholders will act upon the matters outlined in this proxy statement and in the Notice of Annual Meeting of Stockholders included with this proxy statement, including the election of four directors; the ratification of Deloitte & Touche LLP as our independent registered public accounting firm; approval of the Second Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan (“2013 LTIP”); approval of the Amended and Restated Hyatt Hotels Corporation Executive Incentive Plan (“Incentive Plan”); the advisory vote to approve compensation paid to our named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (the “SEC”) (the “Say on Pay Advisory Vote”); and such other matters as may properly come before the meeting or any adjournment or postponement thereof. |
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| Q: | How can I attend the Annual Meeting? |
| A: | Only stockholders who own shares of Hyatt common stock as of the close of business on April 15, 2013, the record date, will be entitled to attend the Annual Meeting. A valid admittance slip (or other written proof of stock ownership as described below) and a photo identification (such as a valid driver’s license or passport) will be required for admission to the Annual Meeting. |
| • | If your shares are registered in your name and you received your proxy materials by mail, an admittance slip appears at the back of this proxy statement. You should bring that admittance slip with you to the Annual Meeting. |
| • | If you are a beneficial owner of shares of common stock and your shares are held in a brokerage account or by another nominee as further described in Question 6 below, you will be admitted to the Annual Meeting only if you present either a valid legal proxy from your bank or broker as to your shares, an admittance slip, or a recent bank or brokerage statement demonstrating that you owned shares of Hyatt common stock as of the close of business on April 15, 2013. |
No cameras, recording devices, other electronic devices or large packages will be permitted at the Annual Meeting. Photographs taken at the Annual Meeting by or at the request of Hyatt may be used by Hyatt, and by attending the Annual Meeting, you waive any claim or rights with respect to those photographs and their use.
| Q: | What should I do if I receive more than one set of proxy materials? |
| A: | You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote each proxy card and voting instruction card that you receive. |
| Q: | What is the difference between holding shares as a record holder versus a beneficial owner? |
| A: | Most Hyatt stockholders hold their shares through a broker or other nominee rather than directly in their own name. There are some distinctions between shares held of record and those owned beneficially: |
Record Holders: If your shares are registered directly in your name with our transfer agent, Wells Fargo Bank, N.A., you are considered, with respect to those shares, the stockholder of record or record holder. As the stockholder of record, you have the right to grant your voting proxy directly to Hyatt or to vote in person at the Annual Meeting. We have enclosed a proxy card for you to use.
Beneficial Owner: If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you automatically, along with a voting instruction card from your broker, bank or nominee. As a beneficial owner, you have the right to direct your broker, bank or nominee how to vote and are also invited to attend the Annual Meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, bank or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, bank or nominee has enclosed or provided voting
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instructions for you to use in directing how to vote your shares. If you do not provide specific voting instructions by the deadline set forth in the materials you receive from your broker, bank or other nominee, your broker, bank or nominee can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. The election of directors, approval of the 2013 LTIP, approval of the Incentive Plan and the Say on Pay Advisory Vote are considered “non-discretionary items,” while the ratification of the appointment of our independent registered public accounting firm is considered a “discretionary” item. For “non-discretionary” items for which you do not give your broker instructions, the shares will be treated as broker non-votes. See Question 12 below for more information about broker non-votes.
| Q: | Who can vote and how do I vote? |
| A: | Only holders of our common stock at the close of business on April 15, 2013, the record date, will be entitled to notice of and to vote at the Annual Meeting. To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the Annual Meeting in person. Most stockholders have four options for submitting their votes: |
| • | in person at the Annual Meeting with a proxy card/legal proxy; |
| • | by mail, using the paper proxy card; |
| • | by telephone, by calling the toll-free telephone number on the proxy card; or |
| • | through the Internet, using the procedures and instructions described on the proxy card. |
Beneficial owners may vote by telephone or Internet if their bank or broker makes those methods available, in which case the bank or broker will enclose the instructions with the proxy materials.
For further instructions on voting, see your proxy card. If you vote by proxy using the paper proxy card, by telephone or through the Internet, the shares represented by the proxy will be voted in accordance with your instructions. If you attend the Annual Meeting, you may also submit your vote in person, and any previous votes that you submitted by mail, telephone or Internet will be superseded by the vote that you cast at the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain from the record holder a legal proxy issued in your name.
| Q: | What are my voting choices, and how many votes are required for approval or election? |
| A: | In the vote on the election of four director nominees identified in this proxy statement to serve until the 2016 annual meeting of stockholders and until their respective successors have been duly elected and qualified, stockholders may (1) vote in favor of all nominees or specific nominees; or (2) withhold authority to vote for all nominees or specific nominees. A plurality of the voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote with respect to the election of directors shall elect the directors. The board of directors unanimously recommends a vote FOR each of the nominees. |
In the vote on the ratification of the appointment of Deloitte & Touche LLP as Hyatt’s independent registered public accounting firm for fiscal year 2013, stockholders may (1) vote in favor of the ratification; (2) vote against the ratification; or (3) abstain from voting on the ratification. Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2013 will require the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the proposal, however, stockholder ratification is not required to authorize the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. The
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board of directors unanimously recommends a vote FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2013.
In the vote on the proposal to approve the 2013 LTIP, stockholders may (1) vote in favor of the proposal; (2) vote against the proposal; or (3) abstain from voting on the proposal. Approval of the 2013 LTIP will require the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. The board of directors unanimously recommends a vote FOR the approval of the 2013 LTIP.
In the vote on the proposal to approve the Incentive Plan, stockholders may (1) vote in favor of the proposal; (2) vote against the proposal; or (3) abstain from voting on the proposal. Approval of the Incentive Plan will require the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. The board of directors unanimously recommends a vote FOR the approval of the Incentive Plan.
In the Say on Pay Advisory Vote, stockholders may (1) vote in favor of the proposal; (2) vote against the proposal; or (3) abstain from voting on the proposal. Approval, on an advisory basis, of the compensation paid to our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules will require the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. The board of directors unanimously recommends a vote FOR the approval, on an advisory basis, of the compensation paid to our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules.
| Q: | How will Hyatt’s dual class ownership structure impact the outcome of the voting at the Annual Meeting? |
| A: | The holders of our Class A common stock are entitled to one vote per share and the holders of our Class B common stock are entitled to ten votes per share on all matters to be voted upon at the Annual Meeting. Holders of Class A common stock and Class B common stock will vote together as a single class on all matters to be voted upon at the Annual Meeting. |
At the close of business on April 15, 2013, we had outstanding and entitled to vote 46,243,853 shares of Class A common stock and 115,434,342 shares of Class B common stock. Collectively, the holders of Class A common stock on such date will be entitled to an aggregate of 46,243,853 votes, and, collectively, the holders of Class B common stock on such date will be entitled to an aggregate of 1,154,343,420 votes, on all matters to be voted upon at the Annual Meeting. Therefore, for all matters to be voted upon at the Annual Meeting, the holders of our Class B common stock will collectively hold approximately 96.1% of the total voting power of our outstanding common stock. See Question 10 for additional information.
| Q: | How will voting agreements entered into with or among Hyatt’s major stockholders impact the outcome of the voting at the Annual Meeting? |
| A: | Voting agreements entered into with or among Hyatt’s major stockholders will result in all of the shares of our Class B common stock being voted consistent with the recommendations of Hyatt’s board of directors. Pursuant to the terms of the Amended and Restated Global Hyatt Agreement (the “Amended and Restated Global Hyatt Agreement”) and the Amended and Restated Foreign Global Hyatt Agreement (the “Amended and Restated Foreign Global Hyatt Agreement”), Pritzker family business interests, which beneficially own in the aggregate 90,322,256 shares of our Class B common stock, or approximately 75.2% of the total voting power of our outstanding common stock, have agreed to vote their shares of our common stock consistent with the |
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| recommendation of our board of directors with respect to all matters (assuming agreement as to any such matter by a majority of a minimum of three independent directors (excluding for such purposes any Pritzker)) or, in the case of transactions involving us and an affiliate, assuming agreement of all of such minimum of three independent directors (excluding for such purposes any Pritzker). This voting agreement expires on the later to occur of January 1, 2015, and the date upon which more than 75% of our fully diluted shares of common stock is owned by non-Pritzker family business interests. In addition, other existing stockholders, including entities affiliated with Goldman, Sachs & Co. and Madrone GHC, LLC, that beneficially own in the aggregate 25,112,086 shares of our Class B common stock, or approximately 20.9% of the total voting power of our outstanding common stock, have entered into a voting agreement with us under which they have agreed to vote their shares of Class B common stock consistent with the recommendation of our board of directors, without any separate requirement that our independent directors agree with the recommendation. These voting agreements expire on the later to occur of December 31, 2013 and the date that Mr. Thomas J. Pritzker is no longer chairman of our board of directors. While these voting agreements are in effect, they may provide our board of directors with effective control over matters requiring stockholder approval. Because our board of directors (including all of our independent directors) has recommended a vote FOR proposal one, FOR proposal two, FOR proposal three, FOR proposal four and FOR proposal five each stockholder party to the voting agreements will be contractually obligated to vote in favor of proposal one, in favor of proposal two, in favor of proposal three, in favor of proposal four and in favor of proposal five. Because the holders of our Class B common stock hold approximately 96.1% of the total voting power of our outstanding common stock, these voting agreements will cause the outcome of the vote on each of the matters to be voted upon at the Annual Meeting to be consistent with the recommendations of our board of directors. |
As used in this Proxy Statement, the term “Pritzker family business interests” means (1) various lineal descendants of Nicholas J. Pritzker (deceased) and spouses and adopted children of such descendants; (2) various trusts for the benefit of the individuals described in clause (1) and trustees thereof; and (3) various entities owned and/or controlled, directly and/or indirectly, by the individuals and trusts described in (1) and (2).
| Q: | What is the effect of an “abstain” vote on the proposals to be voted on at the Annual Meeting? |
| A: | An “abstain” vote with respect to any proposal is considered present and entitled to vote with respect to that proposal, but is not considered a vote cast with respect to that proposal. Therefore, an abstention will not have any effect on the election of directors. Because each of the other proposals requires the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the proposal in order to pass, an abstention will have the effect of a vote against the remaining proposals. |
| Q: | What is the effect of a “broker non-vote” on the proposals to be voted on at the Annual Meeting? |
| A: | A “broker non-vote” occurs if your shares are not registered in your name and you do not provide the record holder of your shares (usually a bank, broker, or other nominee) with voting instructions on a matter and the record holder is not permitted to vote on the matter without instructions from you under applicable rules of the New York Stock Exchange (“NYSE”). A broker non-vote is considered present for purposes of determining whether a quorum exists, but is not considered a “vote cast” or “entitled to vote” with respect to such matter. Therefore, broker non-votes will not have any effect on any of the matters to be voted on at the Annual Meeting. |
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Under NYSE rules, the election of directors, approval of the 2013 LTIP, approval of the Incentive Plan and the Say on Pay Advisory Vote are not considered “discretionary” items. Therefore, if you do not provide instructions to the record holder of your shares with respect to these four proposals, broker non-votes will result with respect thereto. The ratification of appointment of our independent registered public accounting firm is a routine item under NYSE rules. As a result, brokers who do not receive instructions as to how to vote on these matters generally may vote on this matter in their discretion.
| Q: | Who counts the votes? |
| A: | Wells Fargo Bank, N.A., will count the votes. The board of directors has appointed Wells Fargo Bank, N.A. as the inspector of elections. |
| Q: | Revocation of proxy: May I change my vote after I return my proxy? |
| A: | Yes, you may revoke your proxy if you are a record holder by: |
| • | filing written notice of revocation with Hyatt’s corporate secretary at our principal executive offices at 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606; |
| • | signing a proxy bearing a later date than the proxy being revoked and submitting it to Hyatt’s corporate secretary at our principal executive offices at 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606; or |
| • | voting in person at the Annual Meeting. |
If your shares are held in street name through a broker, bank, or other nominee, you need to contact the record holder of your shares regarding how to revoke your proxy.
| Q: | What if I sign and return a proxy card but do not specify a choice for a matter when returning the proxy? |
| A: | Unless you indicate otherwise, the persons named as proxies on the proxy card will vote your shares: FOR all of the nominees for director named in this proxy statement; FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2013; FOR the approval of the 2013 LTIP; FOR the approval of the Incentive Plan and FOR the approval of the Say on Pay Advisory Vote. |
| Q: | What constitutes a quorum? |
| A: | Presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the voting power of the issued and outstanding shares of Hyatt’s common stock entitled to vote at the Annual Meeting will constitute a quorum, permitting the Annual Meeting to proceed and business to be conducted. Proxies received but marked as abstentions or broker non-votes will be included in the calculation of the number of votes considered to be present at the meeting for purposes of determining whether a quorum is present. |
| Q: | Where can I find the voting results of the Annual Meeting? |
| A: | We will publish final results on a Current Report on Form 8-K within four business days after the Annual Meeting. |
| Q: | Who will pay the costs of soliciting these proxies? |
| A: | We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional information furnished to |
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| stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares of common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock for their reasonable costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies may be supplemented by electronic means, mail, facsimile, telephone or personal solicitation by our directors, officers or other employees. No additional compensation will be paid to our directors, officers or other employees for such services. |
| Q: | What happens if additional matters are presented at the Annual Meeting? |
| A: | Other than the five proposals described in this proxy statement, we are not aware of any other properly submitted business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Messrs. Mark S. Hoplamazian and Gebhard F. Rainer and Ms. Rena Hozore Reiss, will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting, including matters of which the Company did not receive timely notice. If any of our nominees for director are unavailable, or are unable to serve or for good cause will not serve, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the board of directors. |
| Q: | What is the deadline under Rule 14a-8 under the Securities Exchange Act of 1934, as amended, for stockholders to propose actions to be included in our proxy statement relating to our 2014 annual meeting of stockholders and identified in our form of proxy relating to the 2014 annual meeting? |
| A: | December 23, 2013 is the deadline for stockholders to submit proposals to be included in our proxy statement and identified in our form of proxy under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Proposals by stockholders must comply with all requirements of applicable rules of the SEC, including Rule 14a-8, and be mailed to our corporate secretary at our principal executive offices at 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with Rule 14a-8 and other applicable requirements. |
| Q: | What is the deadline under our bylaws for stockholders to nominate persons for election to the board of directors or propose other matters to be considered at our 2014 annual meeting of stockholders? |
| A: | Stockholders who wish to nominate persons for election to our board of directors or propose other matters to be considered at our 2014 annual meeting of stockholders must provide us advance notice of the director nomination or stockholder proposal, as well as the information specified in our bylaws, no earlier than February 10, 2014 and no later than March 12, 2014. Stockholders are advised to review our bylaws, which contain the requirements for advance notice of director nominations and stockholder proposals. Notice of director nominations and stockholder proposals must be mailed to our corporate secretary at our principal executive offices at 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606. The requirements for advance notice of stockholder proposals under our bylaws do not apply to proposals properly submitted under Rule 14a-8 under the Exchange Act, as those stockholder proposals are governed by Rule 14a-8. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any director nomination or stockholder proposal that does not comply with our bylaws and other applicable requirements. |
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| Q: | How do I submit a potential director nominee for consideration by the board of directors for nomination? |
| A: | You may submit names of potential director nominees for consideration by the board of directors’ nominating and corporate governance committee for nomination by our board of directors at the 2014 annual meeting of stockholders. Your submission should be mailed to our corporate secretary at our principal executive offices at 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606. The section titled “Nominating and Corporate Governance Committee” below describes the information required to be set forth in your submission, and provides information on the nomination process used by our nominating and corporate governance committee and our board of directors. The deadline has passed to submit a potential director nominee to be considered for nomination by our board of directors at the 2013 Annual Meeting. December 1, 2013 is the deadline to submit a potential director nominee for consideration by our board of directors for nomination at the 2014 annual meeting of stockholders. |
ARTICLE II: CORPORATE GOVERNANCE
PROPOSAL 1 — ELECTION OF DIRECTORS
Hyatt’s Amended and Restated Certificate of Incorporation provides that the total number of members of the board of directors shall consist of not less than five nor more than 15 members, with the precise number of directors to be determined by a vote of a majority of the entire board of directors. At present, the board of directors has fixed the number of members of the board of directors at 12. Hyatt’s Amended and Restated Certificate of Incorporation further provides that the board of directors will be divided into three classes, as nearly equal in number as is practicable, designated Class I, Class II and Class III. Members of each class of the board of directors are elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor is duly elected and qualified.
Class I, the class of directors whose term expires at the Annual Meeting, currently consists of four persons. In accordance with the recommendation of the nominating and corporate governance committee, the board of directors has unanimously nominated Mark S. Hoplamazian, Penny Pritzker and Michael A. Rocca, three of the incumbent directors whose terms expire at the Annual Meeting, to stand for re-election to the board of directors. Bernard W. Aronson, a director since 2004, will not be nominated to stand for re-election as a director at the Annual Meeting. Cary D. McMillan, a new director nominee, will stand for election as the fourth Class I director. Mr. McMillan was recommended for consideration by Mr. Hoplamazian. Each of Messrs. Hoplamazian, McMillan and Rocca and Ms. Pritzker has been nominated to hold office until the 2016 annual meeting of stockholders and until their respective successors have been duly elected and qualified. Unless otherwise instructed by the stockholder, the persons named in the enclosed proxy card will vote the shares represented by such proxy for the election of the nominees named in this proxy statement.
Each of the nominees has consented to serve as a director if elected. If any of the nominees should be unavailable to serve for any reason, the board of directors may designate a substitute nominee or nominees (in which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxy cards for the election of such substitute nominee or nominees). Alternatively, the board of directors may reduce the size of the board of directors or allow the vacancy or vacancies to remain open until a suitable candidate or candidates are identified by the board of directors.
The board of directors unanimously recommends that the stockholders vote “FOR” each of Mark S. Hoplamazian, Cary D. McMillan, Penny Pritzker and Michael A. Rocca as directors to serve and hold office until the 2016 annual meeting of stockholders and until their respective successors have been duly elected and qualified.
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Set forth below is information regarding the business experience of each of our directors that has been furnished to us by the respective director. Each director has been principally engaged in the employment indicated for the last five years unless otherwise stated. Also set forth below for each director is a discussion of the experience, qualifications, attributes or skills that led the board of directors to conclude that the director nominee or director is qualified and should serve as a director of Hyatt.
Directors Standing for Re-Election
| Mark S. Hoplamazian |
Director since 2006 |
Age 49
Mark S. Hoplamazian has been a member of our board of directors since November 2006. He has served as our President and Chief Executive Officer since December 2006, as interim President from July 2006 to December 2006 and Vice President from August 2004 to December 2004. From April 2004 to August 2009, Mr. Hoplamazian served as President and Director of The Pritzker Organization, LLC (“TPO”), the principal financial and investment advisor to various Pritzker family business interests. Mr. Hoplamazian served in various capacities with TPO since its formation in 1997, and with its predecessors prior to its formation, including managing its merchant banking and investment activities. From August 2009 to December 2010, Mr. Hoplamazian was a Vice President of TPO. Mr. Hoplamazian is the current Chairman of the National Advisory Council on Minority Business Enterprise. He serves on the Advisory Board of Facing History and Ourselves, the Council on the University of Chicago Booth School of Business, the Board of Directors of New Schools for Chicago, the Executive Committee of the Board of Directors of World Business Chicago, and the Henry Crown Fellowship Program Board of Overseers. Mr. Hoplamazian is a member of the World Travel & Tourism Council, the Commercial Club of Chicago, and the Discovery Class of the Henry Crown Fellowship.
As Hyatt’s President and Chief Executive Officer, Mr. Hoplamazian provides our board of directors with valuable insight regarding Hyatt’s operations, management team, associates and culture, as a result of his day-to-day involvement in the operations of the business, and he performs a critical role in board discussions regarding strategic planning and development for the Company. The board of directors also benefits from Mr. Hoplamazian’s historical knowledge of Hyatt. Prior to becoming our President and Chief Executive Officer, Mr. Hoplamazian regularly advised Hyatt on business and financial matters in his various roles at TPO. Mr. Hoplamazian is financially sophisticated and also has significant mergers and acquisitions and corporate finance experience.
| Cary D. McMillan |
New Director Nominee |
Age 55
Cary D. McMillan is the Chief Executive Officer of True Partners Consulting LLC, a nationwide provider of tax and financial consulting services, headquartered in Chicago. Mr. McMillan co-founded True Partners Consulting LLC in 2005. Prior to joining True Partners Consulting LLC, he was Executive Vice President of Sara Lee Corporation, Chief Executive Officer of Sara Lee Branded Apparel and a member of Sara Lee’s Board of Directors. Before joining Sara Lee in 1999 as its Chief Financial Officer he was managing partner of Arthur Andersen’s Chicago office. Mr. McMillan serves on the Boards of Directors of McDonald’s Corporation and American Eagle Outfitters, Inc. He served as a Director on the Board of Hewitt Associates from 2002 to 2010. He is also active in the Chicago non-profit community. He currently is the Chairman of The School of the Art Institute of Chicago; Vice Chairman of The Art Institute of Chicago; and a Trustee of Millennium Park and WTTW.
Mr. McMillan brings to our board of directors extensive management and operations experience as a senior executive at a global, complex consumer brand company. The board of directors values Mr. McMillan’s
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knowledge of strategy and business development, finance and accounting skills and international operations experience. Mr. McMillan is also a certified public accountant and his experience as a former audit partner with Arthur Andersen LLP as well as his service on the Audit Committees of McDonald’s Corporation and American Eagle Outfitters, Inc. provides him with extensive knowledge of financial and accounting issues.
| Penny Pritzker |
Director since 2004 |
Age 53
Penny Pritzker has been a member of our board of directors since August 2004 and served on the board of directors of Hyatt Corporation and Hyatt International Corporation from 1999 to 2004. Ms. Pritzker serves as Chairman of Pritzker Realty Group, L.L.C., a real estate investment and advisory firm; is founder, chairman and CEO of PSP Capital Partners, a private investment firm; serves as co-founder and chair of Artemis Real Estate Partners, L.L.C., a real estate investment firm; is a Director and President of The Pritzker Foundation, a charitable foundation; and served as National Finance Chair of Barack Obama’s 2008 presidential campaign and Co-Chair for Barack Obama’s 2012 presidential campaign. Ms. Pritzker served as a Director of the Marmon Group, Inc. until March 2008, as Chairman of TransUnion Corporation from 2005 to April, 2012 and as a Director of LaSalle Bank Corporation, N.A. from 2004 to 2007. Ms. Pritzker is the first cousin of Mr. Thomas J. Pritzker, who is our executive chairman.
Ms. Pritzker has a long history with Hyatt and deep knowledge of the Company’s business having served as a director since the Company’s formation in 2004 and as a former director of Hyatt Corporation and Hyatt International Corporation from 1999 to 2004. Through her work with Pritzker Realty Group, L.L.C. and various other Pritzker business interests, Ms. Pritzker brings to our board of directors extensive experience in real estate and finance matters. Additionally, Ms. Pritzker has significant experience serving on boards of directors for profit and not-for-profit organizations. Ms. Pritzker also contributes to the gender diversity of the board of directors.
| Michael A. Rocca |
Director since 2008 |
Age 68
Michael A. Rocca has been a member of our board of directors since March 2008. From 1994 to 2000, Mr. Rocca served as Senior Vice President and Chief Financial Officer of Mallinckrodt Inc., a pharmaceutical and medical device manufacturer. Prior to 1994, Mr. Rocca served in a variety of finance positions with Honeywell Inc., a diversified technology and manufacturing company, including Vice President, Treasurer and Vice President, Finance Europe. Mr. Rocca also serves as a Director of St. Jude Medical Inc. Mr. Rocca previously served as a Director of Lawson Software, Inc. from 2003-2011.
Mr. Rocca is an audit committee financial expert and has extensive experience chairing public company audit committees. His background as Senior Vice President and Chief Financial Officer of Mallinckrodt Inc., various finance positions with Honeywell Inc. and overall financial and accounting expertise make Mr. Rocca particularly well-suited to assist our board of directors with its oversight responsibilities regarding Hyatt’s financial statements and its financial reporting and disclosure practices.
Continuing Directors
| Thomas J. Pritzker |
Director since 2004 |
Age 62
Thomas J. Pritzker has been a member of our board of directors since August 2004 and our Executive Chairman since August 2004. Mr. Pritzker served as our Chief Executive Officer from August 2004 to December 2006. Mr. Pritzker was appointed President of Hyatt Corporation in 1980 and served as Chairman and Chief Executive Officer of Hyatt Corporation from 1999 to December 2006. Mr. Pritzker is Chairman and Chief
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Executive Officer of The Pritzker Organization, LLC, the principal financial and investment advisor to various Pritzker family business interests. Mr. Pritzker is Chairman of Marmon Holdings, Inc. and also serves as a Director of Royal Caribbean Cruises Ltd. He served as a Director of TransUnion Corp., a credit reporting service company until June 2010. Mr. Pritzker is a Director and Vice President of The Pritzker Foundation, a charitable foundation; Director and President of the Pritzker Family Philanthropic Fund, a charitable organization; and Chairman and President of The Hyatt Foundation, a charitable foundation which established The Pritzker Architecture Prize. Mr. Pritzker is a first cousin of Ms. Penny Pritzker, who is also a member of our board of directors.
Mr. Pritzker brings to our board of directors a deep understanding of Hyatt’s operations and extensive knowledge of the hospitality industry as a result of his more than 30 year history with Hyatt, including as our former Chief Executive Officer. The Company also benefits from Mr. Pritzker’s extensive network of contacts and relationships with owners and developers of hotels around the world as we pursue new opportunities and seek to enter into new management and franchise agreements. Additionally, Mr. Pritzker has significant experience leading boards of directors of for-profit and not-for-profit organizations.
| Richard A. Friedman |
Director since 2009 |
Age 55
Richard A. Friedman has been a member of our board of directors since June 2009. Mr. Friedman joined Goldman, Sachs & Co., a full-service global investment banking and securities firm, in 1981, and has been a Partner there since 1990. He has been a Managing Director at Goldman Sachs & Co. since 1996 and is the Head of the Merchant Banking Division of Goldman, Sachs & Co. Mr. Friedman is also the Chairman of the Corporate Investment Committee, the Real Estate Investment Committee and the Infrastructure Investment Committee of the Merchant Banking Division and a Member of the Management Committee of The Goldman Sachs Group, Inc. Mr. Friedman is the Chairman of Yankees Entertainment and Sports Network, LLC.
As the Head of the Merchant Banking Division of Goldman, Sachs & Co. and Chairman of the Corporate Investment Committee and the Real Estate Investment Committee of the Merchant Banking Division, Mr. Friedman brings to our board of directors deep expertise and experience in a wide variety of areas, including mergers and acquisitions, strategic investments, corporate finance, real estate, corporate governance and human resources. Mr. Friedman has an extensive network of contacts and relationships with investors, financing sources and experienced managers who can be of help to Hyatt.
| Susan D. Kronick |
Director since 2009 |
Age 61
Susan D. Kronick has been a member of our board of directors since June 2009. In February 2012, Ms. Kronick was named an Operating Partner at Marvin Traub Associates, a retail business development firm. From March 2003 until March 2010, Ms. Kronick served as Vice Chair of Macy’s, Inc., the operator of Macy’s and Bloomingdale’s department stores. Ms. Kronick served as Group President, Regional Department Stores of Macy’s, Inc. from April 2001 to February 2003; prior thereto she served as Chairman and Chief Executive Officer of Macy’s Florida from June 1997 to March 2001. Ms. Kronick served as a Director of The Pepsi Bottling Group, Inc. from March 1999 to February 2010.
Ms. Kronick brings to our board of directors a strong background in marketing and experience in building industry leading brands as a result of the various management positions she has held with Macy’s, Inc., most recently as Vice Chair. As a result of her positions with Macy’s, Inc., Ms. Kronick also has gained valuable financial and operations experience. Additionally, she contributes to the gender diversity of the board of directors.
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| Mackey J. McDonald |
Director since 2009 |
Age 66
Mackey J. McDonald has been a member of our board of directors since June 2009. Mr. McDonald has served as a Senior Advisor to Crestview Partners, a private equity firm, since 2008. Mr. McDonald is the retired Chairman and Chief Executive Officer of VF Corporation, an apparel manufacturer. Mr. McDonald served as Chairman and Chief Executive Officer of VF Corporation from 1998 until his retirement in August 2008. From 1996 to 2006, he was the President of VF Corporation; prior thereto he served as VF Group Vice President. Mr. McDonald is a Director of Kraft Foods, Inc. and Bernhardt Industries, Inc. Mr. McDonald served as a Director of Wells Fargo from 1997 to 2012, as a Director of VF Corporation from 1993 to 2008, as a Director of The Hershey Company from 1996 to 2007, and as a Director of Tyco International Ltd. from 2002 to 2007.
Mr. McDonald brings to our board of directors deep management and operations experience as well as experience building internationally recognized brands as a result of his leadership positions with VF Industries. The board of directors also values Mr. McDonald’s experience as a chief executive officer and significant public company board of directors and executive compensation experience, including his former service on the Human Resources Committee of Wells Fargo and Company and former service as Chairman of the Compensation and Human Resources Committee of Tyco International Ltd. and on the Compensation and Executive Organization Committee of The Hershey Company.
| Gregory B. Penner |
Director since 2007 |
Age 43
Gregory B. Penner has been a member of our board of directors since August 2007. Mr. Penner has been a General Partner at Madrone Capital Partners, LLC, an investment management firm, since 2005. From 2002 to 2005, he was the Senior Vice President and Chief Financial Officer of Wal-Mart Japan, and he serves as a Director of Wal-Mart Stores, Inc., Baidu, Inc., Castleton Commodities International LLC and eHarmony.com, Inc. He has previously served as Director of The Seiyu, Ltd., from 2003 to 2008. Prior to joining Wal-Mart, Mr. Penner was a Manager at Peninsula Capital, an early stage venture capital fund and a financial analyst for Goldman, Sachs & Co.
Mr. Penner brings to our board of directors international business experience, particularly in Asia, as a result of his former position with Wal-Mart Japan and from his service as a director of Baidu, Inc. He is sophisticated in financial and accounting matters and has meaningful operations experience. Additionally, Mr. Penner has experience with public company boards of directors.
| Byron D. Trott |
Director since 2007 |
Age 54
Byron D. Trott has been a member of our board of directors since August 2007. He serves as Chairman and CEO of BDT & Company. BDT & Company is a Chicago-based private partnership that combines a $2.7 billion investment fund with advisory services to address the long-term strategic and financing needs of family and/or founder controlled companies. Mr. Trott has 30 years of experience advising and investing with public and private closely held companies. Prior to founding BDT & Company in 2009, Mr. Trott had a distinguished 27-year career at Goldman, Sachs & Co., where most recently he was Vice Chairman of the global Investment Banking Division and head of the Chicago office and the Midwest Region. He also served on the Investment Committee of Goldman’s Principal Investment Area and the firm-wide Partnership Committee. Civically, Mr. Trott is a director of Conservation International and a trustee on the boards of the University of Chicago and the Art Institute of Chicago. In 2011, Mr. Trott was inducted into the Horatio Alger Association of Distinguished Americans in recognition of his professional accomplishments, philanthropic contributions and dedication to hard work, integrity and perseverance.
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Mr. Trott has extensive historical knowledge of Hyatt’s business, deep knowledge of the capital markets and expertise in mergers and acquisitions and corporate finance. Through his role at BDT & Company and his former leadership position at Goldman, Sachs & Co., Mr. Trott has had significant exposure to a number of different companies and business models and has advised numerous companies through a variety of economic cycles, which the board of directors believes provides him with valuable insight regarding Hyatt’s capital structure and in developing strategy. Additionally, Mr. Trott has significant experience in advising closely held companies and brings to Hyatt his knowledge of the travel and tourism industry through his affiliation as an Advisory Director of Enterprise Rent-A-Car Company and his past experience on the boards of directors of two other private companies, Pilot Flying J and Weber-Stephen Products LLC.
| Richard C. Tuttle |
Director since 2004 |
Age 57
Richard C. Tuttle has been a member of our board of directors since December 2004. Mr. Tuttle is a founding Principal at Prospect Partners, LLC, a lower-middle-market private equity firm, and has held this position since 1998. Prior to founding Prospect Partners, he was Executive Vice President of Corporate Development for Health Care & Retirement Corp., now Manor Care, Inc., a healthcare services company. He served as a Director of Manor Care until December 2007 and served as a Director of Cable Design Technologies, Inc., now Belden Inc., for 17 years. Mr. Tuttle is Chairman of the boards of directors of Velvac Holdings, Inc., ESI Lighting, Inc., Office Resources, Inc., Tender Products Corporation, Polymer Holding Corporation and World Data Products, Inc. and was a Director of Pipp Mobile Storage Systems, Inc. from 2005 to 2012.
Mr. Tuttle contributes to our board of directors’ expertise in financing transactions and experience in working with operating companies and management teams as a result of his 20 years of experience in private equity. Having served as a director of the Company for over five years, Mr. Tuttle’s long-standing knowledge of and familiarity with Hyatt and our operations benefits the board of directors. Additionally, he is sophisticated in financial and accounting matters.
| James H. Wooten, Jr. |
Director since 2011 |
Age 64
James H. Wooten, Jr. served as the Senior Vice President, General Counsel and Secretary of Illinois Tool Works Inc. (“ITW”), a worldwide manufacturer of engineered products and equipment from 2006 until his retirement on March 1, 2012. Mr. Wooten joined ITW in 1988 as Senior Attorney. He was named Associate General Counsel in 2000, and in 2005, he was promoted to Vice President, General Counsel and Secretary. Prior to joining ITW, Mr. Wooten practiced law at the firm of Gardner, Carton & Douglas, which is currently part of Drinker Biddle & Reath LLP. Mr. Wooten currently serves as a Director of Ann & Robert H. Lurie Children’s Hospital of Chicago, Window to the World Communications, Inc., Congo Square Theatre and National Merit Scholarship Corporation. He also serves on the Audit Committee of Ann & Robert H. Lurie Children’s Hospital of Chicago and Compensation Committee of Window to the World Communications, Inc.
Mr. Wooten brings to our board of directors extensive experience as an executive officer of a Fortune 200 company. Throughout his more than 20 years with ITW, Mr. Wooten developed deep expertise and experience in the areas of risk assessment and management, SEC reporting issues and the general financial and operational aspects of managing a global enterprise. The board of directors also values Mr. Wooten’s experience on various private and not-for-profit company boards of directors and committees. As an African-American, Mr. Wooten contributes to the diversity of the board of directors.
Other than the relationships of Mr. Thomas J. Pritzker and Ms. Penny Pritzker as described above, there are no family relationships among any of our directors or executive officers.
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Our Class II directors, whose terms will expire at the annual meeting of stockholders held during calendar year 2014, are Messrs. Pritzker, Trott, Tuttle and Wooten.
Our Class III directors, whose terms will expire at the annual meeting of stockholders held during calendar year 2015, are Mr. Friedman, Ms. Kronick, Mr. McDonald and Mr. Penner.
While voting agreements entered into with or among our major stockholders are in effect, they may provide our board of directors with effective control over the election of directors. Directors can be removed from our board of directors only for cause. Vacancies on our board of directors, and any newly created director positions created by the expansion of the board of directors, can be filled only by a majority of remaining directors then in office.
Pursuant to our employment letter with Mr. Pritzker, we have agreed that so long as he is a member of our board of directors we will use our commercially reasonable efforts to appoint him as our executive chairman as long as he is willing and able to serve in that office. If he is not re-appointed as executive chairman, he will be entitled to terminate his employment with the rights and entitlements available to him under our severance policies as if his employment were terminated by us without cause.
Pursuant to our employment letter with Mr. Hoplamazian, we have agreed that so long as he is our president and chief executive officer, we will use our commercially reasonable efforts to nominate him for re-election as a director prior to the end of his term. If he is not re-elected to the board of directors, he will be entitled to terminate his employment with the rights and entitlements available to him under our severance policies as if his employment were terminated by us without cause.
During the fiscal year ended December 31, 2012, Hyatt’s board of directors held eight meetings (and took action three times by written consent). The audit committee held eight meetings, the compensation committee held eight meetings (and took action one time by written consent), the nominating and corporate governance committee held five meetings, and the finance committee held seven meetings (and took action two times by written consent). No incumbent director attended fewer than 75% of the total number of meetings of the board of directors and committees on which such director served during 2012. We do not have a policy regarding attendance of directors at our annual meetings of stockholders. Eleven of our directors attended our 2012 annual meeting of stockholders.
Board Leadership Structure
The Hyatt Hotels Corporation Corporate Governance Guidelines (the “Corporate Governance Guidelines”) provide that the offices of the chairman of the board of directors and chief executive officer may be either combined or separated at the discretion of the board of directors. Mr. Pritzker currently serves as our executive chairman and Mr. Hoplamazian currently serves as our president and chief executive officer. Prior to Mr. Hoplamazian being named to this position in December 2006, Mr. Pritzker served as our executive chairman and chief executive officer. Mr. Hoplamazian also serves on our board of directors. As chief executive officer, Mr. Hoplamazian is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while Mr. Pritzker, as executive chairman, provides guidance to the chief executive officer on a variety of key issues and sets the agenda for board of directors meetings (with input from Mr. Hoplamazian) and presides over meetings of the full board of directors. Our board of directors has determined that Mr. Pritzker’s active involvement as executive chairman while Mr. Hoplamazian serves as president and chief executive officer and a director benefits the Company as a result of Mr. Pritzker’s deep understanding of the Company’s operations, relationships with owners and developers and extensive knowledge of the hospitality industry.
Our Corporate Governance Guidelines also provide that from time to time, the independent directors may determine that the board of directors should have a lead director. In the event that the independent directors make such a determination, the chairman of the nominating and corporate governance committee shall become the lead
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director on an ex officio basis. In the event that a lead director is designated, his or her duties would include: assisting the chairman of the board and board of directors in assuring compliance with and implementation of the Company’s Corporate Governance Guidelines, coordinating the agenda for and moderating sessions of the board of director’s non-management directors and acting as principal liaison between the non-management directors and the chairman of the board on sensitive issues. The Company currently has nine independent directors and to date they have not determined that the board of directors should have a lead director.
Our board of directors believes that this current board leadership structure is in the best interests of the Company and its stockholders at this time. Our Corporate Governance Guidelines provide the flexibility for our board of directors to modify or continue our leadership structure in the future, as it deems appropriate.
Our non-management directors regularly meet in executive session without management present and our independent directors meet in executive session at least once a year. The chairman of the nominating and corporate governance committee presides at such sessions.
Board Role in Risk Oversight
Management is responsible for the Company’s day-to-day risk management activities and processes, and our board of directors’ role is to engage in informed oversight of and to provide direction with respect to such risk management activities and processes. In fulfilling this oversight role, our board of directors focuses on understanding the nature of our enterprise risks, including risk in our operations, finances and strategic direction. Our board of directors performs this oversight function in a variety of ways, including the following:
| • | the board of directors receives management updates on our business operations, financial results and strategy and, as appropriate, discusses and provides feedback with respect to risks related to those topics; |
| • | the Company maintains a risk council that is led by our vice president, internal audit and is comprised of certain members of management from different functional areas and business units. The risk council is responsible for identifying, assessing, prioritizing and monitoring critical risks of the Company and periodically reports to the board of directors and the audit committee regarding the Company’s risk management processes and procedures; and |
| • | while the full board is responsible to monitor enterprise risk management overall, the audit committee assists the board of directors in its oversight of risk management by discussing with management, the internal auditors and the independent auditors the Company’s policies and procedures with respect to the process governing risk assessment and risk management. To this end, the audit committee discusses with management the Company’s major financial, reporting and disclosure risk exposures and the steps management has taken to monitor and control such exposures. Additionally, the compensation committee helps assess risk associated with the Company’s compensation policies and procedures. |
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
All interested parties who wish to communicate with any of our directors, including our non-management directors, can address their communications as follows:
| Mail: | Hyatt Hotels Corporation | |
| Attention: Corporate Secretary | ||
| 71 South Wacker Drive, 12th Floor | ||
| Chicago, Illinois 60606 | ||
| Email: | shareholdercommunications@hyatt.com | |
Hyatt’s corporate secretary will maintain a record of all such communications and promptly forward to the chairman of the nominating and corporate governance committee those that the corporate secretary believes require
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immediate attention. The corporate secretary will also periodically provide the chairman of the nominating and corporate governance committee with a summary of all such communications. The chairman of the nominating and corporate governance committee shall notify the board of directors or the chairs of the relevant committees of the board of directors of those matters that he believes are appropriate for further action or discussion.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted the Hyatt Hotels Corporation Code of Business Conduct and Ethics (the “Code of Ethics”), which is applicable to all of Hyatt’s directors, officers and associates, including the Company’s president and chief executive officer, chief financial officer, principal accounting officer or controller and other senior financial officers performing similar functions. The Code of Ethics is posted on the Company’s website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Code of Business Conduct and Ethics.” The Company will furnish a copy of the Code of Ethics to any person, without charge, upon written request directed to: Senior Vice President–Investor Relations, Hyatt Hotels Corporation, 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606. In the event that the Company amends or waives any of the provisions of the Code of Ethics that applies to the Company’s chief executive officer, chief financial officer, principal accounting officer or controller and other senior financial officers performing similar functions, the Company intends to disclose the relevant information on its website.
CORPORATE GOVERNANCE GUIDELINES
The Company has adopted the Corporate Governance Guidelines to assist the board of directors in the exercise of its responsibilities. The Corporate Governance Guidelines are posted on the Company’s website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Corporate Governance Guidelines.” The Company will furnish a copy of the Corporate Governance Guidelines to any person, without charge, upon written request directed to: Senior Vice President–Investor Relations, Hyatt Hotels Corporation, 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606.
Under our Corporate Governance Guidelines, our board of directors will be comprised of a majority of directors who qualify as independent directors under the listing standards of the NYSE. Directors who do not meet the NYSE’s independence standards, including current and former members of management, also make valuable contributions to the board of directors and to Hyatt by reason of their experience and wisdom, and the board of directors expects that some minority of its members will not meet the NYSE’s independence standards.
Only those directors who the board of directors affirmatively determines have no direct or indirect material relationship with the Company will be considered independent directors, subject to any additional qualifications prescribed under the listing standards of the NYSE. A material relationship is one that would interfere with the director’s exercise of independent judgment in carrying out his or her duties and responsibilities as a director. The nominating and corporate governance committee and the board of directors annually review all relevant business relationships any director or nominee for director may have with Hyatt, including the relationships described in the section below titled “Certain Relationships and Related Party Transactions.” As a result of this review, the board of directors has determined that each of Messrs. Aronson, Friedman, McDonald, Penner, Rocca, Trott, Tuttle, Wooten and Ms. Kronick is an “independent director” under applicable SEC rules and the listing standards of the NYSE. The board of directors has also determined that director nominee Cary D. McMillan will be an “independent director” if elected. In making these independence determinations, in addition to the relationships described below under “Certain Relationships and Related Party Transactions,” the board of directors considered that certain of these directors serve or previously served together on other boards of directors, not-for-profit boards of directors and charitable organizations, certain directors serve as non-management directors or executive officers of companies with which Hyatt does business, and certain directors are affiliated with charitable organizations that received contributions from Hyatt of amounts within the criteria
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set forth in our Corporate Governance Guidelines. The board of directors also took into account that certain entities affiliated with the directors paid amounts to Hyatt for room accommodations and meeting space in the ordinary course of business. Relationships considered by the board of directors not otherwise described in this paragraph are disclosed below.
Mr. Aronson is a director and a member of the compensation committee of Royal Caribbean Cruises Ltd. (“Royal Caribbean”). Mr. Thomas J. Pritzker is a director of Royal Caribbean and Pritzker family non-U.S. situs trusts own approximately 5% of the outstanding common stock of Royal Caribbean. Mr. Aronson is the Founder and Managing Partner of ACON Investments, LLC. The Pritzker Family Foundations, LLC made an investment in ACON-Bastion Partners II, L.P., an investment fund affiliated with ACON Investments, LLC. Ms. Penny Pritzker is an officer of The Pritzker Family Foundations, LLC. The board of directors has affirmatively determined that such relationships would not interfere with Mr. Aronson’s exercise of independent judgment in carrying out his duties and responsibilities as a director.
Mr. McDonald served as a director of Wells Fargo from 1997 to July 2012. Wells Fargo is the parent of Wachovia Bank, National Association, which is a lender and administrative agent under the Company’s credit facility. The Company made payments to Wachovia of approximately $430,671 in 2012 under the credit facility. The board of directors has affirmatively determined that such relationship would not interfere with Mr. McDonald’s exercise of independent judgment in carrying out his duties and responsibilities as a director.
Mr. Trott is the chairman and chief executive officer of BDT Capital Partners, LLC and BDT & Company. An affiliate of BDT Capital Partners, LLC is the general partner of BDT Capital Partners Fund I, L.P. Trusts for the benefit of Mr. Thomas J. Pritzker and members of his family and trusts for the benefit of Ms. Penny Pritzker and members of her family and Ms. Pritzker’s family foundation have subscribed as limited partners in BDT Capital Partners Fund I, L.P. BDT & Company has been previously engaged by the former co-trustees of the Pritzker family U.S. situs trusts (including Mr. Thomas J. Pritzker) to provide financial advisory services on a broad range of matters. The board of directors has affirmatively determined that such relationships would not interfere with Mr. Trott’s exercise of independent judgment in carrying out his duties and responsibilities as a director.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has a nominating and corporate governance committee, an audit committee, a compensation committee and a finance committee, each of which has the composition and responsibilities described below. Our board of directors may also establish from time to time any other committees that it deems necessary or desirable. The composition of each committee complies with the listing requirements and other rules of the NYSE.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Messrs. Aronson, Trott and Tuttle, with Mr. Aronson serving as chairman. Our board of directors has determined that each of Messrs. Aronson, Trott and Tuttle is independent within the meaning of the listing standards of the NYSE. The nominating and corporate governance committee is authorized to:
| • | assist the board of directors in identifying individuals qualified to be members of the board of directors consistent with criteria approved by the board of directors and set forth in the Corporate Governance Guidelines and to recommend director nominees to the board of directors; |
| • | take a leadership role in shaping Hyatt’s corporate governance, including developing and recommending to the board of directors corporate governance guidelines and practices applicable to Hyatt; |
| • | recommend board committee nominees to the board of directors; and |
| • | oversee the evaluation of the board of directors’ and management’s performance. |
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Our board of directors has adopted a written charter for our nominating and corporate governance committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Nominating and Corporate Governance Committee Charter.”
Selection of Director Nominees
At an appropriate time prior to each annual meeting of stockholders, or if applicable, a special meeting of stockholders at which directors are to be elected or re-elected, the nominating and corporate governance committee will recommend to the board of directors for nomination such candidates as the nominating and corporate governance committee has found to be well qualified and willing and available to serve, and in each case, providing the nominating and corporate governance committee’s assessment whether such candidate would satisfy the independence requirements of the NYSE.
Prior to making such recommendations to the board of directors, the nominating and corporate governance committee conducts inquiries into the background and qualifications of any potential candidates, including the following criteria set forth in Hyatt’s Corporate Governance Guidelines:
| • | judgment, character, expertise, skills and knowledge useful to the oversight of Hyatt’s business; |
| • | diversity of viewpoints, backgrounds and experiences; |
| • | business or other relevant experience; and |
| • | the extent to which the integrity of the candidate’s expertise, skills, knowledge and experience with that of the other directors will build a board of directors that is effective, collegial and responsive to the needs of Hyatt. |
The nominating and corporate governance committee also considers such other relevant factors as it deems appropriate, including requirements that the members of the board of directors as a group maintain the requisite qualifications under the applicable NYSE listing standards for independence for the board of directors as a whole and for populating the audit, compensation and nominating and corporate governance committees. While there are no specific minimum qualifications that a director candidate must possess, the nominating and corporate governance committee recommends those candidates who possess the highest personal and professional integrity, have prior experience in corporate management or our industry, maintain academic or operational expertise in an area relating to our business and demonstrate practical and mature business judgment. As described above, our Corporate Governance Guidelines specify that the value of diversity of viewpoints, backgrounds and experiences on the board of directors should be considered by the nominating and corporate governance committee in the director identification and nomination process. The nominating and corporate governance committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The nominating and corporate governance committee does not assign specific weighting to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
The nominating and corporate governance committee will consider stockholder recommendations for candidates to be nominated by our board of directors for election at the 2014 annual meeting of stockholders. Stockholders who want to recommend a potential director candidate for consideration by the nominating and corporate governance committee should send a written notice, addressed to the corporate secretary at our principal executive offices at 71 South Wacker Drive, 12th Floor, Chicago, Illinois 60606. This notice must include the same information as would be required under our bylaws in a stockholder’s notice to nominate a
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director at the 2014 annual meeting of stockholders. These information requirements are set forth in Sections 3.8(a)(2)(x) and 3.8(a)(2)(z)(i)–(vii) of our bylaws. We also consider potential director candidates recommended by current directors, officers, employees and others. We may also retain the services of search firms to provide us with candidates, especially when we are looking for a candidate with a particular expertise, quality, skill or background. In 2012, we engaged Spencer Stuart, Inc., an executive search consulting firm, and paid related fees in the amount of $138,072.
The nominating and corporate governance committee screens all potential candidates in the same manner, regardless of the source of the recommendation. The review is typically based on any written materials provided with respect to potential candidates, and the nominating and corporate governance committee reviews the materials to determine the qualifications, experience and background of the candidates. Final candidates are typically interviewed by one or more members of the nominating and corporate governance committee. In making its determinations, the nominating and corporate governance committee evaluates each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best perpetuate the success of our company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the nominating and corporate governance committee makes a recommendation to the full board of directors regarding whom should be nominated by the board of directors.
The nominating and corporate governance committee did not receive any timely director recommendations from a stockholder for consideration at the 2013 Annual Meeting. December 1, 2013 is the deadline established by the nominating and corporate governance committee for submission of potential director nominees for consideration by the nominating and corporate governance committee for nomination at the 2014 annual meeting of stockholders.
Audit Committee
Hyatt’s audit committee, which was established in accordance with section 3(a)(58)(A) of the Exchange Act, consists of Messrs. Rocca, Tuttle and Wooten and Ms. Kronick, with Mr. Rocca serving as chairman. If Mr. McMillan is elected to the board of directors, the board of directors intends to appoint him to serve as a member of the audit committee in addition to Messrs. Rocca, Tuttle and Wooten and Ms. Kronick. Our board of directors determined that each of Messrs. Rocca, Tuttle, Wooten and McMillan and Ms. Kronick is independent within the meaning of applicable SEC rules and the listing standards of the NYSE, and has determined that Mr. Rocca is an audit committee financial expert, as such term is defined in the rules and regulations of the SEC. The audit committee has oversight responsibilities regarding:
| • | the integrity of our financial statements and our financial reporting and disclosure practices; |
| • | the soundness of our system of internal controls regarding finance and accounting compliance; |
| • | the annual independent audit of our consolidated financial statements; |
| • | the independent registered public accounting firm’s qualifications and independence; |
| • | the engagement of our independent registered public accounting firm; |
| • | the performance of our independent registered public accounting firm; |
| • | the performance of our internal audit function and approval of the internal audit plan; |
| • | our compliance with legal and regulatory requirements in connection with the foregoing; |
| • | compliance with our Code of Ethics; |
| • | assisting the board of directors in its oversight of risk management by discussing with management, the internal auditors and the independent auditors the Company’s policies and procedures with respect to the process governing risk assessment and risk management, and discussing with management the Company’s major financial, reporting and disclosure risk exposures and the steps management has taken to monitor and control such exposures; |
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| • | reviewing and approving procedures with respect to employee submission of and the Company’s response to complaints received regarding accounting, internal accounting controls or auditing matters; and |
| • | addressing requests for waivers of conflict of interest situations and addressing certain concerns related to accounting, internal accounting controls and auditing matters as provided in our Corporate Governance Guidelines. |
Our board of directors has adopted a written charter for our audit committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Audit Committee Charter.”
Finance Committee
Our finance committee consists of Messrs. Pritzker and Trott and Ms. Pritzker, with Mr. Pritzker serving as chairman. The finance committee is responsible for reviewing with Company management strategies, plans, policies and significant actions relating to corporate finance matters, including, without limitation, the following matters:
| • | long and short-term financings, including, without limitation (i) borrowing of funds from, or issuance of debt securities to, one or more lenders, in each case involving an amount in excess of $50,000,000, (ii) designation and issuance of our equity securities and matters related to the sale and marketing thereof, (iii) any financial guaranty in excess of $50,000,000, and (iv) any credit support in excess of $50,000,000; |
| • | changes in our capital structure, including, but not limited to, (i) cash and stock dividend policies, (ii) programs to repurchase our stock, (iii) issues relating to the redemption and/or issuance of our preferred stock, and (iv) stock splits; |
| • | investments (including the making of loans), divestitures and acquisitions, in each case involving an amount in excess of $50,000,000; |
| • | capital expenditures and leasing arrangements, in each case involving an amount in excess of $50,000,000; and |
| • | oversight of administration and asset management of our unfunded and funded employee benefit plans and amounts held for operating needs. |
In addition to its review responsibilities described above, the finance committee has the power and authority to approve on behalf of the board of directors all matters set forth in the first bullet point above (except the issuances of equity) and all of the matters set forth in the third, fourth and fifth bullet points above. Approval of the following matters is specifically reserved to the full board of directors:
| • | issuances of equity; |
| • | debt financings, financial guarantees and/or credit support involving in each case an amount in excess of $100 million; |
| • | all matters described in the second bullet point above; |
| • | merger, acquisition and divestiture activities involving companies, businesses or assets valued in each case in an amount in excess of $100 million; and |
| • | capital expenditures and leasing arrangements involving in each case an amount in excess of $100 million. |
Our board of directors has adopted a written charter for our finance committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Finance Committee Charter.”
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Compensation Committee
Our compensation committee consists of Messrs. McDonald, Aronson and Friedman and Ms. Kronick, with Mr. McDonald serving as chairman. Our board of directors has determined that each member of our compensation committee is independent within the meaning of the SEC rules and the listing standards of the NYSE. However, Mr. Friedman is not an outside director for purposes of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”), or a non-employee director under Section 16 of the Exchange Act. Accordingly, the compensation committee has appointed a sub-committee consisting of Mr. McDonald, Mr. Aronson and Ms. Kronick (the “Section 162(m) and Section 16 subcommittee”) to take actions with respect to any compensation intended to qualify as performance-based compensation and be deductible under Section 162(m) or exempt from the “short-swing” rules under Rule 16b-3 of the Exchange Act. The compensation committee is authorized to discharge the responsibilities of the board of directors relating to:
| • | the establishment, maintenance and administration of compensation and benefit policies and programs designed to attract, motivate and retain personnel with the requisite skills and abilities to enable the Company to achieve its business objectives; |
| • | the goals, objectives and compensation of our president and chief executive officer, including evaluating the performance of the president and chief executive officer in light of those goals; |
| • | the compensation of our other executive officers and non-management directors; |
| • | ensuring that succession planning takes place for the chief executive officer and other senior management positions; |
| • | our compliance with the compensation rules, regulations and guidelines promulgated by the NYSE, the SEC and other law, as applicable; and |
| • | the issuance of an annual report on executive compensation for inclusion in our annual proxy statement. |
Our board of directors has adopted a written charter for our compensation committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Compensation Committee Charter.”
During 2012 the compensation committee relied upon information provided by Mercer (US) Inc. (“Mercer”) in setting compensation for our named executive officers, as more thoroughly discussed below under the section titled “Compensation Consultant Fees and Services.”
In making decisions about executive compensation, the compensation committee considered input from Mercer, our executive chairman, our president and chief executive officer and our chief human resources officer. However, the compensation committee ultimately makes all compensation decisions regarding our executive officers, other than our executive chairman, whose compensation is approved by the full board of directors.
The compensation committee may delegate its duties to a subcommittee under the terms of its charter. In addition, under the terms of our Amended and Restated Long Term Incentive Plan, as amended (the “2008 LTIP”), the compensation committee may delegate to other members of the board of directors and to our officers the authority to make awards and to amend 2008 LTIP awards, except that it may not delegate the authority to make any awards to officers who are subject to Section 16 of the Exchange Act or to make awards to themselves. In addition to the delegation to the Section 162(m) and Section 16 subcommittee as described above, as part of the grant process the compensation committee delegates its authority to Messrs. Pritzker, Hoplamazian, Rainer and certain other executive officers to amend or modify award agreements made under the 2008 LTIP and take other actions with respect to such awards as they deem necessary, appropriate or advisable to carry out the purposes and intent of the compensation committee’s grant.
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Compensation Consultant Fees and Services
During 2012 Mercer was engaged by the compensation committee to provide executive, director and other compensation services. During 2012, Mercer performed the following services:
| • | provided information and data so that we could assess the competitiveness of our executive compensation programs; |
| • | advised on current base salary, incentive compensation and executive benefit practices; |
| • | conducted a job leveling study for our corporate roles; |
| • | provided analysis regarding our total rewards program, equity awards, and dilution and burn-rate under the 2008 LTIP; |
| • | advised on design and documentation of the 2013 LTIP and Hyatt Hotels Corporation Executive Incentive Plan; |
| • | assisted with the preparation of the Compensation Discussion and Analysis section of this proxy statement; and |
| • | assisted with international insurance proposals and renewal negotiations. |
For 2012 the compensation committee retained Mercer directly to serve as its compensation consultant. Mercer has been providing compensation consulting services to management since prior to our initial public offering in 2009. The compensation committee determined to retain Mercer based on its knowledge of Hyatt and the compensation committee’s satisfaction with Mercer’s services. The compensation committee determined that Mercer’s prior engagement by management would not disqualify it from providing independent objective advice to the compensation committee and would not be influenced by Mercer’s or its affiliates’ prior relationships with Hyatt. The compensation committee also reviewed the nature of and extent of the relationship among the compensation committee, Hyatt and Mercer and the individuals at Mercer providing advice to the compensation committee with respect to any conflicts or potential conflicts of interest. Based on that review, the compensation committee believes that there are no conflicts of interest or potential conflicts of interest that would unduly influence Mercer’s provision of advice to the compensation committee. In that regard the individual executive compensation consultant:
| • | receives no incentive or other compensation based on the fees charged to Hyatt for other services provided by Mercer or any of its affiliates; |
| • | is not responsible for selling other Mercer or affiliate services; and |
| • | is prohibited by Mercer’s professional standards from considering any other relationships Mercer or any of its affiliates may have with Hyatt in rendering his advice and recommendations. |
The compensation committee delegated to certain members of management the authority to direct Mercer with respect to matters which are of general applicability to broad levels of employees, do not involve equity compensation, are not limited to executive officers and do not exceed $200,000 in fees per individual statement of work. As such, management has the sole authority to engage Mercer for any such additional services without further approval so long as such services remain within the scope of the established parameters.
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The following is a summary of the fees for professional services, as well as commissions with respect to international insurance matters, paid to Mercer and its affiliates for services rendered in 2012:
| Fee Category |
2012 | |||
| Executive and Director Compensation Consulting |
$ | 173,790 | ||
| Non-Executive Compensation Consulting |
$ | 469,054 | ||
| Non-Executive Compensation Services by an Affiliate of Mercer(1) |
$ | 910,474 | ||
|
|
|
|||
| Total |
$ | 1,553,318 | ||
| (1) | Amount represents commissions and consulting fees paid to an affiliate of Mercer with respect to international insurance matters and an affiliate of Mercer with respect to brand strategy consulting work. |
Compensation Risk Considerations
The compensation committee reviews and evaluates, in conjunction with management, the incentives and material risks arising from or relating to the Company’s compensation programs and arrangements and determines whether such incentives and risks are appropriate. A team made up of members from our internal audit and human resources departments reviewed the Company’s incentive compensation plans and programs in order to assess whether or not any such plans or programs could create risks that are reasonably likely to have a material adverse effect on the Company. Management then reviewed such assessment with the compensation committee. In such assessment, the Company determined that the following policies discourage unreasonable or excessive risk-taking by executives:
| • | base salary levels are commensurate with the overall experience, time in the role, and performance of each “named executive officer” (“NEO”) (and the competitive market) so that the executive officers are not motivated to take excessive risks to achieve a level of financial security; |
| • | annual incentive plans include a diverse mix of corporate and individual performance metrics, including non-financial measures; |
| • | annual incentive payouts are capped to ensure that no payout exceeds a specified percentage of salary, thereby moderating the impact of short-term incentives; |
| • | the mix of short- and long-term incentives is weighted such that a significant percentage of total opportunity is in the form of long-term equity awards; |
| • | awards made under our 2008 LTIP are generally granted as a mix of time-vested stock appreciation rights (“SARs”), time-vested restricted stock units (“RSUs”) and performance-vested restricted shares (“PSs”) which, together, encourage NEOs to focus on earnings, returns and long-term stockholder value; |
| • | annual audit process and activities, controls and monitoring procedures are in place, including but not limited to compensation committee oversight, that mitigate risks associated with incentive compensation plans; |
| • | in addition to our chief executive officer and chief financial officer being subject to the claw-back provisions of the Sarbanes-Oxley Act of 2002, the Company has adopted a compensation recovery policy, described below in the section titled “Share Ownership Requirement and Compensation Recovery Policy”; and |
| • | share ownership requirements align the long-term interests of NEOs and directors with the interests of stockholders. |
Based on these and other considerations, the Company concluded that there are no compensation policies or practices that create risks that are reasonably likely to have a material adverse effect on the Company.
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We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the board of directors. In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties as well as the skill level required by members of our board of directors.
Retainers and Committee Fees
Our directors who are also our employees do not receive any additional compensation for their services as our directors. Accordingly, Messrs. Pritzker and Hoplamazian do not receive any compensation for their services as directors. For 2012, members of the board of directors who are not our employees were entitled to receive annual cash retainers of $70,000 and stock compensation of $105,000. Directors may elect to receive their annual cash retainer in shares of Class A common stock. The annual cash retainer is paid on a quarterly basis. Directors who choose to receive cash do so at the end of each fiscal quarter. Directors who choose to receive shares of Class A common stock in lieu of cash receive shares with a grant date of the second to last business day of each quarter. The annual cash retainer is pro-rated in the event the director did not serve for the full fiscal quarter.
Directors receive their annual stock retainer on the date of the Company’s annual meeting of stockholders, payable in arrears for service since the prior annual meeting. The annual stock retainer is also pro-rated in the event the director did not serve for the full fiscal year.
Committee members and the chairman of each committee received the following annual cash retainers for 2012:
| Committee Name |
Committee Member Retainer |
Committee Chairman Retainer |
||||||
| Audit Committee |
$ | 9,000 | $ | 25,000 | ||||
| Compensation Committee |
$ | 3,000 | $ | 25,000 | ||||
| Nominating and Corporate Governance Committee |
$ | 3,000 | $ | 6,000 | ||||
| Finance Committee(1) |
$ | 3,000 | $ | 6,000 | ||||
| (1) | As an employee of the Company, Mr. Pritzker was not eligible to receive and did not receive a retainer for his service as chairman of the finance committee in 2012. |
The chairman of a committee receives only the chairman retainer and does not also receive the committee member retainer. Committee retainers are paid in quarterly installments on the second to last business day of each quarter based on the individual’s service for such quarter. All of our directors are reimbursed for reasonable expenses incurred in connection with attending board of director meetings and committee meetings and for attending corporate functions on our behalf. To encourage our directors to visit and personally evaluate our properties, the directors are eligible for complimentary and discounted rooms at Hyatt-owned, operated or franchised hotels, as well as the use of hotel-related services when on personal travel.
For 2013, the stock component of the non-employee director compensation program has been increased to $115,000. Committee retainers for 2013 have been increased to $6,000 for all committees other than the audit committee, and $12,000 for the audit committee. The cash retainer for committee chairs other than audit and compensation has been raised to $9,000 for 2013.
Newly Elected Directors
In addition to the annual cash and stock compensation, each newly-elected non-employee director receives an initial equity retainer of $75,000 payable in shares of our Class A common stock. The initial equity retainer is payable on the date the director is first elected or appointed to the board of directors and is based on the value of the shares on such date.
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Non-Employee Director Stock Ownership Guidelines
Our Corporate Governance Guidelines require that each non-employee director accumulate and own, directly or indirectly, at least $225,000 worth of our common stock (or common stock equivalents held under the Directors Deferred Compensation Plan described below) at all times during his or her tenure on the board of directors. Our non-employee directors will have up to five years of service on the board of directors to meet this ownership requirement. If, after the relevant accumulation period, the market value of such director’s stock should fall below the target level, the director will not be permitted to sell any of our common stock until the market value again exceeds the target level. These sale limitations do not apply where the decline in value of the director’s holdings of our common stock is in connection with a change of control transaction.
Directors Deferred Compensation Plan
Each non-employee director may elect to defer all or any portion of his or her annual cash and annual stock retainers under our Directors Deferred Compensation Plan. Once an election is made to defer a retainer, the decision may be revoked or changed only for subsequent calendar years. Under the Directors Deferred Compensation Plan, a director who elects to defer any of his or her annual cash retainer may elect to have such amount invested in a notional cash account, which is credited with interest quarterly at the prime rate, or in stock units equivalent to our Class A common stock. Deferrals of annual stock retainers are invested in stock units equivalent to our Class A common stock. Any retainers deferred into stock units are entitled to receive additional stock units equal to the amount of any dividends payable on the stock units held by the director. The director may also elect to receive payment for any such deferrals at either January 31st of the year following the director’s departure from the board of directors or on the last business day of March of the fifth year following the year in which such retainer was earned. Stock units are paid in shares of our Class A common stock from shares reserved for issuance under our 2008 LTIP.
2012 Director Compensation
The following table provides information related to the compensation of our non-employee directors earned for 2012:
| Name |
Fees Earned or Paid in Cash ($)(1) |
Stock Awards ($)(2)(3) |
Total ($) |
|||||||||
| Bernard W. Aronson |
$ | 79,000 | $ | 105,021 | $ | 184,021 | ||||||
| Richard A. Friedman |
$ | 73,000 | $ | 105,021 | $ | 178,021 | ||||||
| Susan D. Kronick |
$ | 82,000 | $ | 105,021 | $ | 187,021 | ||||||
| Mackey J. McDonald |
$ | 95,000 | $ | 105,021 | $ | 200,021 | ||||||
| Gregory B. Penner |
$ | 73,000 | $ | 105,021 | $ | 178,021 | ||||||
| Penny Pritzker |
$ | 73,000 | $ | 105,021 | $ | 178,021 | ||||||
| Michael A. Rocca |
$ | 95,000 | $ | 105,021 | $ | 200,021 | ||||||
| Byron D. Trott |
$ | 76,000 | $ | 105,021 | $ | 181,021 | ||||||
| Richard C. Tuttle |
$ | 82,000 | $ | 105,021 | $ | 187,021 | ||||||
| James H. Wooten, Jr. |
$ | 79,000 | $ | 105,021 | $ | 184,021 | ||||||
| (1) | Messrs. Friedman, McDonald, Penner, Trott, and Wooten and Ms. Kronick elected to receive their annual cash retainers of $70,000 in the form of our Class A common stock while Ms. Pritzker elected to defer the annual cash retainer of $70,000 into RSUs under the Directors Deferred Compensation Plan. Mr. Tuttle elected to receive half of the annual cash retainer in the form of our Class A common stock. As a result, |
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| other than Mr. Tuttle, each of these directors received 1,797 shares or RSUs (if deferred) and Mr. Tuttle received 899 shares based on the fair market value of our Class A common stock on the date the retainers were payable. Shares deferred into RSUs are reflected in the table contained in footnote (3) below. |
| (2) | Amounts shown represent the grant date fair value of stock or stock units in payment of annual stock retainers in 2012 computed in accordance with Financial Accounting Standards Board (“FASB”) (Accounting Standards Codification (“ASC”)) Topic 718, Compensation — Stock Compensation. Messrs. Aronson and Rocca and Ms. Pritzker each elected to defer all $105,000 of their annual stock retainers into the Directors Deferred Compensation Plan and Mr. Tuttle elected to defer receipt of one-half of his annual stock retainer into the Directors Deferred Compensation Plan. |
| (3) | As described above under “Directors Deferred Compensation Plan,” directors may elect to defer their stock and cash fees into RSUs. The following table sets forth the aggregate number of outstanding RSUs held by each director as of December 31, 2012: |
| Name |
Beginning of Year Balance |
Earned during the Year |
Paid out during the Year |
End of Year Balance |
||||||||||||
| Bernard W. Aronson(1) |
8,509 | 2,927 | 1,838 | 9,598 | ||||||||||||
| Richard A. Friedman |
6,238 | — | — | 6,238 | ||||||||||||
| Mackey J. McDonald |
6,058 | — | — | 6,058 | ||||||||||||
| Penny Pritzker |
3,068 | 4,724 | — | 7,792 | ||||||||||||
| Michael A. Rocca |
9,141 | 2,927 | — | 12,068 | ||||||||||||
| Richard C. Tuttle |
15,678 | 1,463 | — | 17,141 | ||||||||||||
| (1) | Mr. Aronson’s May 2, 2008 deferred award of 1,838 shares was delivered in March 2012. The value upon delivery was $77,821. |
The compensation committee has reviewed the Compensation Discussion and Analysis set forth below and discussed its contents with the Company’s management. Based on this review and discussion, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Mackey J. McDonald, Chairman
Bernard W. Aronson
Richard A. Friedman
Susan D. Kronick
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee consists of Messrs. McDonald, Aronson and Friedman and Ms. Kronick, with Mr. McDonald serving as chairman. None of the members of our compensation committee has at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our compensation committee. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors. Because of his affiliation with Goldman, Sachs & Co., Mr. Friedman had certain relationships with the Company during 2012 that are required to be disclosed under the SEC rules relating to disclosure of related party transactions. See the section below titled “Certain Relationships and Related Party Transactions” for more information.
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ARTICLE III: EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion describes the compensation elements of our total rewards program for our NEOs, including our executive chairman, principal executive officer (“PEO”), principal financial officer (“PFO”) and our three other most highly compensated executive officers. Effective August 15, 2012, Harmit J. Singh transitioned as our PFO and Gebhard F. Rainer was appointed as his successor. Mr. Rainer previously served as Managing Director Hyatt International (EAME) LLC, where he was responsible for the management of 32 full service hotels and resorts in Europe, Africa and Middle East, overseeing a wide range of functions including sales, finance, human resources, product and design, rooms, food and beverage, and engineering.
Our NEOs for 2012 were:
| Name |
Position | |
| Thomas J. Pritzker |
Executive Chairman of the Board | |
| Mark S. Hoplamazian (PEO) |
President and Chief Executive Officer | |
| Gebhard F. Rainer (PFO) |
Executive Vice President, Chief Financial Officer | |
| Harmit J. Singh (Former PFO) |
Former Executive Vice President, Chief Financial Officer | |
| Rakesh K. Sarna |
Executive Vice President, Group President Americas | |
| H. Charles Floyd |
Executive Vice President, Group President Global Operations Center | |
| Stephen G. Haggerty |
Executive Vice President, Global Head of Real Estate and Capital Strategy | |
Our compensation committee is responsible for establishing, maintaining and administering our compensation programs for our NEOs and other executives.
Philosophy and Goals of Our Executive Compensation Program
Our goal is to be the preferred brand for guests and owners and the preferred employer for associates. We believe that this goal is central to and best promotes value creation for our stockholders. Our compensation philosophy is to provide an appropriate base of cash compensation and to align all incentive and long-term components of compensation to support long-term value creation for our stockholders. We have focused on defining annual financial and non-financial goals around metrics that we believe support and promote enhancement of long-term brand value. We believe that this is the best way to align our total rewards with creation of long-term stockholder value. To attract, recruit, develop, engage and retain the talent needed to deliver on this goal, our compensation programs are designed to:
| • | retain the employee capabilities required to achieve our goal and appropriately motivate employees through the alignment of total rewards with performance goals; |
| • | address the needs and preferences of employees as individuals and as members of high-performing teams; |
| • | be innovative and competitive, recognizing the ever changing dynamics of the labor market and acknowledging that, in attracting, retaining and developing talent globally, we need to offer compelling employment opportunities; and |
| • | be cost effective and financially sustainable over time under varying business conditions. |
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To accomplish these goals, our executive compensation program is based on a total rewards program, which provides:
| • | compensation, including forms of current cash and incentive compensation, as well as long-term stock-based compensation; |
| • | benefits, including retirement-related, healthcare and other welfare programs; |
| • | work/lifestyle programs, including paid-time off, a specified number of free hotel stays and other programs that promote well-being; and |
| • | personal development. |
Our total rewards program is designed to provide rewards for individual and organizational achievement of business objectives and to emphasize long-term incentive compensation and variable compensation.
Alignment with Stockholder Interests
The compensation committee periodically reviews what it considers to be best practices in governance and executive compensation. As a result, the compensation committee believes that Hyatt’s executive compensation program is aligned with stockholders because Hyatt:
| • | does not provide for tax reimbursement payments or gross-ups except in limited cases for new hire relocation; |
| • | has eliminated the vast majority of executive perquisites; |
| • | does not allow hedging; |
| • | requires executive officers to maintain specific stock ownership levels to align their interests with stockholders; |
| • | has policies in place that provide for the forfeiture of vested and unvested equity awards and compensation recovery in the event that an NEO violates certain restrictive covenants or engages in fraudulent or willful misconduct that results in a restatement of Hyatt’s financial statements; |
| • | does not permit repricing of SARs or options without stockholder approval; |
| • | does not provide supplemental defined benefit pensions to executives; |
| • | generally provides limited severance protections for NEOs (see the section below titled “Potential Payments on Termination or Change in Control”); |
| • | does not use automatic single trigger arrangements that provide change in control payments or vesting of stock-based compensation without loss of employment or material adverse change in job duties; and |
| • | annually conducts risk assessments. |
Impact of Advisory Vote Approving Executive Compensation
At the Company’s 2012 annual meeting of stockholders, the Company held an advisory vote to approve executive compensation (“say-on-pay”), thereby affording stockholders the opportunity to cast an advisory vote on the compensation programs for our NEOs. The say-on-pay proposal received support from over 99.9% of the shares present and entitled to vote at the annual meeting, indicating stockholder approval of the compensation paid to our NEOs. Among other considerations, including the result of the vote, the compensation committee did not change its approach to executive compensation. The compensation committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for our NEOs.
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Role of the Outside Consultant
Mercer provides consulting services to our compensation committee to help:
| • | assess the competitiveness of our executive compensation programs; |
| • | advise on current base salary, incentive compensation and executive benefit practices; |
| • | advise on design and documentation of the 2013 LTIP and Hyatt Hotels Corporation Executive Incentive Plan; and |
| • | assist with the preparation of this Compensation Discussion and Analysis. |
Mercer consultants also work on our plan design for retirement and international benefits. See the section above titled “Compensation Consultant Fees and Services” for further information regarding services performed by Mercer in 2012.
Role of Executive Officers
In making decisions about executive compensation, the compensation committee invites our executive chairman, our president and chief executive officer and our chief human resources officer to present various compensation proposals at the committee meetings and to answer any questions the committee may have. With respect to the compensation of our chief executive officer, the compensation committee meets in executive session with our executive chairman and, from time to time, our chief human resources officer is present at such meetings.
Market Data
Mercer helps us assess the market competitiveness of our NEOs’ annual cash and long-term incentives. In doing so, Mercer uses several survey sources, and where data for comparable positions was available in the hospitality/restaurant or lodging industry they provided such data. In addition to any such data available from the hospitality/restaurant or lodging industry, Mercer provides general industry survey data for the compensation committee’s consideration. We include restaurant companies in our market data, along with our competitors in the hospitality and lodging business, as these are companies with which we compete for management talent. The restaurant companies included in our market data surveys also have a similar business profile to ours, in that they have franchise operations, in some cases they own restaurants that they manage, have global operations and scope, and are in a consumer facing and customer oriented service business.
In 2012, we reviewed the competitiveness of our compensation against the following peer group selected based on several factors, including business mix and model, revenues, global presence and the strength of their brands:
| • Carnival Corporation |
• Las Vegas Sands Corporation | |
| • Marriott International Inc. |
• Wyndham Worldwide Corporation | |
| • Starwood Hotels and Resorts Worldwide, Inc. |
• Brinker International, Inc. | |
| • Boyd Gaming Corporation |
• Wynn Resorts | |
| • Starbucks Corporation |
• Wendy’s/Arby’s Group, Inc. | |
| • MGM Mirage |
• Host Hotels & Resorts, Inc. | |
| • Darden Restaurants, Inc. |
• Yum! Brands, Inc. | |
| • Royal Caribbean Cruises, Ltd. |
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For 2012 we set our base salaries, annual incentive targets and long-term incentives by reference to the market 50th percentile with the opportunity for upside based on superior performance. Our pay mix is generally consistent with market practice with a slightly greater focus on variable pay, particularly long-term incentives.
Arrangements for Mr. Pritzker
Mr. Pritzker is subject to a different compensation program than the other NEOs. His compensation program is discussed separately below, under “Executive Chairman Compensation.”
Key Elements of Total Rewards in 2012
Our total rewards programs include fixed and variable compensation as well as other benefits. We provide the following compensation elements to our NEOs:
| Compensation Element |
Purpose |
Description | ||
| Base Salary |
Fixed component of pay that fairly compensates the individual based upon level of responsibilities | Fixed cash payments | ||
| Annual Incentive |
Align compensation with performance at the enterprise and business segment or functional level | Variable annual cash award | ||
| Long-Term Incentive |
Reward for creating long-term stockholder value and provide alignment with stockholders | Equity instruments, including stock appreciation rights, time-vested restricted stock units and performance-based restricted stock | ||
| Employee Benefits |
Retirement, health and other benefits that provide comprehensive long-term financial security to a globally mobile workforce, enable us to maintain a healthy and productive workforce and attract and retain employees | 401(k) plan, Field Retirement Plan, and deferred compensation programs with matching and retirement contributions, health, life and disability insurance, severance and change in control protections, as well as certain perquisites | ||
Salaries for our NEOs are reviewed annually. Our NEOs’ salaries for 2012 reflected several factors, including overall experience, time in the role, performance, market levels and the desire to provide an appropriate base as part of their overall total rewards.
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Mr. Pritzker did not receive a base salary increase in 2012. Messrs. Hoplamazian, Singh, Sarna, Floyd, and Haggerty were provided a base salary increase in 2012 with the increases ranging from approximately 2.74% to 3.02%. Mr. Rainer’s 2012 compensation reflects his role as benchmarked to the Zurich market and then adjusted to reflect his new role as Chief Financial Officer, as well as the role’s pay mix in the U.S. market, effective August 15, 2012. Mr. Rainer’s pay as Chief Financial Officer was also set in line with his predecessor. This change in pay mix results in a greater emphasis on variable compensation:
| Managing Director Hyatt International (EAME) LLC Target Compensation |
Chief Financial Officer Target Compensation |
|||||||
| Base Salary |
$ | 830,392 | $ | 600,000 | ||||
| Target Annual Incentive |
40% | 90% | ||||||
| Target Long-term Incentive |
$ | 225,000 | $ | 1,500,000 | ||||
Annual Incentive
Our annual incentive plan provides at-risk compensation designed to reward executives for achievement of operating results over a one-year period. Incentives are based on both financial and non-financial metrics that are intended to balance overall focus on corporate financial performance, business unit financial performance and other initiatives that will strengthen our competitive position. Our annual incentive plan also includes a discretionary leadership component that provides flexibility in assessing how our executives are meeting the needs of our business.
Under the terms of his employment agreement, Mr. Pritzker is not eligible for annual incentives under our plan as his role is to focus on Hyatt’s long-term development. As such, he is eligible to receive long-term incentive awards through our long-term incentive program. Mr. Hoplamazian’s target and maximum incentives are set according to the terms of his letter of employment. The target and maximum incentive opportunities for our other NEOs are determined based on references to market data and the individual’s role in the organization, overall experience and time in the role. In particular, the compensation committee considered the total compensation market data for these positions. The compensation committee focused on delivering a total compensation package which would attract a high level of talent while weighting more of the NEO’s total compensation potential on variable and long-term incentives, thereby aligning it with the interests of our stockholders. For 2012 performance, the target and maximum annual incentive opportunities as a percentage of base salary for each NEO who participated in our annual incentive plan were as follows:
| Position |
Target | Maximum | ||||||
| Mark S. Hoplamazian |
150 | % | 300 | % | ||||
| Gebhard F. Rainer(1) |
90 | % | 135 | % | ||||
| Rakesh K. Sarna |
100 | % | 150 | % | ||||
| H. Charles Floyd |
100 | % | 150 | % | ||||
| Stephen G. Haggerty |
90 | % | 135 | % | ||||
| (1) | Reflects target bonus from August 15, 2012 when Mr. Rainer was appointed Executive Vice President, Chief Financial Officer. Prior to his appointment Mr. Rainer’s target bonus was 40% of base salary with a maximum of 50%. |
Mr. Singh transitioned as Chief Financial Officer effective August 15, 2012 and as part of his transition agreement he received a guaranteed bonus of $540,000. See discussion of Mr. Singh’s transition agreement below.
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For 2012, the annual incentive plan used the following types of incentive goals for each of our incentive eligible NEOs:
| • | Hyatt Financial Performance: The compensation committee assesses Hyatt Financial Performance on a number of factors, including but not limited to revenues, Adjusted EBITDA, net income, and cash flow (“Hyatt Financial Performance”). In 2012, executives were eligible for an award above target for the Hyatt Financial Performance component only if 2012 Adjusted EBITDA (as further adjusted to exclude the earnings impacts associated with acquisitions, dispositions or other transactions that were not budgeted for the year) exceeded $610 million. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics Evaluated by Management — Adjusted EBITDA,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC. For purposes of determining the payout of this component in 2012, if 95% of the target was achieved payout would be at 50%. The Company’s Adjusted EBITDA (as further adjusted as described above) under the annual incentive plan was $602 million. Upon evaluating the Company’s financial results, and applying the payout scale, the compensation committee awarded the NEOs 87% of target annual incentive for this component. |
| • | Financial and Non-Financial MBOs: Financial and non-financial management objectives (“MBOs”), which are designed to incentivize each individual in his area of responsibility, as well as build brand value over time. |
| • | Leadership: Goals based on leadership, collaboration and fulfillment of our values. |
For 2012, the weighting of incentive goals for each relevant NEO was as follows:
| Goal | Hoplamazian | Rainer(1) | Floyd | Sarna | Haggerty | |||||||||||||||
| Hyatt Financial Performance | 37.5 | % | 37.5 | % | 25.0 | % | 25.0 | % | 25.0 | % | ||||||||||
| Financial and Non-Financial MBOs | 42.5 | % | 42.5 | % | 55.0 | % | 55.0 | % | 55.0 | % | ||||||||||
| Leadership | 20.0 | % | 20.0 | % | 20.0 | % | 20.0 | % | 20.0 | % | ||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
| (1) | Reflects Mr. Rainer’s weightings for his service as Chief Financial Officer. |
For 2012, the annual incentive payments were rounded up to the nearest thousands.
Hoplamazian’s 2012 Annual Incentive
Mr. Hoplamazian’s financial and non-financial MBO goals for 2012 were:
| • | Increase Market Share. Increase market share in the markets in which Hyatt operates. |
| • | Asset Strategy. Capital expenditure programs implemented on time and on budget. Execute asset recycling plan and demonstrate returns consistent with projections on projects in which significant investments have been made and have been open and operating for at least 3 years. Identify financing sources for new projects. |
| • | Growth. Achieve the Company’s development goals in 2012. |
| • | Brand and Innovation. Develop and implement innovation efforts tied to brand strategy and ensure Customer Data availability at the property level. |
| • | Organization. Enhance effectiveness, create more leverage within the organization, refine succession planning, and ensure alignment between operations and growth initiatives. |
| • | Human Capital. Adapt organization to support development of succession candidates throughout the Company, identify and develop diverse leadership candidates. |
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Based on input from our executive chairman and the review of our performance during 2012, the compensation committee awarded Mr. Hoplamazian 90% of his financial component (including HHC Financial Performance) and 90% of his non-financial MBO component.
The compensation committee awarded Mr. Hoplamazian 100% of the leadership component based on the compensation committee’s assessment of his leadership and fulfillment of Hyatt’s values in setting the tone for the overall enterprise.
Accordingly, based on Hyatt Financial Performance and the factors and considerations discussed above, the compensation committee awarded Mr. Hoplamazian a 2012 annual incentive payment of $1,399,000, representing a payout of 92% of target.
Other NEOs’ 2012 Annual Incentives
In assessing each of these NEO’s achievement of his MBOs and leadership goals, the compensation committee sought Mr. Hoplamazian’s input and recommendations; however, all decisions as to level of achievement were ultimately made by the compensation committee.
Rainer 2012 Annual Incentive
Mr. Rainer’s annual incentive was pro-rated to reflect both the time spent as Managing Director Hyatt International (EAME) LLC and as Chief Financial Officer effective August 15, 2012. In his role as Managing Director Hyatt International (EAME) LLC, Mr. Rainer’s target bonus was 40% of base salary.
In assessing Mr. Rainer’s 2012 MBOs, the compensation committee considered:
| • | EAME Business Unit Financial Performance. Including Adjusted EBITDA, RevPar, GOP Margins, performance of revenue and NOI for hotels that are owned, leased and JVs in the EAME business unit, and market share |
| • | Financing and Tax Initiatives. Complete finance-related tasks that demonstrate appropriate capital structure and efficiency, including completing financing of various projects and joint ventures as well as reviews of tax matters in various jurisdictions. |
| • | Functional Expenses. Manage the functional cost base to budget and review shared services platform. |
| • | Organization and Strategy. Participate in development of updated Strategic Plan and Long Range financial plan and work to establish effective and efficient business processes in an organizational structure that promotes agility and flexibility. |
| • | Brand Strategy and Innovation. Advocate innovation ideas in lab hotels. |
| • | Analytical and Business Value Add Support Initiatives. Complete review of allocations, complete post audit investment analysis of major investments, support the Board’s evaluation of capital allocation over time, improve close processes, improve shared services throughput, and complete 2012 audit plan. |
The compensation committee awarded Mr. Rainer 93% of his financial component (including HHC Financial Performance) and 95% of his non-financial MBO component based on the performance of the EAME business unit as well as SG&A review initiated during the time Mr. Rainer served as Chief Financial Officer.
The compensation committee awarded Mr. Rainer 100% of the leadership component based on leadership performance and collaboration across different functions.
Accordingly, based on Hyatt Financial Performance, the factors and considerations discussed above, and an additional discretionary payment based on the successful transition to his new role as Chief Financial Officer, the
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compensation committee awarded Mr. Rainer a 2012 annual incentive payment of $400,000, which is approximately $12,000 above his calculated payout of 95% of target.
Sarna’s 2012 Annual Incentive
In assessing Mr. Sarna’s 2012 MBOs, the compensation committee considered:
| • | Business Unit Financial Performance. Enhance financial performance of the International Operations business unit (Q1 through Q3 2012) and the Americas business unit (Q4 2012) relative to historical performance. |
| • | Owned and JV Hotel Performance. Performance at the Adjusted EBITDA (as further adjusted as described above, plus adjustments for exchange rates) level for hotels that are owned, leased, and JVs in the International Operations business unit (Q1 through Q3 2012) and the Americas business unit (Q4 2012). |
| • | Organization and Strategy. Participate in ongoing review of business processes. Participate in development of an updated Strategic Plan and Long Range financial plan. Focus on positioning of established and new worldwide sales offices. Implement the new organizational structure. Actively collaborate in bringing higher level of efficiency and transparency to processes. |
| • | Customer Service and Guest Satisfaction. Increase customer service and guest satisfaction in hotels reporting up through International Operations. |
| • | Engagement. Establish and implement action plans focused on increased associate engagement for International Operations leadership teams. Assist in the development of action plans for the senior leadership team and direct reports. Create one or more internal forums to share best practices. |
| • | Brand Strategy and Innovation. Establish an effective innovation framework and capability that leverages ongoing insights to fulfill the Company’s mission. |
| • | Growth. Support development efforts for all brands in each region. Support launch of Select Service hotels internationally. Actively support conversion opportunities. |
The compensation committee awarded Mr. Sarna 92% of his financial component (including HHC Financial Performance) and 93% of his non-financial MBO component.
The compensation committee awarded Mr. Sarna 100% of the leadership component based on his support of our values, his leadership and other areas of activity including enhanced collaborative efforts across different functional areas within the Company.
Accordingly, based on Hyatt Financial Performance and the factors and considerations discussed above, the compensation committee awarded Mr. Sarna a 2012 annual incentive payment of $652,000, representing a payout of 94% of target.
Floyd’s 2012 Annual Incentive
Mr. Floyd’s financial and non-financial MBO goals for 2012 were:
| • | Business Unit Financial Performance. Enhance financial performance of the North American Operations business unit (Q1 through Q3 2012) relative to historical performance. |
| • | Owned and JV Hotel Performance. Performance at the Adjusted EBITDA (as further adjusted as described above, plus adjustments for exchange rates) level for hotels that are owned, leased, and JVs in the North American Operations business unit (Q1 through Q3 2012). |
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| • | Organization and Strategy. Participate in ongoing review of business processes. Participate in development of an updated Strategic Plan and Long Range financial plan. Refine revenue management activities and evaluate new supporting systems or processes. Support progress on certain critical renovation and new hotel projects. |
| • | Customer Service and Guest Satisfaction. Increase guest satisfaction in North American full service hotels and select service hotels. |
| • | Engagement. Establish and implement action plans focused on increasing associate engagement among North American leadership team members. Assist in the development of action plans for the senior leadership team and their direct reports. Create internal forums to share best practices. |
| • | Growth. Continue to support growth efforts and expand engagement in development process to ensure appropriate prioritization of initiatives. Continue to provide direction and priorities to technical services to support growth. |
| • | Brand Strategy and Innovation. Support implementation of the Company’s innovation efforts as tied to the brand strategy. Establish an effective innovation framework and capability that leverages ongoing insights to fulfill the Company’s mission. |
The compensation committee awarded Mr. Floyd 100% of his financial component (including HHC Financial Performance) and 92% of his non-financial MBO component.
The compensation committee awarded Mr. Floyd 100% of the leadership component for 2012 based on leadership performance and collaboration across different functions.
Accordingly, based on Hyatt Financial Performance and the factors and considerations discussed above, the compensation committee awarded Mr. Floyd a 2012 annual incentive payment of $678,000, representing a payout of 98% of target.
Haggerty’s 2012 Annual Incentive
Mr. Haggerty’s financial and non-financial MBO goals for 2012 were:
| • | Department and Owned and Leased Hotel Financial Performance. Enhance financial performance of owned, leased, and joint venture hotels relative to historical performance, considering the economy and management’s outlook for the owned and joint venture hotels for 2012 as reviewed at the beginning of 2012. Manage department expenses to budgeted levels. |
| • | Growth. Meet or exceed growth targets for 2012 across geographic regions and brands, with the application of appropriate qualitative measures on pursuit of transactions, and with a focus on enhancing owner preference as demonstrated through an increase in transactions with multi-property developers and repeat business with existing developers. |
| • | Asset Strategy. Support creation of stockholder value through the application of capital and the achievement of returns. Capital expenditure programs on time and on budget. Execute asset recycling plan and demonstrate returns levels consistent with projections on projects in which significant investments have been made and have been open and operating for at least 3 years. |
| • | Organization and Strategy. Participate in ongoing review of business processes. Participate in development of an updated Strategic Plan and Long Range financial plan. Work to establish effective and efficient business processes. Ensure alignment of resources with operational and growth initiatives. |
| • | Brand Strategy and Innovation. Participate in the development and implementation of the Company’s innovation efforts as tied to the brand strategy. Provide support and input for initiatives. |
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The compensation committee awarded Mr. Haggerty 100% of his financial component (including HHC Financial Performance) and 97% of his non-financial MBO component based on transactions completed during 2012, the capital expenditure program, and the performance of owned and joint venture hotels.
The compensation committee awarded Mr. Haggerty 100% of the leadership component based on leadership performance and collaboration across different functions.
Accordingly, based on Hyatt Financial Performance and the factors and considerations discussed above, the compensation committee awarded Mr. Haggerty a 2012 incentive payment of $530,000, representing a payout of 99% of target.
The actual annual incentive compensation earned for 2012 performance expressed as a percentage of base salary as in effect at year end for each NEO who participated in the annual incentive plan was as follows:
| Name |
Actual | |
| Mark S. Hoplamazian |
138% of year-end salary (92% of target) | |
| Gebhard S. Rainer(1) |
67% of year-end salary (95% of target) | |
| Rakesh K. Sarna |
94% of year-end salary (94% of target) | |
| H. Charles Floyd |
98% of year-end salary (98% of target) | |
| Stephen G. Haggerty |
89% of year-end salary (99% of target) | |
| (1) | Reflects an average of Mr. Rainer’s prior role and his new role, Executive Vice President, Chief Financial Officer. |
Long-Term Incentive
In 2012, we used equity in the form of Stock Appreciation Rights (“SARs”), Restricted Stock Units (“RSUs”) and performance shares (“PSs”) granted under our 2008 LTIP as the means of providing long-term incentives to our executives. These grants are designed to:
| • | drive and reward performance over an extended period of time to promote creation of long-term value for our stockholders; |
| • | create strong alignment with the long-term interests of our stockholders; |
| • | assist in retaining highly qualified executives; and |
| • | contribute to competitive total rewards. |
In determining the value of long-term incentive grants, we considered the market data, the individual’s potential contribution to our success and the relationship between each NEO’s short-term and long-term compensation. For 2012, the compensation committee determined that the long-term incentive awards to NEOs, apart from Mr. Hoplamazian, Mr. Pritzker and Mr. Rainer, would be split ratably among SARs, RSUs and performance shares. The allocation of grants among SARs, RSUs and target performance shares was established by the compensation committee, after review by the chief human resources officer, so that the value of long-term incentives were delivered one-third in SARs, one-third in RSUs, and one-third (at target performance) in performance shares. The compensation committee believes that awarding an equal mix of SARs, RSUs and performance shares achieves a balance in linking NEO pay to company performance. SARs do not provide any value unless stock price appreciates, the value of RSUs increases or decreases in the same way stockholders’ stock value increases or decreases, and performance shares focus NEOs on company performance objectives. The actual number of SARs, RSUs and performance shares granted was determined based on applying a Black-Scholes value for the SARs and the value of our common stock for the RSUs and performance shares on the date of grant.
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The target value for the annual long-term incentive grants for Messrs. Singh, Floyd, Sarna and Haggerty was established by the compensation committee, based in part upon the recommendation of Mercer, so that target total compensation would approximate the market 50th percentile with the ability to earn more based on superior performance.
SARs are designed to deliver value to executives only if our stock price increases over the value at the time of grant. Each vested SAR gives the holder the right to receive the appreciation in the value of one share of our Class A common stock at the exercise date over the value of one share of our Class A common stock at the date of grant. Generally, SARs vest annually over four years (25% per year) and are settled by delivery of our Class A common stock.
RSUs are designed to align the interests of our NEOs with the interests of our stockholders, to reward performance and to promote retention of our executives by providing equity-based compensation that fluctuates with our stock price. RSUs were also granted in light of the fact that the lodging industry is cyclical, and the volatility of the value of an RSU is lower than the volatility of the value of a SAR. RSUs, accordingly, are intended to create a sense of ownership and to better align executives’ interests with our stockholders’ interests. Generally, RSUs vest equally over four years (25% per year) and are settled by delivery of shares of our Class A common stock.
Performance shares are designed to align the interests of our NEOs with the interests of our stockholders, to reward performance against specified 3-year goals and to promote retention of our executives by providing equity-based compensation that fluctuates with our stock price. The performance shares are earned only if the NEOs achieve what the compensation committee believes are challenging three-year economic profit goals. “Economic profit” is defined as Adjusted EBITDA less 10% of the Company’s average invested capital for each year of the three-year performance period. For this purpose Adjusted EBITDA is defined as set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Business Metrics Evaluated by Management – Adjusted EBITDA,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC. If the threshold goal is not achieved at the end of the three-year performance period, then the performance shares will be forfeited and none will vest. If the threshold performance goal is achieved, 12.5% of the performance shares will vest. If the target performance goal is achieved, 50% of the performance shares will vest. If the maximum performance goal is achieved, then 100% of the performance shares will vest. Achievement between the threshold and maximum performance goals will vest pro-rata based on level of achievement. In 2011 the committee introduced performance share units (“PSUs”) which are similar to RSUs, but with performance vesting. However, in response to uncertainty of the treatment of PSUs under the deduction limits on performance-based compensation under Section 162(m), the committee awarded performance shares instead in 2012. The primary difference between performance shares and PSUs is that actual shares are issued upon grant of performance shares, whereas shares under PSUs are not issued until vesting. As a result, the maximum number of performance shares (200% of target) that could be earned must be granted at the beginning of the performance period, with the amount retained based on achievement levels. Accordingly, in 2012, the maximum number of performance shares were granted (subject to forfeiture based on performance), but in 2011, PSUs were granted at target levels.
For 2012, Mr. Rainer’s grant was based on his position as Managing Director Hyatt International (EAME) LLC and was delivered in RSUs since grants were made in the first quarter of 2012, prior to Mr. Rainer assuming his new role as Chief Financial Officer.
Mr. Hoplamazian received an equity grant in March 2012 of $2,999,977 salary pursuant to his employment agreement, split equally between SARs, and target performance shares (although the maximum number of performance shares was granted consistent with the process described above). The SARs vest 25% each year over four years. The performance shares are earned only if the three-year performance goals are met. In December 2012, Mr. Hoplamazian received an equity grant of RSUs with a value of $1,499,981 which vests ratably over four years. The additional grant of RSUs was made in connection with Mr. Hoplamazian’s
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agreement to continue in his role for another three years and to bring his long-term incentive compensation and total compensation closer to the 50th percentile of the Company’s peer group.
See the section below titled “Executive Chairman Compensation” for a discussion of Mr. Pritzker’s 2012 equity grant.
The Company does not time any equity grants for executive officers or any other employees to coordinate with the release of material non-public information. Pursuant to the Hyatt Hotels Corporation Insider Trading Compliance Program, neither the Company, nor executive officers, directors or covered employees may trade in any securities of the Company during the period beginning two weeks before the end of any fiscal quarter of the Company and ending two business days after the public release of earnings data for such quarter whether or not the Company or any of the executive officers, directors or covered employees is in possession of material, non-public information.
Singh Transition Agreement
In order to ensure an orderly transition of duties and responsibilities, following his separation we entered into a Transition Agreement with Mr. Singh under which he agreed to remain employed through December 31, 2012. That agreement provided that he receive: (i) a bonus equal to $540,000 for 2012, payable in 2013 at such time as the annual bonuses for 2012 are paid; (ii) $1,000,000 payable as part of the first normally scheduled payroll following the six month anniversary of his separation; (iii) $1,055,000 payable as part of the first normally scheduled payroll following the effective date of his required general release of claims in connection with his separation; (iv) continued health and life benefits for 12 months following his separation; (v) outplacement services; (vi) reimbursement of limited legal expenses in connection with entering into the transition agreement; and (vii) such other perquisites which are described in the footnotes to the Summary Compensation Table below. All such compensation was conditioned upon Mr. Singh (1) not terminating his employment prior to August 15, 2012; (2) not being terminated for “cause” (as defined in the agreement); and (3) executing and not revoking a general release of claims. Additionally, Mr. Singh agreed to forfeit and/or repay the cash portion of the compensation in the event he violates any of his non-compete, non-solicitation or confidential information covenants. Mr. Singh also agreed to extend his non-solicitation of our employees to 24 months following his separation. Mr. Singh separated from employment on December 31, 2012.
Employee Benefits
Our NEOs are eligible to receive employee benefits similar to all other salaried associates, such as participation in our 401(k) Plan, Deferred Compensation Plan (“DCP”), and Field Retirement Plan, with matching contributions, health, life and disability plans and severance benefits, as described in more detail in the section below titled “Potential Payments on Termination or Change in Control.” In addition, as described in more detail in the section below titled “Narrative to Summary Compensation Table,” we provide certain additional retirement and deferred compensation benefits to our NEOs, as well as limited perquisites. These additional employee benefits and perquisites make up the benefits/work/lifestyle portion of our total rewards package and allow us to compete in attracting and retaining executives.
Tax Deductibility and Accounting Considerations
We consider tax and accounting implications in designing our executive compensation programs and attempt to maximize the tax deductibility to us, while minimizing the tax consequences to our executives. As a newly public company, we have relied on certain transition rules available under Section 162(m) regarding compensation payable as a public company pursuant to plans and arrangements which were in place prior to becoming public and which were disclosed in the prospectus related to our initial public offering. As those transition rules will expire in 2013, we are asking stockholders to approve the 2013 LTIP and Incentive Plan with this proxy so that we may continue to pay and deduct compensation which is performance-based under
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Section 162(m). However, the compensation committee may determine to pay compensation that is not tax deductible in its discretion.
Share Ownership Requirement and Compensation Recovery Policy
In 2009, we adopted share ownership guidelines that require each of our executive officers to hold SARs, RSUs (whether vested or not) or stock with a value within the following guidelines:
| Mr. Hoplamazian | 5 times base salary | |
| Messrs. Singh, Rainer, Sarna, Floyd and Haggerty | 3 times base salary |
However, once an NEO reaches age 55 his ownership guideline will reduce by 10% per year until age 60. Our NEOs have five years to meet these goals. We adopted these share ownership guidelines as a means of requiring executives to hold equity and tie their interests to the interests of our stockholders. Each NEO currently meets the guidelines.
We also have a compensation recovery policy, which, if the board of directors determines that an executive has engaged in fraudulent or willful misconduct that resulted in a restatement of our financial results, allows the board of directors (or a committee thereof) in its discretion to recover from such executive any bonus, equity compensation or profits received on equity compensation by such executive.
Executive Chairman Compensation
In 2009, Mr. Pritzker entered into an employment agreement which was reviewed and approved by our compensation committee and our board of directors. Under this agreement Mr. Pritzker is entitled to the following compensation and benefits:
| • | annual base salary of $475,000 as may be increased in the discretion of the compensation committee; |
| • | annual grants under the 2008 LTIP similar to other senior executives with a targeted grant date fair value (computed in accordance with FASB (ASC) Topic 718, Compensation — Stock Compensation) equal to 500% of base salary; |
| • | all future grants under the 2008 LTIP will continue to vest following his termination for any reason other than cause, provided he executes a general release of claims and he does not compete with Hyatt; |
| • | benefits and perquisites generally available to our senior executive officers from time to time including medical and dental insurance, life insurance, 401(k) plan, disability coverage, vacation benefits, monthly parking in Hyatt Center, corporate dining room privileges, and participation in our deferred compensation plan; and |
| • | severance in accordance with our general policies. |
Under the terms of this agreement, Mr. Pritzker is not eligible for participation in our annual incentive plan, as all of his performance and incentive-based compensation is designed to be earned through equity grants. In accordance with the terms of his employment agreement, Mr. Pritzker received a SAR grant with a value of $2,430,991 in 2012. Mr. Pritzker’s 2009 employment agreement expired December 31, 2012. He entered into a new employment agreement effective January 1, 2013 through December 31, 2015.
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SUMMARY COMPENSATION TABLE
| Name and Principal Position |
Year | Salary ($) | Bonus ($) |
Stock Awards ($)(1) |
Option Awards ($)(1) |
Non-Equity Incentive Plan Compensation ($) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(2) |
All Other Compensation ($)(3) |
Total ($) | |||||||||||||||||||||||||||
| Thomas J. Pritzker |
2012 | $ | 486,200 | — | $ | 2,430,991 | — | — | $ | 28,372 | $ | 2,945,563 | ||||||||||||||||||||||||
| Executive Chairman of the |
2011 | $ | 486,200 | — | — | $ | 2,430,983 | — | — | $ | 27,806 | $ | 2,944,989 | |||||||||||||||||||||||
| Board |
2010 | $ | 486,200 | — | — | $ | 2,374,987 | — | $ | 4,085 | $ | 93,013 | $ | 2,958,285 | ||||||||||||||||||||||
| Mark S. Hoplamazian |
2012 | $ | 1,010,038 | $ | 2,999,964 | $ | 1,499,994 | $ | 1,399,000 | — | $ | 40,741 | $ | 6,949,737 | ||||||||||||||||||||||
| President and Chief Executive |
2011 | $ | 985,230 | — | $ | 2,666,602 | $ | 1,333,329 | $ | 1,539,030 | — | $ | 39,929 | $ | 6,564,120 | |||||||||||||||||||||
| Officer (Principal Executive Officer) |
2010 | $ | 981,225 | — | $ | 1,662,484 | $ | 1,662,493 | $ | 1,700,000 | — | $ | 30,311 | $ | 6,036,513 | |||||||||||||||||||||
| Gebhard F. Rainer Executive Vice President, Chief Financial Officer (Principal Financial Officer) |
2012 | $ | 722,611 | $ | 12,000 | $ | 224,989 | — | $ | 388,000 | — | $ | 210,247 | $ | 1,557,847 | |||||||||||||||||||||
| Harmit J. Singh(4) |
2012 | $ | 597,333 | $ | 540,000 | $ | 999,961 | $ | 499,992 | $ | — | — | $ | 2,173,285 | $ | 4,810,571 | ||||||||||||||||||||
| Former Executive Vice |
2011 | $ | 582,071 | — | $ | 999,923 | $ | 499,991 | $ | 541,000 | — | $ | 39,922 | $ | 2,662,907 | |||||||||||||||||||||
| President, Chief Financial Officer (Former Principal Financial Officer) |
2010 | $ | 570,553 | — | $ | 1,243,675 | $ | 912,479 | $ | 534,000 | — | $ | 30,236 | $ | 3,290,943 | |||||||||||||||||||||
| Rakesh K. Sarna |
2012 | $ | 691,667 | $ | 1,266,612 | $ | 633,333 | $ | 652,000 | — | $ | 145,950 | $ | 3,389,562 | ||||||||||||||||||||||
| Executive Vice President, |
2011 | $ | 663,174 | — | $ | 1,266,642 | $ | 633,322 | $ | 708,000 | — | $ | 140,213 | $ | 3,411,351 | |||||||||||||||||||||
| Group President Americas |
2010 | $ | 602,070 | — | $ | 985,962 | $ | 985,973 | $ | 733,000 | $ | 476 | $ | 91,889 | $ | 3,399,370 | ||||||||||||||||||||
| H. Charles Floyd |
2012 | $ | 691,667 | $ | 1,266,612 | $ | 633,333 | $ | 678,000 | — | $ | 65,741 | $ | 3,335,353 | ||||||||||||||||||||||
| Executive Vice President, |
2011 | $ | 663,174 | — | $ | 1,266,642 | $ | 633,322 | $ | 726,000 | — | $ | 64,919 | $ | 3,354,057 | |||||||||||||||||||||
| Group President Global Operations Centers |
2010 | $ | 602,070 | — | $ | 985,962 | $ | 985,973 | $ | 705,000 | $ | 5,577 | $ | 55,235 | $ | 3,339,817 | ||||||||||||||||||||
| Stephen G. Haggerty |
2012 | $ | 592,333 | $ | 999,961 | $ | 499,992 | $ | 530,000 | — | $ | 40,741 | $ | 2,663,027 | ||||||||||||||||||||||
| Executive Vice President, |
2011 | $ | 577,003 | — | $ | 999,923 | $ | 499,991 | $ | 576,000 | — | $ | 30,114 | $ | 2,683,031 | |||||||||||||||||||||
| Global Head of Real Estate and Capital Strategy |
2010 | $ | 565,165 | — | $ | 1,447,463 | $ | 867,859 | $ | 543,000 | — | $ | 20,404 | $ | 3,443,891 | |||||||||||||||||||||
| (1) | Amounts shown represent the grant date fair value of SARs, RSUs and performance shares granted in the year indicated as computed in accordance with FASB (ASC) Topic 718, Compensation — Stock Compensation. For a discussion of the assumptions made in the valuation reflected in these columns, see Note 18 to the Consolidated Financial Statements for 2012 contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC. With regard to the performance share awards, the values set forth above reflect the vesting of performance shares based on the probable outcome of target levels. The grant date value of the performance shares assuming maximum performance is as follows for each relevant NEO: Mr. Hoplamazian: $ 2,999,966; Mr. Singh: $ 999,961; Mr. Sarna: $ 1,266,653; Mr. Floyd: $ 1,266,653; Mr. Haggerty: $ 999,961. For a discussion of threshold, target and maximum levels of vesting on performance share awards, see “Grants of Plan-Based Awards.” |
| (2) | Represents earnings in 2010 under deferred compensation plans which were merged into the Deferred Compensation Plan. Under those prior deferred compensation plans, participants were credited with interest annually at a rate equal to the average annual rate for 20 year Treasury securities, constant maturity as published in the Federal Reserve Statistical Release H15 for the calendar year prior to the year in which interest credit is made, plus 100 basis points. |
| (3) | All other compensation for 2012 includes that shown in the table below. For Mr. Singh it also includes legal fees ($17,384), outplacement services ($60,000), the value of technical equipment ($5,278), one month of COBRA ($1,371), and cash payments totaling $2,055,000 in which $1,055,000 was for additional considerations and $1,000,000 was separation pay. |
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| Name |
Corporate Dining Room Usage |
Parking | 401(k) Match and Contributions to DCP/FRP |
Life Insurance and Long-Term Disability Premiums |
Total | |||||||||||||||
| Thomas J. Pritzker |
$ | 11,415 | $ | 6,300 | $ | 10,000 | $ | 657 | $ | 28,372 | ||||||||||
| Mark S. Hoplamazian |
$ | 11,415 | $ | 6,300 | $ | 22,000 | $ | 1,026 | $ | 40,741 | ||||||||||
| Gebhard F. Rainer |
$ | 4,390 | $ | 2,625 | $ | 199,644 | $ | 3,588 | $ | 210,247 | ||||||||||
| Harmit J. Singh |
$ | 7,026 | $ | 4,200 | $ | 22,000 | $ | 1,026 | $ | 34,252 | ||||||||||
| Rakesh K. Sarna |
$ | 11,415 | $ | 6,300 | $ | 123,315 | $ | 4,920 | $ | 145,950 | ||||||||||
| H. Charles Floyd |
$ | 11,415 | $ | 6,300 | $ | 47,000 | $ | 1,026 | $ | 65,741 | ||||||||||
| Stephen G. Haggerty |
$ | 11,415 | $ | 6,300 | $ | 22,000 | $ | 1,026 | $ | 40,741 | ||||||||||
| (4) | Mr. Singh’s employment terminated on December 31, 2012 and he forfeited all option and stock awards granted in 2012 as well as all other unvested awards. |
Narrative to Summary Compensation Table
The actual value, if any, which an executive may realize from a SAR, RSU or performance shares is contingent upon the satisfaction of the conditions to vesting in that award, and with respect to SARs, upon the excess of the stock price over the base price on the date the award is exercised. Thus, there is no assurance that the value, if any, eventually realized by the executive will correspond to the amount shown in the table above. The amounts shown in the table above are computed in accordance with FASB (ASC) Topic 718, Compensation — Stock Compensation.
As part of our total rewards program, we offer the following employee benefit plans and perquisites:
Retirement Programs
In addition to our 401(k) plan that is available to employees generally, our NEOs may participate in the DCP which is a non-qualified deferred compensation plan.
401(k) Plan
Our 401(k) plan is an on-going, tax-qualified “401(k)” plan that matches 100% on the first 3% an employee contributes and 50% on the next 2% an employee contributes for a total match of 4% of an employee’s compensation up to the IRS limits for tax qualified plans.
Deferred Compensation Plan
The DCP allows executives to defer all or any portion of their base salary and annual incentive. We will make an employer contribution to the plan based on a designated contribution schedule. Messrs. Pritzker, Hoplamazian, Singh, Floyd, and Haggerty receive a dollar for dollar match on deferrals up to $12,000 annually. Mr. Floyd also received a supplemental employer contribution to the DCP in the amount of $25,000 as part of an earlier arrangement relating to the termination of a legacy defined benefit plan. Mr. Sarna receives an employer contribution equal to 10.5% of his salary, which is 50% of the normal contribution rate under a legacy plan based on his age and years of service and was agreed to as part of our consolidation of our non-qualified retirement plans. Executives in the DCP can select among various market based investment options and are eligible to receive their account balances when they terminate employment.
Field Retirement Plan
Mr. Rainer was a participant in the Hyatt International Hotels Retirement Plan (“FRP”) until August, 2012. Under the terms of the FRP we are required to contribute each year an amount which depends upon the employee’s age and years of service or benefit level corresponding with their position. Mr. Rainer received a 15% employer contribution to the FRP in 2012 based on his age and years of service and position. He also
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received an additional contribution to the FRP in the amount of $49,136 as part of an arrangement agreed to in consideration of the termination of a legacy defined benefit plan. Contributions to the FRP vest 25% per year after 2 years, with full vesting after 5 years. Based on his service, Mr. Rainer is fully vested in all contributions to the FRP. All contributions are held in an account for Mr. Rainer, which is invested in various investments selected by us according to Mr. Rainer’s direction. Beginning in August, 2012, Mr. Rainer began participating in the U.S. based 401(k) Plan and DCP, with respect to which he is eligible for the 4% employer match and $12,000 employer match, respectively.
Perquisites
We offer limited perquisites to our executives which we believe are reasonable and consistent with our total rewards program and our intention to attract and retain key executives. Perquisites that are provided include:
| • | limited use of Hyatt hotel properties per the policy that is applicable to all Hyatt associates; |
| • | corporate dining room use; and |
| • | parking. |
Messrs. Pritzker and Hoplamazian are permitted to use corporate aircraft for personal travel. Under our aircraft usage policy, Mr. Hoplamazian may use up to 30 hours per year with Mr. Pritzker’s prior approval, and the compensation committee’s approval for personal travel over 30 hours. Mr. Hoplamazian and Mr. Pritzker did not use corporate aircraft for personal travel in 2012.
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GRANTS OF PLAN-BASED AWARDS
| Name |
Grant Date |
Meeting Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock Awards: Number of Shares of Stock or Units (#) |
All Other Option Awards: Number of Securities Underlying Options (#) |
Exercise or Base Price of Option Awards ($/sh)(3) |
Grant Date Fair Value of Stock and Options Awards(4) |
||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
| Thomas J. Pritzker |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| SARs |
3/16/12 | 3/14/12 | — | 140,601 | $ | 41.29 | $ | 2,430,991 | ||||||||||||||||||||||||||||||||||||||||
| Mark S. Hoplamazian |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 1,522,500 | $ | 3,045,000 | ||||||||||||||||||||||||||||||||||||||||||||
| PSs |
3/16/12 | 3/14/12 | 9,082 | 36,328 | 72,656 | $ | 1,499,983 | |||||||||||||||||||||||||||||||||||||||||
| SARs |
3/16/12 | 3/14/12 | — | 86,755 | $ | 41.29 | $ | 1,499,994 | ||||||||||||||||||||||||||||||||||||||||
| RSUs |
12/12/12 | 12/12/12 | 40,694 | — | — | $ | 1,499,981 | |||||||||||||||||||||||||||||||||||||||||
| Gebhard F. Rainer |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 540,000 | $ | 810,000 | ||||||||||||||||||||||||||||||||||||||||||||
| RSUs |
3/16/12 | 3/14/12 | 5,449 | — | — | $ | 224,989 | |||||||||||||||||||||||||||||||||||||||||
| Harmit J. Singh(5) |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 540,000 | $ | 810,000 | ||||||||||||||||||||||||||||||||||||||||||||
| PSs |
3/16/12 | 3/14/12 | 3,027 | 12,109 | 24,218 | $ | 499,981 | |||||||||||||||||||||||||||||||||||||||||
| SARs |
3/16/12 | 3/14/12 | — | 28,918 | $ | 41.29 | $ | 499,992 | ||||||||||||||||||||||||||||||||||||||||
| RSUs |
3/16/12 | 3/14/12 | 12,109 | — | — | $ | 499,981 | |||||||||||||||||||||||||||||||||||||||||
| Rakesh K. Sarna |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 695,000 | $ | 1,042,500 | ||||||||||||||||||||||||||||||||||||||||||||
| PSs |
3/16/12 | 3/14/12 | 3,834 | 15,338 | 30,677 | $ | 633,306 | |||||||||||||||||||||||||||||||||||||||||
| SARs |
3/16/12 | 3/14/12 | — | 36,630 | $ | 41.29 | $ | 633,333 | ||||||||||||||||||||||||||||||||||||||||
| RSUs |
3/16/12 | 3/14/12 | 15,338 | — | — | $ | 633,306 | |||||||||||||||||||||||||||||||||||||||||
| H. Charles Floyd |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 695,000 | $ | 1,042,500 | ||||||||||||||||||||||||||||||||||||||||||||
| PSs |
3/16/12 | 3/14/12 | 3,834 | 15,338 | 30,677 | $ | 633,306 | |||||||||||||||||||||||||||||||||||||||||
| SARs |
3/16/12 | 3/14/12 | — | 36,630 | $ | 41.29 | $ | 633,333 | ||||||||||||||||||||||||||||||||||||||||
| RSUs |
3/16/12 | 3/14/12 | 15,338 | — | — | $ | 633,306 | |||||||||||||||||||||||||||||||||||||||||
| Stephen G. Haggerty |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 535,500 | $ | 803,250 | ||||||||||||||||||||||||||||||||||||||||||||
| PSs |
3/16/12 | 3/14/12 | 3,027 | 12,109 | 24,218 | $ | 499,981 | |||||||||||||||||||||||||||||||||||||||||
| SARs |
3/16/12 | 3/14/12 | — | 28,918 | $ | 41.29 | $ | 499,992 | ||||||||||||||||||||||||||||||||||||||||
| RSUs |
3/16/12 | 3/14/12 | 12,109 | — | — | $ | 499,981 | |||||||||||||||||||||||||||||||||||||||||
| (1) | The amounts shown represent the target and maximum potential payments under the annual incentive program based on multiples of the NEO’s base salary as of December 31, 2012. See the section in the Compensation Discussion and Analysis section of this proxy titled “Annual Incentive” for a more detailed description of the incentive compensation program. |
| (2) | The amounts shown represent the potential performance shares that may be earned under the 2008 LTIP at each of the threshold, target, and maximum performance levels. Each NEO was granted the maximum performance shares at 200% of target, but the number of performance shares that an NEO will vest in and be retained will be determined at the conclusion of the 2012—2014 performance period and will depend on the attainment of performance goals which generally are based on Adjusted EBITDA less a specified percentage of the Company’s average invested capital for each year of the three-year performance period ending December 31, 2014. For this purpose Adjusted EBITDA is defined as set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics Evaluated by Management — Adjusted EBITDA,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC, and based upon the relevant accounting principles at the time. If the threshold performance goal is not achieved at the end of the three-year performance period, then all of the performance shares will be forfeited and none will vest. If the threshold performance goal is achieved, 12.5% of the performance shares will vest. If the target performance goal is achieved, 50% of the performance shares will vest. If the maximum performance goal is achieved, 100% of the performance shares will vest. Achievement between the threshold and maximum performance goals will be paid pro-rata based on level of achievement. |
| (3) | Equals the fair market value of our Class A common stock on the grant date as determined by the compensation committee under the 2008 LTIP. |
| (4) | Amounts shown represent the grant date fair value of SARs, RSUs, and performance shares granted in the year indicated as computed in accordance with FASB (ASC) Topic 718, Compensation — Stock Compensation. For a discussion of the assumptions made in the valuation reflected in these columns, see Note 18 to the Consolidated Financial Statements for 2012 contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. With regard to the valuation of performance share awards, the grant date fair values set forth above reflect the vesting of performance shares based on the probable outcome at target levels. |
| (5) | Mr. Singh terminated employment on December 31, 2012 and forfeited all SARs, RSUs and performance shares granted in 2012 as well as any other previously granted but unvested equity. |
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Narrative to Grants of Plan-Based Awards Table
The actual value, if any, that an executive may realize from a SAR, RSU, or a performance share is contingent upon the satisfaction of the conditions to vesting in that award, and with respect to SARs, upon there being a positive excess of the stock price on the date the award is exercised over the base price established at the award date. Thus, there is no assurance that the value, if any, eventually realized by the executive will correspond to the grant date fair value shown in the table above.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| SAR Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name |
Grant Date | Number
of Securities Underlying Unexercised SAR(#) Exercisable(1) |
Number
of Securities Underlying Unexercised SAR(#) Unexercisable(1) |
SAR Exercise Price ($) |
SAR Expiration Date |
Number of Shares or Units of Stock that have Not Vested (#)(2) |
Market Value of Shares or Units of Stock that have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock that have Not Vested (#)(3) |
Equity Incentive Plan Awards: Market Value of Unearned Shares or Units of Stock that have Not Vested ($)(4) |
|||||||||||||||||||||||||||
| Thomas J. Pritzker |
3/16/2012 | — | 140,601 | $ | 41.29 | 3/16/2022 | ||||||||||||||||||||||||||||||
| 3/16/2011 | 31,852 | 95,558 | $ | 41.74 | 3/16/2021 | |||||||||||||||||||||||||||||||
| 5/11/2010 | 59,853 | 59,854 | $ | 40.96 | 5/11/2020 | |||||||||||||||||||||||||||||||
| Mark S. Hoplamazian |
12/12/2012 | 40,694 | $ | 1,569,568 | ||||||||||||||||||||||||||||||||
| 3/16/2012 | 36,328 | $ | 1,401,171 | |||||||||||||||||||||||||||||||||
| 3/16/2012 | — | 86,755 | $ | 41.29 | 3/16/2022 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 17,470 | 52,411 | $ | 41.74 | 3/16/2021 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 23,958 | $ | 924,060 | |||||||||||||||||||||||||||||||||
| 3/16/2011 | 31,943 | $ | 1,232,042 | |||||||||||||||||||||||||||||||||
| 5/11/2010 | 41,897 | 41,898 | $ | 40.96 | 5/11/2020 | |||||||||||||||||||||||||||||||
| 5/11/2010 | 20,294 | $ | 782,740 | |||||||||||||||||||||||||||||||||
| 10/1/2009 | 45,840 | 15,281 | $ | 29.10 | 10/1/2019 | |||||||||||||||||||||||||||||||
| 10/1/2009 | 7,142 | $ | 275,467 | |||||||||||||||||||||||||||||||||
| 7/1/2007 | 425,000 | — | $ | 62.80 | 7/1/2017 | |||||||||||||||||||||||||||||||
| Gebhard F. Rainer |
3/16/2012 | 5,449 | $ | 210,168 | ||||||||||||||||||||||||||||||||
| 3/16/2011 | 4,043 | $ | 155,939 | |||||||||||||||||||||||||||||||||
| 5/11/2010 | 2,747 | $ | 105,952 | |||||||||||||||||||||||||||||||||
| 3/2/2010 | 8,631 | 8,632 | $ | 33.12 | 3/2/2020 | |||||||||||||||||||||||||||||||
| 5/11/2009 | 16,500 | 5,500 | $ | 26.00 | 6/9/2019 | |||||||||||||||||||||||||||||||
| 5/2/2008 | 15,000 | — | $ | 58.18 | 5/2/2018 | |||||||||||||||||||||||||||||||
| 7/1/2007 | 12,500 | — | $ | 62.80 | 7/1/2017 | |||||||||||||||||||||||||||||||
| 10/6/2006 | 51,562 | — | $ | 49.90 | 10/6/2016 | |||||||||||||||||||||||||||||||
| Harmit J. Singh* |
3/16/2011 | 6,551 | — | $ | 41.74 | 1/30/2013 | ||||||||||||||||||||||||||||||
| 5/11/2010 | 12,600 | — | $ | 40.96 | 1/30/2013 | |||||||||||||||||||||||||||||||
| Rakesh K. Sarna |
3/16/2012 | 15,338 | $ | 591,587 | ||||||||||||||||||||||||||||||||
| 3/16/2012 | 15,338 | $ | 591,587 | |||||||||||||||||||||||||||||||||
| 3/16/2012 | — | 36,630 | $ | 41.29 | 3/16/2022 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 8,298 | 24,895 | $ | 41.74 | 3/16/2021 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 11,380 | $ | 438,927 | |||||||||||||||||||||||||||||||||
| 3/16/2011 | 15,173 | $ | 585,223 | |||||||||||||||||||||||||||||||||
| 5/11/2010 | 13,860 | 13,861 | $ | 40.96 | 5/11/2020 | |||||||||||||||||||||||||||||||
| 5/11/2010 | 6,714 | $ | 258,959 | |||||||||||||||||||||||||||||||||
| 3/2/2010 | 13,684 | 13,685 | $ | 33.12 | 3/2/2020 | |||||||||||||||||||||||||||||||
| 3/2/2010 | 6,582 | $ | 253,868 | |||||||||||||||||||||||||||||||||
| 5/11/2009 | 26,187 | 8,729 | $ | 26.00 | 6/9/2019 | |||||||||||||||||||||||||||||||
| 5/11/2009 | 30,155 | $ | 1,163,078 | |||||||||||||||||||||||||||||||||
| 5/2/2008 | 24,925 | — | $ | 58.18 | 5/2/2018 | |||||||||||||||||||||||||||||||
| 7/1/2007 | 31,114 | — | $ | 62.80 | 7/1/2017 | |||||||||||||||||||||||||||||||
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| SAR Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name |
Grant Date | Number
of Securities Underlying Unexercised SAR(#) Exercisable(1) |
Number
of Securities Underlying Unexercised SAR(#) Unexercisable(1) |
SAR Exercise Price ($) |
SAR Expiration Date |
Number of Shares or Units of Stock that have Not Vested (#)(2) |
Market Value of Shares or Units of Stock that have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock that have Not Vested (#)(3) |
Equity Incentive Plan Awards: Market Value of Unearned Shares or Units of Stock that have Not Vested ($)(4) |
|||||||||||||||||||||||||||
| H. Charles Floyd |
3/16/2012 | 15,338 | $ | 591,587 | ||||||||||||||||||||||||||||||||
| 3/16/2012 | 15,338 | $ | 591,587 | |||||||||||||||||||||||||||||||||
| 3/16/2012 | — | 36,630 | $ | 41.29 | 3/16/2022 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 8,298 | 24,895 | $ | 41.74 | 3/16/2021 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 11,380 | $ | 438,927 | |||||||||||||||||||||||||||||||||
| 3/16/2011 | 15,173 | $ | 585,223 | |||||||||||||||||||||||||||||||||
| 5/11/2010 | 13,860 | 13,861 | $ | 40.96 | 5/11/2020 | |||||||||||||||||||||||||||||||
| 5/11/2010 | 6,714 | $ | 258,959 | |||||||||||||||||||||||||||||||||
| 3/2/2010 | 13,684 | 13,685 | $ | 33.12 | 3/2/2020 | |||||||||||||||||||||||||||||||
| 3/2/2010 | 6,582 | $ | 253,868 | |||||||||||||||||||||||||||||||||
| 5/11/2009 | 26,187 | 8,729 | $ | 26.00 | 6/9/2019 | |||||||||||||||||||||||||||||||
| 5/11/2009 | 74,786 | $ | 2,884,496 | |||||||||||||||||||||||||||||||||
| 5/2/2008 | 21,675 | — | $ | 58.18 | 5/2/2018 | |||||||||||||||||||||||||||||||
| 7/1/2007 | 30,000 | — | $ | 62.80 | 7/1/2017 | |||||||||||||||||||||||||||||||
| 10/6/2006 | 68,750 | — | $ | 49.90 | 10/6/2016 | |||||||||||||||||||||||||||||||
| Stephen G. Haggerty |
3/16/2012 | 12,109 | $ | 467,044 | ||||||||||||||||||||||||||||||||
| 3/16/2012 | 12,109 | $ | 467,044 | |||||||||||||||||||||||||||||||||
| 3/16/2012 | — | 28,918 | $ | 41.29 | 3/16/2022 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 6,551 | 19,654 | $ | 41.74 | 3/16/2021 | |||||||||||||||||||||||||||||||
| 3/16/2011 | 8,984 | $ | 346,513 | |||||||||||||||||||||||||||||||||
| 3/16/2011 | 11,978 | $ | 461,991 | |||||||||||||||||||||||||||||||||
| 5/11/2010 | 12,600 | 12,601 | $ | 40.96 | 5/11/2020 | |||||||||||||||||||||||||||||||
| 5/11/2010 | 6,104 | $ | 235,431 | |||||||||||||||||||||||||||||||||
| 3/2/2010 | 11,546 | 11,547 | $ | 33.12 | 3/2/2020 | |||||||||||||||||||||||||||||||
| 3/2/2010 | 14,304 | $ | 551,706 | |||||||||||||||||||||||||||||||||
| 5/11/2009 | 22,095 | 7,366 | $ | 26.00 | 6/9/2019 | |||||||||||||||||||||||||||||||
| 5/11/2009 | 6,661 | $ | 256,915 | |||||||||||||||||||||||||||||||||
| 5/2/2008 | 21,425 | — | $ | 58.18 | 5/2/2018 | |||||||||||||||||||||||||||||||
| 7/1/2007 | 50,000 | — | $ | 62.80 | 7/1/2017 | |||||||||||||||||||||||||||||||
| * | Due to Harmit J. Singh’s separation from service on December 31, 2012, all unvested awards were forfeited. Awards forfeited included 62,093 RSUs, 12,109 target PSs, 11,978 PSUs and 82,384 SARs and are not included in the table. |
| (1) | Represents SARs held by the NEOs. The SARs vest as follows: |
| Grant Date | Vesting | |||||
| Thomas J. Pritzker |
3/16/2012 | 25% per year commencing on March 16, 2013 and each anniversary of March 16 thereafter. | ||||
| 3/16/2011 | 25% per year commencing on March 16, 2012 and each anniversary of March 16 thereafter. | |||||
| 5/11/2010 | 25% per year commencing on May 11, 2011 and each anniversary of May 11 thereafter. | |||||
| Mark S. Hoplamazian |
3/16/2012 | 25% per year commencing on March 16, 2013 and each anniversary of March 16 thereafter. | ||||
| 3/16/2011 | 25% per year commencing on March 16, 2012 and each anniversary of March 16 thereafter. | |||||
| 5/11/2010 | 25% per year commencing on May 11, 2011 and each anniversary of May 11 thereafter. | |||||
| 10/1/2009 | 25% per year commencing on August 1, 2010 and each anniversary of August 1 thereafter. | |||||
| 7/1/2007 | 25% per year commencing on December 18, 2007 and each anniversary of December 18 thereafter. | |||||
| Gebhard F. Rainer |
3/2/2010 | 25% per year commencing on March 2, 2011 and each anniversary of March 2 thereafter. | ||||
| 5/11/2009 | 25% per year commencing on April 1, 2010 and each anniversary of April 1 thereafter. | |||||
| 5/2/2008 | 25% per year commencing on April 1, 2009 and each anniversary of April 1 thereafter. | |||||
| 7/1/2007 | 25% per year commencing on March 31, 2008 and each anniversary of March 31 thereafter. | |||||
| 10/6/2006 | 25% per year commencing on October 6, 2007 and each anniversary of October 6 thereafter. | |||||
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| Grant Date | Vesting | |||||
| Rakesh K. Sarna |
3/16/2012 | 25% per year commencing on March 16, 2013 and each anniversary of March 16 thereafter. | ||||
| 3/16/2011 | 25% per year commencing on March 16, 2012 and each anniversary of March 16 thereafter. | |||||
| 5/11/2010 | 25% per year commencing on May 11, 2011 and each anniversary of May 11 thereafter. | |||||
| 3/2/2010 | 25% per year commencing on March 2, 2011 and each anniversary of March 2 thereafter. | |||||
| 5/11/2009 | 25% per year commencing on April 1, 2010 and each anniversary of April 1 thereafter. | |||||
| 5/2/2008 | 25% per year commencing on April 1, 2009 and each anniversary of April 1 thereafter. | |||||
| 7/1/2007 | 25% per year commencing on March 31, 2008 and each anniversary of March 31 thereafter. | |||||
| H. Charles Floyd |
3/16/2012 | 25% per year commencing on March 16, 2013 and each anniversary of March 16 thereafter. | ||||
| 3/16/2011 | 25% per year commencing on March 16, 2012 and each anniversary of March 16 thereafter. | |||||
| 5/11/2010 | 25% per year commencing on May 11, 2011 and each anniversary of May 11 thereafter. | |||||
| 3/2/2010 | 25% per year commencing on March 2, 2011 and each anniversary of March 2 thereafter. | |||||
| 5/11/2009 | 25% per year commencing on April 1, 2010 and each anniversary of April 1 thereafter. | |||||
| 5/2/2008 | 25% per year commencing on April 1, 2009 and each anniversary of April 1 thereafter. | |||||
| 7/1/2007 | 25% per year commencing on March 31, 2008 and each anniversary of March 31 thereafter. | |||||
| 10/6/2006 | 25% per year commencing on October 6, 2007 and each anniversary of October 6 thereafter. | |||||
| Stephen G. Haggerty |
3/16/2012 | 25% per year commencing on March 16, 2013 and each anniversary of March 16 thereafter. | ||||
| 3/16/2011 | 25% per year commencing on March 16, 2012 and each anniversary of March 16 thereafter. | |||||
| 5/11/2010 | 25% per year commencing on May 11, 2011 and each anniversary of May 11 thereafter. | |||||
| 3/2/2010 | 25% per year commencing on March 2, 2011 and each anniversary of March 2 thereafter. | |||||
| 5/11/2009 | 25% per year commencing on April 1, 2010 and each anniversary of April 1 thereafter. | |||||
| 5/2/2008 | 25% per year commencing on April 1, 2009 and each anniversary of April 1 thereafter. | |||||
| 7/1/2007 | 25% per year commencing on March 31, 2008 and each anniversary of March 31 thereafter. | |||||
| (2) | Represents RSUs held by the NEOs. The RSUs vest as follows: |
| Grant Date | RSUs | Vesting | ||||||||
| Mark S. Hoplamazian |
12/12/2012 | 40,694 | 25% on each anniversary of December 12, commencing December 12, 2013. | |||||||
| 3/16/2011 | 31,943 | 25% on each anniversary of March 16, commencing March 16, 2012. | ||||||||
| 5/11/2010 | 40,588 | 25% on each anniversary of May 11, commencing May 11, 2011. | ||||||||
| 10/1/2009 | 28,565 | 25% on each anniversary of August 1, commencing August 1, 2010. | ||||||||
| Gebhard F. Rainer |
3/16/2012 | 5,449 | 25% on each anniversary of March 16, commencing March 16, 2013. | |||||||
| 3/16/2011 | 5,390 | 25% on each anniversary of March 16, commencing March 16, 2012. | ||||||||
| 5/11/2010 | 5,493 | 25% on each anniversary of May 11, commencing May 11, 2011. | ||||||||
| Rakesh K. Sarna |
3/16/2012 | 15,338 | 25% on each anniversary of March 16, commencing March 16, 2013. | |||||||
| 3/16/2011 | 15,173 | 25% on each anniversary of March 16, commencing March 16, 2012. | ||||||||
| 5/11/2010 | 13,427 | 25% per year on each May 11, commencing May 11, 2011. | ||||||||
| 3/2/2010 | 13,164 | 25% per year on each March 2, commencing March 2, 2011. | ||||||||
| 5/11/2009 | 16,759 | 25% per year on each April 1, commencing April 1, 2010. | ||||||||
| 5/11/2009 | 51,923 | 10% per year commencing June 9, 2009, and then on April 1 of each subsequent year, except on April 1, 2012, on which 20% vests. | ||||||||
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| Grant Date | RSUs | Vesting | ||||||||
| H. Charles Floyd |
3/16/2012 | 15,338 | 25% on each anniversary of March 16, commencing March 16, 2013. | |||||||
| 3/16/2011 | 15,173 | 25% on each anniversary of March 16, commencing March 16, 2012. | ||||||||
| 5/11/2010 | 13,427 | 25% per year on each May 11, commencing May 11, 2011. | ||||||||
| 3/2/2010 | 13,164 | 25% per year on each March 2, commencing March 2, 2011. | ||||||||
| 5/11/2009 | 16,759 | 25% per year on each April 1, commencing April 1, 2010. | ||||||||
| 5/11/2009 | 76,731 | 2% per year commencing June 9, 2009, and then on each April 1 through 2014, 68% on April 1, 2015 and 4% per year thereafter on each April 1 with full vesting on April 1, 2020. | ||||||||
| Stephen G. Haggerty |
3/16/2012 | 12,109 | 25% on each anniversary of March 16, commencing March 16, 2013. | |||||||
| 3/16/2011 | 11,978 | 25% on each anniversary of March 16, commencing March 16, 2012. | ||||||||
| 5/11/2010 | 12,207 | 25% per year on each May 11, commencing May 11, 2011. | ||||||||
| 3/2/2010 | 28,607 | 25% per year on each March 2, commencing March 2, 2011. | ||||||||
| 5/11/2009 | 14,141 | 25% per year on each April 1, commencing April 1, 2010. | ||||||||
| 5/11/2009 | 12,500 | 25% per year on each April 1, commencing April 1, 2010. | ||||||||
| (3) | Represents (1) PSUs granted on March 16, 2011, which vest on December 31, 2013, contingent on achievement of performance goals and (2) PSs granted on March 16, 2012, which vest on December 31, 2014 contingent on achievement of performance goals. The following sets forth the target number of PSUs and PSs which would vest based on target performance: |
| PSUs at Target | PSs at Target | |||||||
| Mark S. Hoplamazian |
31,943 | 36,328 | ||||||
| Rakesh K. Sarna |
15,173 | 15,338 | ||||||
| H. Charles Floyd |
15,173 | 15,338 | ||||||
| Stephen G. Haggerty |
11,978 | 12,109 | ||||||
| (4) | Based on $38.57 per share, which was the closing price of our Class A common stock on December 31, 2012. |
OPTION EXERCISES AND STOCK VESTED
| SAR Awards | Restricted Stock Awards | |||||||||||||||
| Name |
Number of Shares Acquired on Exercise (#)(3) |
Value Realized on Exercise ($)(3) |
Number of Shares Acquired on Vesting (#)(1) |
Value Realized on Vesting ($)(2) |
||||||||||||
| Mark S. Hoplamazian |
— | — | 33,773 | $ | 1,361,159 | |||||||||||
| Gebhard F. Rainer |
— | — | 2,720 | $ | 109,329 | |||||||||||
| Harmit J. Singh |
37,736 | $ | 404,183 | 28,909 | $ | 1,143,905 | ||||||||||
| Rakesh K. Sarna |
— | — | 79,764 | $ | 4,552,797 | |||||||||||
| H. Charles Floyd |
— | — | 70,289 | $ | 3,034,389 | |||||||||||
| Stephen G. Haggerty |
— | — | 36,458 | $ | 1,545,990 | |||||||||||
| (1) | For each NEO listed above, some shares of Class A common stock underlying vested RSUs were delivered upon vesting while the delivery of other shares of Class A common stock underlying vested RSUs was deferred until a future date. Additionally, a number of awards that were previously deferred were delivered to NEOs in 2012 as follows: Hoplamazian (8,500), Singh (12,500), Sarna (54,750), Floyd (54,125) and |
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| Haggerty (16,600). Shares of Class A common stock underlying vested RSUs were delivered or deferred during 2012 as follows: |
| Delivered Upon Vesting | Delivery Deferred | |||||||||
| Name |
Number of Shares |
Date of Vesting/Delivery |
Number of Shares | Date of Vesting | Deferral Period | |||||
| Mark S. Hoplamazian |
7,985 | March 16, 2012 | 7,141 | August 1, 2012 | Earlier of September 1, 2013, termination of service or a change in control | |||||
| 8,500 | May 1, 2012 | |||||||||
| 10,147 | May 11, 2012 | |||||||||
| Gebhard F. Rainer |
1,347 | March 16, 2012 | ||||||||
| 1,373 | May 11, 2012 | |||||||||
| Harmit J. Singh |
5,614 | March 2, 2012 | 3,966 | April 1, 2012 | May 1, 2013 | |||||
| 2,994 | March 16, 2012 | 783 | July 31, 2012 | June 30, 2013 | ||||||
| 3,052 | May 11, 2012 | |||||||||
| 12,500 | August 31, 2012 | |||||||||
| Rakesh K. Sarna |
3,291 | March 2, 2012 | 4,189 | April 1, 2012 | Earlier of May 1, 2013, termination of service or a change in control | |||||
| 3,793 | March 16, 2012 | 10,384 | April 1, 2012 | Earlier of May 1, 2017, termination of service or a change in control | ||||||
| 54,750 | May 1, 2012 | |||||||||
| 3,357 | May 11, 2012 | |||||||||
| H. Charles Floyd |
3,291 | March 2, 2012 | 4,189 | April 1, 2012 | Earlier of May 1, 2013, termination of service or a change in control | |||||
| 3,793 | March 16, 2012 | 1,534 | April 1, 2012 | Earlier of May 1, 2020, termination of service or a change in control. | ||||||
| 54,125 | May 1, 2012 | |||||||||
| 3,357 | May 11, 2012 | |||||||||
| Stephen G. Haggerty |
7,152 | March 2, 2012 | 6,660 | April 1, 2012 | Earlier of May 1, 2013, termination of service or a change in control | |||||
| 2,994 | March 16, 2012 | |||||||||
| 16,600 | May 1, 2012 | |||||||||
| 3,052 | May 11, 2012 | |||||||||
Shares of Class A common stock underlying vested RSUs with a deferred delivery period are also reflected in the “Non-Qualified Deferred Compensation Table” below.
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| (2) | Value realized upon vesting has been determined as follows: |
| Name |
||||||
| Mark S. Hoplamazian |
The sum of the following valuations: | |||||
| Number of Shares | Closing Price of Class A Common Stock as of Vesting Date | |||||
| 7,985 | $41.29 | |||||
| 8,500 | $43.74 | |||||
| 10,147 | $39.12 | |||||
| 7,141 | $36.79 | |||||
| Gebhard F. Rainer |
The sum of the following valuations: | |||||
| Number of Shares | Closing Price of Class A Common Stock as of Vesting Date | |||||
| 1,347 | $41.29 | |||||
| 1,373 | $39.12 | |||||
| Harmit J. Singh |
The sum of the following valuations: | |||||
| Number of Shares | Closing Price of Class A Common Stock as of Vesting Date | |||||
| 5,614 | $40.88 | |||||
| 2,994 | $41.29 | |||||
| 3,052 | $39.12 | |||||
| 12,500 | $37.93 | |||||
| 783 | $35.55 | |||||
| 3,966 | $42.72 | |||||
| Rakesh K. Sarna |
The sum of the following valuations: | |||||
| Number of Shares | Closing Price of Class A Common Stock as of Vesting Date | |||||
| 3,291 | $40.88 | |||||
| 3,793 | $41.29 | |||||
| 54,750 | $43.74 | |||||
| 3,357 | $39.12 | |||||
| 14,573 | $42.72 | |||||
| H. Charles Floyd |
The sum of the following valuations: | |||||
| Number of Shares | Closing Price of Class A Common Stock as of Vesting Date | |||||
| 3,291 | $40.88 | |||||
| 3,793 | $41.29 | |||||
| 54,125 | $43.74 | |||||
| 3,357 | $39.12 | |||||
| 5,723 | $42.72 | |||||
| Stephen G. Haggerty |
The sum of the following valuations: | |||||
| Number of Shares | Closing Price of Class A Common Stock as of Vesting Date | |||||
| 7,152 | $40.88 | |||||
| 2,994 | $41.29 | |||||
| 16,600 | $43.74 | |||||
| 3,052 | $39.12 | |||||
| 6,660 | $42.72 | |||||
| (3) | Value realized upon exercise has been determined as follows: |
| Name |
||||||||
| Harmit J. Singh |
The sum of the following valuations: | |||||||
| Number of SARs Exercised | Net Number of Shares Received Upon SAR Exercise |
Closing Price of Class A Common Stock as of Exercise Date | ||||||
| 12,000 | 3,893 | $38.49 | ||||||
| 12,789 | 4,323 | $39.28 | ||||||
| 12,947 | 2,132 | $39.65 | ||||||
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Table of Contents
NON-QUALIFIED DEFERRED COMPENSATION TABLE
The table below sets forth certain information as of December 31, 2012 with respect to the non-qualified deferred compensation plans in which our NEOs participate.
| Name |
Plan Name | Executive Contributions in Last Fiscal Year ($)(1) |
Registrant Contributions in Last Fiscal Year ($) |
Aggregate Earnings (Losses) in Last Fiscal Year ($) |
Aggregate Withdrawals/ Distributions ($)(2) |
Aggregate Balance at Last Fiscal Year End ($)(3) |
||||||||||||||||
| Thomas J. Pritzker |
DCP | — | — | $ | 3,306,230 | — | $ | 27,287,982 | ||||||||||||||
| TJP Plan | — | — | — | $ | 884,671 | — | ||||||||||||||||
| Mark S. Hoplamazian |
DCP | $ | 1,154,273 | $ | 12,000 | $ | 319,411 | — | $ | 3,415,966 | ||||||||||||
| RSUs | — | $ | 262,717 | (4) | — | $ | 223,074 | $ | 826,285 | (5) | ||||||||||||
| Gebhard F. Rainer |
DCP | $ | 17,500 | — | $ | 321 | — | $ | 17,821 | |||||||||||||
| FRP | — | $ | 199,644 | $ | 666,552 | — | $ | 3,840,863 | ||||||||||||||
| RSUs | — | — | — | — | — | |||||||||||||||||
| Harmit J. Singh |
DCP | $ | 12,000 | $ | 12,000 | $ | 12,805 | — | $ | 104,695 | ||||||||||||
| RSUs | — | $ | 197,263 | (4) | — | $ | 284,475 | $ | 579,746 | (5) | ||||||||||||
| Rakesh K. Sarna |
DCP | — | $ | 123,315 | $ | 356 | — | $ | 3,317,021 | |||||||||||||
| RSUs | — | $ | 622,559 | (4) | — | $ | 1,468,002 | $ | 1,485,986 | (5) | ||||||||||||
| H. Charles Floyd |
DCP | $ | 34,542 | $ | 37,000 | $ | 859,572 | — | $ | 6,213,961 | ||||||||||||
| RSUs | — | $ | 244,487 | (4) | — | $ | 1,447,488 | $ | 721,413 | (5) | ||||||||||||
| Stephen G. Haggerty |
DCP | $ | 70,060 | $ | 12,000 | $ | 42,312 | — | $ | 349,593 | ||||||||||||
| RSUs | — | $ | 284,515 | (4) | — | $ | 462,551 | $ | 770,629 | (5) | ||||||||||||
| (1) | Includes amounts reflected under “Salary” in the Summary Compensation Table above for 2012 for Messrs. Floyd and Haggerty, and amounts reflected under “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table above for 2011 for Messrs. Hoplamazian, Singh, and Haggerty, which was paid in 2012. |
| (2) | Mr. Pritzker has a nonqualified deferred compensation plan (the “TJP Plan”) in which he is fully vested and which was paid out on January 1, 2012. After the Company entered into Mr. Pritzker’s 2009 employment agreement, it no longer made contributions to the TJP Plan. Amounts in the TJP Plan earned interest at the short term applicable federal rate set by the IRS. Distribution of RSUs represents the fair market value of Class A common stock on the date of delivery. See footnote (1) to the Option Exercises and Stock Vested Table for the number of shares of Class A common stock delivered. |
| (3) | Of the total amounts shown in this column (other than for RSUs), the following amounts have been reported, through fiscal year 2012, as “Salary,” “Bonus,” “Non-Equity Incentive Plan Compensation,” “Change in Pension Value and Nonqualified Deferred Compensation Earnings” or “All Other Compensation” in the Summary Compensation Table for Mr. Pritzker: $5,004,363; Mr. Hoplamazian: $3,151,273; Mr. Singh: $84,000; Mr. Rainer: $17,500; Mr. Sarna: $585,434; Mr. Floyd: $405,726; and Mr. Haggerty: $250,187. |
| (4) | Based on the fair market value of our Class A common stock on the date of vesting. |
| (5) | Based on $38.57, the closing price of our Class A common stock on December 31, 2012 (the last business day of fiscal year 2012). |
Narrative to Non-qualified Deferred Compensation Table
See description of the DCP and FRP under the “Narrative to Summary Compensation Table” above. Messrs. Pritzker, Hoplamazian, Rainer, Singh, Sarna, Floyd and Haggerty participated in the DCP in 2012. Mr. Rainer participated in the FRP through August of 2012.
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Potential Payments on Termination or Change in Control
Severance
In 2012, all NEOs were entitled to severance in the event of a termination of employment under the Hyatt Hotels Corporation Corporate Office Severance Plan, which is applicable to U.S. based corporate headquarters and certain divisional employees. Benefits are paid under the plan only if the eligible employees are laid off or terminated without cause and are offset by any amounts required to be paid in lieu of notice under WARN or WARN-like state laws. In addition, if the eligible employee elects COBRA continuation coverage under our group health plan, we will pay the eligible employee the difference between the premiums charged for COBRA and the amount the eligible employee would have paid as an active employee for such coverage during the eligible employee’s severance period. Severance can be paid in a lump sum or over the severance period in the discretion of the Company, however, severance will not be paid in a lump sum if it would violate Section 409A of the Code. All severance is subject to execution of a general release of claims.
Under the terms of the Severance Plan our NEOs are eligible to receive the following severance for the following severance periods:
| Position |
Severance Period (Weeks of Base Salary) | |
| Executive Chairman of the Board Chief Executive Officer |
78 | |
| Executive Officers of Hyatt Hotels Corporation as defined by the Chief Executive Officer |
52 |
Mr. Pritzker’s employment agreement provides that he is entitled to terminate his employment and claim severance under the Severance Plan or the Executive Officer Change in Control Plan (if applicable) if he is not re-appointed as executive chairman. Mr. Hoplamazian’s employment agreement provides that he is entitled to terminate his employment and claim severance under the Severance Plan or the Executive Officer Change in Control Plan (if applicable) if he is not re-elected to serve as a director.
Mr. Haggerty’s employment letter provides that if he is terminated without “cause” he will receive base salary and continued medical benefits for one year as severance. Mr. Haggerty’s receipt of severance under his employment letter is subject to his signing a general release of claims. His right to continued medical benefits will cease if he secures other medical benefits following his termination of employment.
Change in Control
Each executive officer is entitled to enhanced severance benefits under our Executive Officer Change in Control Plan, if the executive officer’s employment is terminated without cause or the executive officer is constructively terminated within 24 months following a change in control or within three months prior to the change in control. In such event our executive chairman and chief executive officer would each receive severance equal to two times his base salary and target annual incentive for the year of termination, and all other executive officers would receive severance equal to one times their base salary and target annual incentive. All of the executive officers would also be eligible for a pro rata target annual incentive for the year of termination and we will pay the executive officer the difference between the premiums charged for COBRA and the amount the eligible employee would have paid as an active employee for such coverage, regardless of whether or not they elect COBRA coverage. All severance will be paid in a lump sum if permitted by Section 409A of the Code. Otherwise severance will be paid in installments over 24 months for our executive chairman and chief executive officer, or 12 months for all other executive officers. All severance benefits are subject to execution of a general release of claims, and are offset by any other severance or pay in lieu of notice under WARN or WARN-like state laws. We do not provide for tax reimbursement payments or gross-ups related to a change in control.
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Table of Contents
Equity Awards
Outstanding awards under our 2008 LTIP will fully vest if a participant’s employment is terminated within 12 months following a change in control, provided such awards are assumed by a successor in the change in control. If awards are not assumed by a successor then the compensation committee may in its discretion fully vest the awards upon the change in control. In addition, outstanding PSUs and performance shares will vest upon a change in control and will be deemed to have been earned at the greater of (i) the target award level or (ii) the number of PSUs and performance shares that would be payable based on actual performance through the date of the change in control.
Outstanding SAR, RSU, PSU and performance share awards will fully vest if a participant’s employment is terminated by reason of death or disability (with PSUs and performance shares being earned as if the participant remained employed through the last day of the performance period). If Mr. Hoplamazian is terminated other than for cause, provided he executes a general release of claims and he does not compete with us, following termination he will continue to vest in his SARs and will be fully vested in his RSUs (including continuing to earn outstanding PSUs and performance shares), although such RSUs, PSUs and performance shares will not be payable until the vesting dates set forth in his award agreements. In addition, recipients of special RSU awards in both 2008 and 2009 will be treated as having an additional year of vesting if their employment is terminated by us for reasons other than “detrimental conduct.” Detrimental conduct includes engaging in conduct constituting:
| • | a felony; |
| • | gross negligence or willful misconduct in the performance of the participant’s duties and responsibilities; |
| • | willful violation of a material policy, including, without limitation, any policy relating to confidentiality, honesty, integrity and/or workplace behavior, which violation has resulted or may reasonably be expected to result in harm to us, our stockholders, directors, officers, employees or customers; |
| • | improper internal or external disclosure or use of confidential information or material concerning us or any of our stockholders, directors, officers, or employees which use or disclosure has resulted or may reasonably be expected to result in harm to us; |
| • | public disparagement of us or any of our stockholders, directors, officers or employees; and/or |
| • | willful violation of any stockholders’ agreement or other material agreements entered into by the participant with us in connection with or pursuant to the 2008 LTIP. |
The following table summarizes the severance, the value of SARs, RSUs, PSUs and performance shares (at the target level of achievement) that would vest, and the value of other benefits that our NEOs (other than Mr. Singh) would receive upon (i) termination of employment by the Company without cause not in connection with a change in control, or (ii) termination of employment without cause or a constructive termination in connection with a change in control. The following assumptions were used in creating the table:
| • | a stock price of $38.57 per share, which was the closing price of our Class A common stock on December 31, 2012; and |
| • | termination of employment as of December 31, 2012 (for the scenarios that include a termination of employment). |
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The amounts shown do not include payments of vested benefits under our tax qualified and non-qualified retirement and deferred compensation plans or the value of vested SARs and RSUs that were vested prior to December 31, 2012.
| Item |
Name |
Termination of Employment by Company Without Cause |
Change in Control — Termination of Employment Without Cause or Constructive Termination |
|||||||
| Cash Severance |
Thomas J. Pritzker | $ | 750,000 | $ | 1,000,000 | |||||
| Mark S. Hoplamazian | $ | 1,522,500 | $ | 5,075,000 | ||||||
| Gebhard F. Rainer | $ | 600,000 | $ | 1,140,000 | ||||||
| Rakesh K. Sarna | $ | 695,000 | $ | 1,390,000 | ||||||
| H. Charles Floyd | $ | 695,000 | $ | 1,390,000 | ||||||
| Stephen G. Haggerty | $ | 595,000 | $ | 1,130,500 | ||||||
| Annual Incentive (Year of Termination) |
Thomas J. Pritzker | — | — | |||||||
| Mark S. Hoplamazian | — | $ | 1,522,500 | |||||||
| Gebhard F. Rainer | — | $ | 540,000 | |||||||
| Rakesh K. Sarna | — | $ | 695,000 | |||||||
| H. Charles Floyd | — | $ | 695,000 | |||||||
| Stephen G. Haggerty | — | $ | 535,500 | |||||||
| Equity Vesting |
Thomas J. Pritzker | — | — | |||||||
| Mark S. Hoplamazian | $ | 6,329,758 | $ | 6,329,758 | ||||||
| Gebhard F. Rainer | — | $ | 588,238 | |||||||
| Rakesh K. Sarna | $ | 4,067,534 | $ | 4,067,534 | ||||||
| H. Charles Floyd | — | $ | 5,788,952 | |||||||
| Stephen G. Haggerty | $ | 120,531 | $ | 2,942,166 | ||||||
| Medical Benefits |
Thomas J. Pritzker | $ | 10,852 | $ | 14,469 | |||||
| Mark S. Hoplamazian | $ | 5,547 | $ | 7,395 | ||||||
| Gebhard F. Rainer | $ | 10,397 | $ | 10,397 | ||||||
| Rakesh K. Sarna | $ | 5,170 | $ | 5,170 | ||||||
| H. Charles Floyd | $ | 10,757 | $ | 10,757 | ||||||
| Stephen G. Haggerty | $ | 10,757 | $ | 10,757 | ||||||
| Total |
Thomas J. Pritzker | $ | 760,852 | $ | 1,014,469 | |||||
| Mark S. Hoplamazian | $ | 7,857,805 | $ | 12,934,653 | ||||||
| Gebhard F. Rainer | $ | 610,397 | $ | 2,278,635 | ||||||
| Rakesh K. Sarna | $ | 4,767,704 | $ | 6,157,704 | ||||||
| H. Charles Floyd | $ | 705,757 | $ | 7,884,709 | ||||||
| Stephen G. Haggerty | $ | 726,288 | $ | 4,618,923 | ||||||
As described, the amounts shown above under “Equity Vesting” in the “Termination of Employment by Company Without Cause” column are also the amounts that the NEOs would receive upon termination of their employment due to death or disability and, for Mr. Hoplamazian, upon his termination for any reason other than cause.
As described above, Mr. Singh terminated employment on December 31, 2012, and in connection with his termination he is entitled to: (i) a bonus equal to $540,000 for 2012, payable in 2013 at such time as the annual bonuses for 2012 are paid; (ii) $1,000,000 payable as part of the first normally scheduled payroll following the six month anniversary of his separation; (iii) $1,055,000 paid on January 15, 2013 (iv) continued health and life benefits for 12 months following his separation; (v) outplacement services; (vi) reimbursement of up to $15,000 of legal expenses in connection with entering into the transition agreement; and (vii) such other perquisites which are described in the footnotes to the Summary Compensation Table.
See also, Article VI: Second Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan —Proposal 3 — Approval of Second Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan — Securities Authorized for Issuance Under Equity Compensation Plans.
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ARTICLE IV: INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| PROPOSAL 2 | — | RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The audit committee of the board of directors has appointed Deloitte & Touche LLP (“D&T”) as our independent registered public accounting firm for the fiscal year ending December 31, 2013. D&T also served as Hyatt’s independent registered accounting firm for fiscal year 2012, and the services provided to us by D&T in fiscal year 2012 are described under “Independent Registered Public Accounting Firm’s Fees” below. Representatives of D&T will be present at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.
Stockholder ratification of the selection of D&T as our independent registered public accounting firm is not required by our bylaws or otherwise. However, the board of directors is submitting the selection of D&T to the stockholders for ratification as a matter of good corporate governance practice. Furthermore, the audit committee will take the results of the stockholder vote regarding D&T’s appointment into consideration in future deliberations. Even if the selection is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Hyatt and our stockholders.
The board of directors unanimously recommends that the stockholders vote “FOR” Proposal No. 2 to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of Hyatt Hotels Corporation for the fiscal year ended December 31, 2013.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES
In addition to retaining D&T to audit the Company’s consolidated financial statements, the audit committee retained D&T to provide various other services in fiscal years 2012 and 2011. The following table presents fees for professional services rendered by D&T for fiscal years 2012 and 2011. The audit committee approved all of the fees presented in the table below.
| Type of Fees |
FY 2012 | FY 2011 | ||||||
| Audit Fees(1) |
$ | 4,845,720 | $ | 4,530,000 | ||||
| Audit-Related Fees(2) |
$ | 733,575 | $ | 718,000 | ||||
| Tax Fees(3) |
$ | 2,963,450 | $ | 2,073,300 | ||||
| All Other Fees(4) |
$ | 115,000 | $ | 0 | ||||
| Total |
$ | 8,657,745 | $ | 7,321,300 | ||||
The following are footnotes to the above table, in accordance with SEC definitions:
| (1) | Audit fees represent D&T fees for professional services for the audit of the Company’s consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC, review of quarterly financial statements, accounting consultation and other attest services that are typically performed by the independent public accountant, and services that are provided by D&T in connection with statutory and regulatory filings. |
| (2) | Audit-related fees consist principally of D&T fees for audits as required under our agreements with our hotel owners. Audit-related fees for 2011 and 2012 also include due diligence. |
| (3) | Tax fees are fees for tax compliance, tax advice and tax planning. |
| (4) | All other fees are fees billed by D&T to Hyatt for any services not included in the first three categories. The 2012 fees were for permitted advisory services. There were no such services in 2011. |
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POLICY ON AUDIT COMMITTEE PREAPPROVAL OF AUDIT AND PERMISSIBLE NONAUDIT
SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee has adopted a policy requiring that all audit, audit-related and non-audit services provided by the independent auditor be pre-approved by the audit committee. The policy also requires additional approval of any engagements that were previously approved but are anticipated to exceed pre-approved fee levels. The policy permits the audit committee chair to pre-approve principal independent auditor services where the Company deems it necessary or advisable that such services commence prior to the next regularly scheduled meeting (provided that the audit committee chair must report to the full audit committee on any pre-approval determinations). All services provided to us by D&T for fiscal years 2012 and 2011 were pre-approved by the audit committee. D&T may only perform non-prohibited non-audit services that have been specifically approved in advance by the audit committee. In addition, before the audit committee will consider granting its approval, the Company’s management must have determined that such specific non-prohibited non-audit services can be best performed by D&T based on its in-depth knowledge of our business, processes and policies. The audit committee, as part of its approval process, considers the potential impact of any proposed work on the independent auditors’ independence.
The audit committee has adopted a policy that prohibits our independent auditors from providing:
| • | bookkeeping or other services related to the accounting records or financial statements of the Company; |
| • | financial information systems design and implementation services; |
| • | appraisal or valuation services, fairness opinions or contribution-in-kind reports; |
| • | actuarial services; |
| • | internal audit outsourcing services; |
| • | management functions or human resources services; |
| • | broker or dealer, investment adviser or investment banking services; |
| • | legal services and expert services unrelated to the audit; and |
| • | any other service that the Public Company Accounting Oversight Board (the “PCAOB”) or the SEC determines, by regulation, is impermissible. |
ARTICLE V: REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS1
The audit committee reviews the Company’s financial reporting process on behalf of the board of directors. Management has the primary responsibility for the financial statements, the reporting process and maintaining an effective system of internal controls over financial reporting. The Company’s independent auditors are engaged to audit and express opinions on the conformity of the Company’s financial statements to United States generally accepted accounting principles.
In addition to fulfilling its oversight responsibilities as set forth in its charter and further described above in the section titled “Audit Committee,” the audit committee has done the following things:
| • | Prior to the filing on February 13, 2013 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, reviewed and discussed with management and D&T the Company’s audited consolidated financial statements. |
| 1 | This report is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any Hyatt filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing. |
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| • | Discussed with D&T the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by the PCAOB in Rule 3200T, and any other matters required to be communicated to the committee by D&T under auditing standards established from time to time by the PCAOB or SEC rules and regulations. |
| • | Evaluated D&T’s qualifications, performance and independence (consistent with SEC requirements), which included the receipt and review of the written disclosures and the letter from D&T required by applicable requirements of the PCAOB regarding D&T’s communications with the audit committee concerning independence and discussions with D&T regarding its independence. |
Based on the reviews and discussions with management and D&T cited above, including the review of D&T’s disclosures and letter to the audit committee and review of the representations of management and the reports of D&T, the audit committee recommended to the board of directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC.
Audit Committee of the Board of Directors
Michael A. Rocca, Chairman
Susan D. Kronick
Richard C. Tuttle
James H. Wooten, Jr.
ARTICLE VI: SECOND AMENDED AND RESTATED HYATT HOTELS CORPORATION LONG-TERM INCENTIVE PLAN
PROPOSAL 3 — APPROVAL OF SECOND AMENDED AND RESTATED HYATT HOTELS CORPORATION LONG-TERM INCENTIVE PLAN
We originally adopted the Hyatt Hotels Corporation Long-Term Incentive Plan (the “Original LTIP”) as a means of assisting the Company in attracting and retaining qualified non-employee directors, executives and other key employees and to promote the success of the Company by providing certain non-employee directors, executives and other key employees of the Company with a shared interest in increasing the value of the Company and sustaining its growth. In connection with our initial public offering, the Original LTIP was subsequently amended and restated in the Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan and has been further amended from time to time (the “2008 LTIP”). We are now requesting that our stockholders vote in favor of approving the 2013 LTIP in order to allow us to continue providing equity compensation to employees and members of our board of directors as a competitive compensation practice and to align the interests of our employees and Board members with our stockholders.
A summary of the 2013 LTIP appears below. This summary is qualified in its entirety by the text of the 2013 LTIP, which is included as Appendix A to this proxy statement.
The amendments to the 2008 LTIP reflected in the 2013 LTIP would effect the following material changes:
| • | increase the number of shares of Class A common stock that may be granted under the 2013 LTIP by 5,000,000 shares; |
| • | allow awards (as defined below) to qualify as “performance-based compensation” under Section 162(m) by (1) limiting the number of awards that can be granted to any one employee to 1,000,000 shares and $5,000,000 for cash awards, and (2) adding performance goals that may be used for Section 162(m) performance-based awards, as more fully described below; |
| • | limit the value of awards that can be granted to non-employee directors in any year to the greater of 500,000 shares of Class A common stock or $500,000; |
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| • | provide that dividend equivalents will not be paid on any performance vesting awards unless the award vests; |
| • | provide that shares withheld to satisfy exercise price and tax withholdings will not be added back to the pool of shares available for grant under the 2013 LTIP; |
| • | specifically prohibit repricings; and |
| • | extend the term of the 2008 LTIP by 10 years until April 3, 2023. |
As discussed above, equity compensation is a key component of our total rewards program and is the mechanism pursuant to which we provide long-term incentives to our employees. We believe that equity incentives are critical to attracting and retaining the most talented employees. As of April 15, 2013, the 2008 LTIP has only approximately 2.7 million shares available for future awards. If the 2013 LTIP is not approved, we estimate that we will have enough shares remaining under the 2008 LTIP to make approximately one more year of awards, assuming we continue to grant awards consistent with our historical usage and expected practices, and noting that future circumstances may require us to make changes to our expected practices.
Additionally, as discussed above under “Tax Deductibility and Accounting Considerations” in the Compensation Discussion and Analysis section of this Proxy, since our initial public offering in 2009 we have relied on a transition rule available under Section 162(m) regarding compensation payable pursuant to plans and arrangements that were in place prior to becoming public and which were disclosed as part of the public offering to pay compensation that is intended to be tax deductible. However, that transition rule expires for the 2008 LTIP after this annual meeting. Accordingly, in order to be able to pay and deduct compensation that is performance-based under Section 162(m), we need to amend the 2008 LTIP to contain provisions that would allow us to comply with the Section 162(m) requirements, and to obtain stockholder approval of such provisions. The 2013 LTIP is intended to comply with the Section 162(m) requirements for awarding qualified performance-based compensation, if approved by stockholders and if the other technical requirements for granting Awards (as defined below) are met at the time the performance-based awards are granted. If the 2013 LTIP is not approved, then any future awards made under the 2008 LTIP would not be exempt from the limits of Section 162(m).
Significant Historical Award Information
Historically, we have granted predominantly stock appreciation rights (“SARs”), time-vested restricted stock units (“RSUs”), and more recently performance vested RSUs and performance vested restricted shares. The table below presents the number of shares that were subject to the various outstanding equity awards as of April 15, 2013:
| Outstanding Award Type |
||||
| Number of SARs |
3,880,926 | |||
| Weighted-average base price |
$ | 45.15 | ||
| Weighted-average remaining term (years) |
6.37 | |||
| Number of unvested restricted stock units (excludes cash settled awards) |
1,300,549 | |||
| Number of unvested performance stock units |
175,549 | |||
| Number of unvested performance shares |
404,037 | |||
Shares underlying awards granted under the 2008 LTIP that expire, are forfeited or cancelled without having been exercised or settled in full, or otherwise terminate and shares used to pay the exercise price (if any) or satisfy tax withholdings become available again for grant under the 2008 LTIP. Under the 2013 LTIP these shares would not be added back to the shares available for grant under the 2013 LTIP.
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The following table shows how we have used equity compensation since our initial public offering:
| Key Equity Metrics |
2012 | 2011 | 2010 | 2009 | ||||||||||||
| Percentage of equity awards granted to NEOs (1) |
55 | % | 49 | % | 43 | % | 40 | % | ||||||||
| Equity burn rate (2) |
0.7 | % | 0.6 | % | 0.8 | % | 0.6 | % | ||||||||
| Dilution (3)(5) |
5.0 | % | 5.2 | % | 5.1 | % | 5.2 | % | ||||||||
| Overhang (4) |
2.8 | % | 2.6 | % | 2.0 | % | 1.3 | % | ||||||||