UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
(Amendment No. )
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Preliminary Proxy Statement |
Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) |
Definitive Proxy Statement |
Definitive Additional Materials |
Soliciting Material under |
Host Hotels & Resorts, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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HOST HOTELS & RESORTS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND 2018 PROXY STATEMENT
April 4, 20166, 2018
Dear Fellow Stockholder:
I am pleased to invite you to our 20162018 Annual Meeting of Stockholders of Host Hotels & Resorts, Inc., which will be held at 11:00 a.m. on Thursday, May 12, 2016,17, 2018, at the Ritz-Carlton Hotel, Tysons Corner, Virginia. The doors will open at 10:30 a.m. Our directors and management team will be available to answer questions.
The attendance of stockholders at our annual meeting is helpful in maintaining communication and ancan improve stockholders’ understanding of our business. We hope you will be able to join us. Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone, or by Internet, or by completing, signing, dating and returning your proxy card. Instructions for these convenient ways to vote are set forth on the enclosed proxy card.
At the annual meeting we will ask you to elect our Board of Directors. We will also be considering ratification of the selection of KPMG LLP as our independent registered public accountants, an advisoryDirectors, vote to approve executive compensation two Charter amendments strengtheningand vote on one stockholder rights and an increase in authorized shares under the Company’s employee stock purchase plan.proposal. These proposals are described in detail in the attached Notice of 20162018 Annual Meeting of Stockholders and Proxy Statement. Our 20152017 Annual Report (including our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission) is also enclosed. Weenclosed, which we encourage you to read our 2015 Annual Report which we hope you will find interesting and useful.read. Thank you for your continued interest in Host Hotels & Resorts and we look forward to seeing you at the meeting.
Sincerely,
Richard E. Marriott
Chairman of the Board
6903 Rockledge Drive, Suite 1500 Bethesda, Maryland 20817-1109 |
NOTICE OF 20162018 ANNUAL MEETING OF STOCKHOLDERS
Meeting Date: | Thursday, May | |
Meeting Time: | 11:00 a.m., Doors open at 10:30 a.m. | |
Location: | The Ritz-Carlton Hotel, Tysons Corner 1700 Tysons Boulevard, McLean, Virginia |
Agenda
1. | Election of |
2. |
An advisory resolution to approve executive compensation; |
Transaction of any other business that may be properly brought before the annual meeting. |
The proxy statement more fully describes these proposals.
Record Date
You may vote if you were a holder of record of our common stock at the close of business on March 17, 2016,19, 2018, the record date.
By Order of the Board of Directors
Elizabeth A. Abdoo
Secretary
April 4, 20166, 2018
REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:
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| VIA THE INTERNET Go to the website address shown on your proxy card and vote via the Internet | BY MAIL Mark, sign, date and return the enclosed proxy card in the postage-paid envelope | ||||
| BY TELEPHONE Use the toll-free number shown on your proxy card (this call is toll-free if made in the United States or Canada) | IN PERSON Attend the Annual Meeting in McLean, Virginia |
TABLE OF CONTENTS |
PROXY STATEMENT
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Corporate Governance and Code of Business Conduct and Ethics | ||||
Political | ||||
Compensation Policy Committee Interlocks and Insider Participation | ||||
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Stockholder Nominations and Recommendation of Director Candidates | 18 | |||
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Proposal Two— | ||||
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TABLE OF CONTENTS |
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REPORT OF THE | 63 | |||
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Pre-Approval Policy for Services of Independent Registered Public Accountants | ||||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||||
Policy on Transactions and Arrangements with Related Persons | ||||
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Proxy Statement. The Board of Directors of Host Hotels & Resorts, Inc. is soliciting proxies to be voted at our 20162018 Annual Meeting of Stockholders on May 12, 201617, 2018 and at any adjournment or postponement of the meeting. We expect that this Proxy Statement will be mailed and made available to stockholders beginning on or about April 4, 2016.6, 2018.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on May 12, 2016. 17, 2018. The Company’s Proxy Statement for the 20162018 Annual Meeting, and our Annual Report to Stockholders for 20152017 are both available free of charge athttp:https://www.hosthotels.com/investorrelations.aspwww.proxydocs.com/HST. References in this Proxy Statement and accompanying materials to Internet web sites are for the convenience of readers. Information available at or through these web sites is not incorporated by reference in this Proxy Statement.
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PROXY SUMMARY |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
ANNUAL MEETING OF STOCKHOLDERS
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VOTING MATTERS
Matter | Board Recommendation | Page Reference (for more detail) | |||||||||
Election of Directors | ✓ For each director nominee | 19 | |||||||||
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Advisory Resolution to Approve Executive Compensation | ✓ For | 28 | |||||||||
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BOARD NOMINEES
The following table provides summary information about each director nominee. Directors are elected annually by a majority of votes cast.
Name, Age | Director | Principal Occupation | Committee | Other U.S. Public Company Boards | |||||||||||||||
A | C | NCG | |||||||||||||||||
Mary L. Baglivo, | 2013 |
| PVH Corp. Ruth’s Hospitality Group | ||||||||||||||||
Sheila C. Bair, | 2012 | Former President of Washington College |
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| Thomson Reuters | ||||||||||||||||||
Ann McLaughlin Korologos, | 1993 | Former Chair of RAND Corporation Board of Trustees |
| Michael Kors
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Richard E. Marriott, | Chairman of the Board | ||||||||||||||||||
Sandeep L. Mathrani, 55 | 2016 | Chief Executive Officer of GGP | GGP Inc. | ||||||||||||||||
John B. Morse, Jr., | 2003 | Retired Vice President and CFO of The Washington Post Company | (F) | AES Corporation
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Mary Hogan Preusse, 49 | 2017 | Founder and Principal of Sturgis Partners LLC | Digital Realty Trust Kimco Realty VEREIT | ||||||||||||||||
Walter C. Rakowich, Lead Independent Director | 2012 | Retired Chief Executive Officer of Prologis | (F) | Iron Mountain Ventas, Inc. | |||||||||||||||
James F. Risoleo, 62 | 2017 | President and Chief Executive Officer | Cole Office & Industrial REIT | ||||||||||||||||
Gordon H. Smith, | 2009 | President & CEO of the National Association of Broadcasters | |||||||||||||||||
| Chief Executive Officer of Digital Realty Trust | (F) | Digital Realty Trust |
* A | Audit Committee | C | Compensation Policy Committee | |||
| Chair of the Committee | NCG | Nominating and Corporate Governance Committee | |||
(F) | Audit Committee Financial Expert |
1
Date and Time May 17, 2018 11:00 a.m. Eastern time Record Date March 19, 2018 Place Ritz-Carlton, Tysons Corner 1700 Tysons Boulevard, McLean, Virginia # Shares Eligible shares of common stock 27% >10 years 36% 0-2 years 18% 6-10 years 18% 3-5 years
PROXY SUMMARY |
Snapshot of Director Diversity and Experience
All director nominees are independent other than our Chief Executive Officer (CEO) and Chairman. The Nominating and Corporate Governance Committee and the Board believe it is important for the Board to be “refreshed” by adding directors from time to time and two new independent directors joined the Board in 2017. The Committee and the Board also believe that long-serving directors bring critical skills and historical perspective to the Board in a cyclical business such as the lodging industry. The Committee and Board seek a balanced mix of both new and experienced directors and believes this balance is achieved with the current nominees.
AUDITOR REFRESHMENT
Although ratification of the independent registered public accountants is not required by our Bylaws, the Company believes that submitting ratification of the selection of the independent accountants to a stockholder vote is a matter of good corporate practice. This year, however, the Audit Committee is strongly considering the selection of a new independent auditor as a means of refreshing the auditor relationship and has instructed management to solicit proposals from several accounting firms to serve as the Company’s independent auditor for 2018. That process is currently ongoing and for that reason no proposal is being submitted for stockholder vote. The Audit Committee’s evaluation of whether to change its independent auditor is not a result of any disagreement or dispute with KPMG LLP, the Company’s current independent registered public accounting firm, regarding the Company’s financial statements or accounting practices. For more information, see “AuditorFees—Re-assessment of the Audit Firm Relationship.” The Company intends to submit ratification of the selection of the auditor to a stockholder vote again in 2019.
CORPORATE GOVERNANCE HIGHLIGHTS
The Company is committed to the values of effective corporate governance and high ethical standards. Our Board believes that these values are conducive to strong performance and creating long-term stockholder value. Our governance framework gives our highly experienced independent directors the structure necessary to provide oversight, advice and counsel to the Company. This framework is described in more detail in our Corporate Governance Guidelines and codes of conduct, which can be found in the governance section of our website.
Board Independence |
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Board Composition |
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Our Director nominees exhibit an effective mix of skills, experience, diversity and fresh perspective. Four of the last six Board members added are either women or bring diversity to the Board. Median Tenure 5.4 years Gender Diversity 36% Women
PROXY SUMMARY |
Board Committees |
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Leadership Structure |
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Risk Oversight |
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Open Communication |
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Director Stock Ownership |
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Accountability to Stockholders |
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Management Succession Planning |
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Sustainability and Corporate Responsibility |
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COMPENSATION PROGRAM
Our executive compensation programs are designed to:
PROXY SUMMARY |
We meet these objectives through the appropriate mix of compensation, including:
Component | Form | Description & Objective | ||||
Long-Term Incentive Performance Based | Equity | • Restricted stock units that are solely performance based and vest annually based on corporate objectives and over a three-year period based on relative total stockholder return • Representstwo-thirds of total long-term incentive award • Align executive officers’ compensation with returns delivered to Company stockholders and motivate performance against key corporate objectives | ||||
Long-Term Incentive Retention Based | • Restricted stock units that vest in annual installments over three years • Represents one third of total long-term incentive award • Align the interests of the executives with long-term stockholder value | |||||
Annual Incentive | Cash | • At-risk compensation with payments based on the Company’s achievement of key financial measures (adjusted funds from operations and return on invested capital) and objective individual performance goals • Formulaic with limited discretion and maximum amount capped | ||||
Base Salary | • Provides market-competitive pay relative of an executive’s role, experience and individual performance • Only component of compensation that is fixed |
Last year we made several key enhancements to our compensation programs to continue to improve the link between compensation and the Company’s business and strategy as well as the long-term interests of stockholders.
4
2015removed individual performance measures from long-term incentive program modified mix of equity to 2/3rd performance based; and 1/3rd time based for retention purposes reweighted performance based long-term incentives to equally weight strategic measures and total stockholder return will utilize forward looking3-year total stockholder return measure (replacing previous historical approach) removed stock options
PROXY SUMMARY |
✓ 94% of the votescast on our 2017say-on-pay proposal were in favor of our executive compensation program and policies |
See “Compensation Discussion and Analysis—Our Compensation Program” beginning on page 32 for a further discussion of the Company’s compensation programs and the rationale for the changes in 2017.
2017 PERFORMANCE HIGHLIGHTS
20152017 was anothera year of continued growth for the Company. Revenues increased for the sixth year in a row and theThe Company’s comparable hotel revenue per available room (or RevPAR) increased 3.8%to $180, surpassing last year’s record and is the highest full year RevPAR in 2015 as compared to 2014 on a constant U.S. dollar basis.the Company’s history. RevPAR is a commonly used measure within the hotel industry to evaluate hotel operations. For more information on this measure and our 20152017 results, see the Company’s Annual Report on Form10-K.
We alsoWith a new management team in place, we undertook a number of initiatives in 20152017 to capitalize on value-enhancing opportunities and better position the Company for long-term, sustainable growth.growth and continued to execute on our strategy to decrease international exposure and improve the overall quality of the portfolio by recycling out of low RevPAR hotels into high RevPAR hotels.
New CEO as of January 1, 2017; New CIO as of September, 2017; New CFO as of November, 2017.
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Achieved the
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$ Million
| Returned to stockholders in 2017:
$ Million
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Based on |
ATTENDANCE AND VOTING MATTERS |
What is a proxy?
It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. This proxy is being solicited by the Board of Directors, and we have designated Gregory J. LarsonMichael D. Bluhm and Elizabeth A. Abdoo as proxies for this annual meeting. When you properly sign your proxy card or vote via telephone or the Internet, you are giving the persons named on the card your direction to vote your shares of common stock at the annual meeting as you designate.
What is a proxy statement?
It is a document that summarizes information that we are required to provide you under the rules of the Securities and Exchange Commission, or SEC, when we ask you to vote your shares or designate a proxy. It is designed to assist you in voting.
What does it mean if I get more than one proxy card?
You should vote by completing and signing each proxy card you receive. You will receive separate proxy cards for all of the shares you hold in different ways, such as jointly with another person, or in trust, or in different brokerage accounts.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare Trust Company, N.A., or Computershare, you are considered the stockholder of record with respect to those shares, and the Notice of Annual Meeting, Proxy Statement and our 20152017 Annual Report were sent directly to you by the Company.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice of Annual Meeting, Proxy Statement and our 20152017 Annual Report were forwarded to you by that organization. The organization holding your shares is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.
Who is entitled to vote?
Anyone who owned common stock of the Company at the close of business on March 17, 2016,19, 2018, the record date, can vote at the annual meeting and is entitled to one vote for each share of common stock owned.
How can I manage the number of Annual Reports and Proxy Statements I receive?
The included glossy 20152017 Annual Report and our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC (which together comprise the 2015 Annual Report of the Company), is being mailed to stockholders with this Proxy Statement. If you share an address with any of our other stockholders, your household might receive only one copy of these documents. We will promptly deliver, upon oral or written request, individual copies of these documents to any stockholders at a shared address who received only one copy. To request individual copies for each stockholder in your household for this year and/or future years, please contact our Investor Relations department at240-744-1000, bye-mail to ir@hosthotels.com, or by mail to Host Hotels & Resorts, Inc., 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817, Attn: Investor Relations. To ask that only one set of the documents be mailed to your household, please contact your bank, broker or other nominee or, if you are a stockholder of record, please call our transfer agent, Computershare at866-367-6351 toll-free within the United States and Canada; outside the United States and Canada at781-575-4320, or by mail at P.O. Box 30170, College Station, TX 77842-3170.505000, Louisville, KY 40233.
ATTENDANCE AND VOTING MATTERS |
How do I vote?
Voting in Person at the Meeting. If you are a stockholder of record as of the close of business on March 17, 201619, 2018 and attend the annual meeting, you may vote in person at the meeting.meeting by presenting some form of government-issued photo identification. If your shares are held by a broker, bank or other nominee (i.e., in “street name”) and you wish to vote in person at the meeting, you will need to obtain a proxy form from the broker, bank or other nominee that holds your shares of record.record and present some form of government-issued photo identification.
Voting by Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares in your own name as a holder of record, you may authorize a proxy to vote your shares as follows:
• | Vote by |
• | Vote by Internet. You also have the option to vote via the Internet. The website for Internet voting is printed on your proxy card. Internet voting is available 24 hours per day until 11:59 p.m., Eastern Time, on Wednesday, May |
• | Vote by Mail. If you would like to vote by mail, mark your proxy card, sign and date it, and return it to Computershare in the postage-paid envelope provided. |
Voting by Proxy for Shares Registered in Street Name. If your shares are held in street name, you will receive instructions from your broker, bank or other nominee which you must follow in order to have your shares of common stock voted.
Who is acting as my proxy and how will they vote my shares?
The individuals named on the enclosed proxy card are your proxies. They will vote your shares as you indicate. If you sign and return your proxy card but do not indicate how you wish to vote and you hold your shares in your own name as a holder of record, all of your shares will be voted as recommended by the Board of Directors.
However, if you hold your shares in street name, it is critical that you cast your vote in order for your vote to count. In the past, if you held your shares in street name and you did not indicate how you wanted to vote those shares, your bank or broker was allowed to vote those shares on your behalf in the election of directors and other routine matters as they deemed appropriate. Now, due to regulatory changes, your bank or broker is no longer able to vote your shares on a discretionary basis in most matters. If you hold your shares in street name and do not instruct your bank or broker how to vote, then no votes will be cast on your behalf for all matters other than the ratification of the appointment of KPMG LLP as the Company’s independent registered public accountants for 2016 (proposal 2).behalf.
May I revoke my proxy?
You may revoke your proxy at any time before the annual meeting if you:
(1) | File a written notice of revocation dated after the date of your proxy with Computershare; or |
(2) | Send Computershare by mail a later-dated proxy for the same shares of common stock; or |
(3) | Submit a new vote by telephone or the Internet. The date of your last vote, by either of these methods or by mail, will be the one that is counted; or |
(4) | Attend the annual meeting AND vote there in person. |
The mailing address for Computershare is P.O. Box 30170, College Station, TX 77842-3170.505000, Louisville, KY 40202. The overnight delivery address for Computershare is: 211 Quality Circle,462 South 4th Street, Suite 210 College Station, TX 77845.1600, Louisville, KY 40202.
ATTENDANCE AND VOTING MATTERS |
What vote is required to approve each proposal?
In the election of directors (proposal 1), each nominee must receive more “for” votes than “against” votes in order to be elected as a director. The affirmative vote of a majority of votes cast at the meeting is required to ratify the appointment of KPMG LLP as the Company’s independent registered public accountants for 2016 (proposal 2), to approve the advisory resolution on executive compensation (proposal 3)2) and to approve the amended and restated employee stock purchase planstockholder proposal (proposal 6)3). The two Charter amendments (proposals 4 and 5) each require the affirmative vote of at least two-thirds of all the votes entitled to be cast on the proposal.
What constitutes a “quorum”?
A majority of the outstanding shares entitled to vote, present in person or by proxy, constitutes a quorum. We must have a quorum to conduct the annual meeting. If a quorum is not present or if we decide that more time is necessary for the solicitation of proxies, we may adjourn the annual meeting. We may do this with or without a stockholder vote. If there is a stockholder vote to adjourn, the named proxies will vote all shares of common stock for which they have voting authority in favor of the adjournment.
How are abstentions and brokernon-votes treated?
Shares of our common stock represented by proxies that are marked “abstain,” or which constitute broker non-votes,“abstain” will be counted as present at the meeting for the purpose of determining a quorum. Abstentions will have no effect on the results of the vote on the proposals to be acted upon at the annual meeting. Broker non-votes occur when a nominee holding shares of our common stock for a beneficial owner returns a properly executed proxy but has not received voting instructions from the beneficial owner and suchthe nominee exercises its discretionary authority to vote the shares on certain routine proposals, as permitted by New York Stock Exchange rules, but does not possess or doeshave authority to vote the shares on other non-routine proposals. This year, there are no routine proposals to be acted upon at the annual meeting, so there will not choose to exercise discretionary authority with respect to such shares. Abstentions andbe any broker non-votes will have no effect onat the results of the vote on the election of directors, the ratification of the appointment of KPMG LLP, or the advisory resolution on executive compensation. However, abstentions and broker non-votes will have the effect of a vote against each of the two Charter amendments. For the vote on the amended and restated employee stock purchase plan, abstentions will have the effect of a vote against the proposal but broker non-votes will have no effect on the results of the vote.annual meeting.
How can I obtain copies of documents referenced in this proxy statement?
Copies of the Company’s Corporate Governance Guidelines, codescode of conduct and other documents referenced in this proxy statement can be accessed in the “Corporate Governance”“Governance” section of the Company’s website athttp://www.hosthotels.com. Copies of these documents are also available in print to stockholders upon request by writing to:
Host Hotels & Resorts, Inc.
6903 Rockledge Drive, Suite 1500
Bethesda, Maryland 20817
Attention: Investor Relations
How will voting on any other business be conducted?
Although we do not know of any other business to be considered at the annual meeting other than the proposals described in this proxy statement, if any other business is properly presented at the annual meeting your signed proxy card gives authority to Gregory J. LarsonMichael D. Bluhm and Elizabeth A. Abdoo, or either of them, to vote on such matters in their discretion. Unless otherwise required by our Charter or Bylaws or by applicable Maryland law, any other matter properly presented for a vote at the meeting will require the affirmative vote of a majority of the votes cast.
Who will count the votes?
Computershare Trust Company, N.A., our transfer agent, will act as the inspectors of election and will tabulate the votes.
Will there be a sign language interpreter at the meeting?
If you would like to have a sign language interpreter at the annual meeting, please send your request in writing to the Secretary, Host Hotels & Resorts, Inc., 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817. We must receive your request no later than May 8, 2018.
ATTENDANCE AND VOTING MATTERS |
Who pays the cost of this proxy solicitation?
We bear all expenses incurred in connection with the solicitation of proxies. We have hired the firm of MacKenzie Partners, Inc. to assist in the solicitation of proxies for a fee of $12,500,$14,000, plus expenses. We will reimburse brokers, fiduciaries and custodians for their reasonable expenses related to forwarding our proxy materials to those beneficial owners.
Is this proxy statement the only way that proxies are being solicited?
No. In addition to mailing these proxy solicitation materials, our officers and employees may solicit proxies by further mailings or personal conversations, or by telephone, facsimile or other electronic means.
How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will be disclosed on a Current Report on Form8-K filed with the SEC within four business days of the date of the annual meeting, which will be available on the Company’s website athttp://www.hosthotels.com.www.hosthotels.com.
CORPORATE GOVERNANCE AND BOARD MATTERS |
CORPORATE GOVERNANCE AND BOARD MATTERS
Corporate Governance and Code of Business Conduct and Ethics
Our Board of Directors oversees the management of the Company and its business for the benefit of our stockholders in order to enhance stockholder value over the long-term. The Board has adopted Corporate Governance Guidelines which are reviewed annually and periodically amended as the Board enhances the Company’s corporate governance practices. The Board has also adopted a code of business conduct and ethics that applies to all directors, officers and employees of the Company and a code of business conduct and ethics and conflict of interest policy that also applies to the Board.Company. The purpose of these codesthe code of conduct is to promote honest and ethical conduct; to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by the Company; and to promote compliance with all applicable rules and regulations that apply to the Company and its officers, employees and directors. The Company’s Corporate Governance Guidelines, codescode of conduct and other documents describing the Company’s corporate governance practices can be accessed in the “Corporate Governance”“Governance” section of the Company’s website athttp://www.hosthotels.com. Copies of these documents are also available in print to stockholders upon request.
Governance is a continuing focus of the Company. In past years the Board has implemented numerous corporate governance enhancements to serve the long-term interests of all stockholders. These have included adopting a majority vote standard for uncontested director elections, declassifying the Board, allowing the Company’s rights plan to expire and opting out of the Maryland Control Share Acquisition Act. In 2014 the Board filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland electing to opt out of the provisions of the Maryland Unsolicited Takeover Act (the “Act”) that permit the Board to classify itself without a stockholder vote. This year,2016 the Board of Directors is proposing twoamended and restated the Company’s Bylaws to add ‘proxy access,’ a means for the Company’s stockholders to include stockholder-nominated director candidates in the Company’s proxy materials for annual meetings of stockholders. Also in 2016 the Board proposed, and stockholders approved, Charter amendments which strengthen the rights of stockholders by providing stockholders the concurrent power to amend the Company’s Bylaws and making it easierreducing the threshold needed for stockholders to call a special meeting. Over the years, the Board has implemented numerous other corporate governance enhancements to serve the long-term interests of all stockholders. These have included:
For more information on the Company’s corporate governance practices, see the Corporate Governance Guidelines posted on our website.
The Company invites stockholders and other interested parties to communicate any concerns they may have about the Company directly and confidentially with any of the full Board of Directors, the Lead Director or thenon-management directors as a group by writing to:
Host Hotels & Resorts, Inc. | ||||
Attention: Secretary | ||||
6903 Rockledge Dr., Suite 1500 | ||||
Bethesda, MD 20817 |
The Secretary will review and forward all stockholder communications to the intended recipient except those unrelated to the duties and responsibilities of the Board, such as junk mail and mass mailings, resumes and other forms of job inquiries, surveys, new business suggestions, business solicitations or advertisements. In addition, material that is hostile, threatening, illegal or similarly unsuitable or outside the scope of Board matters or duplicative of other communications previously forwarded to the recipient will also be excluded. The Secretary shall retain for three years copies of all stockholder communications that are forwarded.
Stockholder Outreach and Engagement
The Company’sOur relationship with itsour stockholders is an important part of our corporate governance program. Engaging with our stockholders helps us to understand how they view us, to set goals and expectations for our performance,
CORPORATE GOVERNANCE AND BOARD MATTERS |
and to identify emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations. Our stockholder and investor outreach generally includes investor road shows, analyst meetings, investor days, and investor conferences and meetings. In the last twoseveral years we have also expanded our stockholder outreach by engaging stockholders directly and seeking their views on governance and other matters, concentrating our efforts on our largest stockholders. In addition, in 2014 we hosted an investor day highlighting2017 the
Company’s business strategy which stockholders were able to listen to via our website.new management team met with over 200 members of the investment community, reaching holders of approximately 65% of the Company’s actively managed shares (i.e., excluding holdings of passive investors such as index funds). We also communicate with stockholders and other stakeholders through various media, including our annual report and SEC filings, proxy statement, news releases, and our website. Our conference calls for quarterly earnings releases are open to all. These calls are available in real time and as archived webcasts on our website for a period of time.
Our governance framework provides the Board with the flexibility to select the appropriate leadership structure for the Company. This will be driven by the needs of the Company as well as the particular makeup of the Board at any point in time. As
We have historically had a result, no policy exists requiring the combination or separation of leadership roles, and the Company’s governing documents do not mandate a particular structure.
Our current leadership structure is comprised of thethat includes a Chairman of the Board, who is annually elected, a separate Chief Executive Officer, and an independent director serving as Lead Director who presides over the non-management directors, and strong active independent directors.Director. The CEO is responsible for setting the strategic direction of the Company and for the day to day leadership and management of the Company, while the Chairman of the Board provides guidance to the CEO, directs the agenda for Board meetings, and presides over meetings of the full Board.Board and participates in stakeholder outreach. This structure reflects the continued strong leadership, industry experience and energy brought to the Board by Richard E. Marriott, who has been elected and led the Company as Chair since its split with Marriott International in 1993. His over 50 year career at the Company uniquely provides him with a perspective and wealth of knowledge that is invaluable to the Board.
The Board also has the position of Lead Director who provides additional independent oversight of senior management and board matters in our current structure where the Chairman and CEO are not independent directors. The role of a Lead Director is meant to facilitate, and not to inhibit, communication among the directors or between any of them and the Chairman and CEO. Accordingly, directors are encouraged to continue to communicate among themselves and directly with the Chairman and CEO, and under our Corporate Governance Guidelines each independent director may call an executive session. Upon recommendation of the Nominating and Corporate Governance Committee, our Lead Director is elected annually from among the independent directors. Walter C. Rakowich has served as our Lead Director since May 2014. The duties of the Lead Director include: (i) presiding at executive sessions of the Board, and briefing the Chairman and CEO, as needed, following such sessions; (ii) presiding at meetings of the Board where the Chairman is not present; (iii) convening and acting as chair of meetings of the independent directors; (iv) providing input on Board agendas and meeting schedules; (v) providing feedback to and consulting with the Chairman and CEO on any concerns of the Board; and (vi) serving as the director to whom correspondence may be directed on behalf of thenon-management directors as a group, as described above under “Communications with Directors.”
Another component of our leadership structure is the active role played by our independent directors in overseeing the Company’s business, both at the Board and Committee level. SevenNine of nineeleven of our current directors and director nominees are considered independent within the meaning of the rules of the New York Stock Exchange. Under our Corporate Governance Guidelines,non-management directors meet in executive session without the presence of the CEO, the Chairman of the Board or other executive officers. The purpose of these sessions is to promote open discussions among the independent directors concerning the business and affairs of the Company as well as matters concerning management, without any member of management present.
The ChairBoard believes that the separate roles of our NominatingChairman and Corporate Governance Committee, currently Walter C. Rakowich, serves as ourCEO, coupled with an independent Lead Director. As such, he convenes and chairs all meetingsDirector, the use of non-management directors inregular executive sessions on a quarterly basis and more, if needed, serves asof the principal liaison between the non-employeenon-management directors, and the CEO and Chairman, is availablesubstantial majority of independent directors comprising the Board, allows the Board to consult with the CEO about any concernsmaintain effective oversight of the Board, and serves as the director to whom correspondence may be directed on behalf of the non-management directors as a group, as described above under “Communications with Directors.” The position and role of the Lead Director is intended to expand lines of communication between the Board and members of management. It is not intended to reduce the free and open access and communications that each independent board member has with other board members and members of management.Company.
CORPORATE GOVERNANCE AND BOARD MATTERS |
At least annually, the Nominating and Corporate Governance Committee discusses the structure and composition of the Board of Directors and reviews the current leadership structure. This is discussed with the full Board as part of the Board’s annual evaluation to assess its effectiveness and takes into account our current business plans and long-term strategy as well as the particular makeup of the Board at that time.
It is the Board’s policy that a majority of the directors of the Company be independent. To be considered independent, a director must not have a material relationship with the Company that could interfere with a director’s independent judgment. To be considered independent, directors must also be “independent” within the meaning of the New York Stock Exchange’s requirements. To assist the Board in determining whether a director is independent, the Board has adopted standards for independence set forth in the Company’s Corporate Governance Guidelines.
In determining the independence of our directors, the Board considers all relevant facts and circumstances, including, but not limited to, whether the director receives any compensation or other fees from the Company, other than the fees described under “Director Compensation”, whether the director, or an organization with which the
director is affiliated, has entered into any commercial, consulting, or similar contracts with the Company, and any charitable contributions the Company made tonon-profit organizations with which director nominees or their immediate family members are associated. Consistent with these considerations, the Nominating and Corporate Governance Committee reviewed directors’ responses to a questionnaire asking about their relationships with the Company, as well as those of their immediate family members, and other potential conflicts of interest. The Committee determined that all of the director nominees other than Mr. Marriott and Mr. WalterRisoleo are independent and recommended to the Board that Messrs. Golden,Mathrani, Morse, Smith, Stein and Rakowich and Mmes. Korologos, Bair, Hogan Preusse and Baglivo have been determined to be independent. The Board approved the determination that sevennine of the Company’s nineeleven director nominees are independent. Messrs. Marriott and WalterRisoleo are not independent because they are Company employees.
The Board’s Role in Risk Oversight
Our Board of Directors has overall responsibility for risk oversight with a focus on the most significant risks facing the Company. Reviews of certain areas are conducted by the relevant committees that report on their deliberations to the Board. Risks are considered in almost all business decisions and as part of the Company’s business strategy. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, appropriate risk-taking is essential for the Company to be competitive and to achieve its business objectives. The chart below summarizes the primary areas of risk oversight for the Board and its committees.
Risk Oversight
Board/Committee | Primary Areas of Risk Oversight | |
Full Board | Strategic, financial and execution risks and exposures associated with the annual business plan and strategic plan; major litigation and regulatory exposures, environmental and other current matters that may present material risk to the Company’s operations, plans, prospects or reputation; investments, acquisitions and divestitures; capital market and joint ventures; and senior management succession planning. | |
Audit Committee | Discusses guidelines and policies with respect to the Company’s risk assessment and risk management processes. Responsible for oversight of risks associated with financial matters, particularly the Company’s financial statements, tax, accounting, and disclosure; cybersecurity related risks; risks associated with derivatives and hedging strategy; risks associated with the independence, qualifications and performance of the Company’s outside auditor and internal auditors; and the Company’s compliance with legal and regulatory requirements. |
CORPORATE GOVERNANCE AND BOARD MATTERS |
Board/Committee | Primary Areas of Risk Oversight | |
Compensation Policy Committee | Exposures associated with compensation of the Company’s officers, stock ownership and incentive-compensation plans, executive retention, succession planning and employment related matters. As discussed in more detail in the Compensation Discussion & Analysis, the Committee reviews and approves compensation programs with features that are intended to mitigate risk without diminishing the incentive nature of compensation. | |
Nominating and Corporate Governance Committee | Risks and exposures relating to the identification of qualified candidates to become Board members; continuing oversight of Board composition; |
The Board and its committees implement their oversight responsibilities through management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These areas of focus include strategic, operating, financial, legal, compliance and reputational risk. Management communicates routinely with the Board, its committees and individual directors on the significant risks identified through this process and how they are being managed.
Political ContributionsContribution Policy and Trade Association Memberships
The Company has aUnder the Company’s longstanding policy, prohibitingCompany funds may not be used to contribute to candidates, political party committees, or political action committees. Company funds also may not be used to make direct contributionsindependent expenditures to support or oppose political parties, political committees, political candidates,campaigns, to contribute to “social welfare” organizations organized under Section 501(c)(4) of the U.S. Internal Revenue Code or organizations organized under Section 527 of the U.S. Internal Revenue Code.Code, or to support ballot measure committees. The Company does not have a political action committee.
The Company believes that participation in the public policy process is an important and essential means of enhancing stockholder value. To help us achieve this objective, the Company belongs to a number of trade associations (organized under Section 501(c)(6) of the Internal Revenue Code), which allows us to network, build business skills, advance our public agenda and related business goals and monitor industry policies and trends. Company participation in trade associations, including membership on a trade association board, does not mean that the Company agrees with every position a trade association takes on an issue. In fact, from time to time our positions may differ from those of the trade associations of which we are members.
The Company makes payments to these associations, including membership fees and dues. In 2015, sixPursuant to the Company’s code of business conduct and ethics, the Company’s legal department oversees compliance with the Company’s policy on political contributions. The Nominating and Corporate Governance Committee discusses the Company’s political spending policies and disclosures. The chart below lists organizations receivedreceiving dues and other contributions from the Company totaling $25,000 or more.more between 2017 and 2015. Based on each organization’s records, we have listed below the portion of Company dues and other contributionsamounts that isare used by each organization for lobbying.
2015
CORPORATE GOVERNANCE AND BOARD MATTERS |
Trade Association Memberships
U.S. Trade Association | 2015 Company | Lobbying % (1) | Amount of | |||||||||
National Association of Real Estate Investment Trusts | $ | 127,652 | 25 | $ | 31,913 | |||||||
US Travel Association | 104,286 | 38 | 39,629 | |||||||||
Real Estate Roundtable | 45,000 | 65 | 29,250 | |||||||||
The Real Estate Board of New York | 29,000 | 7 | 1,960 | |||||||||
American Hotel & Lodging Association | 164,266 | (2) | 34 | 32,299 | ||||||||
Federal City Council | 50,000 | 0 | 0 |
2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
U.S. Trade Association
| Company Dues and Contributions
| Lobbying
| Amount of
| Company Dues and Contributions
| Lobbying
| Amount of
| Company Dues and Contributions
| Lobbying
| Amount of
| ||||||||||||||||||||||||||||||||||||
National Association of Real Estate Investment Trusts
|
| $130,572
|
|
| 20
|
|
| $26,114
|
|
| $126,740
|
|
| 25
|
|
| $31,685
|
|
| $127,652
|
|
| 25
|
|
| $31,913
|
| ||||||||||||||||||
US Travel Association
|
| 72,500
|
|
| 27
|
|
| 19,575
|
|
| 70,850
|
|
| 27
|
|
| 19,130
|
|
| 104,286
|
|
| 38
|
|
| 39,629
|
| ||||||||||||||||||
Real Estate Roundtable
|
| 30,000
|
|
| 65
|
|
| 22,750
|
|
| 30,000
|
|
| 65
|
|
| 19,250
|
|
| 45,000
|
|
| 65
|
|
| 29,250
|
| ||||||||||||||||||
The Real Estate Board of New York
|
| 29,000
| (2)
|
| 9
|
|
| 2,520
|
|
| 29,000
| (2)
|
| 7
|
|
| 1,960
|
|
| 29,000
| (2)
|
| 7
|
|
| 1,960
|
| ||||||||||||||||||
American Hotel & Lodging Association(3)
|
| 74,072
|
|
| 36
|
|
| 26,665
|
|
| 198,085
|
|
| 36
|
|
| 24,881
| (4)
|
| 164,266
|
|
| 34
|
|
| 32,299
| (5)
| ||||||||||||||||||
Federal City Council | 50,000 | 0 | 0 | 50,000 | 0 | 0 |
(1) | Lobbying percentages obtained from the respective trade association. |
(2) | Of this amount, $28,000 were paid in dues and $1,000 were paid in contributions (no contributions were used for lobbying) |
(3) | In addition to |
(4) | AH&LA only uses dues (and not contributions) to fund its lobbying activities. The Company paid AH&LA $69,115 in dues in 2016. |
(5) | AH&LA only uses dues (and not contributions) to fund its lobbying activities. The Company paid AH&LA $94,996 in dues in 2015. |
Meetings and Committees of the Board
The Board met fivefour times in 2015.2017. Each director attended at least 80% of the meetings of the Board and of the committees on which the director served. Under the Corporate Governance Guidelines, directors are expected to attend the annual meeting of stockholders, and all directors attended the annual meeting in 2015.2017. Under our Corporate Governance Guidelines, non-managementour independent directors meet in executive session without management and did so after each regularly scheduled Board meeting in 2015.2017. Mr. Rakowich, the Chair of the Nominating and Corporate Governance Committee and Lead Director, presided over the executive sessions of thenon-management directors.
| ||||||||
meetings held by the Board of Directors | ||||||||
times the independent directors met in executive session without management present | ||||||||
total Board and Committee meetings | ||||||||
of the then current members of the Board attending the Annual Meeting held on May 11, 2017 |
The Board has established three standing committees to assist it in carrying out its responsibilities: the Audit Committee, the Compensation Policy Committee and the Nominating and Corporate Governance Committee. The Board has adopted a written charter for each committee, all of which are available on the Company’s website (http://www.hosthotels.com). Copies of these charters are also available in print to stockholders upon request. See“Attendance and Voting Matters—How can I obtain copies of documents referenced in this proxy statement?” Each committee consists entirely of independent directors in accordance with New York Stock Exchange rules. The Board generally makes committee assignments in May after the annual meeting of stockholders, upon recommendation of the Nominating and Corporate Governance Committee. The Board may from time to time appoint other committees as circumstances warrant. Any new committees will have authority and responsibility as delegated by the Board.
CORPORATE GOVERNANCE AND BOARD MATTERS |
Audit
Members & Meetings | Committee Functions | |
John B. Morse, Jr. (Chair)
Walter C. Rakowich A. William Stein
Number of Meetings in | • Appoints and oversees the independent auditors;
• Approves the scope of audits and other services to be performed by the independent and internal auditors;
• Interviews, discusses and approves the selection of the lead audit partner of the independent auditor;
• Reviews and approves in advance the engagement fees of the outside auditor and allnon-audit services and related fees, and assesses whether the performance ofnon-audit services could impair the independence of the independent auditors;
• Reviews the work and findings, if any, of the internal auditors;
• Reviews the results of internal and external audits, the accounting principles applied in financial reporting, and financial and operational controls;
• Meets with the independent auditors, management representatives and internal auditors;
• Reviews interim financial statements each quarter before the Company files its Quarterly Report on Form10-Q with the SEC;
• Reviews audited financial statements each year before the Company files its Annual Report onForm 10-K with the SEC; and
• Reviews risk exposures and management policies. |
Each member of the Audit Committee, in the business judgment of the Board, meets the qualifications (including independence) and expertise requirements of the New York Stock Exchange and is anMr. Morse, Mr. Rakowich and Mr. Stein are “audit committee financial expert”experts” within the meaning of SEC rules. Our independent and internal auditors have unrestricted access to the Audit Committee. The Report of the Audit Committee appears later in this proxy statement.
CORPORATE GOVERNANCE AND BOARD MATTERS |
Nominating and Corporate Governance
Members & Meetings | Committee Functions | |
Walter C. Rakowich (Chair) Sheila C. Bair Ann McLaughlin Korologos John B. Morse, Jr.
Number of Meetings in | • Makes recommendations to the Board on corporate governance matters and is responsible for keeping abreast of corporate governance developments;
• Oversees the annual evaluation of the Board, its committees and, in conjunction with the Compensation Policy Committee, management;
• Reviews periodically the compensation and benefits ofnon-employee directors and makes recommendations to the Board or the Compensation Policy Committee of any modifications;
• Reviews the composition and tenure of the Board and skills of directors and recommends nomination of Board members and addition of new members, as appropriate;
• Ensures that the Board maintains its diversity;
• Reviews policies and programs on matters of corporate responsibility and sustainability, including environmental, social and other matters; and
• Fulfills an advisory function with respect to a range of matters affecting the Board and its committees, including making recommendations with respect to:
— selection and rotation of committee chairs and committee assignments; and
— implementation, compliance and enhancements to |
In addition, the Chair of the Nominating and Corporate Governance Committee is the Lead Director and presides at all executive sessions of independent directors, determines the agenda for such discussions, and serves as liaison between the independent directors and the Chairman and the Chief Executive Officer.
Compensation Policy
Members & Meetings | Committee Functions | |
Mary L. Baglivo (Chair) Ann McLaughlin Korologos
Gordon H. Smith
Number of Meetings in | • Oversees compensation policies, plans and benefits for the Company’s employees;
• Approves the goals and objectives for compensation of all executive officers of the Company and approves compensation for other members of senior management;
• Advises our Board on the adoption of policies that govern the Company’s annual compensation and stock ownership plans;
• Reviews and approves the Company’s goals and objectives relevant to the compensation of the CEO and evaluates the CEO’s performance in light of those goals and objectives;
• Reviews and advises the Company on the process used for gathering information on the compensation paid by other similar businesses;
• Reviews the Company’s succession plans relating to the CEO and other senior management and discusses with the full Board;
• Reviews periodic reports from management on matters relating to the Company’s personnel appointments and practices; and
• Reviews the demographics of the Company’s workforce as it relates to diversity. |
Role of the Compensation Consultant
Pursuant to its charter, the Compensation Policy Committee is authorized to engage, retain and terminate any consultant, as well as approve the consultant’s fees, scope of work and other terms of retention. Starting in 2010,
CORPORATE GOVERNANCE AND BOARD MATTERS |
the Committee retained Pay Governance LLC as its advisor. Pay Governance advises and consults with the Committee on compensation issues, compensation design and trends, and keeps the Committee apprised of regulatory, legislative, and accounting developments and competitive practices related to executive compensation. Pay Governance assisted the Committee in the design, structure and implementation of the current annual executive compensation program, which was first introduced in 2012, and reviews, at the direction of the Committee, compensation levels, trends and practices annually. Pay Governance does not determine the exact amount or form of executive compensation for any executive officers. See “Compensation Discussion and Analysis—Our Compensation Program.” Pay Governance reports directly to the Committee, and a representativerepresentatives of Pay Governance, when requested, attendsattend meetings of the Committee, isare available to participate in executive sessions and communicatescommunicate directly with the Committee Chair or its members outside of meetings. Pay Governance also served as a consultant retained by the Nominating and Corporate Governance Committee in late 2017 to assist the Committee with its review of the compensation of independent directors. Pay Governance is retained and conducts its work at the direction and request of the Board committees. It is not retained and does no other work directly for the Company.
In compliance with the disclosure requirements of the SEC regarding the independence of compensation consultants, Pay Governance addressed each of the six independence factors established by the SEC with the Compensation Policy Committee. Its responses affirmed the independence of Pay Governance on executive compensation matters. Based on this assessment, the Committee determined that the engagement of Pay Governance does not raise any conflicts of interest or similar concerns. The Committee also evaluated the independence of other outside advisors to the Committee, including outside legal counsel, considering the same independence factors and concluded their work for the Committee does not raise any conflicts of interest.
The Compensation Policy Committee may delegate any or all of its responsibilities to a subcommittee, but did not do so in 2015.2017. The Compensation Policy Committee’s Report on Executive Compensation appears later in this proxy statement.
The Compensation Policy Committee oversees theall of our compensation policies and plans for all employees.practices. Management, at the request of the Committee, has assessed the Company’s compensation programs and has concluded that they do not create risks that are reasonably likely to have a material adverse effect on the Company. This risk assessment process included a review of all material compensation policies and practices, which were discussed with the Committee. The compensation programs of the Company are all centrally designed and centrally administered. The elements of compensation for senior management and upper middle management are also the same: base salary, annual cash incentive awards and long-term incentives. The performance measures for the annual cash incentive awards are (i) Company financial metrics that are based on an annual business plan and budget reviewed and approved by the Board and (ii) personal performance goals that are derived from the annual business plan and budget and Company strategic plan, which tie to measures of long-term success of the Company. The business plan and budget are reviewed quarterly with theat each Board meeting and the strategic plan is addressed annually. The personal goals are drafted by each employee annually and approved by each manager with the intent that there is a common purpose and accountability throughout the Company. Performance measures for long-term incentives are personalstrategic goals corporate goals, whichof the Company, established annually and are tied to the business plan and budget, and total stockholder return measured over a three year period. Total compensation is capped throughout our compensation programs, and the Compensation Policy Committee reviews all senior management compensation and that of any employee earning more than $500,000 in annual target cash compensation, which would includeincludes salary bonus and equity awards.bonus. Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or excessive risk-taking.
Compensation Policy Committee Interlocks and Insider Participation
None of the members of the Compensation Policy Committee is or has been an officer or employee of the Company or had any relationship that is required to be disclosed as a transaction with a related person.
CORPORATE GOVERNANCE AND BOARD MATTERS |
Identification and Evaluation of Director CandidatesProcess for Selecting Directors
Each year theThe Nominating and Corporate Governance Committee reviews withscreens candidates and recommends candidates for nomination by the Board of Directorsfull Board. The Company’s Bylaws provide that the compositionsize of the Board asmay range from three to thirteen. The Board currently believes that an appropriate size is nine to eleven members, allowing, however, for changing circumstances that may warrant a whole and makes a recommendation whether to renominate directors and whether to consider any new persons to be added to the Board.higher or lower number. The Committee considers director candidates suggested by members of the Committee, other directors, stockholders (as discussed below) and management, and has engaged the services of third party firms to assist in identifying and evaluating director candidates. The Committee retained Ferguson Partners Ltd. in the fall of 2015 for this purpose.
We had three new directors in 2017, two of whom are independent. Mr. Risoleo, our CEO, became a Board member on January 1, 2017. Ms. Mary Hogan Preusse was identified as a candidate by Mr. Risoleo and elected to the Board effective in June 2017 on the recommendation of Committee. Mr. Stein was identified as a candidate by Ferguson Partners Ltd. and elected to the Board in July 2017 on the recommendation of the Committee.
Stockholder Nominations and Recommendation of Director Candidates
The Committee will also considerconsiders any written suggestions of stockholders for director nominees. The recommendation must include the name and address of the candidate, a brief biographical description and a description of the person’s qualifications. Recommendations should be mailed to Host Hotels & Resorts, Inc., 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817, Attn: Secretary. The Committee will evaluate
In addition, we amended our Bylaws in November 2016 to permit a stockholder (or group of up to 20 stockholders) who have owned at least 3% of our stock continuously for at least three years to submit director nominees for the same manner candidates suggestedgreater of two individuals or 20% of the Board for inclusion in accordance with this policyour proxy statement if the stockholder(s) and those recommended by other sources. The Committee has full discretion in considering all nominations tonominee(s) meet the Board. Alternatively, stockholdersrequirements of the Bylaws.
Stockholders who would like to nominate a candidate for director (in lieu of makingfor inclusion in the Company’s proxy statement, or who would like to nominate a recommendationdirector candidate that is not intended to be included in the Nominating and Corporate Governance Committee)Company’s proxy statement must in each case comply with the requirements described in this proxy statement and the Company’s Bylaws. See “Stockholder Proposals for our Next Annual Meeting.”
The evaluation of director candidates involves several steps, not necessarily in any particular order. Preliminary interviews of director candidates may be conducted by the Chair of the Committee or, at his request, any other member of the Committee, the Chairman of the Board, or other directors. Background material pertaining to director candidates is distributed to the members of the Committee for their review. References are checked and analyses are performed to identify potential conflicts of interest and appropriate independence from the Company. Director candidates who the Committee determines merit further consideration are interviewed by the Chair of the Committee and other Committee members, directors and executive officers as determined by the Chair of the Committee. The results of these interviews are considered by the Committee in its deliberations.
There are certain minimum qualifications for Board membership that director candidates should possess, including integrity and high ethical standards, mature and independent judgment, diverse business experience, familiarity with the issues affecting the Company’s business, and a commitment to full participation on the Board and its committees. The Committee has adopted guidelines in its charter to be used in evaluating candidates in order to ensure a diverse and highly qualified Board. In addition to the characteristics mentioned above, the guidelines provide that the Committee may consider the following criteria, including: experience in running a major enterprise, sound business acumen, experience as a board member of another publicly held company, academic expertise in an area of the Company’s operations, and a reputation, both personal and professional, consistent with the image and reputation of the Company. In addition, when considering new Board members, the Committee considers whether the candidate would qualify as an independent director under New York Stock Exchange rules and other applicable regulations.HOW WE BUILD A BOARD THAT IS RIGHT FOR HOST
The current members of the Board of Directors have served for an average of approximately 13 years. Independent directors have served for an average of approximately 10 years. The Nominating Committee and the Board believe it is important for the Board to be “refreshed” by adding new directors from time to time and three of the current directors, or 33% of the Board, have served for less than five years and the median Board tenure of independent directors is slightly less than 7 years. However, the Committee and the Board also believe that long-serving directors bring critical skills to the Board. Among other things, such senior directors bring a historical perspective to the Board, which is highly relevant in a cyclical business such as the lodging industry. In addition, the Committee and the Board believe that long-serving directors have acquired extensive knowledge of the business that tends to make them less dependent upon management for information and perspectives. Accordingly, while the Committee considers tenure as a factor in determining the nominee slate, it is not a critical or determinative factor.
The Board is also committed to a diversified membership, in terms of both the individuals involved and their experience. As stated in the Committee’s charter, the Committee may take into account the overall diversity of the Board, including professional background, experience, perspective, age, tenure, gender, and ethnicity. The Board is satisfied that the current nominees reflect an appropriate diversity of gender, race, age, professional background and experience, but is committed to continuing to consider diversity issues in evaluating the composition of the Board.
The Board continuously identifies potential director candidates in anticipation of retirements, resignations, or the need for additional capabilities. The graphic below describes the ongoing Nominating and Corporate Governance Committee process to identify highly qualified candidates for Board service. | ||||
Consider current Board skill sets and needs | Ensure Board is strong in core competencies of strategic oversight, corporate governance, stockholder advocacy and leadership and has diversity of expertise and perspective | |||
Consider qualified candidates | Looking for exceptional candidates that possess integrity, independent judgment, broad business experience, diversity and a skill set to meet existing or future business needs | |||
Check conflicts of interest and references | All candidates are screened for conflicts of interest, and all directors are independent, except the CEO and Chairman | |||
Nominating and Corporate Governance Committee | To consider shortlisted candidates; after deliberations, Committee recommends candidates for election to the Board | |||
Board dialogue and decision—Commitment to refreshment and diversity | Added four highly qualified directors in the past two years; four of the last six Board members added are either women or bring diversity to the Board |
PROPOSALS REQUIRING YOUR VOTE |
Proposal One—Election of Directors
Our Board of Directors currently consists of nine members. Each director nominee standshas nominated 11 directors for election every year.at this Annual Meeting to hold office until the next Annual Meeting and the election of their successors. All the nominees are currently directors. Each nominee has consented to serve if elected, but should any director nominee be unavailable to serve (an event which our Board does not now anticipate), the proxies named on your proxy card will vote for a substitute nominee recommended by the Board. Alternatively, should such circumstances arise, the Board, on the recommendation of the Nominating and Corporate Governance Committee, may decide to reduce the size of the Board and the number of nominees.
Each director nominee stands for election every year. Except in a contested election, each director will be elected only if he or she receives more votes “for” than votes “against”. As set forth in the Company’s Corporate Governance Guidelines, any director nominee who is not elected by the vote required and who is an incumbent director must immediatelypromptly tender his or her resignation to the Board for consideration. The Nominating and Corporate Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation, or whether other action is recommended. The Board will act on the tendered resignation within 90 days and will promptly disclose its decision and rationale as to whether to accept the resignation or the reasons for rejecting the resignation. If a director’s resignation is accepted by the Board, or if a nominee for director is not elected and is not an incumbent director, the Board may fill the resulting vacancy or decrease the size of the Board.
It is the responsibility of theBoard Skills, Qualifications, Diversity and Tenure
The Nominating and Corporate Governance Committee to identify, evaluate and recommend prospective director candidates for the Board, in accordance with the policy and procedures described in the Committee’s charter and the Company’s Corporate Governance Guidelines. The Committee regularly reviews the composition of the Board in light of the Company’s changing requirements and its annual assessment of the Board’s performance. The Committee seeks to includeand Board seek a complementary mix of individuals with diverse backgrounds and skills reflecting the broad set of challenges that the Board confronts. For more information on this process, see “Corporate Governance—Identification and Evaluation of Director Candidates.”
In assessingThere are general qualifications for nominees, the Committee expectsthat all candidates to meet the qualificationsDirectors must have, which are described in the Committee’s charter and the Company’s Corporate Governance Guidelines, including integrity and high ethical standards, mature and independent judgment, diverse business experience, familiarity with the issues affecting the Company’s business, and a commitment to full participation on the requisite timeBoard and abilityits committees. The Committee also considers other criteria, including: experience in running a major enterprise, sound business acumen, experience as a board member of another publicly held company, academic expertise in an area of the Company’s operations, and a reputation, both personal and professional, consistent with the image and reputation of the Company.
The Board and the Committee are also committed to attend meetingsa diversified membership, in terms of both the individuals involved and fully participatetheir experience. As stated in the activitiesCommittee’s charter, the Committee may take into account the overall diversity of the Board.Board, including professional background, experience, thought, perspective, age, tenure, gender, and ethnicity.
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Proposal 1 Election of 11 Directors The Committee believes thatBoard recommends a vote FOR each of the director nominees possesses these key attributes thatDiverse slate of directors with broad leadership experience Four of the last six Board members added are importanteither women or bring diversity to an effective Board. Each director nominee holds or has held senior executive positionsthe Board All candidates highly successful executives in large organizations or the government with relevant skills and has experience relevantexpertise Commitment to the Company’s business. Ourrefreshment—4 directors also serve on the boards of other public and private companies and have an understanding of corporate governance practices and trends. The Committee also takes into account diversity considerations in determining the slate of directors and believes that, as a group, the nominees bring a broad range of perspectives to Board deliberations. In addition to the above, the Committee also considered the specific experiences describedadded in the last two years Median director tenure 5.4 years
PROPOSALS REQUIRING YOUR VOTE |
The Board and the Nominating and Corporate Governance Committee believe it is important for the Board to be “refreshed” by adding new directors from time to time. However, the Committee and the Board also believe that long-serving directors bring critical skills to the Board. Among other things, such senior directors bring a historical perspective to the Board, which is highly relevant in a cyclical business such as the lodging industry. In addition, the Committee and the Board believe that long-serving directors have acquired extensive knowledge of the business that tends to make them less dependent upon management for information and perspectives. Accordingly, while the Committee considers tenure as a factor in determining the nominee slate, it is not a critical or determinative factor. | 2016 & 2017 BOARD REFRESHMENT |
The Committee believes that each of the nominees possesses the key attributes that are important to an effective Board. Each director nominee holds or has held senior executive positions in large organizations or the government and has experience relevant to the Company’s business. Our directors also serve on the boards of other public and private companies and have an understanding of corporate governance practices and trends. The Committee has also taken into account diversity considerations in determining the slate of directors and believes that, as a group, the nominees bring a broad range of perspectives to Board deliberations. The director nominees have served on our Board for an average of approximately 8.5 years. The median tenure of our director nominees is 5.4 years. Four of the director nominees, or 36% of the Board, have served for less than two years, and three directors were added in 2017. The Committee also considered the specific experiences described in the biographical details that follow in determining to nominate the individuals set forth below for election as directors. | INDEPENDENCE TENURE |
Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that follow in determining to nominatecovers the individuals set forth belowassessment for election as directors.the full Board.
DIVERSITY OF BACKGROUND
PROPOSALS REQUIRING YOUR VOTE |
The Board of Directors unanimously recommends that you vote FOR each of the nominees for director.
NOMINEES FOR DIRECTOR
MARY L. BAGLIVO | Ms. Baglivo is Vice Chancellor Communications and Marketing for Rutgers University and formerly was the Vice President for Global Marketing and Chief Marketing Officer for Northwestern
Skills and Expertise:
• in depth global marketing, advertising and consumer branding experience
• strategic planning expertise
• extensive business and leadership experience of large complex companies, including as Chair and CEO of the Americas at Saatchi & Saatchi Worldwide
• understanding of growth strategies in worldwide branded businesses
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Age: Director since:2013
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Committees: Compensation (Chair)
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Public Boards:
PVH Corp.
Ruth’s Hospitality
Group
SHEILA C. BAIR | Ms. Bair is the former President of Washington College. She is also the former Chair of the Federal Deposit Insurance Corporation, where she served in that capacity from 2006 to 2011. From 2002 to 2006 she was the Dean’s Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst. She also served as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury (2001 to 2002), Senior Vice President for Government Relations of the New York Stock Exchange (1995 to 2000), Commissioner of the Commodity Futures Trading Commission (1991 to 1995), and as counsel to Kansas Republican Senate Majority Leader Bob Dole (1981 to 1988). She continues her work on financial policy issues as
Skills and Expertise:
• extensive expertise in banking and finance as a result of her services as Chair of the FDIC
• recognized leader and author on financial policy issues
• broad government and regulatory experience both from her service at the FDIC as well as prior service in senior positions at the NYSE, CFTC and the U.S. Department of the Treasury
• audit committee financial expert
• familiarity with aspects of managing and providing leadership to complex business organizations • familiarity and experience with global financial systems as an independent director for China’s largest bank, an advisor to the China Bank Regulatory Commission, and as a former board member and current advisor to Grupo Santander, one of Europe’s largest banks | |
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Age:64
Director since:2012
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Committees:
Corporate Governance | ||
Public Boards: Thomson Reuters
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PROPOSALS REQUIRING YOUR VOTE |
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Skills and Expertise:
•
•
• • board oversight expertise, serving on the boards of three other public real estate companies | |
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Age:49 Director since:2017
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Nominating and
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Public Boards: Digital Realty Trust Kimco Realty VEREIT | ||
SANDEEP L. MATHRANI | Mr. Mathrani is the Chief Executive Officer and a director of GGP Inc. Prior to GGP, he served as the President of Retail at Vornado Realty Trust from 2002 to 2010, and was responsible for all retail real estate activities in the United States and India. Prior to Vornado, he served as an Executive Vice President at Forest City Ratner Companies, LLC from 1994 to 2002 and was responsible for its retail development and related leasing in the New York City metropolitan area. Mr. Mathrani is a director of Century 21, Inc., an Executive Board member and First Vice Chair of the National Association of Real Estate Investment Trusts, a member of the Real Estate Roundtable, and a member of the Executive Board and Board of Trustees of the International Council of Shopping Centers. Skills and Expertise: • significant experience as CEO and a director of GGP, a large real estate investment trust focused on retail real estate • real estate industry veteran with over 20 years of experience • extensive familiarity with all aspects of managing and providing leadership to a complex business organization | |
Age:55 Director since:2016 | ||
Committees: Audit Compensation | ||
Public Boards: GGP Inc. | ||
PROPOSALS REQUIRING YOUR VOTE |
ANN MCLAUGHLIN | Ms. Korologos served as the Chair of the Board of Trustees of the RAND Corporation, an international public policy research organization from April 2004 to April 2009. From October 1996 to December 2005 she served as Senior Advisor to Benedetto, Gartland & Company, Inc., a private investment banking firm in New York. She formerly served as President of the Federal City Council from 1990 until 1995 and as Chairman of the Aspen Institute from 1996 until 2000. Ms. Korologos has served in several United States Administrations in such positions as Secretary of Labor from 1987 to 1989 and Under Secretary of the Department of the Interior from 1984 to 1987. She also serves as a director of Michael Kors,
Skills and Expertise:
• significant experience as a director of large, diversified, global public companies
• recognized expertise and leadership in the oversight of public companies (including specific experience in compensation, audit, diversity, governance, and social responsibility oversight)
• through her
• public policy, social responsibility and succession issues expertise
• vast knowledge of and long-term experience with the Company, serving as a director since 1993 | |
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Age:76
Director since:1993
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Committees: Compensation Nominating and
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Public Boards: Michael Kors | ||
RICHARD E. MARRIOTT | Mr. Marriott is our Chairman of the Board. He is Chairman of the Board of First Media Corporation, the Chairman and a director of the J. Willard Marriott and Alice S. Marriott Foundation and a director of the Richard E. and Nancy P. Marriott Foundation. Mr. Marriott also serves on the Federal City Council and the National Advisory Council of Brigham Young University. He previously served on the Board of Marriott International, Inc. and is a past President of the National Restaurant Association and a past director of the Polynesian Cultural Center. In addition, Mr. Marriott is the President and a Trustee of the Marriott Foundation for People with Disabilities.
Skills and Expertise:
• comprehensive knowledge of the Company and unique perspective and insight into the hospitality industry based on a
• during his tenure, Mr. Marriott has served in various executive capacities
• long history of successful management of the Company | |
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Chairman of the Board
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Age:79
Director since:
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PROPOSALS REQUIRING YOUR VOTE |
JOHN B. MORSE, JR. | Mr. Morse served as Vice President, Finance and Chief Financial Officer of The Washington Post Company (now Graham Holdings Company) from November 1989 until his retirement in December 2008. He also served as President of Washington Post Telecommunications, Inc. and Washington Post Productions Inc., both subsidiaries of The Washington Post Company. Prior to joining The Washington Post Company, Mr. Morse was a partner at PricewaterhouseCoopers. Mr. Morse is a
Skills and Expertise:
• substantial financial expertise that includes extensive knowledge of the complex financial and operational issues facing large companies
• in-depth understanding of accounting principles and financial reporting rules and regulations acquired in the course of serving as the CFO of The Washington Post Company and his years as a partner at PricewaterhouseCoopers
• board oversight expertise as an audit committee financial expert and a member of the audit committees of other public company boards | |
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Age:71
Director since:2003
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Committees: Audit (Chair) Nominating and | ||
Public Boards: AES Corporation
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WALTER C. RAKOWICH | Mr. Rakowich is the retired Chief Executive Officer of Prologis, where he also served as a director of its board upon completion of the merger with AMB Property Corporation in 2011, and prior to that merger, as a trustee of the board since 2004. At Prologis, Mr. Rakowich served asCo-Chief Executive Officer from
Skills and Expertise: • significant real estate and financial experience, including extensive knowledge of the issues facing large international real estate investment trusts
• from 1998 to 2012, Mr. Rakowich served, over time, as chief financial officer, chief operating officer and chief executive officer of Prologis, a real estate investment trust focused on industrial real estate with extensive international operations
• brings valuable experience to the Board on issues facing the Company’s international portfolio, risk assessment and leadership development
• extensive experience in accounting through his years at Pricewaterhouse
• audit committee financial expert | |
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Age:60
Director since:2012 Lead Director
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Committees: Audit Nominating and (Chair) | ||
Public Boards: Iron Mountain Ventas, Inc. | ||
PROPOSALS REQUIRING YOUR VOTE |
JAMES F. RISOLEO | Mr. Risoleo became our President and Chief Executive Officer in January 2017. He joined our Company in 1996 as Senior Vice President for Acquisitions, and was appointed Executive Vice President and Chief Investment Officer in 2000. In 2012, he became Executive Vice President and Managing Director of the Company’s European business activities and, in 2015, Mr. Risoleo assumed leadership for all of the Company’s West Coast investment activities in addition to Europe. Prior to joining our Company, Mr. Risoleo was Vice President, Development at Interstate Hotels Corporation and a Senior Vice President at Westinghouse Electric Corporation. Mr. Risoleo serves as thenon-executive Chairman of Cole Office & Industrial REIT, a public non-listed REIT and is a member of its audit committee. He serves on the Board of Governors of NAREIT and on the CEO Roundtable of U.S. Travel and is a member of the Real Estate Roundtable and the AH&LA Executive Committee. Mr. Risoleo is also a member of the Bar of the State of Pennsylvania. Skills and Expertise: • extensive business and leadership experience • significant expertise in finance, capital markets, real estate and the hospitality industry • extensive international experience, including leading the Company’s European investment strategy • extensive knowledge of the Company as a member of senior management for over 20 years, serving in various roles within the Company and culminating in his current service as CEO | |
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President and Chief Executive Officer | ||
Age:62 Director since:2017 | ||
Public Boards: Cole Office &
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GORDON H. SMITH | Senator Smith is President and
Skills and Expertise:
• high-level U.S. government experience and leadership as a United States Senator
• extensive knowledge of public policy, international affairs and trade and law
• significant business experience and knowledge of finance, accounting and | |
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Age:65
Director since:2009
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Committees: Compensation
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PROPOSALS REQUIRING YOUR VOTE |
A. WILLIAM STEIN | Mr. Stein is the Chief Executive Officer and a director of Digital Realty Trust. Prior to being named CEO in 2014, he served as Chief Financial Officer and Chief Investment Officer. Before joining Digital Realty in 2004, Mr. Stein was with GI Partners, a private equity fund of which Digital Realty was a portfolio company. Past positions include serving asCo-Head of VentureBank@PNC and Media and Communications Finance at The PNC Financial Services Group; President and Chief Operating Officer of TriNet Corporate Realty Trust (acquired by iStar Financial) and a variety of senior investment and financial management positions with Westinghouse Electric, Westinghouse Financial Services and Duquesne Light Company. In addition, Mr. Stein practiced law for eight years, specializing in financial transactions and litigation. Mr. Stein serves on the Executive Board and as Treasurer of NAREIT and is a member of the Fisher Center for Real Estate & Urban Economics Policy Advisory Board. He is also a member of the University of Pittsburgh Chancellor’s Global Advisory Council. Skills and Expertise: • over 30 years of investment, financial and operating management experience • in-depth understanding of the real estate industry and the issues facing real estate investment trusts • extensive leadership experience including as CEO of Digital Realty Trust, a real estate investment trust focused on data centers, and has overseen a doubling of the company’s total enterprise value, as well as its inclusion in the S&P 500 Index • audit committee financial expert | |
Age:64 Director since: 2017 | ||
Committees: Audit | ||
Public Boards: Digital Realty Trust | ||
PROPOSALS REQUIRING YOUR VOTE |
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Proposal Two—RatificationSummary of Appointment of Independent Registered Public Accountants2018 Director Qualifications and Experience
The Audit Committee is directly responsible for the appointment, compensation, retentionNominating and oversight of the independent registered public accountants retained to audit the Company’s financial statements. The Audit Committee has unanimously approved and voted to recommend that the stockholders ratify the appointment of KPMG LLP as independent registered public accountants of the Company for 2016. Representatives of KPMG LLP will be at the annual meeting and will be given the opportunity to make a statement, if they desire to do so, and to respond to questions.
KPMG LLP has been retained as the Company’s independent registered public accountant since 2002. In determining whether to reappoint the independent accountant, the Audit Committee considers the length of time the firm has been engaged, the quality of the discussions with the independent accountant and its annual assessment of the past performance of both the lead audit partner and KPMG LLP. A new lead audit partner is designated at least every five years as required by the SEC to ensure independence, and to provide a fresh perspective. The Audit Committee and its Chair are directly involved in the selection of the lead audit partner. The Audit Committee is responsible for the negotiation of audit fees associated with the Company’s retention of KPMG LLP.
Although ratification is not required by our Bylaws, the Board is submitting the selection of KPMG LLP to our stockholders for ratification as a matter of good corporate practice. The members of the AuditCorporate Governance Committee and the full Board believe that the continued retentiona complementary mix of KPMG LLP todiverse skills, attributes, and experiences will best serve as the Company’s independent registered public accountants is in the best interests of the Company and its stockholders.
If The director skills summary that appears below, and the selection is not ratified,related narrative for each director nominee, notes the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even ifspecific experience, qualifications, attributes, and skills for each director that the selection is ratified,Board considers important in determining that each nominee should serve on the Audit CommitteeBoard in its discretion may select a different public accounting firm at any time during the year if it determines that such a change would be in the best interestslight of the CompanyCompany’s business, structure, and its stockholders.strategic direction. The absence of a “•” for a particular skill does not mean the director in question is unable to contribute to the decision-making process in that area.
The Board of Directors unanimously recommends a vote FOR ratification of the appointment of KPMG LLP as independent registered public accountants of the Company for 2016.
PROPOSALS REQUIRING YOUR VOTE |
Proposal Three—Advisory Resolution to Approve Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the Company seek anon-binding advisory vote from its stockholders to approve executive compensation. Since the required vote is advisory, the result of the vote is not binding upon the Company or the Board. In 2011, the Board recommended that this advisory resolution to approve named executive officer compensation be conducted annually and stockholders voted in favor of this recommendation by a substantial majority. Accordingly, the Board has determined that it will hold an advisory resolution to approve named executive officer compensation annually until the next vote to determine the frequency of such an advisory vote, which shall occur at the 2017 annual meeting of stockholders.
We urge stockholders to read the “Compensation Discussion and Analysis”, which describes how our executive compensation policies operate and how they are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative which provide detailed information on the compensation of our named executive officers. Our executive compensation program is designed to provide the opportunity to earn a competitive level of compensation necessary to attract, motivate and retain talented and experienced executives and to motivate them to achieve short-term and long-term corporate goals that enhance stockholder value. Highlights of the Company’s compensation programs include the following:
The Compensation Policy Committee and the Board believe that these policies are effective in implementing our compensation philosophy, in achieving its goals, and have been effective at incenting the achievement of the Company’s strong financial performance.
For the reasons stated above, the Board of Directors unanimously recommends a vote FOR“FOR” approval of the following resolution:
“RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as described in the Compensation Discussion and Analysis and in the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.”
Effect of Proposal
This advisory resolution to approve named executive officer compensation, commonly referred to as a “say-on-pay”“say-on-pay” resolution, isnon-binding on the Board of Directors. The approval or disapproval of this proposal by stockholders will not require the Board, the Compensation Policy Committee or the Company to take any action regarding the Company’s executive compensation practices. Althoughnon-binding, the Board and the Compensation Policy Committee will carefully review and consider the voting results when evaluating our future executive compensation program.
PROPOSALS REQUIRING YOUR VOTE |
Proposal Four—Approval of a Charter Amendment to Provide Stockholders with the Concurrent Power to Amend the Company’s Bylaws
Our Board of Directors has declared advisable and recommends that stockholders approve an amendment to the Company’s Charter to provide the Board of Directors and the Company’s stockholders with the concurrent power to amend the Company’s Bylaws. The full text of the proposed Charter amendmentSet forth below is set forth as Appendix A to this proxy statement.
General Information
At the 2015 Annual Meeting of Stockholders of the Company, a stockholder proposal recommending that our Board take all steps necessary to allow stockholders to amendsubmitted by UNITE HERE, 275 Seventh Avenue, New York, New York 10001, the Bylaws received the affirmative votebeneficial owner of 80%339 shares of the votes cast on the proposal. Currently, both the Charter and Bylaws provide the BoardCompany’s common stock, along with the exclusive power to amend the Bylaws. In light of the support of our stockholders for theits supporting statement. The stockholder proposal and based upon discussions with our stockholders, the Nominating and Corporate Governance Committee recommended to the Board and the Board is submitting this Charter amendment for approval in order to implement the prior stockholder proposal. Because a Charter amendment is required the Board is not able to implement the proposal without further action by the stockholders at this annual meeting. Any amendments to the Bylaws proposed by stockholders would require approval by the affirmative vote of the holders of a majority of the shares entitled to be cast on the matter.
The Board of Directors has also approved, subject to approval of this Charter amendment by the stockholders, an amendment to Article XIV of the Bylaws to provide that the Bylaws may be amended as contemplated by the Charter amendment. The Bylaw amendment does not require stockholder approval and will take effect subject to approval of the Charter amendmentvoted upon at the annual meeting only if properly presented at the annual meeting by UNITE HERE.
Proposal:
“Shareholders request Host Hotels & Resorts (“Host”) issue an annual sustainability report with due diligence about operations at Host’s properties, including the impact on investors of hotel operators’ environmental, human rights, and labor practices. The reports should be prepared at reasonable cost, omitting proprietary information, and the first report should be available to shareholders in advance of the 2019 annual meeting.
ConclusionWe recommend Host ask its hotel operators to use the Global Reporting Initiative’s (“GRI”) Sustainability Reporting Standards to prepare the report(s). The Standards cover environmental impacts, human rights, and Recommendation; Vote Requiredlabor practices, and provide a flexible reporting system that allows omission of content irrelevant to company operations.”
UNITE HERE’s Supporting Statement:
“The GRI provides the mostwidely adopted global standards for sustainability reporting. According to GRI, “[t]he practice of disclosing sustainability information inspires accountability, helps identify and manage risks, and enables organizations to seize new opportunities. Reporting with theGRI Standards supports companies, public and private, large and small, protect the environment and improve society, while at the same time thriving economically by improving governance and stakeholder relations, enhancing reputations and building trust.”
The BoardUN Principals of Directors is submittingResponsible Investment (UNPRI) has over 1750 signatories, with ~$70 trillion in assets, including many of Host’s own investors, who publicly commit to “seek appropriate disclosure on ESG [environmental, social and recommendinggovernance] issues by the Charter amendment set forth as Appendix Aentities in which [they] invest” and to “incorporate ESG issues into investment analysis and decision making.” This type of diligence generates value for shareholders.
Hotel owners are reporting on the environmental footprint of hotel operations, but pay less attention to the Company’s stockholders for approval. The approvalhuman capital dimensions of these operations—the thousands of people providing hospitality services. Host does not presently require hotel operators to provide reporting on social or governance factors, a notable diligence gap given the centrality of guest services to Host’s business.
Host has acknowledged that, although it does not directly employ workers, it is “subject to many of the Charter amendment requires the affirmative vote of at least two-thirds of all the votes entitled to be cast on the proposal.
For the reasons stated above, the Board of Directors unanimously recommends a vote“FOR” approval of the Charteramendment to provide the Board of Directorscosts and the Company’s stockholdersrisks generally associated with the concurrent powerhotel labor force,” and that it [is] subject to amendrisk when hotel operations are disrupted. (2016 Form10-K at27-28.) Through their taxable subsidiaries, real estate investment trusts like Host are able to collect income from operations within their properties, which go beyond income from lease payments (see 26 USC §§856-857).
After the Bylaws.Starwood merger, 78% of Host’s properties were managed or franchised by Marriott. As Host has acknowledged, “[a]ny adverse developments in Marriott’s business and affairs or financial condition… could have a
PROPOSALS REQUIRING YOUR VOTE |
Proposal Five—Approval of a Charter Amendmentmaterial adverse effect on us.”(10-K at 27.) Marriott International’ssustainability reporting, which ceased using the GRI sustainability framework after 2014, provides much less detail to Reduceinvestors than Starwood Hotels’premerger reporting, which used the Threshold Required for StockholdersGRI framework.
We urge shareholders to Call Special Meetingsrecommend Host provide comprehensive disclosure about its sustainability practices, including reporting from hotel operators about environmental, human rights, and labor practices, by committing to using, and requiring its operators to use, the GRI sustainability framework.”
Our Board of Directors has declared advisableStatement Opposing the Stockholder Proposal
After careful consideration, our Board and recommends that stockholders approve an amendment to the Company’s Charter reducing from a majority to 25% the requisite percentage of stockholders required to call a special meeting of stockholders. The full text of the proposed Charter amendment is set forth as Appendix B to this proxy statement.
General Information
The Maryland General Corporation Law generally provides that, except as otherwise provided in a corporation’s charter or bylaws, the secretary of a corporation shall call a special meeting of the stockholders on the written request of stockholders entitled to cast at least 25% of all the votes entitled to be cast at the meeting, provided that, unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of the stockholders held during the preceding 12 months. Currently, as permitted by Maryland law, the Charter and Bylaws of the Company include a higher threshold and provide that the Secretary of the Company shall call a special meeting of stockholders on the written request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting (for all matters and not just those already voted on during the preceding 12 months).
Theits Nominating and Corporate Governance Committee andbelieve that the Board continue to implement corporate governance enhancements to serve the long-term interests of all stockholders. See “Corporate Governance and Board Matters” earlier in this proxy statement for examples of other reforms taken in prior years. The Board believes that decreasing the required ownership threshold for stockholders to call a special meeting from a majority to 25% strikes a reasonable balance between enhancingabove-described stockholder rights and preventing a small minority of stockholders from calling a special meeting solely to pursue agendas that mightproposal is not be in the best interests of the Company and its stockholders in general. In reachingstockholders. The Board recommends a vote “Against” adoption of this conclusion,stockholder proposal for the Board consideredfollowing reasons.
Host Hotels & Resorts has a demonstrated commitment to corporate responsibility and sustainability. Over the views expressed on this matter by a number ofpast 10 years, our properties, communities and stakeholders have benefited from the Company’s stockholders (including leading institutional investors) basedproper focus on discussionsenvironmental, social and governance issues and initiatives. We have spent hundreds of millions of dollars on improvements at our properties, which have reduced their environmental impact and contributed positively to stockholder value. Our team of hospitality and sustainability professionals work with them. The Boardour hotel managers to constantly improve business operations and reduce the impact of our properties on the environment, as evidenced by projects including renewable solar power installations, LED lighting,in-room energy management systems, water saving fixtures and core building infrastructure upgrades to heating and cooling. We are also consideredcommitted to the practices and experiences of other leading companies, and notes that one recent study found that a 25% threshold iscommunities in which we do business. In the most common threshold for Delaware incorporated S&P 500 companies while, as noted above, the Maryland statutory default threshold is also 25%. The Board does not believe a threshold lower than 25% is advisable because special meetings of stockholders should be extraordinary events that occur when strategic concerns require that the matters to be addressed not be delayed until the next annual meeting of the stockholders. Moreover, because special meetings are expensive forpast two years the Company and potentially disruptiveits 200 employees contributed to its normal businessover 145 charities and organizations, and volunteered more than 1,000 hours of community service. The Company likewise is committed to fostering human rights, employee health and safety, and compliance with local wage and labor regulations and practices.
In addition, we are committed to transparency and keeping our stockholders informed of our progress. Accordingly, the corporate responsibility section of our website(https://www.hosthotels.com/corporate-responsibility/strategy-and-themes) thoroughly communicates our approach and activities on environmental, social and governance matters.
The leadership demonstrated by our corporate responsibility program has been confirmed by the recognition we have received, including:
• | 1st position in the Hotels sector and1st position in the U.S. for listed companies from Global Real Estate Sustainability Benchmark (GRESB), a leading sustainability benchmark for the real estate industry; and Green Star designation recipient, which recognizes outstanding management and implementation of key sustainability issues; |
Under the proposed Charter amendment the threshold required for stockholders to call a special meeting will be reduced from a majority to 25%. However, the exception provided for under Maryland law noted above will continue to apply for considerationsetting of any matter which is substantially the same as a matter voted on at any meetingmeaningful targets and emissions reduction activities and verified emissions data;
The Board has also approved, subject to approval
Conclusion and Recommendation; Vote Required
The Board of Directors is submitting and recommending the Charter amendment set forth as Appendix B to the Company’s stockholders for approval. The approval of the Charter amendment requires the affirmative vote of at least two-thirds of all the votes entitled to be casttop-ranked real estate company on the proposal.U.S. 500 list from Newsweek’s 2017 Green Rankings;
For the reasons stated above, the Board of Directors unanimously recommends a vote“FOR” approval of the Charter amendment reducing the threshold required for stockholders to call a special meeting.
PROPOSALS REQUIRING YOUR VOTE |
Proposal Six—ApprovalIn addition, the Company was also featured in the Sustainability Accounting Standard Board’s “The State of Disclosure: An Analysis of the AmendedEffectiveness of Sustainability Disclosure in SEC Filings 2017” in the “Overview—Standout Reporting Demonstrates Leadership” section.
The proposal requests that we produce a very specific form of sustainability report based on the guidelines published by the Global Reporting Initiative (“GRI”), which requires the assessment of nearly 100 indicators of performance in various areas of the Company’s operations. The proposal does not recognize or explain the burden that this reporting would impose on the Company. We believe that preparing a report in compliance with GRI’s complex and Restated Employee Stock Purchase Plantechnical guidelines would require a substantial commitment of time and money without adding any meaningful benefit to Increase Shares Reserved for Issuanceour management team in the way we currently run our business. We further believe that restricting the form of sustainability reporting to these guidelines is too limiting and that such reporting would not add any measurable stockholder value.
Overview
We are requesting that our stockholders approveAdditionally, the amendmentproposal does not take into consideration reporting done by the Company’s largest operators, all of which already publishGRI-aligned indices and restatement of our existing Employee Stock Purchase Plan (the “Purchase Plan”) to increase by 200,000 shares the number of shares of our common stock currently reserved for issuance under the Purchase Plan. No other changesreports. This includes, despite UNITE HERE’s assertions to the Purchase Plan are being requested. contrary, Marriott International which has available on its website “Serve 360: Doing Good in Every Direction Sustainability and Social Impact Platform” as well as its55-pageGRI-aligned 2017 Marriott Sustainability and Social Impact Report. More information can be found at: http://www.marriott.com/corporate-social-responsibility/performance.mi. Having the Company prepare a full-scale GRI sustainability report that includes reporting from hotel operators would be largely duplicative of information already available through their websites and not further stockholder value.
In this proxy statement, we sometimes refer tosummary, the proposed amendedBoard believes that the Company has in place the appropriate policies, practices and restated Employee Stock Purchase Plan asdisclosure concerning environmental, social and governance matters, and its major operators haveGRI-aligned sustainability reports available on their websites. As such, the “Restated Purchase Plan.”Board believes that the annual preparation of a formal GRI sustainability report would not provide any meaningful additional value or information for our stockholders.
On February 5, 2016, ourFor the reasons stated above, the Board of Directors approvedunanimously recommends a vote “Against” the Restated Purchase Plan, subject to stockholder approval at the annual meeting. The Restated Purchase Plan will become effective on the dayproposal
Effect of the annual meeting, assuming approval of this proposal by our stockholders. Approval of the plan requires theProposal
The affirmative vote of a majority of all the votes cast on the stockholder proposal at the annual meeting.
There are 612,896 shares of our common stock currently authorizedmeeting is necessary for issuance under the existing Purchase Plan. The initial 600,000 authorized shares were proportionately adjusted by 12,896 shares to 612,896 in order to account for the Company’s 2009 stock dividend to all stockholders. The current shares have lasted since 1998 and no increases have been requested in that time. As of March 15, 2016, only 36,305 shares remained available for issuance under the existing Purchase Plan. If approved by the stockholders, the Restated Purchase Plan will provide for an increase of 200,000 shares over the remaining 36,305 shares.
In general, stockholder approval of the Restated Purchase Plan will implement the share reserve increase while (1) complying with the terms of the Purchase Plan regarding amendments and (2) meetingproposal. If approved, the stockholder approval requirements of the New York Stock Exchange. If this Proposal Six is approved, the Restated Purchase Plan will amend and restate the existing Purchase Plan; however, the share reserve increase is the only change thatproposal would be made.
If this Proposal Six is not approved, the Restated Purchase Plan will not become effective, the existing Purchase Plan will continue in full force and effect, and Company employees may continue to purchase our common stock under the existing Purchase Plan, subject to its terms, conditions and limitations, using the remaining shares that are available for issuance.
Why You Should Vote for the Restated Purchase Plan
We firmly believe that the Purchase Plan is a necessary and powerful incentive and retention tool that benefits our stockholders. Specifically, the Restated Purchase Plan will enable us to continue to: (1) provide eligible employees with a convenient means of acquiring an equity interest in the Company through payroll deductions (or elective contributions), (2) enhance our employees’ sense of participation in the performance of the Company and (3) provide an incentive for continued employment. The Restated Purchase Plan will also continue to align the interests of our employees with those of our stockholders through increased stock ownership.
We estimate that the 200,000 additional authorized shares being requested under the Restated Purchase Plan would provide enough shares to last through approximately December 31, 2021; however, we reserve the right to request additional shares for issuance under the Restated Purchase Plan prior to that date. The actual usage rate of the share reserve under the Restated Purchase Plan may differ from historical usage rates and will depend on various factors, including employee participation levels, changes in our stock price and hiring activity, which we cannot predict with any degree of certainty at this time. In the event that more shares are required for the Restated Purchase Plan in the future, the prior approval of our stockholders will be required.
In considering itsnon-binding recommendation to seek stockholder approval for the addition to the plan of 200,000 shares of our common stock, our Board of Directors considered the historical number of shares purchased under the plan in the past three years, which were 42,278, 31,944 and 33,603, in 2015, 2014 and 2013, respectively, and our current stock price. The Board also considered our expectation that the additional shares should last until approximately December 31, 2021.Directors.
Summary of the Restated Purchase Plan
The following is a summary of the Restated Purchase Plan. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Restated Purchase Plan, a copy of which is attached asAppendix Cto this proxy statement.
General Nature and Purpose. The Restated Purchase Plan is intended to enable eligible employees of the Company, Host Hotels & Resorts, L.P. (our “operating partnership”) and participating subsidiaries to purchase shares of our common stock at a discounted price through payroll deductions (or elective contributions) and thus to benefit us by increasing such employees’ interest in our growth and success. Employees will make such purchases by participation in the quarterly purchase periods under the Restated Purchase Plan.
Administration. The Restated Purchase Plan will be administered by the Compensation Policy Committee. Subject to the provisions of the Restated Purchase Plan, the Committee will have the authority to interpret the terms of the Restated Purchase Plan and prescribe rules as to the administration of the plan.
Shares Subject to the Restated Purchase Plan. The Purchase Plan currently provides for the issuance of up to 612,896 shares of our common stock (of which 36,305 shares remained available for issuance as of March 15, 2016). If this Proposal Six is approved, the Restated Purchase Plan will provide for the issuance of up to 812,896 shares of our common stock.
Eligibility. Our employees will be eligible to participate in the Restated Purchase Plan if they are employed by us, our operating partnership or a participating subsidiary on the first day of a calendar quarter and are customarily employed for more than 20 hours per week and more than five months in any calendar year. However, an employee may not be granted rights to purchase our common stock under the Restated Purchase Plan if such employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of our common or other class of stock. With respect to participating subsidiaries, our Board of Directors must first approve participation in the Restated Purchase Plan by employees of each such subsidiary, and our Board of Directors may at any time, in its sole discretion, withdraw participation from the employees of a subsidiary. As of March 15, 2016, there were 242 employees eligible to participate in the Purchase Plan, of whom 101 were participating.
Grant of Rights. Eligible employees will be offered the opportunity to purchase our common stock under the Restated Purchase Plan during purchase periods. The purchase periods will occur each calendar quarter, or such other period as the Compensation Policy Committee may designate, not to exceed 27 months in length. The current purchase period under the existing Purchase Plan runs through the second quarter of 2016 and will end on June 30, 2016. The participant’s option to purchase our common stock will be automatically exercised on the last day of each purchase period for the maximum number of shares of our common stock which the accumulated funds in the participant’s account at that time will purchase at the applicable purchase price per share. Any funds remaining in the participant’s account that are insufficient to purchase a full share will be refunded to the participant. No eligible employee may purchase more than $25,000 worth of shares during any calendar year (based on the fair market value per share of our common stock on the first day of each purchase period in which the employee participates in the plan for that year). In addition, no eligible employee may assign his or her rights under the plan (including his or her rights in the option to purchase our common stock).
Purchase Price. The purchase price per share at which shares will be sold in an offering under the Restated Purchase Plan is the lesser of (1) 90% of the fair market value of a share of our common stock on the first day of the purchase period and (2) 90% of the fair market value of a share of our common stock on the last day of the purchase period. The fair market value per share of our common stock on a given date is generally the average of the high and low prices per share of our common stock on the New York Stock Exchange. On March 15, 2016, the average of the high and low prices per share of our common stock on the New York Stock Exchange was $16.55.
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Payment of Purchase Price. The purchase price of the shares is generally accumulated by payroll deductions over the purchase period, or, alternatively, elective contributions by the participant on each pay day during the purchase period, in any multiple of 1% (up to a maximum of 10%) of his or her “base compensation” (as defined by the Compensation Policy Committee). These payroll deductions or contributions are credited to the participant’s account under the Restated Purchase Plan and are included with our general funds.
Withdrawal. Participants may voluntarily end their participation in the Restated Purchase Plan at any time and will be refunded any funds remaining in his or her account under the plan that have not yet been used to purchase shares of our common stock.
Termination of Employment. Termination of a participant’s employment for any reason, other than retirement or total or permanent disability in certain circumstances (as described below), cancels his or her participation in the Restated Purchase Plan immediately. In such event, the participant will be refunded any funds remaining in his or her account under the plan that have not yet been used to purchase shares of our common stock. If the employment of a participant is terminated by the participant’s retirement or total or permanent disability within one month before the end of a purchase period, the participant’s accrued payroll deductions in his or her account will be used to purchase shares under the Restated Purchase Plan at the end of the purchase period.
Share Proration. If the total number of shares of our common stock which could be purchased by payroll deductions exceeds the total number of shares available for issuance under the Restated Purchase Plan, the number of shares purchasable by participants will be reduced proportionately, and a participant will be refunded any funds remaining in his or her account that have not yet been used to purchase shares of our common stock.
Capital Changes. In the event that the Company declares a stock dividend or stock split or reclassifies its stock, the purchase price per share of our common stock under the Restated Purchase Plan and the number of shares of our common stock reserved for issuance under the plan will be adjusted proportionately.
Amendment and Termination of the Restated Purchase Plan. The Restated Purchase Plan may be amended at any time by our Board of Directors or the Compensation Policy Committee or terminated at any time by our Board. However, without approval of our stockholders, no amendment will be made (1) changing the number of shares of our common stock reserved for issuance under the Restated Purchase Plan (except for adjustments pursuant to capital changes, as described above), (2) decreasing the purchase price of our common stock issued under the Restated Purchase Plan below a price computed in accordance with the applicable provisions of the Restated Purchase Plan (except for adjustments pursuant to capital changes, as described above), (3) changing administration of the plan from the Company or changing the classification of employees eligible to participate in the Restated Purchase Plan or (4) as may be required by any applicable law, regulation or stock exchange rule.
U.S. Federal Income Tax Consequences
The following is a general summary under current law of the material U.S. federal income tax consequences to an employee who participates in the Restated Purchase Plan. This summary deals with the general U.S. federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of federal income taxation that may be relevant in light of a participant’s personal circumstances. This summarized tax information is not tax advice and a recipient of an option to purchase our common stock under the Restated Purchase Plan should rely on the advice of his or her legal and tax advisors.
The Restated Purchase Plan authorizes the grant of rights to purchase our common stock that do not qualify under Section 423 of the Internal Revenue Code of 1986, as amended. Accordingly, a participant in the Restated Purchase Plan will have compensation income equal to the value of our common stock on the day he or she purchased our common stock less the purchase price. When a participant sells our common stock he or she purchased under the Restated Purchase Plan, he or she also will have a capital gain or loss equal to the difference between the sales proceeds and the value of our common stock on the day he or she purchased it. This capital
gain or loss will be long-term if the participant held our common stock for more than one year and otherwise will be short-term. Any compensation income that a participant receives upon the purchase of shares of our common stock under the Restated Purchase Plan is subject to withholding for income, Medicare and social security taxes, as applicable. In addition, the compensation income is required to be reported as ordinary income to the participant on his or her annual Form W-2, and the participant is responsible for ensuring that this income is reported on his or her individual income tax return. We should be entitled to a deduction for amounts taxed as ordinary income to a participant to the extent of ordinary income recognized upon a purchase made under the Restated Purchase Plan.
New Plan Benefits
Because the number of shares that may be purchased under the Restated Purchase Plan will depend on each employee’s voluntary election to participate and on the fair market value of our common stock at various future dates, the actual number of shares that may be purchased by any individual cannot be determined in advance. No shares of our common stock have been issued with respect to the share reserve increase for which stockholder approval is sought under this Proposal Six.
Existing Plan Benefits
The following table sets forth the number of shares of our common stock that were purchased under the Purchase Plan through January, 2016 by the individuals and groups identified below.
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Recommendation of the Board
For the reasons stated above, our Board of Directors unanimously recommends that you vote “FOR” the proposal to amend and restate the Purchase Plan to increase the number of shares reserved for issuance.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) provides you with information on the Company’s executive compensation programs and practices, and the decisions that the Compensation Policy Committee of the Board of Directors (the “Compensation Committee”) has made under the program. The CD&A focuses on our named executive officers for 2015,2017, who were:
President and Chief Executive Officer | ||
Executive Vice President, Chief Financial Officer (effective November 2017) | ||
Former Executive Vice President, Chief Financial Officer | ||
Nathan S. Tyrrell | Executive Vice President, | |
Elizabeth A. Abdoo | Executive Vice President, General Counsel & Secretary | |
20152017 Company Performance Highlights
20152017 was anothera year of continued growth for the Company. RevenuesThe Company’s comparable hotel revenue per available room (or RevPAR) increased to $180, surpassing last year’s record and is the highest full year RevPAR in the Company’s history. Our stockholders were rewarded with 10% total stockholder return for the sixth year in a row and we returned substantial capital to our stockholders in the form of dividends and share repurchases.year. We also undertookaccomplished a number of initiatives in 20152017 to capitalize on value enhancing opportunities and better position the Company for long-term, sustainable growth. Some of the highlights for 20152017 include:
• | We continued to be recognized as a leader for corporate action on climate change and again achieved a position on the 2017 Climate “A” List and Climate Disclosure Leadership Index (CDLI) by CDP. We also achieved thetop position in the U.S. among public companies in the 2017 Global Real Estate Sustainability Benchmark (GRESB) survey. We were the winner of the NAREIT “Leader in the Light” award and were the “Best in Industry” in Newsweek’s 2017 Green Rankings for equity real estate investment trusts and thetop-ranked real estate company on the U.S. 500 list. |
For more complete information about our 20152017 performance, please review the Company’s Annual Report onForm 10-K included in our mailing to stockholders. Adjusted FFO used by the Compensation Committee as a performance measure is also used by the Company as a non-GAAP supplemental measure of operating
COMPENSATION DISCUSSION AND ANALYSIS |
performance in its earnings releases, financial presentations and SEC filings. For more information on this measure and a reconciliation to the comparable GAAP measure, see the Company’s Annual Report on Form 10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Host Inc. Reconciliation of Net Income to NAREIT and Adjusted Funds From Operations per Diluted Share” on page 96.
Results of 20152017 Advisory Vote
Each year, the Compensation Committee considers the outcome of the stockholder advisory vote on executive compensation when making decisions relating to the compensation of the named executive officers and our executive compensation program design, structure and policies.
In 2015,2017, stockholders continued their significant support for our executive compensation program with over 93%approximately 94% of the votes cast for approval of the “say on pay” proposal at the 20152017 Annual Meeting of Stockholders. The Compensation Committee believes that the voting results, together with the over 93%92% or better approval received oversince the last three years,inception of the advisory vote, conveyed our stockholders’ strong support of the philosophy, design and structure of our executive compensation program. The Committee will continue to considerconsiders the results of the stockholders’ advisory votes on executive compensation when making decisions about our executive compensation program.
The Compensation Committee has approved the design and structure of our annual compensation programs, which provide for more flexibility in light of changing times and stockholder involvement. TheOur long-standing compensation philosophy, ofwhich has supported our compensation programs has remained constant forbusiness and talent needs over a decade:the past decade and the various economic cycles we have experienced is:
Elements of Program
Our compensation program has three key elements—base salary, annual cash incentive, and long-term incentives. Importantly, it also:
COMPENSATION DISCUSSION AND ANALYSIS |
The mix of target total direct compensation for 2017 for our CEO and the average of our other named executives is shown in the chart below:
CHIEF EXECUTIVE OFFICER
AVERAGE OF OTHER NAMED
EXECUTIVE OFFICERS
Our 2017 program has several enhancements from prior years based on anin-depth review of our executive compensation program conducted in 2016, including how it compared with peers and best practices, and how it was supporting our talent needs. We elected to retain the design and structure of the annual incentive program. We did, however, make changes to our long-term incentive program, which are described below.
COMPENSATION DISCUSSION AND ANALYSIS |
Elements
There were no changes to the design or structure of the annual compensation program in 2015 from the previous two years. It continues to have three key elements, base salary, annual cash incentive, and long-term incentives. Importantly, it also:2017 Long-Term Incentive Program
Changes:
• | Reasons for Changes:
• • Few peers used stock options to | |||||||||
• Modified the mix of incentive awards to 2/3 performance-based restricted stock units (“RSUs”) and 1/3 time-based RSUs | • Provided for the majority of the
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•
| •
• Individual measures are included in the annual incentive plan | |||||||||
• Reweighted the corporate measures of performance to an equal mix of strategic objectives | • Relative TSR performance is a commonly used and understood metric that compares our relative success at driving stockholder value compared to the
• | |||||||||
• Utilized a forward-looking performance measurement period, replacing the mostly historical performance orientation of our 2016 program | • Aligned all of the executives with future performance against strategic and financial performance goals • Better reflect typical and best practice of utilizing forward-looking goals | |||||||||
COMPENSATION DISCUSSION AND ANALYSIS |
The following table summarizes the key elements of target direct compensation for our 2017 executive compensation program. Our incentives are designed to drive overall corporate performance, achieve strategic goals, and individual performance using measures that correlate to stockholder value.
Summary of 2017 Executive Compensation Program Design
CASH COMPENSATION | EQUITY COMPENSATION | |||||||
Base Salary | Annual Cash Incentive Awards | Performance Based Long- Awards | Retention Based Long- Term Incentive Awards | |||||
Key Characteristics | • Fixed compensation component payable in cash. • Reviewed annually and adjusted when appropriate. | • At risk compensation component payable annually in cash. • Amount payable is based on actual performance against annually established goals. | • Two-thirds of the value of annual equity awards is performance based. • One-half of the performance-based equity award vests annually based on achievement of corporate objectives. • One-half of the performance-based equity award vests over three years based on relative TSR performance compared to three indices. | • One-third of the value of annual equity awards is retention-based. • Equity award that vests in annual installments over three years. | ||||
Why We Pay This Element | • Provide a base level of competitive cash compensation for executive talent. • Only component of compensation that is fixed. | • Motivate and reward executives for performance based on the Company’s achievement of key financial measures and objective individual performance goals. | • Motivate and reward executives for performance on key measures. • Align the interests of executives with long-term stockholder value. | • Align the interests of executives with long-term stockholder value. • Retain executive talent. | ||||
How We Determine Amount | • Experience, job scope, market data, and individual performance. • Senior executive base salaries, including those of the named executive officers, are approved by the Compensation Committee. | • Payments based on corporate performance related to: • Adjusted funds from operations • Return on invested capital • Formulaic determination with limited discretion and a limit on the maximum amount payable. | • Target awards are based on job scope, market data, and individual performance. • Amount of the awards that ultimately vest is based on performance against corporate objectives and relative TSR measures. |
COMPENSATION DISCUSSION AND ANALYSIS |
Best Practices
TheOur compensation program incorporatesfor 2017 continues to incorporate our best practices:
What We Do
• Compensation Committee comprised solely of independent directors;
• An independent compensation consultant retained exclusively by the Committee and which has no ties to the Company;
• Annual advisory vote on executive compensation;
• Stock ownership and retention requirements for senior management and directors;
• Regular reviews of our compensation and relative TSR peer groups and indices;
• Regular briefings from the independent consultant regarding key trends in executive compensation and regulatory developments;
• An annual review of the performance of the chief executive officer;
• Market-aligned severance policy for executives with a double trigger for any change in control payments under the plan;
•
• Limited perquisites; • The vast majority of total compensation is tied to performance; and
•
| What We Don’t Do
• No employment contracts with executive officers;
• No individual change in control agreements;
• No tax gross up on change in control payments or severance payments;
• No pledging, hedging or short sales of Company securities by directors, officers or
• No pension plans or
• No dividends paid on unvested restricted stock or restricted stock unit awards unless the awards actually vest;
• No counting of performance vesting restricted stock toward our stock ownership guidelines; and
• No option repricing without stockholder approval. | |||||||||||||
Target Compensation
Total target direct compensation for 2015 is described below and consists of salary, annual cash incentives and restricted stock and option awards. It does not include other benefits.
2015 Target Direct Compensation
Salary | Annual Cash Incentive | Long-Term Incentives (1) | Total Target Compensation | |||||||||||||
Mr. Walter | $ | 952,750 | | $ | 1,429,125 | $ | 4,500,000 | $ | 6,881,875 | |||||||
Mr. Larson | 489,250 | 489,250 | 1,200,000 | 2,178,500 | ||||||||||||
Mr. Abji | 530,450 | 530,450 | 1,670,000 | 2,730,900 | ||||||||||||
Mr. Risoleo(2) | 560,000 | 560,000 | 830,000 | 1,950,000 | ||||||||||||
Ms. Abdoo | 473,800 | 473,800 | 980,000 | 1,927,600 | ||||||||||||
Mr. Robertson (3) | 489,250 | 489,250 | 1,500,000 | 2,478,500 |
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Determination of 2015 Target Compensation for 2017
Increases inThe Compensation Committee annually reviews and sets total target direct compensation for 2015, that is basesenior executives. This consists of salary, an annual cash incentives andincentive based on the “target” level of performance, an award of restricted stock units valued based on the “target” level of performance and options, ranged from 1.02% - 1.45% for the named executive officers, with the exception of Mr. Risoleo who assumed increased responsibilities in April 2015 as discussed below.retention-based restricted stock units that vest over three years. The Compensation Committee’s decisions on total target compensation for 2015 werethis are informed with the assistance of its independent consultant, Pay Governance. Pay Governance, at the direction of the Committee, had most recently conducted a comprehensive competitive review of the compensation provided to senior management for 2014 compensation based on data presented in 2013. While theThe Committee reviews compensation levels, trends and practices every year, it requestsand has historically requested that Pay Governance conduct a thorough review every two years asyears. This is because pay practices and market pay ranges generally do not change dramatically over a one year period. Further,period, and the Committee prefers to take a broad view of the compensation landscape. Based on its
The last comprehensive compensation review which is described further below,was conducted in 2015 to inform compensation decisions for 2016. However, given the Company’s and industry performance in 2015, management recommended, and the Committee determinedagreed, that as expected, there had not been much change in year over year compensation from 2014 to 2015, and the previously implemented increases that had been approved for 2014 generally aligned the Company’s compensation levels with the data that had been considered at that time. Accordingly,would be modest increases in 2015 total target compensation were modest.for executives in 2016, which included base salary increases of 3% consistent with all employees in the Company.
At
COMPENSATION DISCUSSION AND ANALYSIS |
The detailed review conducted in 2016 involved:
In May 2016, the Committee reviewed compensation design elements, trends and data sources for the compensation review. No changes inThe Committee has historically relied on various sources of compensation information to ascertain the design ofcompetitive market for the program were made.executives’ compensation. As in the past, data from three sources were used toapproved by the Committee for use in generally assessassessing and comparecomparing pay levels at the Company. These were (1) proxy pay data reported in recent proxy filings for 21 peer companies, (2) general industry survey data of companies fornon-real estate specific functions, size adjusted based on revenue size,revenues, and (3) NAREIT survey data focused on companies of similar size in terms of total capitalization. The companies included in the proxy peer group were screened based on operatingis generally 15-25 companies, which is a sufficient number to provide robust market data and minimize year over year changes to the extent possible. The companies primarily operate in the real estate and/or hospitality industry comparableand with North American operations or a similar business model to that of the Company. The companies are generally competitors for talent and/or investment capital. They are screened as to size and generally fall within a range of a market capitalization that is 0.5 times to 3 times that of the Company similaror with revenues in the range of 0.4 times to 2.5 times that of the Company. The Committee approved changes in the peer group from 2015, and removed (i) Public Storage, a self storage REIT with a different business operations asmodel and market capitalization four times larger than the Company and/or havingand (ii) Apartment Investment and Management Co., which had the smallest market capitalization of the Company’snon-hotel related peers. The Committee added Essex Property Trust and UDR, Inc., each of which was in the S&P 500 and had a global portfolio, and which are a competitor for talent and investment capital. Adjustments were madesimilar market capitalization to that of the companies that had been in theCompany. The proxy peer group in 2014. Brookfield Office Properties had been acquired and de-listed so it was removed. Hilton Worldwide Holdings, Inc., which became public in 2013, was added because it was comparable toconsisted of the Company in size, scope, and industry.
As a result, the proxy peer group from which the data were aggregated consisted of:following 21 companies:
COMPENSATION PEER GROUP | ||
AvalonBay Communities, Inc. Boston Properties, Inc. Duke Realty Corporation Equity Residential Essex Property Trust, Inc. Federal Realty Investment Trust General Growth Properties, Inc. HCP, Inc.
Hilton Worldwide Holdings, Inc. Hyatt Hotels Corporation Kimco Realty Corporation | The Macerich Company Marriott International, Inc. Prologis, Inc.
SL Green Realty Corp. Starwood Hotels & Resorts Worldwide, Inc. * UDR, Inc. Ventas, Inc. Vornado Realty Trust Welltower, Inc. (formerly known as Health Care REIT, Inc.) Wyndham Worldwide Corporation | |
* acquired by Marriott International, Inc. in September 2016 |
The NAREIT survey data provided the Committee with industry specific references for a broad range of companies. It also reflectedwould reflect companies against which the Company competes directly for talent and investment capital. The general industry database presented information from a broader market than the real estate industry and is consistent with the Company’s inclusion in the S&P 500 Index. While
The Committee generally compared the compensation of each executive in relation to multiple percentiles of each data source. In addition, the Committee reviewed compensation information derived fromtook into consideration the general industry groupcharacteristics of each executive’s position, scope of responsibilities, experience, performance and NAREIT samples,internal equity. Compensation levels for an executive officer who is new to a position tended to be at a lower end of the competitive range, while seasoned executives would tend to be positioned at the higher end of the competitive range.
Based on its review, the Committee did not seeapproved target total compensation for the identity of anynamed executive officers, other than Mr. Risoleo, in January 2017. Mr. Risoleo became Chief Executive Officer of the surveyed companies.Company effective
COMPENSATION DISCUSSION AND ANALYSIS |
January 1, 2017. In December 2016, the Committee recommended, and the Board approved, his total target direct compensation. Pay Governance and the Executive Vice President, Human Resources assisted the Committee in its determination. Mr. Risoleo’s total target compensation for 2017 was $5,300,000, which includes a base salary of $850,000, target annual incentive of $1,062,500 and target long-term incentive of $3,387,500. The Committee established the compensation package based on market data and reflective of Mr. Risoleo’s being new to the role.
September 2017 Leadership Appointments
The Company made additional organizational changes during 2017, continuing the evolution that began at the beginning of the year with the appointment of Mr. Risoleo as the new Chief Executive Officer effective as of January 1, 2017. In September 2017, the Company announced several changes, including the streamlining of asset management and investments functions to facilitate a corporate culture that is more nimble, dynamic and decisive. As part of this transition, Mr. Tyrrell was promoted to Executive Vice President, Chief Investment Officer, effective in September 2017, and oversees both the asset management and investment groups. In addition, Mr. Larson retired from his position as Executive Vice President, Chief Financial Officer, effective in November 2017, but will remain an employee of the Company until July 31, 2018. He did not receive any severance in connection with his retirement. Mr. Bluhm was announced as his successor in October 2017 and was appointed Executive Vice President, Chief Financial Officer in November 2017.
In connection with his appointment as Executive Vice President, Chief Financial Officer, Mr. Bluhm was hired with an annual base salary of $560,000, a target annual cash incentive of $560,000 and long term equity incentive with a target value of $1,880,000. Mr. Bluhm was also reimbursed for expenses associated with temporary housing and travel, up to $100,000. Mr. Bluhm did not receive an annual cash incentive for performance year 2017 (which is typically targeted at 100% of salary for executive vice presidents). However, in lieu thereof, Mr. Bluhm received a cash bonus of $450,000, which was payable 50% on his start date with the Company and 50% in April 2018 (thesix-month anniversary of his start date). In addition, to compensate him for remuneration that Mr. Bluhm forfeited from his former employer, he received a long-term equity grant with a target value of $3,000,000 and vesting provisions consistent with the Company’s executive compensation program. This grant is described in more detail below.
In connection with his promotion to Executive Vice President, Chief Investment Officer and assumption of oversight of both asset management and investments, Mr. Tyrrell’s annual base salary was increased from $500,000 to $530,000 effective September 11, 2017. His annual target annual cash incentive remained at 100% of salary, but was based on his prorated salary after taking into account the increase in base salary. He did not receive any additional long term incentives in connection with his promotion in 2017.
The chart below shows the elements of total target direct compensation for 2017 and provides a comparison of the total to 2016. It does not include other benefits.
2017 Target Direct Compensation
Salary
| Annual Cash Incentive
| Long-Term Incentives (1)
| Total Target Compensation 2017
|
| Total Target Compensation 2016
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Mr. Risoleo
| $
| 850,000
|
| $
| 1,062,500
|
| $
| 3,387,500
|
| $
| 5,300,000
|
| $
| 1,983,600
|
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Mr. Bluhm(2)
|
| 560,000
|
|
| 560,000
|
|
| 1,880,000
|
|
| 3,000,000
|
|
| —
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Mr. Larson
|
| 590,000
|
|
| 590,000
|
|
| 1,900,000
|
|
| 3,080,000
|
|
| 2,207,900
|
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Mr. Tyrrell(3)(4)
|
| 509,205
|
|
| 509,205
|
|
| 1,000,000
|
|
| 2,018,410
|
|
| —
|
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Ms. Abdoo
|
| 550,000
|
|
| 550,000
|
|
| 1,225,000
|
|
| 2,325,000
|
|
| 1,956,100
|
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Ms. Hamilton(4) |
|
400,000 |
|
|
400,000 |
|
|
650,000 |
|
|
1,450,000 |
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|
— |
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(1) | This column reflects the “target” level value of long-term incentives. These are equity-based awards;two-thirds of the award value shown is performance based and the remainingone-third of the award value shown is retention based, vesting ratably over three years. The Compensation Committee determines the dollar value that should be awarded and the number of shares of restricted stock is then determined by dividing the value by the average of the closing prices of the Company’s common stock on the New York Stock Exchange for the 60 calendar days preceding December 31, 2016, which was $17.46. The Compensation Committee believes that an average price over a period of time is a better gauge of value as it mitigates volatility. |
COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Committee reviewed aggregated compensation data for the 25th, 50th, and 75th percentiles for the competitive market samples discussed above. The Compensation Committee does not target overall compensation to a certain percentile, or a range of percentiles, in any market sample. This is because market data have limitations, including not reflecting the experience of a person in a particular position, past performance, and elements of responsibility. The Committee, instead, used the collective data, in consultation with Pay Governance, to learn about the current levels of compensation in the market, and considered other factors, such as the credentials, length of service, experience, scope of responsibility, prior performance of each individual and internal equity considerations among the senior management team. In considering salary increases, the Committee reviewed the individual executive’s role, contribution to the management team, experience, performance, and progression in each role as well as comparisons of compensation to the external market. The Compensation Committee also consulted Mr. Walter and the Executive Vice President of Human Resources and discussed its recommendations for senior management with them. Mr. Walter was not involved in any discussions or determinations of his compensation. The Committee reviewed its determinations for all executives and Mr. Walter with the independent directors of the Board in executive session. The Compensation Committee did not adopt a specific formula in determining the mix of compensation but consistently emphasizes a program with a majority of the total opportunity based on variable long-term incentives, and a majority of those incentives tied to stock performance over a multi-year period.
Based on its review, the Committee approved salary increases of 3% for the named executive officers effective January 1, 2015, consistent with the general salary increase that had been provided to all other employees of the Company. There were no increases in equity approved for the named executive officers at that time. In connection with the restructuring of the investment department in April 2015, the Committee reviewed Mr. Risoleo’s compensation. Based on a significantly increased role and responsibility, the Committee increased Mr. Risoleo’s target compensation effective April 15, 2015 by 28%. The increase was heavily weighted towards long-term, at risk compensation, as salary increased 5.7% while target equity compensation increased 52%.
(2) | Mr. Bluhm was appointed Executive Vice President, Chief Financial Officer in November 2017. The amounts shown reflect his full year target compensation amounts. As described above, Mr. Bluhm did not receive an annual cash incentive award for 2017, but did receive asign-on cash bonus of $450,000 payable in two installments and a long-term equity grant valued at $3,000,000 to compensate him for renumeration forfeited from his former employer. |
(3) | Mr. Tyrrell’s salary amount reflects his prorated salary increase to $530,000 effective September 11, 2017 in connection with his promotion to Executive Vice President, Chief Investment Officer. His annual cash incentive was based on his prorated salary amount after taking into account the increase in base salary. |
(4) | Mr. Tyrrell and Ms. Hamilton were not named executive officers in 2016. |
Realized Pay
The table below, which supplements the Summary Compensation Table that appears on page 48,54, shows the compensation that might be realized for 20152017 by each named executive officer. Our compensation program allows the named executive officers to earn variable compensation (except salary) at “threshold”, “target” and “high” levels based on performance on:
In 2015Performance was above “target” against each of the measures used to assess performance noted above. However, realized compensation declined significantly from 2014 primarily because we only exceededin 2017 was generally below total target direct compensation due to the “threshold” levelstructural change to use a forward looking performance period for our performance-based restricted stock unit grants based on relative TSR under the long-term incentive program discussed above. Under the new program, 2017 was a transition year (with performance periods of performance on one, two and three years). This resulted in a “gap” in the number of three TSR measures, which has the greatest impact on executive compensation. We achieved just above “target” level of performance on the other metrics.restricted stock units vesting in 2017. The Compensation Committee believes that the program functioned as designed with pay tied to performancemajority of the Company and aligned with stockholder interests. As we describe later in this CD&A, key performance results included:
they vest ratably over three years.
20152017 Realized Pay Table(1)
Name | Salary | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation (1) | All Other Compensation | 2015 Total Compensation Realized | 2014 Total Compensation Realized | % Decrease | Salary(2) | Bonus | Equity Awards(3) | All Other Awards (4) | Non-Equity Incentive Plan Compensation | All Other Compensation | 2017 Total Compensation Realized | |||||||||||||||||||||||||||||||||||||||||||||
W. Edward Walter | $ | 952,750 | $ | 1,547,828 | $ | 0 | $ | 1,471,500 | $ | 225,660 | $ | 4,197,738 | $ | 9,086,809 | (54 | )% | ||||||||||||||||||||||||||||||||||||||||||||
James F. Risoleo
|
| $850,000
|
|
| $ —
|
|
| $2,190,713
|
|
| 416,635
|
|
| $1,427,000
|
|
| $116,163
|
|
| $5,000,510
|
| |||||||||||||||||||||||||||||||||||||||
Michael D. Bluhm
|
| 107,397
|
|
| 225,000
|
|
| —
|
|
| —
|
|
| —
|
|
| —
|
|
| 332,397
|
| |||||||||||||||||||||||||||||||||||||||
Gregory J. Larson | 489,250 | 429,351 | 0 | 518,500 | 86,570 | 1,523,671 | 2,826,903 | (46 | ) |
| 590,000
|
|
| —
|
|
| 1,228,744
|
|
| 233,674
|
|
| 789,500
|
|
| 137,363
|
|
| 2,979,281
|
| ||||||||||||||||||||||||||||||
Minaz B. Abji | 530,450 | 593,659 | 0 | 559,500 | 149,831 | 1,833,440 | 3,562,605 | (49 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
James F. Risoleo | 551,580 | 299,180 | 0 | 610,100 | 90,553 | 1,551,413 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Nathan S. Tyrrell
|
| 509,205
|
|
| —
|
|
| 646,706
|
|
| 122,976
|
|
| 686,500
|
|
| 65,801
|
|
| 2,031,189
|
| |||||||||||||||||||||||||||||||||||||||
Elizabeth A. Abdoo | 473,800 | 351,762 | 0 | 503,300 | 71,918 | 1,400,780 | 2,524,444 | (45 | ) |
| 550,000
|
|
| —
|
|
| 792,206
|
|
| 150,655
|
|
| 757,900
|
|
| 62,650
|
|
| 2,313,412
|
| ||||||||||||||||||||||||||||||
Joanne Hamilton
|
| 400,000
|
|
| —
|
|
| 420,356
|
|
| 79,934
|
|
| 559,200
|
|
| 109,444
|
|
| 1,568,935
|
|
(1) | Amounts shown |
(2) | Mr. Bluhm’s salary amount |
Amounts shown represent the value of the |
The difference between this supplemental table and the Summary Compensation Table is as follows:primarily relate to the treatment of the long-term equity incentive award, reflected in the “Stock Awards” column of the Summary Compensation Table and the “Equity Incentive Awards” and “All Other Equity Awards” columns of the Realized Pay
COMPENSATION DISCUSSION AND ANALYSIS |
Table above. In general, the amount of realized pay was significantly lower than the amounts reflected in the Summary Compensation Table because the amounts shown in the Summary Compensation Table for stock awards reflect the grant date fair value of entire stock awards at the time the stock awards were deemed to be granted for accounting purposes, which was February 13, 2017. In contrast, Realized Pay Table values the actual shares received based on fair market value of the Company’s common stock on the dates of vesting, February 8, 2018 and February 13, 2018. It therefore excludes forfeitures and units that may vest in future years. There was some price appreciation in the Company’s common stock which resulted in higher values being assigned to the Realized Pay Table amounts, but not enough to offset the value of the full award included in the Summary Compensation Table values.
For a detailed description of the grant date fair value of the stock awards and optionunit awards, please see footnotes 2 andfootnote 3 to the Summary Compensation Table for 2015.Table. This table is not a substitute for the Summary Compensation Table and is intended to provide additional information that the Company believes is useful in facilitating an understanding of 20152017 realized compensation amounts to executive officers.
Mr. Robertson’s Severance
On April 14, 2015, the Company announced a leadership restructuring in its investment team in which Mr. Robertson would no longer serve as Executive Vice President, Chief Investment Officer effective April 15, 2015. Mr. Robertson left the service of the Company on May 1, 2015. Mr. Robertson was entitled to, and received benefits under, the Company’s Severance Plan upon execution of a release and one-year non-compete and non-solicitation agreement. These were (1) a one time payment equal to his annual base salary of $489,250, (2) a one time payment equal to the average of his annual incentive bonus for the last two years, which was $599,900, and (3) continuation of his medical and dental benefits for up to 18 months, which was $38,015. In addition, under the terms of his agreements for restricted stock and stock options, Mr. Robertson was entitled to vest in (1) 58,431 shares of common stock, which represents shares that would have vested at the “target” level of performance in 2015 and (2) 28,902 options, which were all the options granted on January 15, 2015 at an exercise price of $23.76.
Salary
Base salary is set at an annual rate, and increases were 3% in 2015, which was the same percentage increase budgeted for all employees in 2015. Mr. Risoleo received an additional increase of 5.7% in April 2015 in connection with assuming increased responsibilities. The Committee first established total target compensation, as discussed previously, and then determined an appropriate allocation of the total target compensation to salary based on various factors, including peer level salary data and internal equity considerations.rate. Salary as a percentage of the named executive officers’ total target compensation ranged between 14% and 29%28% in 2015.2017. These increases are larger than those typically provided in prior years and reflect the significant organizational changes during 2017.
Name | Salary 2015 | Salary 2014 | Increase % | Salary 2017
| Salary 2016
| Increase%
| |||||||||||||||||||||
Mr. Walter | $ | 952,750 | $ | 925,000 | 3 | % | |||||||||||||||||||||
Mr. Risoleo(1)
|
| $850,000
|
|
| $576,800
|
|
| 47
|
| ||||||||||||||||||
Mr. Bluhm(2)
|
| 560,000
|
|
| —
|
|
| —
|
| ||||||||||||||||||
Mr. Larson | 489,250 | 475,000 | 3 |
| 590,000
|
|
| 503,950
|
|
| 17
|
| |||||||||||||||
Mr. Abji | 530,450 | 515,000 | 3 | ||||||||||||||||||||||||
Mr. Risoleo(1) | 560,000 | 515,000 | 9 | ||||||||||||||||||||||||
Mr. Tyrrell(3)
|
| 530,000
|
|
| —
|
|
| —
|
| ||||||||||||||||||
Ms. Abdoo | 473,800 | 460,000 | 3 |
| 550,000
|
|
| 488,050
|
|
| 13
|
| |||||||||||||||
Ms. Hamilton(3) | 400,000 | — | — |
(1) |
(2) | Mr. |
(3) | Mr. Tyrrell and Ms. Hamilton were not named executive officers in 2016. |
Annual Cash Incentive
All employees participate in the annual cash incentive program. Any awards earned are based on (1) the Company’s performance against two annual financial metrics, Adjusted FFO per diluted share (“Adjusted FFO”), and Return on Invested Capital (“ROIC”, defined below), and (2) performance on individual objectives. Except for Mr. Risoleo, theThe annual cash incentive was weighted as follows for the named executive officers:
Mr. Risoleo’s weighting on the annual cash incentive for 2015 was 50% on individual and regional objectives, 35% on Adjusted FFO and 15% on ROIC.
COMPENSATION DISCUSSION AND ANALYSIS |
The financial performance measures of Adjusted FFO and ROIC are key metrics for the Company and the most significant portion of executives’ annual cash bonus is tied to the Company’s financial performance for the year. FFO per diluted share is the predominant measure of operating performance used by real estate investment trusts and the Company uses the measure in accordance with National Association of Real Estate Investment TrustsNAREIT guidelines, with certain adjustments, as a supplemental measure of operating performance in its earnings releases and financial presentations.presentations and SEC filings. For more information on this measure and a reconciliation to the applicable GAAP measure, see the Company’s Annual Report on Form10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Host Inc. Reconciliation of Net Income to NAREIT and Adjusted Funds From Operations per Diluted Share” on page 85. ROIC provides an emphasis on investing capital effectively. In the cyclical real estate / hospitality market, this focus on using capital effectively enhances the opportunity for longer term stability and growth.
The individual performance goals create line of sight and motivate behaviors that support the Company’s annual business plan and long-term strategy. These goals represent the smallest component of the named executive officers’ annual incentive award opportunity, reflecting the Committee’s continued belief that the incentive emphasis for senior executives should be primarily based on Company performance. These goals create line of sight and motivate behaviors that support
In 2017 the Company’s annual business plan and long-term strategy.
The target annual cash incentive represents 20%-25%represented14%-28% of the named executive officers’ total target compensation. The total amount that a named executive officer may earn depends on: (1) salary or eligible earnings, because the award is calculated and paid as a percentage of the annual salary or amount earned, and (2) the level of performance achieved on Adjusted FFO and ROIC, and (3) the level of performance achieved on individual goals. Performance levels are set at “threshold”, “target” and “high” and results are interpolated between these levels. There is no bonus if performance is “below threshold”, and bonuses are capped at the “high” level. The chart below shows the target annual incentive award as a percentage of salary for each named executive officer in 2015.2017. Mr. Bluhm was hired in October 2017 and because his hire date was late in the year he was not eligible to receive an annual cash incentive bonus for 2017.
Target Annual Incentive
Name | Salary | Target as % of Salary | Target Annual Incentive | Salary
| Target as % of Salary
| Target Annual Incentive
| ||||||||||||||||
Mr. Walter | $ | 952,750 | 150 | % | $ | 1,429,125 | ||||||||||||||||
Mr. Risoleo
| $
| 850,000
|
| 125
| $
| 1,062,500
|
| |||||||||||||||
Mr. Bluhm
|
| 560,000
|
| N/A
|
| N/A
|
| |||||||||||||||
Mr. Larson | 489,250 | 100 | 489,250 |
| 590,000
|
| 100
|
| 590,000
|
| ||||||||||||
Mr. Abji | 530,450 | 100 | 530,450 | |||||||||||||||||||
Mr. Risoleo | 560,000 | 100 | 560,000 | |||||||||||||||||||
Mr. Tyrrell
|
| 530,000
|
| 100
|
| 530,000
|
| |||||||||||||||
Ms. Abdoo | 473,800 | 100 | 473,800 |
| 550,000
|
| 100
|
| 550,000
|
| ||||||||||||
Ms. Hamilton | 400,000 | 100 | 400,000 |