UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

 

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

 

Wyndham Worldwide Corporation

(Name of Registrant as Specified In Its Charter)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notice of 2007
Annual Meeting and
Proxy Statement

 

 

Wyndham Worldwide Corporation

Seven Sylvan Way

Parsippany, New Jersey 07054

 

March 12, 2007

 

Dear Shareholder of Wyndham Worldwide Corporation,

 

You are invited to attend the 2007 Annual Meeting of Shareholders to be held on April 26, 2007, at 3:00 p.m. local time at the Meadow Wood Manor, 461 Route 10 East, Randolph, New Jersey 07869.

 

The annual meeting will begin with voting on the matters set forth in the accompanying notice of annual meeting and proxy statement and discussion on other business matters properly brought before the meeting followed by a brief report on our operations.

 

If you plan to attend the meeting, please follow the instructions provided in the proxy statement. An admission ticket is required for admission to the meeting.

 

Whether or not you plan to attend it is important that your shares be represented and voted at the meeting. To make it easier for you to vote your shares, you have a choice of voting over the Internet or by telephone, or by completing, signing, dating and returning your proxy card in the enclosed envelope. To vote your shares by Internet or telephone please refer to the instructions contained on the enclosed proxy card.

 

Cordially,

 

 

Stephen P. Holmes

Chairman and Chief Executive Officer

WYNDHAM WORLDWIDE CORPORATION

 

NOTICE OF 2007 ANNUAL MEETING OF SHAREHOLDERS

 

March 12, 2007

 

To the Shareholders:

 

Wyndham Worldwide Corporation’s 2007 Annual Meeting of Shareholders will be held at the Meadow Wood Manor, 461 Route 10 East, Randolph, New Jersey 07869, on April 26, 2007 at 3:00 p.m. local time for the following purposes:

 

 

The matters specified for voting above are more fully described in the attached proxy statement, which are hereby made a part of this Notice. Only shareholders of record at the close of business on March 7, 2007 will be entitled to notice of and to vote at the meeting and any adjournments.

 

By Order of the Board of Directors

 

 

Lynn A. Feldman

Senior Vice President,

Deputy General Counsel and

Corporate Secretary

 

 

Even though you may plan to attend the meeting in person, please vote by telephone or the Internet, or complete and execute the enclosed proxy card and mail it promptly. A return envelope (which requires no postage if mailed in the United States) is enclosed for your convenience. Telephone and Internet voting information is provided on your proxy card. Should you attend the meeting in person, you may revoke your proxy and vote in person.

 

WYNDHAM WORLDWIDE CORPORATION

 

2007 ANNUAL MEETING OF SHAREHOLDERS

 

TABLE OF CONTENTS

 

WYNDHAM WORLDWIDE CORPORATION

 

 

The enclosed proxy materials are being sent at the request of the Board of Directors of Wyndham Worldwide Corporation to encourage you to vote your shares at our 2007 Annual Meeting of Shareholders to be held April 26, 2007. This Proxy Statement contains information on matters that will be presented at the meeting and is provided to assist you in voting your shares. References in this proxy statement to “we,” “us,” “our,” and “Wyndham Worldwide” refer to Wyndham Worldwide Corporation and our consolidated subsidiaries.

 

Our 2006 Annual Report on SEC Form 10-K, containing our management’s discussion and analysis of financial condition and results of operations and audited financial statements together with this proxy statement were distributed together beginning on or about March 12, 2007.

 

Who may vote and how many votes does a shareholder have?

 

All holders of record of our common stock as of the close of business on March 7, 2007 (the record date) are entitled to vote at the meeting. Each shareholder will have one vote for each share of our common stock held as of the close of business on the record date. As of the record date, 188,203,537 shares of our common stock were outstanding. There is no cumulative voting and the holders of our common stock vote together as a single class.

 

How many votes must be present to hold the meeting?

 

The holders of a majority of the outstanding shares of our common stock entitled to vote at the meeting, or 94,101,769 votes, must be present, in person or by proxy, at the meeting in order to constitute a quorum necessary to conduct the meeting. Abstentions and broker non-votes will be counted for the purposes of establishing a quorum at the meeting.

 

We urge you to vote by proxy even if you plan to attend the meeting so that we will know as soon as possible that a quorum has been achieved.

 

What are shareholders being asked to vote on at the meeting?

 

You are being asked to vote on the following:

 

 

How to Vote

 

Even if you plan to attend the meeting you are encouraged to vote by proxy. You may vote by proxy in one of the following ways:

 

 

When you vote by proxy, your shares will be voted according to your instructions. If you sign your proxy card, vote by Internet or by telephone, but do not specify how you want your shares to be voted, they will be voted as the Board recommends. You may change or revoke your proxy at any time prior to the voting at the meeting by submitting a later dated proxy, by entering new instructions by Internet or telephone, by giving timely written notice of such change or revocation to the Corporate Secretary or by attending the meeting and voting in person and requesting that your prior proxy not be used.

 

If your shares are registered in the name of a bank, broker or other nominee, follow the proxy instructions on the form you receive from the nominee. The availability of telephone and internet proxy will depend on the nominee’s proxy processes. However, you may not vote these shares in person at the meeting unless you bring with you a legal proxy from the stockholder of record.

 

For participants in the Wyndham Worldwide Corporation Employee Savings Plan, with shares of our common stock credited to their accounts, voting instructions for the trustees of the plan are also being solicited through this proxy statement. In accordance with the provisions of the plan, the trustee will vote shares of our common stock in accordance with instructions received from the participants to whose accounts the shares are credited.

 

The Board recommends the following votes:

 

 

We are not aware of any other matters that will be brought before the shareholders for a vote at the annual meeting. If any other matters are properly presented for a vote, the individuals named as proxies will have discretionary authority, to the extent permitted by law, to vote on such matters according to their best judgment.

 

What Vote Is Required to Approve Each Proposal?

 

In the election of directors, the affirmative vote of a plurality of the votes present in person or by proxy and entitled to vote at the meeting is required. In other words, the director nominees receiving the greatest number of votes will be elected. Abstentions will have no effect on the outcome of the vote.

 

For the proposal to ratify the selection of Deloitte & Touche LLP to serve as our independent registered public accounting firm, the affirmative vote of the holders of a majority of the shares represented at the meeting in person or by proxy and entitled to vote on the proposal will be required for approval. An abstention will have the effect of a vote against this proposal.

 

If your shares are registered in the name of a bank, broker or other nominee and you do not give your broker or other nominee specific voting instructions for your shares, under rules of the New York Stock Exchange your record holder has discretion to vote your shares on proposals relating to what are deemed to be “routine” matters, which include the election of directors and the ratification of auditors described in this proxy statement, and do not have discretion to vote on proposals relating to what are deemed to be “non-routine” matters. A “broker non-vote” occurs when a broker or other nominee submits a proxy that states that the broker does not vote for some or all of the proposals, because the broker has not received instructions from the beneficial owner on how to vote on the proposals and does not have discretionary authority to vote in the absence of instructions.

 

Although broker non-votes will be considered as represented for purposes of determining a quorum, broker non-votes are not counted in the tabulation of the voting results for the election of directors or the ratification of our auditors. Thus, a broker non-vote will make a quorum more readily obtainable and will not count as a vote against a proposal that requires a majority of the votes represented at the meeting.

 

Attendance at the meeting will be limited to shareholders as of the record date, their authorized representatives and guests of Wyndham Worldwide. Admission will be by ticket only. For registered shareholders, please check the appropriate box on the proxy card and retain the bottom portion of the card as your admission ticket. Beneficial owners with shares held through a bank, broker or other nominee should request tickets in writing from the Corporate Secretary of Wyndham Worldwide Corporation, Seven Sylvan Way, Parsippany, New Jersey 07054, and include proof of ownership, such as a bank or brokerage firm account statement or letter from the broker, trustee, bank or nominee holding their stock, confirming beneficial ownership. Shareholders who do not obtain tickets in advance may obtain them on the meeting date at the registration desk upon verifying his or her stock ownership as of the record date. In accordance with our security procedures, all persons attending the meeting must present a picture identification along with their admission ticket or proof of beneficial ownership in order to gain admission. Admission to the meeting will be expedited if tickets are obtained in advance. Tickets may be issued to others at our discretion.

 

If you are unable to attend the annual meeting in person, you may listen to the proceedings through the Internet. To listen to the live webcast, please log on at www.wyndhamworldwide.com and select “News and Events” and “Webcasts and Events” on the Investor Center page of the website. The webcast will begin at 3:00 p.m., New York time, and will remain on our website for 90 days. The webcast will permit shareholders to listen to the meeting but will not provide for the ability to vote, present any stockholder proposals or ask questions.

 

We will pay all costs relating to the solicitation of proxies. Mellon Investor Services LLC has been retained to assist in soliciting proxies at a cost of $11,500 plus reasonable expenses. Proxies may be solicited by our officers, directors and employees personally, by mail, telephone or other electronic means. We will also reimburse brokers, custodians, nominees and fiduciaries for reasonable expenses in forwarding proxy materials to beneficial owners of our common stock.

 

Shareholders interested in presenting a proposal for inclusion in our proxy statement and proxy relating to our 2008 Annual Meeting of Shareholders may do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and our By-Laws. To be eligible for inclusion in next year’s proxy statement, shareholder proposals must be received by the Corporate Secretary at our principal executive offices no later than the close of business on November 10, 2007. In general, any shareholder proposal to be considered at next year’s annual meeting, but not included in the proxy statement, must be submitted in writing to and received by the Corporate Secretary at our principal executive offices not earlier than the close of business on December 29, 2007 and not later than the close of business on January 28, 2008. However, if the date of the 2008 Annual Meeting of Shareholders is not within 30 days before or after April 26, 2008, then a shareholder will be able to submit a proposal for consideration at the annual meeting not later than the 10th day following the day on which public disclosure of the date of the annual meeting was made or such notice of the date of such annual meeting was mailed, whichever occurs first. Any notification to bring any proposal before the 2008 Annual Meeting of the Shareholders must comply with the requirements of our By-Laws. A shareholder may obtain a copy of our By-Laws on our website or by writing to our Corporate Secretary. Our Corporate Governance Committee will take into consideration nominees for election to the Board submitted by shareholders in accordance with the criteria and procedures described in this proxy statement under “Director Nomination Process.” The Corporate Governance Committee will consider shareholder recommendations for candidates to the Board sent to the Committee c/o the Corporate Secretary. In order to submit a nomination, a shareholder must comply with provisions of applicable law and our By-Laws.

 

The SEC has adopted rules governing the delivery of annual disclosure documents that permit us to send a single set of our annual report and proxy statement to any household at which two or more shareholders reside if we believe that the shareholders are members of the same family. This rule benefits both shareholders and us by reducing the volume of duplicate information received and our expenses. Each shareholder will continue to receive a separate proxy card. If your household received a single set of disclosure documents for this year, but you would prefer to receive your own copy, or if you share an address with another shareholder and together both of you wish to receive only a single set of our annual disclosure documents, please contact our transfer agent, Mellon Investor Services, by calling their toll-free number (866) 540-5760 or through their website at www.melloninvestors.com.

 

Strong corporate governance is an integral part of our core values. We are committed to having sound corporate governance principles and practices. Please visit our website at www.wyndhamworldwide.com under the Investor Center page for the Board’s Corporate Governance Guidelines and Director Independence Criteria, the Board-approved charters for the Audit, Compensation and Corporate Governance committees and related information. These guidelines and charters may be obtained by writing to our Corporate Secretary at Wyndham Worldwide Corporation, Seven Sylvan Way, Parsippany, New Jersey 07054.

 

Our Board has adopted Corporate Governance Guidelines that, along with the charters of the Board committees, Director Independence Criteria and Code of Business Conduct and Ethics for Directors, provide the framework for our governance. The governance rules for companies listed on the New York Stock Exchange and those contained in the Sarbanes-Oxley Act of 2002 and related regulations are reflected in the guidelines. The Board will review these principles and other aspects of governance periodically. The Corporate Governance Guidelines are available on the Investor Center page of our website (www.wyndhamworldwide.com).

 

The Board adopted the Director Independence Criteria set out below for its evaluation of the materiality of director relationships with us. The Director Independence Criteria contain independence standards that exceed the independence standards specified in the listing standards of the New York Stock Exchange. The Director Independence Criteria are available on the Investor Center page of our website (www.wyndhamworldwide.com).

 

A director who satisfies all of the following criteria shall be presumed to be independent under our Director Independence Criteria:

 

 

 

The Corporate Governance Guidelines and Director Independence Criteria provide for director independence standards that meet or exceed those of the New York Stock Exchange. These standards require the Board to affirmatively determine that each director has no material relationship with Wyndham Worldwide other than as a director.

 

In accordance with these standards and criteria, the Board undertook its annual review of the independence of its directors. During this review, the Board considered whether there are any relationships between each director or any member of his or her immediate family and us and our subsidiaries and affiliates. The Board also considered whether there were any transactions or relationships between directors or any member of their immediate family or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder and us. The purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.

 

As a result of this review, the Board affirmatively determined that the following directors are independent of Wyndham Worldwide and its management as required by the New York Stock Exchange listing standards and the Director Independence Criteria: Myra J. Biblowit, George Herrera, The Right Honourable Brian Mulroney, Pauline D.E. Richards and Michael H. Wargotz. Under New York Stock Exchange rules, Mr. Buckman, as a former executive officer of our former parent corporation, Cendant Corporation (now Avis Budget Group), may not be deemed to be independent until August 2009, three years from the effective date of the spin-off. All members of the Audit, Compensation and Corporate Governance committees are independent directors as required by the New York Stock Exchange listing standards, SEC rules as applicable and the Director Independence Criteria.

 

The Board follows a number of procedures to review, and if necessary and appropriate, ratify related persons transactions. Each Board member answers a questionnaire designed to disclose conflicts and related persons transactions. We also review our internal records for related party transactions. Based on a review of these standards and materials, none of the directors determined by the Board to be independent had or has any relationship with us other than as a director. Accordingly, the Board did not need to consider any director relationship with us to make its determination of director independence.

 

The following describes our Board Committees. The composition of the Committees is provided immediately after.

 

Audit Committee

 

Responsibilities include:

 

 

 

All members of the Audit Committee are independent directors under the Board’s Director Independence Criteria and applicable regulatory and listing standards. The Board in its business judgment has determined that each member of the Audit Committee is financially literate, knowledgeable and qualified to review financial statements in accordance with applicable listing standards. The Board has also determined that Pauline D.E. Richards is an audit committee financial expert within the meaning of applicable SEC rules.

 

See the Audit Committee Report below. The Audit Committee Charter is available on the Investor Center page of our website (www.wyndhamworldwide.com).

 

Compensation Committee

 

Responsibilities include:

 

 

All members of the Compensation Committee are independent directors under the Board’s Director Independence Criteria and applicable regulatory and listing standards.

 

See the Compensation Committee Report below. The Compensation Committee Charter is available on the Investor Center page on our website (www.wyndhamworldwide.com).

 

Cendant’s compensation committee retained Frederic W. Cook & Co., Inc. as third party advisor and employed them to provide independent advice and evaluation on the compensation packages of Cendant’s executives, including our CEO, effective for 2006.

 

In October 2006, Hewitt Associates was retained by our Compensation Committee as a third-party advisor to provide independent advice, research, and evaluation related to executive compensation. In this capacity, Hewitt Associates reports directly to the Compensation Committee. Hewitt Associates has been retained to provide our Compensation Committee with the following services upon request: competitive market pay analyses including total compensation measurement services, proxy data studies, dilution analyses and market trends; ongoing support with regard to the latest relevant legal, regulatory and accounting considerations impacting compensation and benefit programs; assistance with the redesign of any compensation or benefit programs, if needed; and preparation for and attendance at selected management, committee and Board meetings.

 

Corporate Governance Committee

 

Responsibilities include:

 

 

All members of the Corporate Governance Committee are independent directors under the Board’s Director Independence Criteria and applicable regulatory and listing standards.

 

The Corporate Governance Charter is available on the Investor Center page on our website (www.wyndhamworldwide.com).

 

Executive Committee

 

The Executive Committee may exercise all of the powers of the Board when the Board is not in session, including the power to authorize the issuance of stock, except that the Executive Committee does not have the authority to alter, amend or repeal the by-laws or any resolution or resolutions of the Board, declare any dividend or make any other distribution to shareholders, appoint any member of the Executive Committee or take any other action which legally may be taken only by the full Board.

 

The following chart shows the current committee membership and the number of meetings that each committee held since July 31, 2006, the effective date of our spin-off from Cendant Corporation.

 

 

M = Member

C = Chair

 

Directors fulfill their responsibilities not only by attending Board and committee meetings but also through communication with the Chairman and CEO and other members of management relative to matters of mutual interest and concern to Wyndham Worldwide.

 

Since July 31, 2006, the Board held two meetings. Each director attended 100% of the meetings of the Board and the committees of the Board on which the director served.

 

The Board will meet at least three times a year in executive session without any members of management present, whether or not they are directors, and at least once per year with only the independent directors present. Directors meeting in executive session will formulate and disclose the manner by which a presiding director is selected for each executive session.

 

Shareholders and other parties interested in communicating directly with the Board or an individual non-employee director may do so by writing our Corporate Secretary at Wyndham Worldwide Corporation, Seven Sylvan Way, Parsippany, New Jersey 07054. The Corporate Secretary will forward the correspondence only to the intended recipients. However, prior to forwarding any correspondence, the Corporate Secretary will review it and, in her discretion, not forward correspondence deemed to be of a commercial nature.

 

The Board has adopted a Code of Business Conduct and Ethics for Directors with ethics guidelines specifically applicable to directors. In addition, we adopted Business Principles applicable to all our employees, including our CEO, CFO and Chief Accounting Officer. The Code of Business Conduct and Ethics for Directors and our Business Principles are available on the Investor Center page of our website (www.wyndhamworldwide.com). Copies of these documents may also be obtained free of charge by writing to our Corporate Secretary. We will disclose on our website any amendment to or waiver from a provision of our Business Principles that applies to our CEO, CFO or Chief Accounting Officer.

 

As provided in the Board’s Corporate Governance Guidelines, directors are expected to attend our annual meeting of shareholders absent exceptional cause. All of our directors plan to attend the Annual Meeting.

 

Role of Corporate Governance Committee.  The Corporate Governance Committee considers the appropriate balance of experience, skills and characteristics required of the Board when considering potential candidates to serve on the Board. Nominees for director are selected on the basis of their depth and breadth of experience, wisdom, integrity, ability to make independent analytical inquiries, understanding of our business environment and willingness to devote adequate time to Board duties.

 

Identification and Evaluation Process.  The process for identifying and evaluating nominees to the Board is initiated by identifying a candidate who meets the criteria for selection as a nominee and has the specific qualities or skills being sought based on input from members of the Board and, if the Corporate Governance Committee deems appropriate, a third-party search firm. These candidates will be evaluated by the Corporate Governance Committee by reviewing the candidates’ biographical information and qualifications and checking the candidates’ references. Qualified nominees will be interviewed by at least one member of the Corporate Governance Committee. Using the input from the interview and other information obtained by the Corporate Governance Committee, the Corporate Governance Committee evaluates whether the prospective candidate is qualified to serve as a director and whether the Corporate Governance Committee should recommend to the Board that the Board nominate this prospective candidate for election by the shareholders or to fill a vacancy on the Board.

 

Shareholder Nominations and By-Law Procedures.  The Corporate Governance Committee will consider written proposals from shareholders for nominees for director. Nominations should be submitted to the Corporate Governance Committee, c/o the Corporate Secretary, and include at least the following: name of the shareholder and evidence of the person’s ownership of our common stock, number of shares owned and the length of time of ownership, name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director and the person’s consent to be named as a director if selected by the Corporate Governance Committee and nominated by the Board.

 

Our By-Laws establish procedures pursuant to which a stockholder may nominate a person for election to the Board. Our By-Laws are posted on our website under Investor Center at www.wyndhamworldwide.com. To nominate a person for election to the Board, a stockholder must set forth all information relating to the nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Section 14 under the Securities Exchange Act of 1934, as amended (and the related rules and regulations). Such notice must also contain information specified in the By-Laws as to the director nominee, information about the shareholder making the nomination, including name and address, class and number of shares owned, and representations regarding the intention to make such a nomination and to solicit proxies in support of it. We may require any proposed nominee to furnish information concerning his or her eligibility to serve as an independent director or that could be material to a reasonable shareholder’s understanding of the independence of the nominee.

 

To nominate a person for election to the Board at our annual meeting of stockholders, written notice of a stockholder nomination must be delivered to our Corporate Secretary not less than 90 nor more than 120 days prior to the anniversary date of the prior year’s annual meeting. However, if our annual meeting is advanced or delayed by more than 30 days from the anniversary date of the previous year’s meeting, a shareholder’s written notice will be timely if it is delivered by no later than the close of business on the 10th day following the day on which public disclosure of the date of the annual meeting is made or the notice of the date of the annual meeting was mailed, whichever occurs first. A shareholder may make nominations of persons for election to the Board at a special meeting if the shareholder delivers written notice to our Corporate Secretary not later than the close of business on the 10th day following the day on which public disclosure of the date such special meeting was made or notice of such special meeting was mailed, whichever occurs first. At a special meeting of shareholders, only such business may be conducted as shall have been brought before the meeting pursuant to our notice of meeting.

 

Evaluation of Shareholder Nominees.  The Corporate Governance Committee intends to use a substantially similar evaluation process as discussed above to evaluate nominees for director recommended by shareholders.

 

The Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities for the external reporting process and the adequacy of Wyndham Worldwide’s internal controls. Specific responsibilities of the Audit Committee are set forth in the Audit Committee Charter adopted by the Board on July 13, 2006. The Charter is available on the Investor Center page of our website (www.wyndhamworldwide.com).

 

The Audit Committee is comprised of three directors, all of whom meet the standards of independence adopted by the New York Stock Exchange and the SEC. Subject to shareholder ratification, the Audit Committee appoints Wyndham Worldwide’s independent registered public accounting firm. The Audit Committee approves in advance all services to be performed by Wyndham Worldwide’s independent registered public accounting firm in accordance with SEC rules, subject to the de minimis exceptions for non-audit services.

 

Management is responsible for Wyndham Worldwide’s financial statements and reporting process, for establishing and maintaining an adequate system of internal controls over financial reporting, and for assessing the effectiveness of Wyndham Worldwide’s internal controls over financial reporting. Deloitte & Touche LLP, Wyndham Worldwide’s independent registered public accounting firm, is responsible for auditing Wyndham Worldwide’s consolidated and combined financial statements. The Audit Committee has reviewed and discussed Wyndham Worldwide’s 2006 annual report on Form 10-K, including the audited consolidated and combined financial statements of Wyndham Worldwide for the year ended December 31, 2006, with management and with representatives of Deloitte & Touche LLP.

 

The Audit Committee has also discussed with Deloitte & Touche LLP matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended, other applicable auditing standards of the Public Company Audit Oversight Board, as well as Rule 2-07 of Regulation S-X of the SEC — Communication with audit committees.  The Audit Committee has received from Deloitte & Touche LLP the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with Deloitte & Touche LLP its independence.

 

The Audit Committee has also considered whether Deloitte & Touche LLP providing limited non-audit services to Wyndham Worldwide is compatible with maintaining its independence. The Audit Committee has satisfied itself as to the independence of Deloitte & Touche LLP.

 

Based on the Audit Committee’s review of the audited consolidated and combined financial statements of Wyndham Worldwide, and on the Audit Committee’s discussions with management of Wyndham Worldwide and with Deloitte & Touche LLP, the Audit Committee recommended to the Board of Directors that the audited consolidated and combined financial statements be included in Wyndham Worldwide’s Annual Report on Form 10-K for the year ended December 31, 2006.

 

AUDIT COMMITTEE

 

Michael H. Wargotz (Chair)

George Herrera

Pauline D.E. Richards

 

In July 2006, we separated from Cendant Corporation (now Avis Budget Group) in a spin-off and became a stand-alone public company. Compensation paid to our non-employee directors in 2006 was determined by Cendant prior to the spin-off.

 

Non-employee directors receive compensation for Board service designed to compensate directors for their Board responsibilities and align their interests with the long-term interests of shareholders. An employee director receives no additional compensation for Board service.

 

In connection with the spin-off, on August 1, 2006 our non-employee directors received new director equity grants in the form of deferred stock units. Each deferred stock unit entitles the director to receive one share of common stock following retirement or termination of service from our Board for any reason. Directors may not sell or receive value from any deferred stock unit prior to termination of service. The number of units granted equaled $75,000, the grant date fair value, divided by $31.85, the fair market value of a share of our common stock as of the close of business on the grant date.

 

The following table describes compensation for non-employee directors for 2006. The amounts reported include compensation paid to the directors in their capacity as directors of Cendant prior to the spin-off.

 

2006 Director Compensation

 

 

 

2007 Director Compensation

 

The following describes compensation we will pay our non-employee directors in 2007:

 

Annual director retainer		$	150,000
Audit committee chair			20,000
Audit committee member			10,000
Compensation committee chair			15,000
Compensation committee member			7,500
Corporate governance committee chair			10,000
Corporate governance committee member			5,000
Executive committee member			8,000

 

The annual director retainer and committee chair and membership fees are paid on a quarterly basis 50% in cash and 50% in deferred stock units. The number of deferred stock units issued is based on our stock price on the quarterly determination date. Directors may elect to receive more than 50% of the retainer and fees in deferred stock units. Board members do not receive additional fees for meeting attendance.

 

In addition to this compensation, Directors Biblowit, Mulroney and Richards are insured by term life insurance policies owned by us with a $1.1 million death benefit payable $1 million to us, which benefit we will donate to a charitable beneficiary of the director’s choice, and $100,000 paid directly to a personal beneficiary of the director’s choice. Mr. Buckman is currently insured by a term life insurance policy established when he was an executive officer of Cendant with a $1 million death benefit payable to us. We expect to insure all of our directors under the arrangement currently in place for Directors Biblowit, Mulroney and Richards described above.

 

We adopted a policy providing for a company match of a director’s charitable contributions in an amount up to $10,000 per year.

 

The Corporate Governance Guidelines require each non-employee director to own at least 1,000 shares of our common stock. As of December 31, 2006, all of our non-employee directors met or exceeded the ownership requirements.

 

The following table describes the beneficial ownership of our common stock for the following persons as of January 31, 2007: each executive officer named in the Summary Compensation Table below (who we refer to as named executive officers), each person who to our knowledge owns in excess of 5% of our common stock; and all of our directors and executive officers as a group. The percentage values are based on 188,895,025 shares of our common stock outstanding as of January 31, 2007. The principal address for each director, nominee and executive officer of Wyndham Worldwide is Seven Sylvan Way, Parsippany, New Jersey 07054.

 

Under SEC rules, “beneficial ownership” includes shares for which the individual, directly or indirectly, has or shares voting or investment power, whether or not the shares are held for the individual’s benefit.

 

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Directors and executive officers are required to file reports of ownership and changes in ownership of our common stock with the SEC and the New York Stock Exchange. In 2006 all reports were filed on time.

 

At the date of this proxy statement, the board of directors consists of seven members, six of whom are non-employee directors and five of whom are independent directors under applicable listing standards and our corporate governance documents. The board is divided into three classes, each with three-year terms. The terms of the classes are staggered so that one-third of the directors, or as near to one-third as possible, are elected at each annual meeting.

 

At this year’s meeting, two directors are to be elected for three-year terms. The Corporate Governance Committee of the board has nominated the Right Honourable Brian Mulroney and Michael H. Wargotz, both of whom are presently our directors.

 

We do not know of any reason why any nominee would be unable to serve as a director. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board may nominate.

 

The two nominees and the other present directors continuing in office after the meeting are listed below, with brief biographies.

 

Nominees for Election to the Board for a
Three-Year Term Expiring at the 2010 Annual Meeting

 

Directors Continuing in Office for a Term
Expiring at the 2008 Annual Meeting

 

 

Directors Continuing in Office for a Term
Expiring at the 2009 Annual Meeting

 

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS

A VOTE FOR THE ELECTION OF THE NOMINEES,

THE RIGHT HONOURABLE BRIAN MULRONEY AND MICHAEL H. WARGOTZ

 

Compensation Committee Matters

 

Separation from Cendant.  During 2005 and 2006 Cendant’s compensation committee met on numerous occasions to, among other things, determine and approve the employment agreement for our CEO. We subsequently entered into employment agreements with our other named executive officers.

 

Wyndham Worldwide Compensation Committee.  Our Compensation Committee is responsible for establishing executive compensation policies and programs consistent with corporate objectives and shareholder interests. The Compensation Committee operates under a written charter adopted by the Board. The charter is reviewed on an annual basis and revised as appropriate. The Committee’s membership is determined by the Board and is composed entirely of independent directors. The Compensation Committee Chair reports on Compensation Committee actions and recommendations at our Board meetings.

 

Ratification of Prior Actions.  In October 2006 our Compensation Committee reviewed the actions of Cendant’s compensation committee as they applied to our CEO and ratified the employment agreements of our other named executive officers.

 

Management’s Role.  Management plays a significant role in the compensation-setting process. The most significant aspects of management’s role are evaluating employee performance, establishing business performance targets and objectives, and recommending salary levels and equity awards. Our CEO works with the Compensation Committee in establishing the agenda for committee meetings. Management also prepares meeting information for each Compensation Committee meeting. Our CEO also participates in Compensation Committee meetings at the committee’s request to provide background information regarding our strategic objectives, his evaluation of the performance of the senior executive officers and compensation recommendations as to senior executive officers (other than himself). The CEO is not involved in setting his own compensation. CEO compensation is exclusive responsibility of the Compensation Committee.

 

Overview

 

In July 2006, we separated from Cendant Corporation (now Avis Budget Group) in a spin-off and became a stand-alone public company. Compensation elements and target levels for our named executive officers for 2006 were determined by Cendant. These determinations were made largely in the context of the spin-off. In summary, the compensation decisions relevant to our named executive officers for 2006 were as follows:

 

 

 

Executive Total Compensation Strategy

 

In February 2007, we adopted our Executive Total Compensation Strategy with the following principles and objectives as they apply to our named executive officers:

 

 

Determining Executive Compensation

 

An important aspect of the Compensation Committee’s annual work relates to the determination of compensation for our senior executives.

 

Annual Evaluation.  The Compensation Committee will meet each year to evaluate the performance of the named executive officers, to consider and review their base salaries for potential annual increases and to consider and approve any grants to them of long-term incentive compensation.

 

Performance Compensation and Objectives.  Performance-based compensation for our named executive officers generally includes cash annual incentive compensation for achievement of specified performance objectives and stock-based compensation whose value is dependent upon long-term appreciation in stock price. The “Non-Equity Incentive Plan” column of the Summary Compensation Table below lists the annual incentive compensation we paid our named executive officers for 2006.

 

Performance objectives for 2006 annual incentive compensation paid in 2007 were established on the basis of corporate and/or business unit Earnings Before Interest and Taxes (EBIT), a measure of our profitability. The EBIT targets for 2006 were adjusted for separation and related costs and other special items. The 2006 adjusted EBIT targets and funding models for the corporation and business units were set by management based on approved operating budgets and represented a specified growth rate over the prior year’s EBIT consistent with our strategic plan. We used these operating budgets to set the ranges for our published 2006 earnings guidance.

 

An executive’s annual incentive compensation may be higher or lower than the target payment (down to zero) depending on corporate and business unit performance. For example, the annual incentive payment could be as high as 125% of the target if the operating unit results exceed 106% of the 2006 adjusted EBIT target or as low as zero if the operating unit results are less than 95% of the 2006 adjusted EBIT target.

 

For our CEO and CFO, the 2006 annual incentive payment was based on a corporate target. For our business unit chief executives other than Mr. Hanning, the 2006 annual incentive payment was weighted 50% for the corporate target and 50% for the business unit target. For Mr. Hanning, the 2006 annual incentive payment was weighted 100% for the business unit target.

 

We link performance to our long-term incentives by basing the size of the aggregate pool of shares available for grant on business unit and corporate performance and, for individual grants, on individual performance assessment and future potential. The long-term incentive awards we made to our named executive officers in 2006 are described below in the Grants of Plan-Based Awards Table.

 

Targeted Compensation Levels.  We believe that information regarding compensation practices at other companies is useful in evaluating compensation of our named executive officers. We recognize that our compensation practices must be competitive in the market. In addition, this market information is a key factor that we consider in assessing the reasonableness of compensation. Accordingly, we review compensation levels for our CEO against compensation levels at the companies in the peer group deemed appropriate by our Compensation Committee for benchmarking purposes.

 

At the request of Cendant’s Compensation Committee, Cendant’s compensation consultant provided Cendant with information regarding CEO compensation levels at the 50th and 75th percentiles among a group of representative hospitality, travel and gaming companies.

 

For our 2007 compensation arrangements, our compensation consultant provided our Compensation Committee CEO compensation levels of base salary, annual incentive awards and long-term incentive awards at the 50th and 75th percentile among those companies that we consider to be our most directly comparable peer hospitality companies.

 

The Compensation Committee also reviewed general industry market survey data from the 2006 Hewitt Associates Total Compensation Measurement (TCM) database. The general industry peer group consists of 54 companies with revenues between $2.5 and $5 billion with a median of $3.3 billion.

 

We and Cendant used the comparable data to determine compensation levels for our CEO, and in turn, our other named executive officers as described below.

 

Policies and Practices for Pricing and Timing of Equity Grants.  We expect to make equity grants to our named executive officers in May of each year. We expect to observe the following relating to the timing of equity grants:

 

 

2006 Executive Compensation Elements and Decisions

 

Base Salary.  Base salary is a critical element of executive compensation because it provides executives with a base level of monthly income needed to be market competitive. We set base salaries at a level designed to attract and retain superior managers. Base salaries for our executives are established based on the scope of their responsibilities, taking into account historical compensation, competitive market compensation paid by other companies for similar positions as well as salaries paid to the executives’ peers within the company.

 

The base salaries we (and Cendant) paid to our named executive officers in 2006 are listed in the Summary Compensation Table below. These amounts include compensation paid by Cendant prior to the spin-off.

 

Mr. Holmes’ base salary was targeted to the 75th percentile of the peer group selected by Cendant’s compensation consultant. The base salaries of our other named executive officers were set relative to Mr. Holmes’ base salary and each other.

 

Annual Incentive Compensation.  We pay annual incentive compensation to incent and reward superior performance for the year. Annual incentive compensation is paid in cash in the first quarter for the prior year’s performance. Annual incentive awards are granted under our 2006 Equity and Incentive Plan. Consistent with their employment agreements, we paid our named executive officers the annual incentive compensation listed in the Summary Compensation Table below.

 

Mr. Holmes’ target annual incentive compensation was set by Cendant to the 75th percentile of the peer group used by Cendant’s compensation consultant and consistent with his historical compensation. The target annual incentive compensation eligible paid to our other named executive officers were set relative to their base salaries and each other. The possible threshold, target and maximum annual incentive compensation payouts payable to the named executive officers for 2006 are described below in the Grants of Plan Based Awards Table.

 

The annual incentive compensation paid to Mr. Holmes and Ms. Wilson for 2006 was weighted 100% on a corporate adjusted EBIT target. We achieved at least 102.3% of the corporate adjusted EBIT target which resulted in an annual incentive payment of 105% of target for Mr. Holmes and Ms. Wilson under the established corporate funding models.

 

The annual incentive compensation paid to Mr. May and Mr. Rudnitsky for 2006 was weighted 50% for the corporate target and 50% for the business unit target. Each of these executives received 105% of

50% of his target annual incentive compensation based on the corporate results as described above. Mr. May’s business unit, RCI Global Vacation Network, did not achieve at least 97% of the adjusted EBIT target which resulted in him receiving 0% of 50% of his target annual incentive compensation under the established business unit funding models. Mr. Rudnitsky’s business unit, Wyndham Hotel Group, achieved at least 103.2% of the adjusted EBIT target which resulted in him receiving 105% of 50% of his target annual incentive compensation under the established business unit funding models.

 

The annual incentive compensation paid to Mr. Hanning for 2006 was weighted 100% for the business unit target. Mr. Hanning’s business unit, Wyndham Vacation Ownership, achieved at least 110.3% of the adjusted EBIT target which resulted in him receiving 125% of his target annual incentive compensation under the established business unit funding models.

 

Long-Term Incentive Compensation.  The purpose of long-term incentives for our named executive officers is to align their interests with shareholders through meaningful equity participation and long-term ownership. Long-term incentives should help balance a short-term performance focus and encourage retention. Long-term incentive awards are granted under our 2006 Equity and Incentive Plan.

 

At the CEO level, long-term incentives are heavily weighted toward stock settled stock appreciation rights to provide maximum leverage and to drive long-term share price appreciation. A stock settled stock appreciation right is similar to a stock option and gives the executive the right to receive an amount in shares of common stock equal to the excess of the fair market value of a share of our common stock on the date of exercise over the exercise price of the stock appreciation right. For our other named executive officers, long-term incentives are weighted between stock settled stock appreciation rights and restricted stock units to encourage retention. A restricted stock unit represents the right to receive a share of our common stock on a set vesting date.

 

We granted the stock settled stock appreciation rights and restricted stock units to our named executive officers as described in the Grants of Plan-Based Awards Table below. The grant made to our CEO was designed to equal 200% of his prior year award intended to provide increased retention incentive and consistent with the CEOs of the other companies being separated from Cendant. The grants made to our other named executive officers were set relative to Mr. Holmes’ grant and each other.

 

Officer Deferred Compensation Plan.  We adopted an officer deferred compensation plan that permits named executive officers to defer salary and bonus compensation. We match executive contributions to the plan up to 6% of salary and bonus. The executive may elect a single lump-sum payment of his or her account or may elect payments over time subject to 5-year vesting. The participant’s entire account balance will vest and be paid in a single lump sum following a change-in-control or in the event that the executive’s employment terminates.

 

401(k) Plan.  We provide employees, including our named executive officers, with a 401(k) plan. We provide named executive officers and other participants a company match of salary contributed up to 6% of salary. If an executive elects to participate in both the Officer Deferred Compensation Plan and the 401(k) plan, the executive must elect to defer salary in one or the other of the plans but not both.

 

Savings Restoration Plan.  We adopted a savings restoration plan, which allows executives to defer compensation in excess of the amounts permitted by the Internal Revenue Code under our 401(k) plan, but there are no matching contributions for these deferrals.

 

Perquisites.  We provide our senior executive officers with perquisites that we believe are reasonable, competitive and consistent with our overall executive compensation program. We believe that our perquisites help us to retain the best managers and allow them to operate more effectively.

 

In 2006 we provided our named executives perquisites consistent with Cendant’s historical practices including a leased automobile and financial planning services. For each of these perquisites the executive receives a “tax gross-up” payment, which means the executive receives additional compensation to reimburse them for the amount of taxes owed on the compensation imputed for the perquisite. We also provided our CEO with limited personal use of company aircraft for which we imputed income for our incremental costs without a tax gross-up. Perquisites provided in 2006 are described in the All Other Compensation Table below.

 

Severance Arrangements.  The employment agreements of our named executive officers provide for payments related to base salary and bonus as well as accelerated equity vesting if the executive’s employment is terminated without cause or for a constructive discharge. The payments and terms vary in certain respects between the individual executives. These payments and terms are discussed below under Agreements with Named Executive Officers.

 

Change-in-Control Arrangements.  Mr. Holmes’ employment agreement provides for payments related to base salary and bonus as well as accelerated equity vesting in the event of a change-in-control. The employment agreements of our other named executive officers provide for accelerated equity vesting based on certain vesting schedules in the event of a change-in-control. The payments and terms vary in certain respects between the individual executives. These payments and terms are discussed below under Agreements with Named Executive Officers. In addition, equity grants made to all employees, including the named executive officers, under our 2006 Equity and Incentive Plan fully vest on a change-in-control.

 

2007 Executive Compensation Decisions

 

Base Salary.  In the first quarter of 2007 our Compensation Committee approved the 2006 annual incentive compensation payments discussed above and the 2007 base salaries for each of our named executive officers. Consistent with the executives’ employment agreements, 2007 base salaries are as follows:

 

			2007
Name			Base Salary
			($)
Mr. Holmes				1,040,000
Mr. Hanning				577,500
Mr. May				550,000
Mr. Rudnitsky				520,000
Ms. Wilson				494,000

 

Merit increases in base salary reward successful performance and seek to create incentives for retention. We based the 2007 merit increases on a review of the 2006 performance of the named executive officers and their applicable function or business unit.

 

Annual Incentive Compensation.  Consistent with the executives’ employment agreements, and based on the 2007 base salaries described above, the possible threshold, target and maximum annual incentive compensation payouts payable to the named executive officers for 2007 are as follows:

 

Management provided our Compensation Committee with the financial criteria and targets that will be used to determine the level of annual incentive compensation payouts and management’s rationale as to why these targets are appropriate. Performance objectives for 2007 annual incentive compensation were established on the basis of corporate and/or business unit EBIT. The EBIT targets for both corporate and the business units will be adjusted for separation, related costs and special items if appropriate.

 

The 2007 adjusted EBIT targets and funding models for the corporation and business units were set by management based on approved operating budgets and represented a specified growth rate over the prior year’s EBIT consistent with our strategic plan. We used these operating budgets to set the ranges for our published 2007 earnings guidance.

 

For our CEO and CFO, the 2007 annual incentive payment will be weighted 100% on the corporate target. For our business unit chief executives, the 2007 annual incentive payment will be weighted 25% for the corporate target and 75% for the business unit target.

 

The Compensation Committee reviewed the criteria and targets with our compensation consultant and management and approved the threshold, target and maximum levels of financial performance under the plan and the potential payouts at those levels of performance. The Compensation Committee and we believe these financial targets are rigorous but reasonably attainable.

 

Section 162(m) of the Internal Revenue Code of 1986

 

The federal tax laws impose requirements in order for compensation payable to the CEO and certain executive officers to be fully deductible and generally provide that compensation in excess of a certain amount is deductible only if it is performance-based compensation and meets certain requirements. In 2007, we expect to claim an income tax deduction for 2006 compensation paid to our CEO and executive officers to the extent permitted by this section of the Internal Revenue Code.

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. The Compensation Committee is satisfied that the Compensation Discussion and Analysis fairly and completely represents the philosophy, intent, and actions of the Compensation Committee with regard to executive compensation. We recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the Securities and Exchange Commission.

 

COMPENSATION COMMITTEE

 

 

The Right Honourable Brian Mulroney (Chair)

Myra J. Biblowit

Pauline D.E. Richards

 

The following table describes compensation paid to our named executive officers for 2006. The amounts reported include compensation attributable to employment with Cendant prior to the spin-off.

 

 

 

 

The All Other Compensation in the Summary Compensation Table above includes the following components. The total compensation amounts for the table are provided in the “All Other Compensation” column of the Summary Compensation Table above.

 

 

 

 

The following table summarizes grants of plan-based awards made to named executive officers in 2006.

 

 

 

 

Under our 2006 Equity and Incentive Plan, all grants set forth in the table fully-vest on a change-in-control. In the event dividends are paid on our common stock, dividends are credited for unvested restricted stock units and are paid in cash on vesting.

 

The following table summarizes the number of securities underlying outstanding plan awards for the named executive officers as of December 31, 2006.

 

 

 

 

 

 

 

The following table summarizes the Wyndham Worldwide stock option exercises and vesting of restricted stock by named executive officers in 2006.

 

 

 

 

The following Cendant, Realogy and Avis Budget Option Exercises and Stock Vested Tables are presented to describe the 2006 option exercises and vesting of awards denominated in stock of those entities. In connection with the separation of Cendant into three separate companies, Cendant equity awards were equitably adjusted to become awards for each of the companies. We do not expect to provide this data for future periods.