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 2009 ANNUAL MEETING
OF SHAREHOLDERS AND
PROXY STATEMENT

 

Wyndham Worldwide Corporation

22 Sylvan Way

Parsippany, New Jersey 07054

 

April 1, 2009

 

Dear Shareholder of Wyndham Worldwide Corporation,

 

You are cordially invited to attend the 2009 Annual Meeting of Shareholders to be held on Tuesday, May 12, 2009.

 

The meeting will start at 2:00 p.m. local time at Birchwood Manor, 111 North Jefferson Road, Whippany, New Jersey 07981.

 

I appreciate your continued support of Wyndham Worldwide Corporation and look forward to seeing you on May 12, 2009.

 

Very truly yours,

 

 

Stephen P. Holmes

Chairman and Chief Executive Officer

 

WYNDHAM WORLDWIDE CORPORATION

 

NOTICE OF 2009 ANNUAL MEETING OF SHAREHOLDERS

 

April 1, 2009

 

 

Purposes of the meeting:

 

 

The matters specified for voting above are more fully described in the attached proxy statement. Only our shareholders of record at the close of business on March 16, 2009 will be entitled to notice of and to vote at the meeting and any adjournments.

 

Who may attend the meeting:

 

Only shareholders, persons holding proxies from shareholders, invited representatives of the media and financial community and other guests of Wyndham Worldwide Corporation may attend the meeting.

 

What to bring:

 

If you received (or requested and received) a printed copy of the proxy materials, you should bring the enclosed Admission Ticket to gain admission to the meeting. If you received a Notice of Internet Availability of Proxy Materials (Notice) or voting instructions and will not be requesting a printed copy of the proxy materials, please bring the Notice or voting instructions with you as your Admission Ticket. You must bring with you a picture identification such as a valid driver’s license or passport for purposes of personal identification.

 

If your shares are held in the name of a broker, trust, bank or other nominee, you will also need to bring a proxy, letter or recent account statement from that broker, trust, bank or nominee that confirms that you are the beneficial owner of those shares.

Record Date:

 

March 16, 2009 is the record date for the meeting. This means that owners of Wyndham Worldwide common stock at the close of business on that date are entitled to:

 

 

Information About the Notice of Internet Availability of Proxy Materials:

 

This year, instead of mailing a printed copy of our proxy materials, including our Annual Report, to all of our shareholders, we have decided to provide access to these materials in a fast and efficient manner via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all shareholders. Accordingly, on or about April 2, 2009, we will begin mailing a Notice to all shareholders owning less than 1,000 shares as of March 16, 2009, and will post our proxy materials on the website referenced in the Notice. As more fully described in the Notice, shareholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

 

Householding Information:

 

We have adopted a procedure approved by the Securities and Exchange Commission called “householding.” Under this procedure, shareholders of record who have the same address and last name and have not previously requested electronic delivery of proxy materials will receive a single envelope containing the Notices for all shareholders having that address. The Notice for each shareholder will include that shareholder’s unique control number needed to vote his or her shares. This procedure will reduce our printing costs and postage fees.

 

If, in the future, you do not wish to participate in householding and prefer to receive your Notice in a separate envelope, please contact our transfer agent, BNY Mellon Shareowner Services, by calling their toll-free number at (800) 504-8998 or through their website at www.bnymellon.com/shareowner/isd.

 

For those shareholders who have the same address and last name and who request to receive a printed copy of the proxy materials by mail, we will send only one copy of such materials to each address unless one or more of those shareholders notifies us, in the same manner described above, that they wish to receive a printed copy for each shareholder at that address.

 

Beneficial shareholders may request information about householding from their banks, brokers or other holders of record.

 

Proxy Voting:

 

Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the annual meeting. You can vote by Internet, by telephone, by requesting a printed copy of the proxy materials and using the enclosed proxy card or in person at the annual meeting.

 

Our proxy tabulator, Mellon Investor Services LLC, must receive any proxy that will not be delivered in person to the annual meeting by 11:59 p.m., Eastern Daylight Time on Monday, May 11, 2009.

 

By order of the Board of Directors,

 

 

Lynn A. Feldman

Corporate Secretary

TABLE OF CONTENTS

 

WYNDHAM WORLDWIDE CORPORATION

 

 

The enclosed proxy materials are provided to you at the request of the Board of Directors of Wyndham Worldwide Corporation (Board) to encourage you to vote your shares at our 2009 annual meeting of shareholders. 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 Board made these materials available to you over the Internet or, upon your request, mailed you printed versions of these materials in connection with our 2009 annual meeting. We will mail a Notice of Internet Availability of Proxy Materials (Notice) to our shareholders beginning on or about April 2, 2009 and will post our proxy materials on our website referenced in the Notice on that same date. We are, on behalf of our Board, soliciting your proxy to vote your shares at our 2009 annual meeting of shareholders. We solicit proxies to give all shareholders of record an opportunity to vote on matters that will be presented at the annual meeting. In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

 

The annual meeting will be held on May 12, 2009 at 2:00 p.m. local time at Birchwood Manor, 111 North Jefferson Road, Whippany, New Jersey 07981.

 

You are being asked to vote on the following:

 

 

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.

 

All holders of record of our common stock as of the close of business on March 16, 2009 (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, 178,077,214 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.

 

The holders of a majority of the outstanding shares of our common stock entitled to vote at the meeting, or 89,038,608 shares, 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.

 

Even if you plan to attend the meeting you are encouraged to vote by proxy.

 

If you are a shareholder of record, also known as a registered shareholder, you may vote by proxy in one of the following ways:

 

 

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. You may also vote in person at the annual meeting (please see below under “How do I attend the meeting?”).

 

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.

 

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:

 

 

 

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 all other proposals, 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 any of these proposals.

 

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, and do not have discretion to vote on proposals relating to what are deemed to be “non-routine” matters, which include the approval of the amendment and restatement of the Wyndham Worldwide Corporation 2006 Equity and Incentive Plan primarily for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (Code) and the shareholder proposals.

 

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. 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.

 

If you received (or requested and received) a printed copy of the proxy materials, you should bring the enclosed Admission Ticket to gain admission to the meeting. If you received a Notice or voting instructions and will not be requesting a printed copy of the proxy materials, please bring the Notice or voting instructions with you as your Admission Ticket. You must bring with you a picture identification such as a valid driver’s license or passport for purposes of personal identification.

 

If your shares are held in the name of a broker, trust, bank or other nominee, you will also need to bring a proxy, letter or recent account statement from that broker, trust, bank or nominee that confirms that you are the beneficial owner of those shares.

 

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.

 

Georgeson Inc. has been retained to assist in soliciting proxies at a cost of $9,000 plus reasonable expenses. Proxies may also be solicited by our officers, directors and employees personally, by mail,

telephone or other electronic means. We will pay all costs relating to the solicitation of proxies. 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 2010 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 14, 2009. 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 26, 2009 and not later than the close of business on January 25, 2010. However, if the date of the 2010 Annual Meeting of Shareholders is not within 30 days before or after May 12, 2010, 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 2009 Annual Meeting of 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 also consider shareholder recommendations for candidates to the Board sent to the Committee c/o the Corporate Secretary. In order to submit a nomination or a recommendation, a shareholder must comply with provisions of applicable law and our By-Laws.

 

Strong corporate governance is an integral part of our core values. Our Board is committed to having sound corporate governance principles and practices. Please visit our website at www.WyndhamWorldwide.com under the Corporate Governance 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, 22 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 Corporate Governance page of our website at 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 Corporate Governance page of our website at www.WyndhamWorldwide.com.

 

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

 

 

 

Our 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 us and our 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, Securities and Exchange Commission (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 party transactions. We maintain a written policy governing related party transactions that requires Board approval of related party transactions exceeding $10,000. Each Board member answers a questionnaire designed to disclose conflicts and related party 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 both Pauline D.E. Richards and Michael H. Wargotz are audit committee financial experts within the meaning of applicable SEC rules.

 

See the Audit Committee Report below. The Audit Committee Charter is available on the Corporate Governance page of our website at 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 Corporate Governance page on our website at www.WyndhamWorldwide.com.

 

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 Committee Charter is available on the Corporate Governance page on our website at www.WyndhamWorldwide.com.

 

Executive Committee

 

The Executive Committee may exercise all of the authority of the Board when the Board is not in session, including the authorization of 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 January 1, 2008.

 

 

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.

The Board held five meetings during 2008. Each director attended at least 75% of the meetings of the Board and the committees of the Board on which the director served.

 

The Board met three times during 2008 in executive session without any members of management present, whether or not they are directors. The Board met once during 2008 in executive session with only independent directors present. Directors meeting in executive session select a presiding director for each executive session.

 

Shareholders and other parties interested in communicating directly with the Board, an individual non-employee director or the non-employee directors as a group may do so by writing our Corporate Secretary at Wyndham Worldwide Corporation, 22 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 Corporate Governance page of our website at 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 attended our 2008 annual meeting and are expected to attend the 2009 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 the 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 shareholder may nominate a person for election to the Board. Our By-Laws are posted on our website under Corporate Governance at www.WyndhamWorldwide.com. To nominate a person for election to the Board, a shareholder 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, 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 shareholders, written notice of a shareholder 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 Recommendations of 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 Corporate Governance page of our website at 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 adequate 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 the integrated audit of Wyndham Worldwide’s consolidated financial statements and internal control over financial reporting. The Audit Committee has reviewed and discussed Wyndham Worldwide’s 2008 annual report on Form 10-K, including the audited consolidated financial statements of Wyndham Worldwide for the year ended December 31, 2008, 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 applicable standards of the Public Company Accounting Oversight Board (“PCAOB”), including Statement on Auditing Standards No. 61, “Communication with Audit Committees”, as amended, and as adopted by the PCAOB, 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 applicable standards of the PCAOB regarding Deloitte & Touche LLP’s independence, 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 financial statements of Wyndham Worldwide and management’s annual report on internal control over financial reporting, 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 financial statements and management’s annual report on internal control over financial reporting be included in Wyndham Worldwide’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

AUDIT COMMITTEE

 

Michael H. Wargotz (Chair)

George Herrera

Pauline D.E. Richards

 

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.

The following table describes compensation for non-employee directors for 2008.

 

 

 

 

The following describes compensation we will pay our non-employee directors in 2009:

 

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.

 

We make available to each director a term life insurance policy 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. In the event we undergo a change-in-control or a director retires, we will pay the premiums for the policies for one year from the date of the change-in-control or retirement as applicable. Directors are not required to use this benefit and not all directors have opted to use the benefit.

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

 

We maintain a policy to make available to our directors the right to use annually one week at a Wyndham Vacation Ownership timeshare facility.

 

The Corporate Governance Guidelines require each non-employee director to own at least 1,000 shares of our common stock. Deferred stock units credited to a director count towards satisfaction of the guidelines. As of December 31, 2008, 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 December 31, 2008 (October 3, 2008 for Mr. Rudnitsky): each executive officer named in the Summary Compensation Table below (who we refer to in this proxy statement as named executive officers), each director, each person who to our knowledge beneficially 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 177,509,822 shares of our common stock outstanding as of December 31, 2008. The principal address for each director, nominee and executive officer of Wyndham Worldwide is 22 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

 

Our directors and executive officers are required to file with the SEC reports of ownership and changes in ownership of our common stock. In 2008, 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, three directors are to be elected for three-year terms. The Corporate Governance Committee of the Board has nominated Stephen P. Holmes, Myra J. Biblowit and Pauline D.E. Richards. They are all 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 three 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 2012 Annual Meeting

 

 

Directors Continuing in Office for a Term
Expiring at the 2010 Annual Meeting

 

Directors Continuing in Office for a Term
Expiring at the 2011 Annual Meeting

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ELECTION OF THE NOMINEES,
STEPHEN P. HOLMES, MYRA J. BIBLOWIT AND PAULINE D.E. RICHARDS

 

Overview

 

Our Executive Total Compensation Strategy is designed to achieve the following objectives:

 

 

As discussed in more detail below, the compensation decisions and other actions applicable to our named executive officers for 2008 were as follows:

 

 

 

As discussed further below, the compensation decisions applicable to our named executive officers for 2009 were as follows:

 

 

Compensation Committee Matters

 

Wyndham Worldwide Compensation Committee.  The Committee is responsible for establishing executive compensation policies and programs consistent with corporate objectives and shareholder interests. The 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 Committee Chair reports at our Board meetings on Committee actions and recommendations.

 

Executive Compensation Consultant.  For 2008 and 2009, Hewitt Associates was retained by the Committee as a third-party advisor to provide independent advice, research and evaluation related to executive compensation. In this capacity, the Committee utilizes reports and analyses prepared by Hewitt Associates. Hewitt Associates was retained to provide the Committee with competitive market pay analyses including total compensation measurement services, proxy data studies and market trends.

 

Management’s Role.  Our management plays a significant role in our executive compensation process including evaluating executive performance and recommending performance targets for incentive compensation, salary increases and equity awards. Our CEO works with the Committee in establishing the agenda for Committee meetings and management prepares and distributes meeting information to Committee members. Our CEO also participates in Committee meetings at the Committee’s request to provide background information regarding our strategic objectives, his evaluation of the performance of the senior executives and compensation recommendations for senior executives (other than himself). Our CEO is not involved in setting his own compensation, which is the exclusive responsibility of the Committee.

 

Executive Total Compensation Strategy

 

Our Executive Total Compensation Strategy is designed to achieve the following objectives as they apply to our named executive officers:

 

 

 

Determining Executive Compensation

 

Annual Evaluation.  An important aspect of the Committee’s annual work relates to the determination of compensation for our senior executives. The Committee meets each year to evaluate the performance of the named executive officers, to consider and review their base salaries for potential annual increases, approve plan parameters for annual incentive compensation and to consider and approve any grants to them of long-term incentive compensation.

 

Employment Agreements.  In connection with our 2006 spin-off from Cendant, Cendant’s compensation committee approved the employment agreement for Mr. Holmes. In July 2006, we entered into employment agreements with Mr. Holmes, Mr. Rudnitsky, Mr. Hanning and Ms. Wilson. In August 2006, we provided an employment letter for Mr. Anderson; we amended and restated Mr. Anderson’s employment letter in March 2008 and further amended the letter in March 2009. In October 2006, the Committee reviewed the actions of Cendant’s compensation committee as they applied to Mr. Holmes and ratified the employment agreements of our other named executive officers. In March 2008, we entered into an employment agreement with Mr. Ballotti. In December 2008, we executed amendments to the employment agreements of each of the named executive officers intended to either exempt payments and benefits under the agreements from or comply with Section 409A of the Code. The Section 409A amendments to the employment agreements amended the agreements only to the extent necessary under Section 409A of the Code and did not materially amend any provisions of the employment agreements.

 

The employment agreements for our named executive officers established the executives’ initial base salary, target annual incentive compensation and long-term incentive award. Since the employment agreements expire in July 2009 for Mr. Hanning and Ms. Wilson, July 2010 for Mr. Holmes and March 2011 for Mr. Ballotti, the terms of the agreements similarly form the basis for 2008 and 2009 base salary and annual incentive compensation. Long-term incentive awards for 2008 (other than for Mr. Ballotti) and 2009 were approved in the discretion of the Committee. The employment agreements are described in further detail below under Agreements with Named Executive Officers.

 

Compensation Committee Discretion.  The Committee annually reviews and approves all elements of the compensation of the named executive officers. For 2008, the Committee exercised discretion over annual base salary merit increases, approval of plan parameters for annual incentive compensation, approval of annual incentive compensation awards, grants of long-term incentive awards and perquisites. Accordingly, for these elements, the Committee has discretion to determine the size of any award or payment. For 2008, the Committee generally based their decisions on a combination of management’s recommendations (other than with respect to our CEO), the external market data provided by our management and compensation consultant and such other factors deemed appropriate by the Committee in its discretion.

 

Performance Compensation.  Performance-based compensation for our named executive officers includes base salary merit increases, annual incentive compensation, other performance-based compensation and long-term incentive compensation.

 

Base Salary.  Base salary is a critical element of executive compensation because it provides executives with a base level of monthly income designed to attract and retain superior managers. Merit increases in base salary reward successful individual performance and seek to create incentives for retention. Under our annual performance review process, to receive a 2008 base salary merit increase an executive must have achieved a “Key Contributor” or “Exceptional Contributor” performance rating. If an executive had

received a “Low Contributor” rating, the executive would not have been eligible for a 2008 base salary merit increase. An “Exceptional Contributor” exhibits exceptional contributions and personal leadership above the norm. A “Key Contributor” fully and consistently meets position requirements, objectives and expectations. A “Low Contributor” does not achieve or only intermittently achieves the responsibilities of the position and the goals of the individual’s performance and development plan.

 

The 2008 merit increases were based on the market analysis described below and a review of the 2007 individual performance of the named executive officers against these performance ratings. Elements of individual performance considered by the Committee and management in such review include business unit or function results of operations, achievement of non-financial objectives and leadership characteristics. The 2008 base salary merit increases for our named executive officers are described below under 2008 Executive Compensation Elements and Decisions — Base Salary.

 

Annual Incentive Compensation.  Our annual incentive compensation program is designed to create incentives for our executives to drive our financial and operating performance and thus create value for our shareholders. The amount of annual incentive compensation paid to our named executive officers for 2008 was based on four factors: total company (corporate) and/or business unit Earnings Before Interest and Taxes (EBIT), a standard measure of our profitability; individual performance based upon strategic accomplishments; an agreed upon percentage of actual earnings during the year; and actual earnings. The EBIT targets may be adjusted for special items or circumstances if appropriate. The EBIT targets under the funding models for the corporation and business units are recommended by management and approved by the Committee based on approved operating budgets consistent with our strategic plan.

 

An executive’s annual incentive compensation may be higher or lower than the target payment depending on corporate, business unit and individual performance. Executives must have received at least a Key Contributor performance rating to have been eligible for 2008 annual incentive compensation. For our corporate services executives, any 2008 annual incentive compensation was based 100% on the corporate component. For our business unit chief executives, other than Mr. Ballotti, 2008 annual incentive compensation was weighted 25% for the corporate component and 75% for the business unit component. In accordance with his employment agreement, Mr. Ballotti’s 2008 annual incentive compensation was equal to 100% of his base salary earned in 2008.

 

The Non-Equity Incentive Plan column of the Summary Compensation Table below lists the annual incentive compensation we paid our named executive officers for 2008.

 

Additional Cash Incentive Compensation for Mr. Hanning.  Mr. Hanning’s employment agreement provides that he will receive additional incentive cash compensation of up to $2 million if Wyndham Vacation Ownership (WVO) meets annual EBIT target performance objectives from 2006 to 2008. This additional incentive cash compensation opportunity was established in connection with our 2006 spin-off from Cendant. The EBIT target for each year is the same used to measure WVO’s performance under our annual incentive compensation program.

 

Under the agreement, if WVO achieved 100% or greater of the EBIT target in each applicable year, Mr. Hanning will be paid 100% of the maximum cash compensation. If WVO achieved at least 95% of the EBIT target in each applicable year, Mr. Hanning will be paid 90% of the maximum cash payment. If WVO did not achieve at least 95% of the EBIT target in each applicable year, no payment will be made to Mr. Hanning. If and to the extent WVO exceeded the EBIT target in any applicable year, the excess will be applied to cover any shortfall in the following years so that the results may be evaluated on a cumulative basis. The Non-Equity Incentive Plan Compensation column of the Summary Compensation Table below lists the additional incentive cash compensation we paid Mr. Hanning for the 3-year performance period.

 

Long-term Incentive Compensation.  The Committee annually approves an aggregate budget available for long-term incentive awards. For 2008, the aggregate budget was allocated based on the relative number of eligible executives in corporate services and the business units. Equity awards are then granted by the Committee to the corporate services and business unit executives based on individual performance review and future potential. Elements of individual performance considered by the Committee in such review include business unit or function results of operations, achievement of non-financial objectives and leadership characteristics.

Long-term incentive awards are granted under our 2006 Equity and Incentive Plan. The long-term incentive awards granted to our named executive officers in 2008 are listed in the Grants of Plan-Based Awards Table.

 

Compensation Benchmarking.  Management and the Committee believe that information regarding compensation practices at other companies is useful in evaluating compensation of our named executive officers. Management and the Committee recognize that our compensation practices must be competitive in the market to attract and retain superior senior managers. In addition, this market information is a key factor that management and the Committee consider in assessing the reasonableness of the compensation of our executives. Accordingly, management and the Committee review compensation levels for our named executive officers against benchmarked compensation levels at peer companies and industry surveys recommended by our compensation consultant.

 

Peer Group for Mr. Holmes’ 2008 Compensation.  In February 2008, our management provided the Committee a competitive market assessment prepared by our compensation consultant of the market median and 75th percentile of Mr. Holmes’ compensation focusing on base salary, annual incentive compensation and long-term incentive compensation. The competitive assessment utilized external market data based on Choice Hotels International, Inc., Hilton Hotels Corporation, Interstate Hotels and Resorts, Inc., Marriott International, Inc. and Starwood Hotels & Resorts Worldwide, Inc. (hotel peer group). This peer group was based on the prior year’s practice and was used because management and the Committee believed these companies comprised a comparable set of peer companies. Since our 2008 compensation evaluation cycle was substantially similar to the prior year, the compensation of the named executive officers is determined primarily by the terms of their employment agreements and management and the Committee expected to review the executives’ compensation under the revised peer group as discussed below, management and the Committee did not conduct a February 2008 review of the compensation of the named executive officers other than Mr. Holmes.

 

Review and Revision of Peer Group.  In 2007, our management determined to review our compensation benchmarking practices for our senior executives given our development as a public company and that merger and acquisition activity had reduced the number of companies in the hotel peer group. In June 2008, management and the Committee engaged our compensation consultant to review and recommend a peer group of comparable hotel and other service companies.

 

Our compensation consultant advised us that companies typically use several criteria in selecting peer organizations including: competitors for executive talent, which is often a predominant consideration as companies typically identify their labor market as being the principal criteria in peer selection; competitors for customers; similarly sized organizations, typically used as a measure of complexity and scope; and competitors for capital.

 

In making a recommendation, our compensation consultant selected the suggested peer group companies based on the following criteria: companies or divisions within companies in generally the same industry or business as Wyndham Worldwide; companies that were similar in size to Wyndham Worldwide in terms of revenues and market value, specifically median peer group revenues of $4.1 billion and median peer group market capitalization of $6 billion (each as of the evaluation period); companies used by analysts to compare Wyndham Worldwide’s financial performance; and organizations in similar markets such as non-hospitality companies that have franchise operations. The suggested peer group was reviewed with management and the Committee.

In July 2008, the Committee reviewed and adopted the peer group recommended by management and our compensation consultant (revised peer group) as follows:

 

 

In June 2008, management and the Committee engaged our compensation consultant to conduct a competitive review of the compensation levels and mix of our named executive officers using the revised peer group. The objectives of this review were to compare our compensation of our executives to that of similarly-situated executives at peer organizations, ensure that our compensation practices are consistent with the market and our compensation philosophy and provide a framework for 2009 compensation decisions.

 

Base Salary.  In February 2008, our compensation consultant reviewed Mr. Holmes’ 2007 actual base salary against the hotel peer group and found his base salary to be above the median but below the benchmark 75th percentile. In October 2008, our compensation consultant reviewed the 2008 base salaries of the named executive officers against the revised peer group and found Mr. Holmes’ base salary to be above the median but below the benchmark 75th percentile and the base salaries of the other named executive officers to be below the benchmark median.

 

For 2008 base salary merit increases, our management provided the Committee with a market assessment of annual salary increases utilizing external market data from World at Work, Hewitt Associates and Mercer annual salary increase surveys. Based on this review, management determined that U.S. salaries were projected to increase by 4% in 2008 and the Committee accordingly established a 4% 2008 merit increase budget. Base salary merit increases may exceed the merit increase budget for Exceptional Contributors.

 

Annual Incentive Compensation.  In February 2008, our compensation consultant reviewed Mr. Holmes’ actual 2006 annual incentive compensation against the hotel peer group and found it to be consistent with the benchmark 75th percentile. In October 2008, our compensation consultant reviewed the 2007 actual annual incentive compensation of the named executive officers against the revised peer group and found Mr. Holmes’ annual incentive compensation to be above the median but below the benchmark 75th percentile and the annual incentive compensation of the other named executive officers to be below or consistent with the benchmark median.

 

Long-term Incentive Compensation.  Our 2008 competitive assessment focused on potential long-term incentive award mix including stock options, restricted stock, stock-settled stock appreciation rights; target award values; and plan design such as vesting and performance. In February 2008, our compensation consultant reviewed Mr. Holmes’ 2007 long-term incentive compensation against the hotel peer group and found it to be above the median but below the benchmark 75th percentile. In October 2008, our compensation consultant reviewed the 2007 long-term incentive compensation of the named executive officers against the revised peer group and found their long-term incentive compensation to be above the median but below or consistent with the benchmark 75th percentile.

 

Perquisites.  For 2008, our management provided the Committee with a market assessment of competitive perquisite practices utilizing widely available market data publications from Hewitt Associates, Watson Wyatt and other service providers. Based on this information, the Committee found our existing executive perquisites program to be consistent with market practices.

 

Total Compensation.  In connection with the annual and on-going evaluation of the compensation of the named executive officers, our compensation consultant prepares and management provides the

Committee with prior year total compensation summaries and tally sheets for the named executive officers so the Committee may evaluate how each compensation element fits into our overall compensation objectives and affects decisions regarding other elements. In addition, based on the peer group data for the individual compensation elements discussed above, management provides the Committee with a market assessment of total compensation of each of the named executive officers.

 

In February 2008, our compensation consultant reviewed Mr. Holmes’ 2007 total compensation against the hotel peer group and found it to be above the median but below the benchmark 75th percentile. In October 2008, our compensation consultant reviewed the 2007 total compensation of the named executive officers against the revised peer group and found it to above the median but below the benchmark 75th percentile. In February 2009, the Committee reviewed the peer group data prepared by our management and compensation consultant as described above in considering each compensation element against total compensation and, although individual elements may have approached or been consistent with the benchmark 75th percentile for a particular named executive officer, the Committee was satisfied that 2008 total compensation was consistent with our Executive Total Compensation Strategy.

 

Mix of Compensation Elements.  In addition to the review of the compensation levels of the named executive officers against the revised peer group, the Committee reviewed the mix of compensation elements prevalent among the revised peer group. For 2008, our compensation consultant advised management and the Committee that the elements of compensation that we pay or award our named executive officers are consistent with the elements paid or awarded by our peers.

 

As discussed in detail above, each of our executive compensation elements is designed to accomplish different objectives. Base salary is designed to attract and retain our executives. Annual incentive compensation is designed to create incentives for executives to drive financial and operating performance and thus create value for shareholders. Long-term incentive compensation similarly creates performance incentives and encourages retention. As each element has specific objectives, the Committee determinations with respect to one element generally do not influence decisions regarding the other elements to the extent total compensation is consistent with our Executive Total Compensation Strategy. Since the peer group data confirmed that each element of compensation as well as total compensation of our CEO and other named executive officers are market competitive and within compensation benchmarks consistent with our Executive Total Compensation Strategy, and given the significant scope and responsibilities of the CEO which are greater than those of the other named executive officers, the Committee believes any differences between the individual compensation elements and the total compensation of our CEO and the other named executive officers are appropriate.

 

2008 Executive Compensation Elements and Decisions

 

Base Salary.  In February 2008, the Committee approved 2008 base salary merit increases for each of our named executive officers. Mr. Holmes received a 4.33% merit increase for 2008 consistent with the other named executive officers and to reflect the Committees’ evaluation of Mr. Holmes’ performance as exceptional. Mr. Hanning received a 4.94% increase based on an Exceptional Contributor rating. Mr. Rudnitsky and Ms. Wilson received 4.04% and 4.05% merit increases respectively for 2008 based on a Key Contributor performance rating. Mr. Anderson received a 5.0% increase based on a Key Contributor rating and an assessment of his responsibilities and value-added performance.

 

The base salaries we paid to our named executive officers in 2008 are listed in the Summary Compensation Table below.

 

Annual Incentive Compensation.  In February 2008, the Committee approved annual incentive compensation plan parameters applicable to our corporate and business unit named executive officers. In February 2009, the Committee approved 2008 annual incentive compensation that was paid to the named executive officers, other than Mr. Holmes, in March 2009. While Mr. Holmes would have been eligible for 2008 annual incentive compensation consistent with the other corporate services executives, in recognition of the current global economic environment and the associated impact on Wyndham Worldwide and its employees, Mr. Holmes proposed to the Committee that in determining his 2008 annual incentive compensation it should consider not paying him incentive

compensation for 2008. The Committee considered and accepted Mr. Holmes’ proposal and did not award him annual incentive compensation. In accordance with his employment agreement, Mr. Ballotti’s 2008 annual incentive compensation was equal to 100% of his base salary earned in 2008.

 

The Committee’s review of 2008 annual incentive compensation was based on our financial performance in the face of a challenging economic environment and strategic accomplishments by the named executive officers in the wake of a global financial crisis including cost reduction, productivity and organizational efficiencies. Based on the above, the Committee approved annual incentive compensation for Ms. Wilson, Mr. Anderson and Mr. Hanning at 70% of target.

 

The 2008 annual incentive compensation paid to our named executive officers is listed in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table below.

 

Additional Cash Incentive Compensation for Mr. Hanning.  Under his employment agreement, Mr. Hanning was eligible to receive additional cash incentive compensation not to exceed $2 million for the 3-year performance period from January 1, 2006 to December 31, 2008 for meeting goals relating to WVO’s financial performance. This provision for additional incentive cash compensation was established in connection with our 2006 spin-off from Cendant. As a result of the aggregate performance levels achieved by WVO during the 3-year performance period, the Committee awarded Mr. Hanning the maximum additional cash incentive compensation payable under his employment agreement. The Non-Equity Incentive Plan Compensation column of the Summary Compensation Table below lists the additional incentive cash compensation we paid Mr. Hanning for the 3-year performance period.

 

Long-Term Incentive Compensation.  Our 2008 long-term incentive award plan focused on the following objectives: further strengthen the alignment between shareholder interests and the named executive officers; achieve competitiveness with the external market; foster retention; and reward and recognize the key talent contributions of our named executive officers. Management’s recommendations for 2008 long-term incentive compensation were based on several criteria including performance, tenure, scope of responsibility and potential.

 

Based on the factors described above under Determining Executive Compensation, the Committee determined to heavily weight our CEO’s 2008 long-term incentive award toward stock settled stock appreciation rights in relation to restricted stock units to provide maximum leverage and create incentives 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. A restricted stock unit represents the right to receive a share of our common stock on a set vesting date. For our other named executive officers, long-term incentives were weighted relatively equally between stock settled stock appreciation rights and restricted stock units to drive performance and encourage retention.

 

The Committee 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.

 

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

 

In 2008, based on external market data provided by our management and the other factors described above, the Committee approved perquisites for the named executive officers consistent with our existing program 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 Mr. Holmes and Mr. Hanning with limited personal use of company aircraft for which we imputed income without a tax gross-up. Perquisites provided to the named executive officers in 2008 are described in the All Other Compensation Table below.

Officer Deferred Compensation Plan.  Our nonqualified officer deferred compensation plan permits named executive officers to defer salary, commission and annual incentive compensation. We match executive contributions to the plan up to 6% of salary, commission and annual incentive compensation. The executive makes an irrevocable deferral election prior to the beginning of the calendar year. The executive may elect a single lump-sum payment of his or her account or may elect payments in annual installments up to ten years. The participant’s entire account balance is 100% vested. The contributions to our officer deferred compensation plan applicable to our named executive officers are listed below under the 2008 Nonqualified Deferred Compensation Table.

 

401(k) Plan.  We provide employees, including our named executive officers, with a 401(k) plan. Our 401(k) plan permits named executive officers to defer salary. We provide named executive officers and other participants a company match of salary contributed up to 6% of salary. The company match is 100% vested.

 

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

 

Severance Arrangements.  The employment agreements of our named executive officers provide for payments as a percentage of base salary and annual incentive compensation as well as accelerated equity award vesting if the executive’s employment is terminated without cause or for a constructive discharge. These payments and terms are discussed below under Agreements with Named Executive Officers.

 

The severance terms for the named executive officers other than Mr. Ballotti and Mr. Anderson were negotiated in connection with their employment agreements consistent with Cendant peer executives and prevailing market practices based on market data provided by Cendant’s compensation consultant. The severance terms for Mr. Ballotti were negotiated in connection with his employment agreement consistent with his Wyndham Worldwide peer executives. The primary focus of the severance terms is generally on the termination of employment and thus the value of these terms only arises in the context of imminent termination. The severance terms do not enhance an executive’s current income and therefore are independent of the annual compensation review.

 

Change-in-Control Arrangements.  Mr. Holmes’ employment agreement provides for payments related to base salary and annual incentive compensation as well as accelerated equity vesting in the event of a change-in-control. The other named executive officers receive payments only if their employment is terminated without cause or for constructive discharge following a change-in-control. These payments and terms are discussed below under Agreements with Named Executive Officers. In addition, equity grants made to all key employees, including the named executive officers, under our 2006 Equity and Incentive Plan fully vest on a change-in-control.

 

The change-in-control terms for Mr. Holmes were negotiated in connection with his employment agreement consistent with Cendant peer executives and based on market data provided by Cendant’s compensation consultant. Since a potential change-in-control transaction generally results in increased shareholder value, the Committee believes that it is important to provide incentives to motivate Mr. Holmes to pursue and complete a potential transaction should it arise. Like the severance arrangements, the value of the change-in-control arrangements only arises in the context of an imminent change-in-control. The terms do not enhance Mr. Holmes’ current income and therefore are independent of his annual compensation review.

 

Policies and Practices for Pricing and Timing of Equity Grants.  In February 2008, our Board amended our Policy on Granting Equity Awards to provide that grants of equity awards to our eligible executives, including the named executive officers, will be made annually within twenty New York Stock Exchange trading days of the date on which we publicly announce our annual results of operations as opposed to within ten trading days of the date on which we release our first quarter results of operations as provided under the policy prior to amendment. These amendments aligned the timing of our long-term incentive award grant process with the rest of the annual executive compensation review cycle so that salary, annual incentive compensation and long-term incentive award planning and determination may be more efficiently considered as a whole. In February 2009,

the Board further amended the policy to permit grants of equity awards other than in connection with the annual compensation review, including, for example, for new hires or promotions; these grants will be made within twenty New York Stock Exchange trading days of the date on which we publicly announce our results of operations for any of our first, second or third fiscal quarters as applicable. Under our amended Policy on Granting Equity Awards, the Committee observes the following relating to the timing of equity grants:

 

 

Appointment of Named Executive Officer.  In March 2008, we entered into an employment agreement with Mr. Ballotti with a term expiring in March 2011. The agreement provides for a minimum base salary of $550,000, annual incentive compensation with a target amount equal to 100% of base salary subject to meeting performance goals, 2008 annual incentive compensation equal to a minimum of 100% of base salary earned in 2008, a 2008 long-term incentive award consisting of restricted stock units with a grant date fair value of $1,387,500 and stock-settled stock appreciation rights with a grant date fair value of $462,500, annual long-term incentive awards upon terms determined by us, relocation assistance and participation in employee benefit plans and perquisite programs generally available to our executive officers. The terms of Mr. Ballotti’s employment agreement are further described below under Agreements with Named Executive Officers.

 

Review and Revision of Peer Group.  In July 2008, the Committee adopted a revised peer group as described under Compensation Benchmarking — Review and Revision of Peer Group.

 

Termination Agreement with Named Executive Officer

 

Effective September 30, 2008, we entered into a termination agreement with Mr. Rudnitsky. Consistent with Mr. Rudnitsky’s employment agreement, we paid Mr. Rudnitsky cash severance of $2,164,000, which is an amount equal to 200% of the sum of his 2008 base salary and target annual incentive compensation, and any of Mr. Rudnitsky’s long-term incentive awards that would have otherwise vested within one year of September 30, 2008 vested immediately. As a result of this acceleration of the vesting dates, Mr. Rudnitsky was vested with the following stock settled stock appreciation rights that would have otherwise vested on March 1, 2009, 17,618 with an exercise price of $22.17, and May 2, 2009, 23,964 with an exercise price of $31.85 and 11,093 with an exercise price of $36.70, all of which expire October 3, 2010. Similarly, Mr. Rudnitsky was vested with 40,708 restricted stock units net of income tax withholding that would have otherwise vested on March 1, 2009 or May 2, 2009 as applicable.

 

Mr. Rudnitsky will continue to hold two tranches of stock options as described in the Outstanding Equity Awards at 2008 Fiscal Year-End Table. Mr. Rudnitsky was paid deferred compensation of approximately $306,293 under the guidelines of our Officer Deferred Compensation Plan.

 

Mr. Rudnitsky executed a customary release agreement with us pursuant to which Mr. Rudnitsky released us from claims arising in connection with, among other things, his employment with us and the termination agreement. Under the termination agreement, Mr. Rudnitsky will remain subject to certain provisions of his employment agreement.

 

Amendment of Employment Agreements to Comply with Code Section 409A.  In December 2008, we executed amendments to the employment agreements of each of the named executive officers intended to either exempt payments and benefits under the agreements from or comply with Section 409A of the Code.

Executive Officer Stock Ownership Guidelines

 

Our Executive Officer Stock Ownership Guidelines are intended to align further the financial interests of executive officers with the interests of shareholders. The guidelines apply to our CEO and the other executive officers who report directly to him, including the named executed officers.

 

The following guidelines specify the amount of our common stock that the following officers must beneficially own: CEO: four (4) times base salary; Business Unit CEO: two (2) times base salary; CFO: two (2) times base salary; and other executive officers who report directly to the CEO: one (1) times base salary.

 

Compliance with the individual guidelines is calculated as follows: the product of the multiple and the applicable base salary is divided by the highest closing price of our common stock on the New York Stock Exchange for the 12 month period prior to the date of determination. Compliance is evaluated on a twice-per-year basis, as of June 30 and December 31 of each year, and not on a running basis.

 

Share ownership that counts towards satisfaction of the guidelines includes: shares owned outright by the executive or his or her immediate family members residing in the same household; shares held in our 401(k) savings plan or Officer Deferred Compensation Plan; restricted stock or restricted stock units; and shares held in trust by the executive or his or her immediate family members residing in the same household.

 

As of December 31, 2008, all of the named executive officers were in compliance with these guidelines.

 

2009 Executive Compensation Decisions

 

Base Salary.  In January 2009, management recommended to the Committee that, as part of an overall plan to reduce our costs, the named executive officers together with other senior levels of management should not receive a 2009 base salary merit increase. The Committee considered and approved this recommendation. Accordingly, 2009 base salaries are the same as 2008 base salaries as follows:

 

 

Annual Incentive Compensation.  In February 2009, the Committee approved plan parameters that will be the basis for any 2009 annual incentive compensation.

 

For Mr. Holmes, Ms. Wilson and Mr. Anderson, any 2009 annual incentive compensation will be weighted 100% on the corporate component. For our business unit chief executives, any 2009 annual incentive compensation will be weighted 25% for the corporate component and 75% for the business unit component.

Consistent with the executives’ employment agreements, and based on the 2009 base salaries described above, the possible threshold, target and maximum annual incentive compensation payouts payable to the named executive officers for 2009 are the same as 2008 as follows:

 

 

Long-term Incentive Compensation.  In February 2009, based on peer group data, the Committee approved 2009 long-term incentive compensation for each of our named executive officers in the following amounts:

 

 

 

 

Perquisites.  In February 2009, based on external market data, the Committee approved 2009 executive perquisites consistent with our 2008 perquisite program. The Committee intends to continue to review trends in pay practices relating to the perquisites we provide our executive officers including the use of tax gross-up payments.

 

Amendment of Policies and Practices for Pricing and Timing of Equity Grants.  In February 2009, the Board further amended our Policy on Granting Equity Awards as described under Policies and Practices for Pricing and Timing of Granting Equity Awards.

 

Impact of Accounting and Tax

 

As a general matter, the Committee considers the various accounting and tax implications of compensation vehicles employed by us.

 

When determining amounts of long-term incentive grants to executives and employees, the Committee examines the accounting cost associated with the grants. Under SFAS No. 123(R), grants of options, restricted stock, restricted stock units and other share-based payments result in an accounting charge. The accounting charge is equal to the fair value of the instruments being issued. For restricted stock and restricted stock units, the cost is equal to the fair value of the stock on the date of grant multiplied by the number of shares or units granted. This expense is amortized over the requisite service period, or vesting period of the instruments.

 

Section 162(m) of the Code generally disallows a federal income tax deduction to public companies for compensation in excess of $1,000,000 paid to the CEO and the named executive officers during any

taxable year, unless such compensation is performance based and meets certain requirements. Since our spin-off from Cendant, with respect to our 2006 Equity and Incentive Plan, we have relied on the transition period applicable to newly spun-off companies provided under Section 162(m) of the Code. As this transition period has expired, we are now submitting our 2006 Equity and Incentive Plan to the shareholders for Section 162(m) approval. If our 2006 Equity and Incentive Plan is not approved by the shareholders, future grants made pursuant to our 2006 Equity and Incentive Plan will not qualify as performance based and, depending on the applicable facts and circumstances, may not be tax deductible. Although it is the Committee’s goal to maximize the effectiveness of our executive compensation plans, the Committee may determine that it is appropriate and in our best interest as well as the best interests of our shareholders to have the flexibility to pay compensation that is not performance-based for Section 162(m) purposes in order to provide a compensation package consistent with our program and objectives.

 

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 SEC.

 

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 2008, 2007 and 2006. The 2006 amounts reported include compensation attributable to employment with Cendant prior to the spin-off.

 

 

 

 

 

The All Other Compensation column in the Summary Compensation Table above includes the following components. The total all other compensation amounts for 2007 and 2006 are provided in the “All Other Compensation” column of the Summary Compensation Table above.