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 2010 ANNUAL MEETING
OF SHAREHOLDERS AND
PROXY STATEMENT

 

Wyndham Worldwide Corporation

22 Sylvan Way

Parsippany, New Jersey 07054

 

April 1, 2010

 

Dear Shareholder of Wyndham Worldwide Corporation,

 

You are cordially invited to attend the 2010 Annual Meeting of Shareholders to be held on Thursday, May 13, 2010.

 

The meeting will start at 2:00 p.m. local time at the 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 13, 2010.

 

Very truly yours,

 

 

Stephen P. Holmes

Chairman and Chief Executive Officer

 

WYNDHAM WORLDWIDE CORPORATION

 

NOTICE OF 2010 ANNUAL MEETING OF SHAREHOLDERS

 

April 1, 2010

 

 

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 17, 2010 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 17, 2010 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:

 

Instead of mailing a printed copy of our proxy materials, including our Annual Report, to all of our shareholders, we 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 8, 2010, we will begin mailing a Notice to all shareholders owning less than 1,000 shares as of March 17, 2010, 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 Broadridge Financial Solutions, by calling their toll-free number at (800) 542-1061 or through Broadridge Financial Solutions, Attn.: Householding Department, 51 Mercedes Way, Edgewood, New York 11717.

 

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, Broadridge Financial Solutions, must receive any proxy that will not be delivered in person to the annual meeting by 11:59 p.m., Eastern Daylight Time on Wednesday, May 12, 2010.

By order of the Board of Directors,

 

 

Scott G. McLester
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 2010 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 2010 annual meeting. We will mail a Notice of Internet Availability of Proxy Materials (Notice) to our shareholders beginning on or about April 8, 2010 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 2010 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.

 

The annual meeting will be held on Thursday, May 13, 2010 at 2:00 p.m. local time at the 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 17, 2010 (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, 180,190,792 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 90,095,397 shares (also known as a “quorum”), 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.

 

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.

 

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 bank, broker or other nominee. 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. If you do not instruct the plan trustee on how to vote the shares of our common stock credited to your account, the trustee will vote those shares in proportion to the shares for which instructions are received.

 

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 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 election of Director nominees and the amendment of our 2006 Equity and Incentive Plan (amended and restated as of May 12, 2009).

 

Effective January 1, 2010, your broker will no longer be permitted to vote on your behalf on the election of directors unless you provide specific instructions by completing and returning the voting instruction or proxy card or following the instructions provided to you to vote your shares by telephone or the Internet. For your vote to be counted, you now will need to communicate your voting decisions to your broker, bank or other financial institution before the date of the annual 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 directors, officers 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 2011 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 December 4, 2010. 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 January 13, 2011 and not later than the close of business on February 12, 2011. However, if the date of the 2011 Annual Meeting of Shareholders is not within 30 days before or after May 13, 2011, then a shareholder will be able to submit a proposal for consideration at the annual meeting not later than the 10^th 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 2010 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 Investor Relations/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 reviews these principles and other aspects of governance periodically. The Corporate Governance Guidelines are available on the Investor Relations/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, James E. Buckman, George Herrera, The Right Honourable Brian Mulroney, Pauline D.E. Richards and Michael H. Wargotz. 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 and related matters. 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.

 

The Audit Committee Charter is available on the Investor Relations/Corporate Governance page of our website at www.WyndhamWorldwide.com.

 

Audit Committee Report

 

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 Relations/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 reporting process, including our system of internal controls, and for the preparation of consolidated financial statements in compliance with generally accepted accounting principles, applicable laws and regulations. In addition, management is responsible for establishing, maintaining 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 expressing an opinion on Wyndham Worldwide’s consolidated financial statements and the effectiveness of Wyndham Worldwide’s internal control over financial reporting. The Audit Committee has reviewed and discussed Wyndham Worldwide’s 2009 Annual Report on Form 10-K, including the audited consolidated financial statements of Wyndham Worldwide for the year ended December 31, 2009, with management and with representatives of Deloitte & Touche LLP. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews or procedures.

 

The Audit Committee has also discussed with Deloitte & Touche LLP matters required to be discussed by applicable standards and rules of the PCAOB and the SEC. The Audit Committee has also received from Deloitte & Touche LLP the written disclosures required by applicable standards and rules of the PCAOB

and the SEC regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and has discussed with Deloitte & Touche LLP the independence of Deloitte & Touche LLP.

 

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

 

Based on the Audit Committee’s review and discussions described above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements and management’s 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, 2009.

 

AUDIT COMMITTEE

 

Michael H. Wargotz (Chair)
George Herrera
Pauline D.E. Richards

 

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.

 

The Compensation Committee Report is provided below under “Executive Compensation”. The Compensation Committee Charter is available on the Investor Relations/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 Investor Relations/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 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 provides the current committee membership and the number of meetings that each committee held since January 1, 2009.

 

 

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, Lead Director and other members of management relative to matters of mutual interest and concern to Wyndham Worldwide.

 

The Board held seven meetings during 2009. 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 believes that Wyndham Worldwide’s CEO is best situated to serve as Chairman because he is the Director most familiar with our business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Independent Directors and management have different perspectives and roles in strategy development. Our independent Directors bring experience, oversight and expertise from outside the company and industry, while the CEO brings company-specific experience and expertise. The Board believes that the combined role of Chairman and CEO promotes strategy development and execution, and facilitates information flow between management and the Board, all of which are essential to effective governance.

 

One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for the execution of strategy once it is developed. The Board believes the combined role of Chairman and CEO, together with an independent Lead Director having the duties described below, is

in the best interest of stockholders because it provides the appropriate balance between strategy development and independent oversight of management.

 

James E. Buckman, an independent Director who serves as a member of the Executive Committee, was selected by the Board to serve as the Lead Director for all meetings of the non-management directors. The Lead Director has the responsibility of chairing executive sessions of the non-management Directors and providing feedback from such sessions to the Chairman; chairing meetings of the Board in the absence of the Chairman; and reviewing in advance, in consultation with the Chairman, the schedule and agenda for all Board meetings as well as materials distributed to the Directors in connection with such meetings.

 

The Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board regularly reviews information regarding and risks associated with our credit, liquidity, operations and strategy. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation. The Audit Committee oversees management of financial reporting and compliance risks. The Corporate Governance Committee oversees the management of risks associated with the independence of the Board and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of risks, the entire Board of Directors is regularly informed through committee reports about our risks.

 

The Board meets regularly without any members of management present. The Lead Director chairs these sessions.

 

Shareholders and other parties interested in communicating directly with the Board, an individual non-management Director or the non-management 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 his discretion, not forward correspondence deemed to be of a commercial nature or otherwise not appropriate for review by the Directors.

 

As provided in the Board’s Corporate Governance Guidelines, Directors are expected to attend our annual meeting of shareholders absent exceptional cause. A majority of our directors attended our 2009 annual meeting and are expected to attend the 2010 annual meeting.

 

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 associates, 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 Relations/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.

 

Wyndham Worldwide has been listed in Ethisphere Institute’s 2010 List of the World’s Most Ethical Companies. The designation is awarded to companies that have demonstrated leading ethics and compliance programs compared to industry peers.

 

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, skills, wisdom, integrity, ability to make independent analytical inquiries, understanding of our business environment and willingness to devote adequate time to Board duties.

 

The Corporate Governance Committee also focuses on issues of diversity, such as diversity of gender, race and national origin, education, professional experience and differences in viewpoints and skills. The Corporate Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Corporate Governance Committee believe that it is essential that the Board members represent diverse viewpoints. In considering candidates for the Board, the Corporate Governance Committee considers the entirety of each candidate’s credentials in the context of these standards. With respect to the nomination of continuing Directors for re-election, the individual’s contributions to the Board are also considered.

 

All our Directors bring to our Board a wealth of executive leadership experience derived from their service as senior executives of large organizations. Many of our Directors also bring extensive board experience. Certain individual qualifications, experience and skills of our Directors that led the Board to conclude that each nominee or Director should serve as our Director are described below under “Election of Directors”.

 

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 Investor Relations/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 10^th 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 10^th 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.

 

Non-management 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. A management Director receives no additional compensation for Board service.

 

The following table describes 2009 compensation for non-management Directors:

 

 

 

 

In June 2009, management engaged our Compensation Consultant, Hewitt Associates LLC, to review the compensation of our Board members against the compensation of the board members of the peer group companies described below under “Executive Compensation — Compensation Discussion and Analysis — Compensation Benchmarking”. Based on the review, management recommended to the Board that it adopt a $10,000 increase in the annual retainer for Board members and a $5,000 increase in the annual retainer for the chairs of the Audit, Compensation and Corporate Governance Committees. In November 2009, the Board considered and approved such recommendations. Based on the above, the following describes 2010 compensation for non-management Directors:

 

Annual Lead Director retainer		$	185,000
Annual Director retainer			160,000
Audit Committee chair			25,000
Audit Committee member			10,000
Compensation Committee chair			20,000
Compensation Committee member			7,500
Corporate Governance Committee chair			15,000
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-management 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, 2009, all of our non-management 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, 2009 (November 13, 2009 for Ms. Wilson): 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 178,748,535 shares of our common stock outstanding as of December 31, 2009. The principal address for each director, nominee and executive officer of Wyndham Worldwide is 22 Sylvan Way, Parsippany, New Jersey 07054.

 

 

 

 

Our directors and executive officers are required to file with the SEC reports of ownership and changes in ownership of our common stock. All 2009 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-management Directors and 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 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.

 

Our Certificate of Incorporation and By-Laws provide for a plurality voting standard for the election of our Directors. Under a plurality voting standard, the nominee for each Director position with the most votes wins the election.

 

Under the Board’s Corporate Governance Guidelines, any nominee for Director in an uncontested election (such as this one, where the number of nominees does not exceed the number of Directors to be elected) who receives a greater number of votes withheld from his or her election than votes for such election shall promptly tender his or her resignation following certification of the shareholder vote. The Corporate Governance Committee will promptly consider the tendered resignation and will recommend to the Board whether to accept the tendered resignation or to take some other action, such as rejecting the tendered resignation and addressing the apparent underlying causes of the withheld votes. In making this recommendation, the Corporate Governance Committee will consider all factors deemed relevant by its members.

 

The Board will act on the Corporate Governance Committee’s recommendation no later than at its first regularly scheduled meeting following certification of the shareholder vote, but in any case, no later than 120 days following the certification of the shareholder vote. In considering the Corporate Governance Committee’s recommendation, the Board will consider the factors considered by the Corporate Governance Committee and such additional information and factors the Board believes to be relevant. We will promptly publicly disclose the Board’s decision and process in a periodic or current report filed with the SEC. Any Director who tenders his or her resignation under this process will not participate in the Corporate Governance Committee recommendation or Board consideration regarding whether or not to accept the tendered resignation. However, such Director shall remain active and engaged in all other Corporate Governance Committee and Board activities, deliberations and decisions during this Committee and Board process.

 

 

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ELECTION OF THE NOMINEES,
THE RIGHT HONOURABLE BRIAN MULRONEY AND MICHAEL H. WARGOTZ

 

Overview

 

Our 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 2009 were as follows:

 

 

 

Total Compensation Strategy

 

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

 

 

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 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 compensation measurement services, peer group proxy data studies and market trends. In November 2009, we paid Hewitt Associates approximately $7,500 for benefits and regulatory trend consulting services that were not related to any specific employee or group of employees of Wyndham Worldwide. Hewitt Associates provided no other services to the Committee or Wyndham Worldwide during 2009.

 

Management’s Role.  Our management plays a significant role in our executive compensation process including evaluating executive performance and recommending base salary merit increases, performance factors for annual incentive compensation and long-term incentive compensation for the named executive officers other than our CEO. 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.

 

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

 

Compensation Committee Discretion.  For 2009, while the Committee reviewed management’s recommendations, the Committee retained discretion over all elements and levels of the named executive officers’ compensation. For 2009, 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.

 

Employment Agreements

 

We have entered into employment agreements with each of the named executive officers the terms of which form the basis of the named executive officers’ compensation elements and levels. The compensation elements and levels provided under the agreements are reviewed at the inception, annually or for renewals of each agreement by our compensation consultant and the Committee against the peer group data described below under “Compensation Benchmarking”.

 

In September 2009, we entered into an employment agreement with Mr. Conforti with a term expiring in September 2012. In November 2009, we executed a second amendment to the employment agreement with Mr. Holmes to, among other things, extend the term of his employment for a period of 3 years from the termination date under his then existing agreement of July 2010 to July 2013, revise the method by which his severance is calculated in the event of a without cause termination or a constructive discharge, eliminate his right to receive severance solely upon the occurrence of a change-in-control, and eliminate a tax gross up in the event an excise tax under Section 4999 of the Code is triggered under his agreement, but instead provide that his compensation will be reduced to $1 below the threshold that triggers excise taxes under the Code, but only to the extent that the net after-tax amount received after the reduction is higher than what he would receive if he paid the applicable excise and related taxes. In November 2009, we executed a new employment agreement with Mr. Hanning expiring in August 2011.

The terms of the employment agreements are further described below under “Agreements with Named Executive Officers”.

 

Compensation Benchmarking

 

Management and the Committee believe that information regarding compensation practices at other companies is useful in evaluating the 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, in September 2008, our compensation consultant conducted a competitive review of the compensation elements and levels of our named executive officers using a representative peer group of companies. Our compensation consultant recommended to the Committee and the Committee approved a peer group of companies consistent with the prior year review and based on one or more of 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; 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. Our peer group for 2009 compensation benchmarking consisted of the following companies:

 

Choice Hotels International, Inc.		Darden Restaurants, Inc.
Host Hotels & Resorts, Inc.		Morgans Hotel Group Co.
Marriott International, Inc.		Orient-Express Hotels Ltd.
Starwood Hotels & Resorts Worldwide, Inc.		Bluegreen Corporation
Intercontinental Hotels Group Plc		Sunstone Hotel Investors, Inc.
MGM Mirage		Strategic Hotels & Resorts, Inc.
Wynn Resorts, Limited		LaSalle Hotel Properties
Royal Caribbean Cruises Ltd.		Gaylord Entertainment Company
Carnival Corporation & Plc		Yum Brands, Inc.
American Express Company		The Walt Disney Company

 

The objectives of the compensation review were to compare for consistency the compensation of our executives to that of similarly-situated executives at peer organizations, ensure that our compensation practices are consistent with our Total Compensation Strategy and provide a framework for 2009 compensation decisions. The peer group compensation review included the following compensation elements using the most recently filed proxy statements for each peer company: base salary, annual incentive compensation, long-term incentive compensation, actual total cash compensation and actual total compensation. Compensation levels were obtained for the peer group median and 75th percentiles for each compensation element to provide a full understanding of competitive pay practices.

 

Base Salary

 

Consistent with our Total Compensation Strategy, we provide base salaries designed to attract and retain our named executive officers while providing them with a base level of income.

 

In October 2008, our compensation consultant reviewed the named executive officers’ 2008 base salaries against the peer group and found their base salaries to be above the benchmark median but below the 75^th percentile.

 

In February 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.

 

For 2009, we paid our named executive officers the base salaries (that were effective March 1, 2008) listed in the Summary Compensation Table below.

 

Annual Incentive Compensation

 

Consistent with our Total Compensation Strategy, we provide cash-based annual incentive compensation designed to create incentives for the named executive officers to drive our short-term financial and operating performance and thus create value for our shareholders.

 

In October 2008, our compensation consultant reviewed the named executive officers’ 2007 annual incentive compensation (because 2008 annual incentive compensation was not determined until February 2009) against the peer group and found the executives’ annual incentive compensation to be above or consistent with the benchmark median but below the 75^th percentile.

 

In February 2009, management recommended and the Committee approved a combination of four factors to determine potential 2009 annual incentive compensation for our named executive officers: actual total company (corporate) and/or business unit Earnings Before Interest and Taxes (EBIT), as adjusted, a standard measure of our profitability, as measured against target EBIT established at the beginning of the plan year; individual performance based on meeting strategic objectives; a target percentage of base salary as specified in the executive’s employment agreement; and the executive’s actual base salary earned during the year. An executive’s annual incentive compensation may be higher or lower than target annual incentive compensation depending on corporate, business unit and individual performance.

 

The EBIT targets for the corporation and business units are recommended by management and approved by the Committee based on operating budgets consistent with our strategic plan. The EBIT targets may be adjusted for special items including legacy matters. Consistent with our Total Compensation Strategy, we believe that the EBIT targets represent appropriate and rigorous goals for our executives to achieve earnings growth and create shareholder value. We further believe that using our annual incentive compensation program to provide incentives to our named executive officers to exceed the EBIT targets and accomplish strategic objectives is an important tool to implement our Total Compensation Strategy.

 

To review the named executive officers’ individual performance, senior management reviews the executives’ individual contributions and personal leadership together with their performance on function or business unit strategic objectives including business development, business drivers and cost reduction initiatives. Management reviews the function or business unit operating results against the targets as previously approved by the Committee together with the individual performance of the named executive officers and recommends to the Committee annual incentive compensation levels for the named executive officers. The Committee then considers the recommendations and may approve, deny or modify the recommendations in its discretion.

 

For 2009, the corporate adjusted EBIT target was approximately $664.3 million and actual adjusted corporate EBIT was approximately $734.8 million or 110.6% of the adjusted target. Any potential annual incentive compensation to be paid to Mr. Holmes and Mr. Conforti was weighted 100% on the corporate results and their individual performance. Management reviewed the corporate results together with their individual performance and recommended to the Committee that Mr. Holmes and Mr. Conforti receive 2009 annual incentive compensation at 125% of target. Since Mr. Conforti joined Wyndham Worldwide in September 2009, his 2009 annual incentive compensation was prorated to his 2009 earnings.

 

For 2009, the WER adjusted EBIT target was approximately $200.8 million and actual WER adjusted EBIT was approximately $231.5 million or 115.3% of the adjusted target. Any annual incentive

compensation to be paid to Mr. Ballotti was weighted 25% on the corporate results and 75% on the WER results and his individual performance. Management reviewed the WER and corporate results together with his individual performance and recommended to the Committee that Mr. Ballotti receive 2009 annual incentive compensation at 125% of target.

 

For 2009, the Wyndham Hotel Group (WHG) adjusted EBIT target was approximately $164.7 million and actual WHG adjusted EBIT was approximately $131.5 million or 79.8% of the adjusted target. Any annual incentive compensation to be paid to Mr. Danziger was weighted 25% on the corporate results and 75% on the WHG results and his individual performance. Management reviewed the WHG and corporate results together with his individual performance and recommended to the Committee that Mr. Danziger receive 2009 annual incentive compensation at 74% of target.

 

For 2009, the WVO adjusted EBIT target was approximately $298.9 million and actual WVO adjusted EBIT was approximately $371.9 million or 124.4% of the adjusted target. Any annual incentive compensation to be paid to Mr. Hanning was weighted 25% on the corporate results and 75% on the WVO results and individual performance. Management reviewed the WVO and corporate results together with his individual performance and recommended to the Committee that Mr. Hanning receive 2009 annual incentive compensation at 125% of target.

 

In February 2010, the Committee considered and approved the management recommendations described above. The Non-Equity Incentive Plan column of the Summary Compensation Table below lists the annual incentive compensation we paid our named executive officers for 2009.

 

Long-term Incentive Compensation

 

Consistent with our Total Compensation Strategy, we provide our named executive officers with long-term incentive compensation to create incentives to achieve share price appreciation and encourage retention.

 

In October 2008, our compensation consultant reviewed the named executive officers’ 2008 long-term incentive compensation against the peer group and found it to be above the benchmark median but below the 75^th percentile.

 

Management annually recommends and the Committee approves an aggregate budget available for long-term incentive compensation. For 2009, the aggregate budget was allocated based on the relative number of eligible executives in corporate services and the business units. Long-term incentive compensation is then recommended by management and granted by the Committee to the named executive officers 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 the strategic objectives described above and leadership characteristics.

 

Consistent with the objectives of our Total Compensation Strategy, 2009 long-term incentive compensation for our named executive officers focused on aligning their interests with those of shareholders, achieving competitiveness with the external market, rewarding key talent contributions and retention.

 

Consistent with these objectives, the Committee granted long-term incentive compensation as follows: in February 2009, the Committee granted stock-settled stock appreciation rights, restricted stock units and 817,500 restricted cash units to Mr. Holmes. In February 2009, the Committee granted each of Mr. Ballotti and Mr. Hanning restricted stock units and 202,500 restricted cash units. In December 2008, in connection with his employment agreement, the Committee granted Mr. Danziger an initial grant of stock-settled stock appreciation rights and restricted stock units. Mr. Danziger’s 2009 grant of restricted stock units was prorated based on the terms of his employment agreement given the initial grant in December 2008. In September 2009, in connection with his employment agreement, the Committee granted Mr. Conforti restricted stock units.

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 subject to continued employment. Restricted cash units vest in whole in February 2012. Each restricted cash unit is equal to $1 on vesting. For our February 2009 grants (other than for Mr. Danziger) the Committee reduced our traditional vesting period for long-term incentive compensation from four years to three years to further support the objectives of our Total Compensation Strategy.

 

The 2009 grants of stock-settled stock appreciation rights and restricted stock units made to the named executive officers are listed in the Grants of Plan-Based Awards table below. Long-term incentive compensation is granted under our 2006 Equity and Incentive Plan (amended and restated as of May 12, 2009).

 

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. 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 October 2008, our compensation consultant reviewed the named executive officers’ 2008 total compensation (using 2007 annual incentive compensation) against the peer group and found it to be above the benchmark median but below the 75^th 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 the Committee was satisfied that 2009 total compensation was consistent with our 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 peer group. For 2009, our compensation consultant advised management and the Committee that the elements of compensation that we provide our named executive officers are consistent with the compensation elements provided by the peer group companies.

 

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 named executive officers while providing them with a base level of income. Annual incentive compensation is designed to create incentives for the named executive officers to drive short-term financial and operating performance and thus create value for shareholders. Long-term incentive compensation creates share price appreciation incentives for our named executive officers 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 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 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.

Perquisites

 

We provide our named executive officers with perquisites that management and the Committee believe are reasonable, competitive and consistent with our Total Compensation Strategy. Management and the Committee believe that our perquisites help us to retain the best managers and allow them to operate more effectively.

 

In February 2009, management provided the Committee with and the Committee reviewed a market assessment of competitive perquisite practices utilizing widely available market data publications from Hewitt Associates, Watson Wyatt and other compensation consultants. Based on this information, the Committee found our 2009 executive perquisites to be consistent with market practices.

 

In February 2009, 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. As permitted under his employment agreement, for 2009 we provided Mr. Holmes with personal use of company aircraft for which we imputed income without a tax gross-up. Perquisites provided to the named executive officers in 2009 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 2009 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 vesting of specified long-term incentive grants 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” and “Potential Payments on Termination or Change-in-Control”.

 

The severance terms for the named executive officers were negotiated in connection with their employment agreements consistent with peer group market practices and data provided by our compensation consultant. We believe these arrangements are necessary to attract and retain our executives and ensure the continuity of management. 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  

 

The 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” and “Potential Payments on Termination or Change-in-Control”. In addition, long-term incentive compensation grants made to all key employees, including the named executive officers, under our Equity and Incentive Plan fully vest on a change-in-control.

 

The change-in-control terms for the named executive officers were negotiated in connection with their employment agreements consistent with peer group market practices and data provided by our 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 the named executive officers to pursue and complete a potential transaction should it arise and ensure retention. 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 the named executive officers’ current income and therefore are independent of the annual compensation review.

 

Amendment of Equity and Incentive Plan  

 

In May 2009, our shareholders approved the amendment and restatement of our 2006 Equity and Incentive plan primarily for purposes of Section 162(m) of the Code. In connection with the amendment, we reduced the reserve of shares of our common stock that may be issued under the plan from 43.5 million to 36.7 million shares and extended the expiration of the plan to March 30, 2019.

 

Termination and Release Agreement with Named Executive Officer

 

In July 2009, we entered into a termination and release agreement with Ms. Wilson effective November 13, 2009. Consistent with Ms. Wilson’s employment agreement, we paid Ms. Wilson cash severance of $2,056,000, which is an amount equal to 200% of the sum of her 2009 base salary and target annual incentive compensation, and any of Ms. Wilson’s long-term incentive awards that would have otherwise vested within one year of November 13, 2009 vested immediately. As a result of this acceleration of the vesting dates, Ms. Wilson was vested with the following stock-settled stock appreciation rights that would have otherwise vested on March 1, 2010, 11,591 with an exercise price of $22.17, and May 2, 2010, 7,923 with an exercise price of $36.70, all of which expire November 13, 2011. Similarly, Ms. Wilson was vested with 99,565 restricted stock units (before income tax withholding) that would have otherwise vested on February 27, 2010, March 1, 2010 or May 2, 2010 as applicable. Ms. Wilson will continue to hold stock-settled stock appreciation rights and stock options as described in the Outstanding Equity Awards at 2009 Fiscal Year-End Table.

 

Ms. Wilson executed a customary release agreement with us pursuant to which Ms. Wilson released us from claims arising in connection with, among other things, her employment with us and the termination and release agreement. Under the termination and release agreement, Ms. Wilson will remain subject to certain provisions of her employment agreement including customary restrictive covenants including non-competition and non-solicitation covenants for two years following the effective date of the termination and release agreement.

 

2010 Annual Incentive Compensation

 

In February 2010, the Committee approved the factors that will be used to determine any potential 2010 annual incentive compensation for our named executive officers. While corporate and business unit EBIT performance and individual performance against strategic objectives will continue to be significant determining factors as in prior years, for 2010 we have introduced the Cash Flow Multiplier, an additional annual incentive compensation modifier that will create incentives for superior execution to increase cash flow.

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 require our named executed officers to own our common stock with a market value at least equal to the following multiples: CEO: 4 times base salary; and Business Unit CEO and our CFO: 2 times base salary. Share ownership meeting the guidelines includes common stock and restricted stock units. As of December 31, 2009, all of the named executive officers were in compliance with these guidelines.

 

Impact of Accounting and Tax

 

As a general matter, the Committee considers the various accounting and tax implications of the compensation elements employed by us. 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 certain named executive officers during any taxable year, unless such compensation is performance based and meets certain requirements. 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. 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 2009, 2008 and 2007.

 

 

 

 

 

The All Other Compensation in the Summary Compensation Table above includes the following components. The total all other compensation amounts for 2008 and 2007 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 the named executive officers in 2009.