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 2011 ANNUAL MEETING
OF SHAREHOLDERS AND
PROXY STATEMENT

 

Wyndham Worldwide Corporation

22 Sylvan Way

Parsippany, New Jersey 07054

 

March 31, 2011

 

Dear Shareholder of Wyndham Worldwide Corporation,

 

You are cordially invited to attend the 2011 Annual Meeting of Shareholders to be held on Thursday, May 12, 2011.

 

The meeting will start at 2:00 p.m. local time at Wyndham Worldwide Corporation, 22 Sylvan Way, Parsippany, New Jersey 07054.

 

I appreciate your continued support of Wyndham Worldwide Corporation and look forward to seeing you on May 12, 2011.

 

Very truly yours,

 

 

Stephen P. Holmes

Chairman and Chief Executive Officer

 

WYNDHAM WORLDWIDE CORPORATION

 

NOTICE OF 2011 ANNUAL MEETING OF SHAREHOLDERS

 

March 31, 2011

 

 

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, 2011 will be entitled to notice of and to vote at the meeting and any adjournments or postponements for which no new record date is set.

 

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 photo 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, 2011 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 1, 2011, we will begin mailing a Notice to all shareholders as of March 17, 2011, 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 11, 2011.

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 2011 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 2011 annual meeting. We will mail a Notice of Internet Availability of Proxy Materials (Notice) to our shareholders beginning on or about April 1, 2011 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 2011 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 12, 2011 at 2:00 p.m. local time at Wyndham Worldwide Corporation, 22 Sylvan Way, Parsippany, New Jersey 07054.

 

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, 2011 (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, 171,878,357 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 85,939,179 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, and abstentions and broker non-votes will have no effect on the outcome of the vote. However, as further described under Shareholder Voting for Election of Directors, under the Board’s Corporate Governance Guidelines, any nominee for Director who receives a greater number of votes withheld than votes for election is required to tender his or her resignation for consideration by the Corporate Governance Committee.

 

For the proposal regarding the frequency of the advisory vote on executive compensation, the choice (i.e., every year, every two years or every three years) receiving the highest number of votes cast by shareholders will be considered by the Board as the expressed preference of shareholders. Abstentions and broker non-votes 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 does not have discretion to vote on proposals relating to what are deemed to be non-routine matters, which include the election of Director nominees, the advisory vote on executive compensation, the advisory vote regarding the frequency of the advisory vote on executive compensation and the shareholder proposal. Your broker will not be permitted to vote on your behalf on these non-routine matters 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 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 photo 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.

 

Phoenix Advisory Partners has been retained to advise and 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 2012 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 3, 2011. 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 January 13, 2012 and not later than February 12, 2012. However, if the date of the 2012 Annual Meeting of Shareholders is not within 30 days before or after May 12, 2012, then a shareholder will be able to submit a proposal for consideration at the annual meeting not later than the close of business on 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 2011 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 (which can be reached by clicking on the Investor Relations link followed by the Corporate Governance link) 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 Securities and Exchange Commission (SEC) rules and 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, 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, with the exception of Mr. Mulroney whose law firm, Ogilvy Renault, was retained by us in 2010 to perform de minimis legal services. Other than this relationship, which was determined not to impair Mr. Mulroney’s independence, 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 control 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 2010 Annual Report on Form 10-K, including the audited consolidated financial statements of Wyndham Worldwide for the year ended December 31, 2010, 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 permissible non-audit services provided by Deloitte & Touche LLP to Wyndham Worldwide are 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 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, 2010.

 

AUDIT COMMITTEE

 

Michael H. Wargotz (Chair)

George Herrera

Pauline D.E. Richards

 

Compensation Committee

 

Responsibilities include:

 

 

For additional information regarding the Compensation Committee’s processes and procedures, see below under Executive Compensation — Compensation Discussion and Analysis — Compensation Committee Matters.

 

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, except that the Executive Committee does not have the authority to take any action which legally or under our internal governance policies 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 during 2010.

 

 

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 six meetings during 2010. 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 review our 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 shareholders because it provides the appropriate balance between strategy review 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 and Committee 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 focuses on the most significant risks facing us and our general risk management strategy and seeks to ensure that risks undertaken by us are consistent with a level of risk that is appropriate for the company and the achievement of our business objectives and strategies.

 

The Board regularly reviews information regarding and risks associated with our finances, credit, liquidity, operations and strategy. The Audit Committee is charged with reviewing our policies with respect to risk assessment and risk management, including overseeing management of financial accounting and reporting and compliance risks, and steps undertaken by management to control these risks. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation. 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 about our risks through committee reports and management presentations.

 

While the Board and the committees oversee our risk management, our CEO and other senior management are primarily responsible for day-to-day risk management analysis and mitigation and report to the full Board or the relevant committee regarding risk management. We believe this division of responsibility is the most effective approach for addressing our risk management.

 

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 2010 annual meeting and are expected to attend the 2011 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, Chief Financial Officer (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 2011 List of the World’s Most Ethical Companies. The designation is awarded to companies that have demonstrated leading ethics and compliance programs.

 

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 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 under our notice of meeting.

 

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

 

Non-management Directors receive compensation for Board service designed to compensate them 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 2010 compensation for non-management Directors:

 

 

 

 

In October 2010, 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 under Executive Compensation — Compensation Discussion and Analysis — Compensation Benchmarking. Based on the review, management recommended to the Corporate Governance Committee that it consider a $40,000 increase in the annual retainer for Board members, a $65,000 increase in the annual retainer for the Lead Director, a $15,000 increase in the fees for the chair of the Audit Committee, a $10,000 increase in the fees for the chairs of the Compensation and Corporate Governance Committees, a $10,000 increase in the fees for a member of the Audit Committee, a $7,500 increase in the fees for a member of the Compensation and Corporate Governance Committees, and a $7,000 increase in the fees for a member of the Executive Committee. In November 2010, the Corporate Governance Committee considered and recommended to the Board that it adopt such compensation for 2011 and the Board approved such recommendation.

 

The annual Director retainer and committee chair and membership fees are paid on a quarterly basis 50% in cash and 50% in Wyndham Worldwide stock. The number of shares of stock issued is based on our stock price on the quarterly determination date. Directors may elect to receive the stock-based portion of their fees in the form of common stock or deferred stock units. A deferred stock unit entitles the Director to receive one share of common stock following the Director’s retirement or termination of service from the Board for any reason. The Director may not sell or receive value from any deferred stock unit prior to termination of service.

Based on the above, the following table describes 2011 compensation for non-management Directors. Our non-management Directors do not receive fees for attending Board or committee meetings.

 

		Cash-Based				Stock-Based				Total
Annual Lead Director retainer		$	125,000			$	125,000			$	250,000
Annual Director retainer		$	100,000			$	100,000			$	200,000
Audit Committee chair		$	20,000			$	20,000			$	40,000
Audit Committee member		$	10,000			$	10,000			$	20,000
Compensation Committee chair		$	15,000			$	15,000			$	30,000
Compensation Committee member		$	7,500			$	7,500			$	15,000
Corporate Governance Committee chair		$	12,500			$	12,500			$	25,000
Corporate Governance Committee member		$	6,125			$	6,125			$	12,500
Executive Committee member		$	7,500			$	7,500			$	15,000

 

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 it.

 

We provide for a two-for-one company match of a Director’s qualifying charitable contributions up to a company contribution of $25,000 per year.

 

We maintain a policy to award our Directors annually 200,000 Wyndham Rewards Points. Wyndham Rewards Points may be redeemed for numerous rewards options including stays at Wyndham properties.

 

The Corporate Governance Guidelines require each non-management Director to comply with Wyndham Worldwide’s Non-Management Director Stock Ownership Guidelines. These stock ownership guidelines require each non-management Director to beneficially own an amount of our stock equal to the greater of a multiple of at least five times the cash portion of the annual retainer or two and one-half times the total retainer value without regard to Board committee fees. Deferred stock units credited to a Director count towards satisfaction of the guidelines. As of December 31, 2010, all of our non-management Directors met or exceeded the stock ownership requirements.

 

The following table describes the beneficial ownership of our common stock for the following persons as of December 31, 2010: 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 173,600,901 shares of our common stock outstanding as of December 31, 2010. 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 and our ten percent shareholders are required to file with the SEC reports of ownership and changes in ownership of our common stock. All 2010 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 James E. Buckman and George Herrera. Both are presently our Directors. The two nominees and the other present Directors continuing in office after the meeting are listed below, with brief biographies.

 

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.

 

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 is elected.

 

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.

 

 

Mr. Buckman brings to the Board exceptional leadership, experience and perspective necessary to be our Lead Director. As a former director, Vice Chairman and General Counsel of Cendant and a Director of Wyndham Worldwide, Mr. Buckman has deep experience with Wyndham Worldwide’s business and operations. Mr. Buckman serves as Vice Chairman and General Counsel of leading hedge fund manager York Capital Management, contributing valuable cross-industry experience and depth of knowledge. Mr. Buckman’s specific experience, qualifications, attributes and skills described above led the Board to conclude that Mr. Buckman should serve as our Director.

 

 

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ELECTION OF THE NOMINEES,
JAMES E. BUCKMAN AND GEORGE HERRERA

 

Overview

 

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

 

 

We have consistently maintained a strong pay-for-performance culture with:

 

 

We also pay close attention to evolving governance trends in terms of our compensation approach and, for example, in 2009 eliminated the potential tax gross-up provision under our CEO’s change-in-control severance arrangement and also eliminated our CEO’s right to elect to terminate employment and receive severance solely upon the occurrence of a change-in-control.

 

As discussed in more detail below, the compensation decisions and other actions applicable to our named executive officers for 2010 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 Committee reviews the charter on an annual basis. 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 2010, Hewitt Associates (now Aon Hewitt) was retained by the Committee as a third-party advisor to provide independent advice, research and evaluation related to executive compensation and was paid approximately $95,000 for its services during 2010. 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. Hewitt Associates provided no other services to the Committee or Wyndham Worldwide during 2010. On October 1, 2010, Hewitt Associates merged with a subsidiary of Aon Corporation. Prior to the merger, Aon Corporation was engaged by management, without Board involvement, to provide insurance broker services to Wyndham Worldwide during 2010, and approximately $146,000 of the total fees paid to Aon Corporation for these services during 2010 were attributable to the period from October 1, 2010 through year-end. The Committee has reviewed this relationship and determined that the advice received from Hewitt Associates was objective and not influenced by Aon Corporation’s relationship with Wyndham Worldwide.

 

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 review the performance of the named executive officers and review, consider and approve any potential increases in base salaries, annual incentive compensation, grants of long-term incentive compensation and perquisites.

 

Compensation Committee Discretion.  For 2010, while the Committee reviewed management’s recommendations, the Committee retained discretion over all elements and levels of the named executive officers’ compensation. For 2010, the Committee generally based its decisions on a combination of management’s recommendations (other than for our CEO) and the external market data provided by our management and compensation consultant.

 

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 and for renewals of each agreement by our compensation consultant and the Committee against the peer group data described below under Compensation Benchmarking. The terms of the employment agreements are 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 February 2010, 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 2010 compensation benchmarking consisted of the following companies:

 

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

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 2010 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, total cash compensation and 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 and to provide them with a base level of income. For 2010 base salary merit increases, our management provided our Compensation 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. We based the 2010 merit increases on this market analysis and a review of the 2009 individual performance of the named executive officers. To review the named executive officers’ individual performance, senior management reviews the executives’ individual contributions and personal leadership together with their performance on corporate or business unit strategic objectives including business development, business drivers and cost reduction initiatives.

 

In February 2010, the Committee approved 2010 base salary merit increases for each of our named executive officers (that were effective February 27, 2010) based on their performance evaluations and maintaining market competitiveness. For 2010, we paid our named executive officers the base salaries 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 February 2010, management recommended and the Committee approved a combination of five factors to determine potential 2010 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; a cash flow multiplier; a target percentage of base salary as specified in the executive’s employment agreement; the executive’s actual base salary earned during the year; and an individual performance modifier based on meeting strategic objectives. 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. The cash flow multiplier targets for the corporation and business units are recommended by management and approved by the Committee based on varied quantitative balance sheet metrics focusing on such areas as accounts receivable, inventory disposition and other specific cash flow targets in support of our business strategy. The cash flow multiplier is added to or subtracted from, as the case may be, annual incentive compensation depending upon corporate or business unit performance.

 

To review the named executive officers’ individual performance, senior management reviews the executives’ individual contributions and personal leadership together with their performance on corporate or business unit strategic objectives including business development, business drivers and

cost reduction initiatives. Management reviews the corporate 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.

 

Consistent with our Total Compensation Strategy, we believe that the EBIT targets and cash flow multiplier 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 and cash flow multiplier targets and accomplish strategic objectives is an important tool to implement our Total Compensation Strategy.

 

For 2010, the corporate adjusted EBIT target was $580 million and actual adjusted corporate EBIT was $698.6 million or 120.4% of the adjusted target. Corporate actual adjusted cash flow multiplier performance was 66.1% of the adjusted premium cash flow multiplier target resulting in a +8.27% annual incentive compensation modifier. 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. The Committee reviewed the corporate results together with Mr. Holmes’ individual performance and determined that he would receive 2010 annual incentive compensation at 133.27% of target. Management reviewed the corporate results together with Mr. Conforti’s individual performance and recommended to the Committee that he receive 2010 annual incentive compensation at 133.27% of target.

 

For 2010, the Wyndham Exchange & Rentals (WER) adjusted EBIT target was $224.4 million and actual WER adjusted EBIT was $243.7 million or 108.6% of the adjusted target. WER actual adjusted cash flow multiplier performance was 56.0% of the adjusted premium cash flow multiplier target resulting in a +7% annual incentive compensation modifier. 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 Mr. Ballotti’s individual performance and recommended to the Committee that he receive 2010 annual incentive compensation at 132% of target.

 

For 2010, the Wyndham Hotel Group (WHG) adjusted EBIT target was $137.4 million and actual WHG adjusted EBIT was $150.5 million or 109.5% of the adjusted target. WHG actual adjusted cash flow multiplier performance was 0% of the adjusted premium cash flow multiplier target resulting in no annual incentive compensation modifier. 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 Mr. Danziger’s individual performance and recommended to the Committee that he receive 2010 annual incentive compensation at 125% of target.

 

For 2010, the Wyndham Vacation Ownership (WVO) adjusted EBIT target was $300.7 million and actual WVO adjusted EBIT was $398.5 million or 132.5% of the adjusted target. WVO actual adjusted cash flow multiplier performance was 100% of the adjusted premium cash flow multiplier target resulting in a +12.5% annual incentive compensation modifier. 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 Mr. Hanning’s individual performance and recommended to the Committee that he receive 2010 annual incentive compensation at 137.5% of target.

 

In February 2011, 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 2010.

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. Accordingly, 2010 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. Long-term incentive compensation is granted under our 2006 Equity and Incentive Plan, as amended.

 

Management annually recommends and the Committee approves an aggregate budget available for long-term incentive compensation. For 2010, 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, tenure, scope of responsibility and future potential. Elements of individual performance considered by the Committee in such review include corporate or business unit results of operations, achievement of the strategic objectives described above and leadership characteristics.

 

Based on these factors, the Committee determined our CEO’s 2010 long-term incentive award to be a combination of stock-settled stock appreciation rights and restricted stock units to create incentives to drive long-term share price appreciation. For our other named executive officers, long-term incentives were granted in the form of restricted stock units to drive performance and encourage retention. A stock-settled stock appreciation right is similar to a stock option and gives the executive the right to receive a number of shares of common stock equal in value 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.

 

Consistent with these objectives, in February 2010, the Committee granted stock-settled stock appreciation rights and restricted stock units to Mr. Holmes and restricted stock units to each of the named executive officers in the amounts listed in the Grants of Plan-Based Awards Table below.

 

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 January 2010, our compensation consultant reviewed the named executive officers’ 2009 total compensation (using 2008 annual incentive compensation) against the peer group and found it to be consistent with our peers. In February 2010, 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 2010 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 peer group, the Committee reviewed the mix of compensation elements prevalent among the peer group. For 2010, 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 highly talented managers and allow them to operate more effectively.

 

In February 2010, 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 2010 executive perquisites to be consistent with market practices.

 

In February 2010, 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 2010 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 2010 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 in the 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. In addition, our named executive officers are not entitled to any excise tax gross-up in connection with their change-in-control arrangements. Previously, our CEO’s employment agreement provided him with the right to elect to terminate employment and receive severance solely upon the occurrence of a change-in-control as well as an excise tax gross-up; however, the November 2009 amendment to his employment agreement eliminated each of these features from his change-in-control arrangement.

 

The payments and terms of our named executive officers’ change-in-control arrangements 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 2010, our shareholders approved an amendment of our 2006 Equity and Incentive Plan primarily for purposes of Section 162(m) of the Code. In connection with the amendment, shareholders approved an increase to the maximum value of payments under our annual incentive compensation program to any individual plan participant during any plan year from $3 million to $10 million. The plan otherwise remained unchanged from the amended and restated plan approved by shareholders at the 2009 Annual Meeting.

2011 Annual and Long-Term Incentive Compensation

 

For 2011, we modified our annual incentive compensation program to eliminate the cash flow multiplier and increase the potential maximum payout level to 150% from 137.5% based on EBIT and individual performance. We believe this modification further supports our pay for performance strategy and makes our annual incentive compensation opportunity more consistent with that offered by our peer companies.

 

For 2011, we introduced to our executive compensation program performance-vested restricted stock units, an additional long-term incentive compensation performance modifier to be earned for achievement of a premium earnings growth target over a three year period. No shares will be earned pursuant to these awards unless earnings exceed premium target performance.

 

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 executive 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, 2010, all of the named executive officers were in compliance with these guidelines.

 

Impact of Tax Considerations

 

As a general matter, the Committee considers the 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 2010, 2009 and 2008.

 

 

 

 

 

 

The All Other Compensation in the Summary Compensation Table above includes the following for 2010.

 

 

 

 

 

 

The following table summarizes grants of plan-based awards made to the named executive officers in 2010.

 

 

 

 

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

 

The following table summarizes the number of securities underlying outstanding plan awards for the named executive officers as of December 31, 2010.