DEF 14A of Sunstone Hotel Investors, Inc.
Filed Mar 20, 2024 · FY20230001558370-24-003631
TABLE OF CONTENTS (continued)
| Employment Agreements | 56 | | Employment Agreements (Giglia, Springer, Reyes, Ostapovicz, and Klein) | 56 | | Outstanding Equity Awards at 2023 Fiscal Year End | 57 | | Outstanding Equity Awards at 2023 Fiscal Year End Table | 57 | | 2023 Option Exercises and Stock Vested | 59 | | 2023 Option Exercises and Stock Vested Table | 59 | | Potential Payments Upon Termination or Change in Control | 60 | | Employment Agreements (Giglia, Springer, Reyes, Ostapovicz, and Klein) | 60 | | Equity Award Agreements (Giglia, Springer, Reyes, Ostapovicz, and Klein) | 60 | | Potential Payments | 62 | | Pay Ratio Disclosure | 65 | | Determining the Median Employee | 65 | | Compensation Measure and Annual Total Compensation of Median Employee | 65 | | Annual Total Compensation of CEO | 65 | | Pay Versus Performance Disclosure | 66 | | Pay Versus Performance Table | 66 | | Tabular List of Most Important Performance Measures | 67 | | Description of Relationship Between Pay and Performance | 68 | | Director Compensation | 69 | | Board Member Cash and Equity-Based Compensation (2023) | 69 | | 2023 Independent Director Compensation | 69 | | Independent Review of Director Compensation | 70 | | Certain Relationships and Related Party Transactions | 71 | | Our Independent Registered Public Accounting Firm | 72 | | Appointment of Ernst & Young LLP | 72 | | Fee Information | 72 | | Audit Committee Pre-Approval Policies and Procedures | 72 | | Report of the Audit Committee of the Board of Directors | 73 | | Miscellaneous | 75 | | Stockholder Proposals for the 2025 Annual Meeting | 75 | | Householding of Proxy Materials | 75 | | Other Matters to Come Before the Annual Meeting | 75 | | Compensation Committee Interlocks and Insider Participation | 76 | | Other Information | 76 |
DIRECTOR NOMINEES(1)
DIRECTOR NOMINEES(1)
DIRECTOR NOMINEES(1)
| | | | 2024 Committee Membership and | | | | | | Director | | Other Roles (2) | | | Other Public | | Name, Age | Since | Primary Occupation | A | C | NCG | Company Boards | | W. Blake Baird, 63 | 2016 | Co-Founder, Chairman of the Board and Chief Executive Officer, Terreno Realty Corporation | | | (Chair) | Terreno Realty Corporation | | Andrew Batinovich, 65 | 2011 | President and Chief Executive Officer, Glenborough, L.P. | | | | | | Monica S. Digilio, 60 | 2020 | Founder and Chief Executive Officer, Compass Advisors, LLC | | (Chair) | | | | Bryan A. Giglia, 47 | _ | Chief Executive Officer, Sunstone Hotel Investors, Inc. | | | | | | Kristina M. Leslie, 59 | 2021 | Former Chief Financial Officer, DreamWorks Animation | (Chair) | | | | | Murray J. McCabe, 56 | 2016 | Founder and Managing Partner, Montgomery Street Partners, L.P. | | | | | | Verett Mims, 61 | 2021 | Chief Financial Officer, Blum Capital Partners, L.P. | | | | Sila Realty Trust, Inc. | | Douglas M. Pasquale, 69 Chairman of the Board | 2011 | Founder and Chief Executive Officer, Capstone Enterprises Corporation | | | | Alexander and Baldwin, Inc. Terreno Realty Corporation Dine Brands Global, Inc. |
DIRECTOR NOMINEES(1)
A – Audit CommitteeC – Compensation CommitteeNCG – Nominating and Corporate Governance Committee
DIRECTOR NOMINEES(1)
| (1) Director Nominee information presented is as of March 1, 2024. |
DIRECTOR NOMINEES(1)
| (2) Committee assignments reflect appointments that are expected to be made following the Annual Meeting. |
DIRECTOR NOMINEES(1)
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DIRECTOR NOMINEES(1)
| 2 | Sunstone Hotel Investors |
Director Nominees' Diversity and Skills
Director Nominees' Diversity and Skills Our Director nominees exhibit a comprehensive mix of knowledge, skills, and experience, along with diversity of thoughts, backgrounds and perspectives. Three new independent directors joined the Board since 2020. The Nominating and Corporate Governance Committee and the Board seek a balanced mix of new and experienced directors.
Director Nominees' Diversity and Skills
| | W. Blake | Andrew | Monica S. | Bryan A. | Kristina M. | Murray J. | Verett | Douglas M. | | | Baird | Batinovich | Digilio | Giglia | Leslie | McCabe | Mims | Pasquale | | Knowledge, Skills and Experience | | | | | | | | | | Accounting / Financial Expert | • | • | | • | • | • | • | • | | Board Experience | • | • | • | | • | • | • | • | | Capital Markets | • | • | | • | • | • | • | • | | Corporate Governance / Investor Relations | • | • | • | • | • | • | • | • | | Cyber Security | | • | • | | • | | • | | | ESG / Corporate Responsibility | • | • | • | • | • | • | • | • | | Executive Leadership | • | • | • | • | • | • | • | • | | Hotel / Real Estate Investments | | • | • | • | | • | • | • | | Hotels / Operations | | • | • | • | | • | • | • | | Human Resources / Compensation | • | • | • | • | • | • | • | • | | Legal | • | • | • | • | • | | • | • | | Public Company REIT Experience | • | • | • | • | | • | • | • | | Risk Management | • | • | • | • | • | • | • | • | | Gender | | | | | | | | | | Female | | | • | | • | | • | | | Male | • | • | | • | | • | | • | | Race/Ethnicity | | | | | | | | | | African American | | | | | | | • | | | Asian / Pacific Islander | | | | | | | | | | White / Caucasian | • | • | • | • | • | • | | • | | Hispanic / Latino | | | | | | | | | | Native American | | | | | | | | |
Director Nominees' Diversity and Skills
| 2024 Proxy Statement | 3 |
Nominees for Election as Directors
Nominees for Election as Directors
Nominees for Election as Directors
| W. Blake Baird Age: 63 Director | | | Mr. Baird has served as a director since April 28, 2016. Mr. Baird co – founded Terreno Realty Corporation (NYSE: TRNO), and has served as chairman of its board of directors and its CEO since February 2010. Terreno Realty Corporation acquires, owns and operates industrial real estate in six major coastal U.S. markets. Mr. Baird was managing partner and co – founder of Terreno Capital Partners LLC, a private real estate investment firm, from September 2007 to February 2010. Mr. Baird served as President of AMB Property Corporation (NYSE: AMB) from January 2000 to December 2006. AMB, now Prologis, Inc. (NYSE: PLD), is a leading global developer, owner and operator of industrial real estate. Mr. Baird also served as a director of AMB from 2001 to 2006 and chairman of its investment committee. Mr. Baird joined AMB as its Chief Investment Officer in 1999. Prior to that, Mr. Baird was a managing director of Morgan Stanley & Co., most recently as head of Real Estate Investment Banking for the Western United States. Mr. Baird spent 15 years at Morgan Stanley and Dean Witter, the last 11 focusing on real estate. Mr. Baird previously served as a director of Matson, Inc. (NYSE: MATX), a Honolulu-headquartered ocean transportation and logistics company, from June 2012 until April 2020. Mr. Baird is a former member of the Young Presidents’ Organization and a former member of the board of governors of the National Association of Real Estate Investment Trusts. Mr. Baird holds a B.S. degree in Economics from the Wharton School (magna cum laude) and a B.A. degree in History from the College of Arts and Sciences (magna cum laude) at the University of Pennsylvania. He also holds an M.B.A. degree from New York University. The following experience, qualifications, attributes and/or skills led our Board to conclude that Mr. Baird should serve as a director: his professional background and experience, education, previously held and current senior-executive level positions, other public company board experience, his extensive background and experience with REITs and his background and experience in real estate and finance transactions. | | | | Committees: Compensation Committee; Nominating and Corporate Governance Committee (Chair) |
Nominees for Election as Directors
| 14 | Sunstone Hotel Investors |
Nominees for Election as Directors
| Andrew Batinovich Age: 65 Director | | | Mr. Batinovich has served as a director since November 7, 2011. Mr. Batinovich currently serves as President and CEO of Glenborough, L.P., a privately held real estate investment company. In 2010, Mr. Batinovich led a private investor group in acquiring Glenborough, LLC and related real estate assets that were originally part of Glenborough Realty Trust, a NYSE – listed REIT, which was sold to affiliates of Morgan Stanley in 2006. From December 2006 to October 2010, Mr. Batinovich served as President and CEO of Glenborough, LLC, a company formed by an affiliate of Morgan Stanley to acquire Glenborough Realty Trust. In 1996, Mr. Batinovich co – founded Glenborough Realty Trust and was President and CEO and a director at the time of the sale in 2006. Mr. Batinovich was appointed President of Glenborough Realty Trust in 1997 and CEO in 2003. He also served as Chief Operating Officer and Chief Financial Officer during his tenure at Glenborough Realty Trust. Prior to founding Glenborough Realty Trust, Mr. Batinovich served as Chief Operating Officer and Chief Financial Officer of Glenborough Corporation until 1996 when it was merged into Glenborough Realty Trust. Glenborough Corporation was a private real estate investment and management company that completed a number of private placements of office, industrial, residential and hotel properties. Prior to joining Glenborough Corporation in 1983, Mr. Batinovich was an officer of Security Pacific National Bank. He also serves as a trustee of the American University of Paris. Mr. Batinovich has a B.A. degree in International Business Administration from the American University of Paris. The following experience, qualifications, attributes and/or skills led our Board to conclude that Mr. Batinovich should serve as a director: his professional background and experience, education, previously held senior-executive level positions, other public company board experience, his extensive background and experience with REITs and his background and experience in real estate and finance transactions. | | | | Committees: Audit Committee; Compensation Committee |
Nominees for Election as Directors
| 2024 Proxy Statement | 15 |
Nominees for Election as Directors
| Monica S. Digilio Age: 60 Director | | | Ms. Digilio has served as a director since April 30, 2020. Ms. Digilio has over 30 years of C-Suite experience in public and privately held hospitality, gaming, entertainment, and real estate development companies worldwide. Ms. Digilio is the Founder and CEO of Compass Advisors LLC, a strategic advisory firm which draws on her expertise in human resources, talent management, business leadership and organizational development. Prior to establishing Compass Advisors, Ms. Digilio was the Executive Vice President and Chief Human Resources Officer for Caesars Entertainment Corporation, where she led the Human Resources and Corporate Social Responsibility functions (with oversight of ESG) from 2018 - 2020. Prior to her tenure at Caesars, Ms. Digilio spent six years as the Executive Vice President and Chief Human Resources Officer for Montage International and spent 12 years as the Executive Vice President, Global Human Resources & Administration for Kerzner International, parent company of the Atlantis and One&Only brands. Ms. Digilio began her hospitality career at ITT Sheraton Corporation. In addition to Sunstone Hotel Investors, Ms. Digilio currently serves on the boards of CopperPoint Insurance Companies and The Venetian Resort Las Vegas. Ms. Digilio is an Advisory Board Member for Cornell University’s Leland C. and Mary M. Pillsbury Institute for Hospitality Entrepreneurship. She is a member of the Women Corporate Directors Foundation (WCD) and the National Association of Corporate Directors (NACD). Ms. Digilio holds both a M.S. and a B.S. from Ithaca College in Ithaca, N.Y. The following experience, qualifications, attributes and/or skills led our Board to conclude that Ms. Digilio should serve as a director: her professional background and experience, extensive education, previously held senior-executive level positions, domestic and international real estate knowledge, labor relations, corporate governance, enterprise risk management and extensive experience with the hospitality industry in general. | | | | Committees: Compensation Committee (Chair); Nominating and Corporate Governance Committee |
Nominees for Election as Directors
| 16 | Sunstone Hotel Investors |
Nominees for Election as Directors
| Bryan A. Giglia Age: 47 Director | | | Mr. Giglia is our Chief Executive Officer. Mr. Giglia joined the Company in March 2004, and between 2004 and 2013, served in numerous financial roles, including Senior Vice President Corporate Finance where he oversaw capital market transactions, corporate financial planning and analysis, and investor relations. In February 2013, Mr. Giglia was appointed Senior Vice President and Chief Financial Officer, and in February 2016 he was appointed Executive Vice President and Chief Financial Officer, a position he held until March 2022 when he was appointed Chief Executive Officer. Prior to joining Sunstone, Mr. Giglia served in a variety of accounting positions for Hilton Hotels Corporation. Mr. Giglia currently serves on the Board of the American Hotel and Lodging Association. Mr. Giglia attended the Marshall School of Business at the University of Southern California, where he earned an M.B.A. degree. Mr. Giglia earned his B.S. degree in Business Administration from the University of Arizona. The following experience, qualifications, attributes and/or skills led our Board to conclude that Mr. Giglia should serve as a director: his professional background and experience, education, previously held senior-executive level positions, his extensive background and experience with REITs and his background and experience in real estate and finance transactions. | |
Nominees for Election as Directors
| 2024 Proxy Statement | 17 |
Nominees for Election as Directors
| Kristina M. Leslie Age: 59 Director | | | Ms. Leslie has been a director since April 29, 2021. Ms. Leslie began her career at Paramount Communications in New York, serving in a variety of financial management roles, including treasury, investor relations, and strategic planning. Following the acquisition of Paramount by Viacom, Ms. Leslie served as Director of Strategic and Financial Planning for Viacom. In 1996, Ms. Leslie relocated to California to join DreamWorks, then in its infancy, as Head of Strategic Planning and Corporate Finance, where she oversaw financial planning, strategic partnerships and all investor and banking relationships. She became Chief Financial Officer of DreamWorks in 2003 and led the $840 million initial public offering of DreamWorks Animation in 2004. She continued to serve as DreamWorks’ CFO until her retirement in 2007. Over the past 15 years, Ms. Leslie has served on a number of public and private boards. Currently, Ms. Leslie is a Director and Chair of the Board of Blue Shield of California where she is also a member of the Nominating and Governance Committee. She is a Director, Chair of the Audit Committee and a member of the Compensation Committee of Justworks, Inc., a human resources service and benefits provider for small businesses. Ms. Leslie was also a Director, Chair of the Audit Committee and a member of the Compensation Committee of Rover Group, Inc. (Nasdaq: ROVR), the world’s largest marketplace for pet services, until its privatization in February 2024. She is also a member of the National Association of Corporate Directors (NACD). Ms. Leslie earned her B.A. in Economics from Bucknell University and her M.B.A in Finance from Columbia University. The following experience, qualifications, attributes and/or skills led our Board to conclude that Ms. Leslie should serve as a director: her professional background and experience, extensive education, previously held senior-executive level finance positions, significant public and private company board experience, her extensive experience in corporate strategy and enterprise risk, accounting, finance, and corporate governance. | | | | Committees: Audit Committee (Chair); Compensation Committee |
Nominees for Election as Directors
| 18 | Sunstone Hotel Investors |
Nominees for Election as Directors
| Murray J. McCabe Age: 56 Director | | | Mr. McCabe has served as a director since April 28, 2016. Mr. McCabe is a founder and Managing Partner at Montgomery Street Partners, L.P., an investment firm. Prior to founding Montgomery Street Partners, Mr. McCabe worked at JPMorgan Chase & Co. from 1992 through August 2012. During his 20 – year tenure at JPMorgan, Mr. McCabe held several positions in the Investment Banking Division, including Managing Director and Global Head of Real Estate and Lodging Investment Banking. In addition, Mr. McCabe served as a member of JPMorgan’s Mergers and Acquisitions Fairness Opinion Committee from 2001 to 2002, the Investment Banking Coverage Management Committee from 2010 through his departure in August 2012, and on the board of JPMorgan Real Estate Advisors during the same period. Mr. McCabe was a director of Columbia Property Trust (NYSE: CXP) until its sale in 2021, and remains a director of RREEF America REIT II Inc., a diversified real estate investment company with $16 billion in assets. He is an executive council member of the Real Estate Finance and Investment Center and serves on the REIT Investment Funds advisory board for the McCombs School of Business at the University of Texas, Austin. Mr. McCabe received his B.A. in Finance from the University of Texas, Austin. The following experience, qualifications, attributes and/or skills led our Board to conclude that Mr. McCabe should serve as a director: his professional background and experience, education, previously held and current senior-executive level positions, other public company board experience, his extensive background and experience with REITs and his background and experience in real estate and finance transactions. | | | | Committees: Nominating and Corporate Governance Committee |
Nominees for Election as Directors
| 2024 Proxy Statement | 19 |
Nominees for Election as Directors
| Verett Mims Age: 61 Director | | | Ms. Mims has served as a director since April 29, 2021. Ms. Mims is currently the Chief Financial Officer at Blum Capital Partners, L.P., a long-term strategic equity investment management firm where she leads a team of seasoned accounting/finance professionals with responsibility for the Financial, Operations, Compliance and Tax functions of the firm. Prior to joining Blum Capital, Ms. Mims worked at The Boeing Company (NYSE: BA) from 2002 through early 2020. During her 18-year tenure at Boeing, Ms. Mims held several positions including Director, International Finance and the Assistant Treasurer, Global Treasury Operations. Ms. Mims had oversight of the Foreign exchange, commodity and inflation hedging portfolio, cash investments and global banking infrastructure and her notable contributions include the development of tech-driven processes and systems that drove efficiency, multimillion-dollar cost savings, and operational excellence. Prior to Boeing, Ms. Mims spent seven years in sales serving as a strategic advisor to match FX solutions with corporate clients’ risk profiles at Citibank (NYSE: C), NationsBank (NYSE: BAC) and Bank of Montreal (NYSE: BMO) where she pioneered an early Salesforce-like client management system and built a profitable book of business. Ms. Mims currently serves on the boards of Sila Realty Trust Inc. and Steppenwolf Theatre of Chicago. She has previously served on the boards of Arts & Business Council of Chicago, San Miguel Schools of Chicago, Illinois Student Assistance Commission, Southern University MBA Board of Advisors, the Muntu Dance Theatre of Chicago, and most recently Illinois Humanities. Ms. Mims holds an M.B.A. from the Stanford University Graduate School of Business, an M.S. in physics from Massachusetts Institute of Technology, and a B.S. in physics from Southern University and A&M College. The following experience, qualifications, attributes and/or skills led our Board to conclude that Ms. Mims should serve as a director: her professional background and experience, extensive education, private and public Board experience, previously held and current senior-executive level positions, and experience in enterprise risk, treasury accounting, and finance. | | | | Committees: Audit Committee |
Nominees for Election as Directors
| 20 | Sunstone Hotel Investors |
Nominees for Election as Directors
| Douglas M. Pasquale Age: 69 Chairman of the Board | | | Mr. Pasquale has served as our Chairman of the Board since May 1, 2015, and as a director since November 7, 2011. In addition, Mr. Pasquale served as our Interim CEO from September 2, 2021 until March 7, 2022 and served as our Executive Chairman from March 7, 2022 until September 1, 2022. Mr. Pasquale is Founder & CEO of Capstone Enterprises Corporation, an investment and consulting firm, since January 1, 2012. Mr. Pasquale served as Senior Advisor to Healthpeak (NYSE: PEAK) from June 2017 through December 2019. On the July 1, 2011 sale of Nationwide Health Properties, Inc. (NYSE: NHP) to Ventas Inc. (NYSE: VTR), Mr. Pasquale served as Senior Advisor from July 1, 2011 to December 31, 2011. He also served on the Ventas Board of Directors from July 1, 2011 to May 18, 2017. Prior to Nationwide Health Properties, Inc.’s sale, Mr. Pasquale served as Chairman of the Board of NHP from May 2009 to July 2011, as President and CEO of NHP from April 2004 to July 2011, and as Executive Vice President and Chief Operating Officer of NHP from November 2003 to April 2004. Mr. Pasquale was a Director of NHP from November 2003 to July 2011. Mr. Pasquale served as Chairman and CEO at ARV Assisted Living, Inc., a leading owner and operator of assisted living facilities, from June 1998 to September 2003 and concurrently served as President and CEO of Atria Senior Living Group, Inc. from April 2003 to September 2003. Mr. Pasquale also served as President and CEO of Richfield Hospitality Services, Inc. and Regal Hotels International—North America, a hotel ownership and management company, from 1996 to 1998, and as its Chief Financial Officer from 1994 to 1996. Prior to 1994, he served in various capacities primarily in finance, real estate, investment banking and public accounting. Mr. Pasquale has served on over a dozen public, private and philanthropic boards over the course of his career. He currently serves on three additional NYSE Boards and is a Director of: 154-year old Alexander and Baldwin, Inc. (NYSE: ALEX), a Honolulu - headquartered real estate and related business company, for which he serves as Lead Independent Director, Chairman of the Audit Committee, and Nominating and Corporate Governance Committee; Terreno Realty Corporation (NYSE: TRNO), a leading industrial REIT with a focus in six coastal U.S. markets, for which he serves as Lead Independent Director and a member of the Audit, Compensation, and Nominating and Corporate Governance Committees; and Dine Brands Global, Inc. (NYSE: DIN), which franchises Applebee’s, IHOP and Fuzzy’s Taco Shop restaurants, for which he serves as the Chairman of the Audit Committee. Mr. Pasquale is a successful leader in the real estate industry with extensive experience and skills in leadership, management, finance, mergers and acquisitions and strategic planning. Mr. Pasquale received his B.S. degree in Accounting and his M.B.A. degree with highest honors from the University of Colorado and is a guest lecturer at several universities. The following experience, qualifications, attributes and/or skills led our Board to conclude that Mr. Pasquale should serve as a director: his professional background and experience, extensive education, previously held senior-executive level positions, other public company board experience, his extensive background and experience with REITs and his background and experience in real estate and finance transactions. | | | | Chairman of the Board Committees: Nominating and Corporate Governance Committee |
Nominees for Election as Directors
| 2024 Proxy Statement | 21 |
Nominees for Election as Directors
Vote required. Directors will be elected by a majority of the votes cast. Any shares not voted, whether by abstention, “broker non - vote” or otherwise, will have no impact on the vote. Our Corporate Governance Guidelines and bylaws provide a majority voting standard in uncontested director elections. A director nominee will be elected to the Board only if the number of votes cast “for” such nominee’s election exceeds the number of votes cast “against” or “withheld” with respect to such nominee’s election (with abstentions and broker non-votes not counted as votes cast either for or withheld in such election). If an incumbent nominee for director fails to receive the required majority vote in a director election, our Corporate Governance Guidelines require that he or she tender his or her resignation as a director for consideration by the Nominating and Corporate Governance Committee, and ultimately the Board. Our Nominating and Corporate Governance Committee will evaluate the circumstances of the failed election and will make a recommendation regarding how to act upon the tendered resignation to the full Board, taking into consideration the best interests of the Company and its stockholders. After considering the recommendation of the Nominating and Corporate Governance Committee, the full Board will then act upon the resignation, and will publicly disclose its decision regarding the tendered resignation and its rationale within 90 days of the certification of the election results. If the Board accepts the resignation, the nominee will no longer serve on the Board. If the Board rejects the resignation, the nominee will continue to serve until his or her successor has been duly elected and qualified or until his or her earlier disqualification, death, resignation, or removal. Notwithstanding the foregoing, the Board shall be required to accept any resignation tendered by a nominee who is already serving as a director if such nominee shall have received more votes “against” or “withheld” than “for” his or her election at each of two consecutive annual meetings of stockholders for the uncontested election of directors at which a quorum was present.
Nominees for Election as Directors
| 22 | Sunstone Hotel Investors |
Nominees for Election as Directors
| PROPOSAL 2 | RATIFICATION OF THE AUDIT COMMITTEE’S APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | | | | | The Board recommends that our stockholders vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024. |
Nominees for Election as Directors
The Audit Committee has selected and appointed the firm of Ernst & Young LLP to act as our independent registered public accounting firm for the year ending December 31, 2024. Ernst & Young LLP has audited the financial statements for us since our initial public offering on October 26, 2004. Although stockholder ratification of the appointment of our independent auditor is not required by our bylaws or otherwise, we are submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate governance practice. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company. If our stockholders do not ratify the Audit Committee’s selection, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of our independent registered public accounting firm. In selecting Ernst & Young LLP as the Company’s independent registered public accounting firm, the Audit Committee considered many factors, including the quality of its ongoing discussions with Ernst & Young LLP’s representatives, the length of time the firm has been engaged, the appropriateness of fees, the experience and professional qualifications of Ernst & Young LLP, and Ernst & Young LLP’s programs and processes for maintaining its independence. Furthermore, in accordance with SEC rules and Ernst & Young LLP’s policies, lead engagement partners are subject to rotation requirements to limit the number of consecutive years the lead partner may provide services. For lead audit partners, the maximum number of consecutive years of service in that capacity is five years. We select the Company’s lead audit partner pursuant to this rotation policy following meetings between the chair of the Audit Committee and candidates for that role, as well as discussions by the full Audit Committee, members of the Board and management. The Audit Committee believes that the continued retention of Ernst & Young LLP as the Company’s independent external auditor is in the best interests of the Company and its stockholders. The Board believes the Company receives significant benefits from the extensive history Ernst & Young LLP has with the Company. These benefits include:
Nominees for Election as Directors
| ● | the quality of their audit work and accounting advice, and their institutional knowledge of our business operations, key risks, accounting policies, financial systems, and internal control framework; |
Nominees for Election as Directors
| ● | a competitive fee structure because of Ernst & Young LLP’s familiarity with the Company; |
Nominees for Election as Directors
| ● | the significant time and expense that would be avoided by the Company to onboard a new auditor; and |
Nominees for Election as Directors
| ● | their commitment to maintaining their independence from the Company. |
Nominees for Election as Directors
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. These representatives will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions. You can find more information about our relationship with Ernst & Young LLP on page 72 of this proxy statement. Vote required. Ratification of the appointment of Ernst & Young LLP requires a majority of the votes cast. Any shares not voted, whether by abstention, “broker non - vote” or otherwise, have no impact on the vote.
Nominees for Election as Directors
| 2024 Proxy Statement | 23 |
Nominees for Election as Directors
| PROPOSAL 3 | ADVISORY SAY-ON-PAY VOTE | | | | | The Board recommends that our stockholders vote FOR the approval (on a non-binding, advisory basis) of the compensation of the NEOs as disclosed in this proxy statement. |
Nominees for Election as Directors
Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), as enacted as part of the Dodd - Frank Wall Street Reform and Consumer Protection Act in July 2010 (“Dodd-Frank Act”) requires us to submit to our stockholders a non - binding advisory vote to approve the compensation of the NEOs listed in the Summary Compensation Table of this proxy statement, commonly referred to as a “say - on - pay” vote. The Board has approved the submission of the following resolution to the Company’s stockholders for approval at the Annual Meeting: “Resolved, that the stockholders hereby approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Company’s 2024 proxy statement pursuant to the disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other executive compensation tables and related discussion).” As described more fully in the “Compensation Discussion and Analysis” beginning on page 40 of this proxy statement, the Company’s executive compensation program is designed to attract, motivate and retain talented executives through competitive compensation arrangements that, within appropriate risk parameters, provide strong financial incentives for the NEOs to maximize stockholder value. The compensation program is designed to achieve these objectives through a combination of the following types of compensation: base salary, annual cash incentive bonus and equity incentive awards. Base salary is intended to provide a baseline level of compensation for our NEOs. The remaining types of compensation, which in the aggregate represent the majority of our NEOs’ target total compensation opportunities, tie compensation directly to the achievement of corporate and individual objectives. Highlights of the Company’s executive compensation program include the following:
Nominees for Election as Directors
| ● | We pay for performance. Our executive compensation program is weighted towards performance-based and/or at-risk compensation, rather than fixed compensation. Specifically, the at-risk portion of our NEO compensation program is designed to reward performance relative to financial, stockholder return, and other metrics that we believe best align management with stockholder interests. Under the NEO compensation program, on average, approximately 79% of our NEOs’ total target compensation is considered performance-based and/or at-risk. |
Nominees for Election as Directors
| ● | We maintain a clawback policy. Effective October 2, 2023, we adopted a new clawback policy that complies with Section 10D of the Exchange Act and the NYSE listing standards adopted in 2023 as mandated by the Dodd-Frank Act. Each of our NEOs are subject to a compensation recovery policy that provides for the recovery of incentive compensation received by an NEO that is granted, earned, or vested based wholly or in part upon the attainment of one or more financial reporting measures, following an accounting restatement. |
Nominees for Election as Directors
| ● | We require our CEO and other executives to have a meaningful ownership interest in the Company. Our executive officer stock ownership policy requires that on or before January 1 of the year following the fourth anniversary of the CEO or President or other executive officers appointment to such position (i) the CEO or President will own and retain shares of the Company’s common stock having a value equal to at least six times his or her annual base salary, and (ii) each Executive Vice President will own and retain shares of the Company’s common stock having a value equal to at least three times his or her annual base salary. Our Compensation Committee believes that requiring the CEO and other executive officers to maintain a meaningful ownership interest in the Company aligns the interests of the CEO and other executive officers with those of our stockholders. |
Nominees for Election as Directors
| 24 | Sunstone Hotel Investors |
Nominees for Election as Directors
| ● | We maintain a double trigger requirement for acceleration of equity awards in connection with a Change of Control. To best align with our stockholders’ interests, we maintain a “double trigger” (requiring both a change in control and qualifying termination of employment) for an employee to receive accelerated vesting of equity awards in connection with a Change of Control. |
Nominees for Election as Directors
| ● | We solicit independent compensation advice. Our Compensation Committee retains Ferguson Partners Consulting, an independent compensation consultant, to advise the Compensation Committee with respect to the compensation of our NEOs. |
Nominees for Election as Directors
The Compensation Committee and the Board believe that these policies incentivize the NEOs to achieve strong financial performance and maximize stockholder returns. At the 2023 annual meeting, the Company’s stockholders voted in favor of holding annual say-on-pay votes and our Board agreed with the stockholders’ advisory vote and resolved to continue to hold annual advisory say-on-pay votes. Unless our Board modifies its determination regarding the frequency of future say-on-pay advisory votes, the next say-on-pay vote will be held at the annual meeting of stockholders in 2025. Vote required. The affirmative vote of a majority of the votes cast will be required to approve, on a non - binding, advisory basis, the Say-on-Pay Vote. Any shares not voted, whether by abstention, “broker non - vote” or otherwise, have no impact on the vote. The stockholder vote on executive compensation is an advisory vote only, and it is not binding on the Company, the Board, or the Compensation Committee. Although the vote is non - binding, the Compensation Committee and the Board value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions.
Nominees for Election as Directors
| 2024 Proxy Statement | 25 |
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| | | | | Non-Equity | | | | Name and | | | | Incentive Plan | All Other | | | Principal | | Salary | Stock | Compensation | Compensation | | | Position | Year | ($) (1) | Awards ($) (2) | ($) (3) | ($) (4) | Total ($) | | Bryan A. Giglia | 2023 | 650,000 | 2,365,543 | 944,684 | 105,269 | 4,065,496 | | CEO | 2022 | 591,346 | 3,616,381 | 1,085,906 | 66,698 | 5,360,331 | | | 2021 | 520,200 | 1,242,307 | 169,065 | 46,046 | 1,977,618 | | Robert C. Springer | 2023 | 575,000 | 1,860,534 | 835,682 | 101,280 | 3,372,496 | | President - CIO | 2022 | 541,346 | 3,257,976 | 995,414 | 60,346 | 4,855,082 | | | 2021 | 441,660 | 1,054,743 | 143,540 | 43,250 | 1,683,193 | | Aaron R. Reyes | 2023 | 400,000 | 850,529 | 441,637 | 55,992 | 1,748,158 | | SVP - CFO | 2022 | 320,673 | 332,833 | 438,750 | 46,469 | 1,138,725 | | Christopher G. Ostapovicz | 2023 | 425,000 | 903,684 | 449,792 | 72,315 | 1,850,791 | | EVP - COO | 2022 | 400,000 | 1,470,331 | 533,750 | 56,831 | 2,460,912 | | | 2021 | 310,096 | 1,351,982 | 108,750 | 44,158 | 1,814,986 | | David M. Klein | 2023 | 435,000 | 808,005 | 460,375 | 71,604 | 1,774,984 | | EVP - General | 2022 | 425,000 | 1,286,522 | 572,422 | 53,408 | 2,337,352 | | Counsel | 2021 | 361,080 | 785,650 | 104,713 | 44,190 | 1,295,633 |
SUMMARY COMPENSATION TABLE
| (1) Amounts represent base salary earned by our NEOs for the applicable year. |
SUMMARY COMPENSATION TABLE
| (2) For 2023, amounts in this column represent the grant date fair value of (i) the Annual Time-Based RSAs and (ii) the Annual Performance RSUs, in each case, granted to the NEO in February 2023. Amounts in each case have been computed as prescribed by Accounting Standards Codification Topic 718, Compensation—Stock Compensation (referred to as “ASC Topic 718”). The grant date fair values shown for the 2023 Annual Performance RSUs were calculated in accordance with ASC Topic 718 using a Monte Carlo simulation valuation model. Because the Performance RSU awards are earned based solely on market conditions (relative and absolute TSR performance), the value of the Performance RSU awards assuming maximum performance is not presented in this footnote. For more information, including the assumptions used to calculate such values, please see Note 12 (“Incentive Award Plan”) to our audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023. |
SUMMARY COMPENSATION TABLE
| a. | The table below sets forth the grant date fair value for the 2023 Annual Time-Based RSAs and the 2023 Annual Performance RSUs. |
SUMMARY COMPENSATION TABLE
| | Grant Date Fair Value ($) | | | Name | Time-Based RSAs | Performance RSUs | | Bryan A. Giglia | 577,251 | 1,788,292 | | Robert C. Springer | 454,013 | 1,406,521 | | Aaron R. Reyes | 207,550 | 642,979 | | Christopher G. Ostapovicz | 220,521 | 683,163 | | David M. Klein | 197,173 | 610,832 |
SUMMARY COMPENSATION TABLE
| (3) The amounts in this column represent the annual cash incentive bonus earned for the fiscal year and paid in the first fiscal quarter of the following year. |
SUMMARY COMPENSATION TABLE
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SUMMARY COMPENSATION TABLE
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
| (4) “All Other Compensation” includes the following amounts for fiscal year 2023: |
SUMMARY COMPENSATION TABLE
| | | Dividends Paid | | | | | | Company | on Awarded | Employer | Company | | | | Contributions | but Unvested | Matching | Hotel | | | | to 401(k) | Stock | Charitable | Reimbursement | | | Name | Plan ($) | Awards($) | Contributions ($) | Credit ($) | Total ($) | | Bryan A. Giglia | 43,500 | 55,303 | 5,000 | 1,466 | 105,269 | | Robert C. Springer | 43,500 | 48,280 | 4,500 | 5,000 | 101,280 | | Aaron R. Reyes | 43,500 | 10,335 | — | 2,157 | 55,992 | | Christopher G. Ostapovicz | 43,500 | 21,773 | 5,000 | 2,042 | 72,315 | | David M. Klein | 43,500 | 22,503 | 5,000 | 601 | 71,604 |
SUMMARY COMPENSATION TABLE
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2023 GRANTS OF PLAN-BASED AWARDS
2023 GRANTS OF PLAN-BASED AWARDS The following table sets forth the information with respect to plan – based awards granted to the NEOs in 2023.
2023 GRANTS OF PLAN-BASED AWARDS TABLE
2023 GRANTS OF PLAN-BASED AWARDS TABLE
2023 GRANTS OF PLAN-BASED AWARDS TABLE
| | | | | | | | | All Other | | | | | | | | | | | Stock | | | | | | | | | | | Awards: | Grant Date | | | | Estimated Future Payouts | | | Estimated Future Payouts | | | Number of | Fair Value | | | | Under Non-Equity | | | Under Equity | | | Shares of | of Stock | | | | Incentive Plan Awards (1) | | | Incentive Plan Awards (2) | | | Stock or | and Option | | | Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Awards | | Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) (3) | ($) (4) | | Bryan A. Giglia | | | | | | | | | | | RSA | 2/9/2023 | | | | | | | 53,848 | 577,251 | | RSU | 2/9/2023 | | | | 80,772 | 161,544 | 323,088 | | 1,788,292 | | Annual Cash Bonus | n/a | 438,750 | 877,500 | 1,316,250 | | | | | | | Robert C. Springer | | | | | | | | | | | RSA | 2/9/2023 | | | | | | | 42,352 | 454,013 | | RSU | 2/9/2023 | | | | 63,529 | 127,057 | 254,114 | | 1,406,521 | | Annual Cash Bonus | n/a | 388,125 | 776,250 | 1,164,375 | | | | | | | Aaron R. Reyes | | | | | | | | | | | RSA | 2/9/2023 | | | | | | | 19,361 | 207,550 | | RSU | 2/9/2023 | | | | 29,042 | 58,083 | 116,166 | | 642,979 | | Annual Cash Bonus | n/a | 200,000 | 400,000 | 600,000 | | | | | | | Christopher G. Ostapovicz | | | | | | | | | | | RSA | 2/9/2023 | | | | | | | 20,571 | 220,521 | | RSU | 2/9/2023 | | | | 30,857 | 61,713 | 123,426 | | 683,163 | | Annual Cash Bonus | n/a | 212,500 | 425,000 | 637,500 | | | | | | | David M. Klein | | | | | | | | | | | RSA | 2/9/2023 | | | | | | | 18,393 | 197,173 | | RSU | 2/9/2023 | | | | 27,590 | 55,179 | 110,358 | | 610,832 | | Annual Cash Bonus | n/a | 217,500 | 435,000 | 652,500 | | | | | |
2023 GRANTS OF PLAN-BASED AWARDS TABLE
| (1) We pay a cash incentive bonus for performance under our Incentive Bonus Plan in February following the performance year if the performance criteria related to the Cash Incentive Bonus Objectives have been satisfied in the performance year. The actual amounts of the fiscal year 2023 performance cash incentive bonus are shown in the SCT in the “Non – Equity Incentive Plan Compensation” column. The Threshold, Target, and Maximum award opportunities shown under this heading are for 2023 performance. For our NEOs, the amounts are a multiple of each NEO’s base salary in 2023. See “Compensation Discussion and Analysis—2023 Compensation Decisions (Annual Cash Incentive Bonuses and Annual Equity Incentive Awards)” for a detailed description of the annual cash incentive bonuses. |
2023 GRANTS OF PLAN-BASED AWARDS TABLE
| (2) The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards column represent the possible number of Annual Performance RSUs that may vest based upon the level of achievement of the applicable performance measures. These estimated possible payouts for each NEO do not include dividend equivalent units that may vest, if at all, following the end of the performance period. The Annual Performance RSUs have a three-year performance period and vest based on the Company’s TSR compared to Index Relative Performance. Threshold assumes that 50% of the RSUs awarded vest, Target assumes that 100% of the RSUs awarded vest, and Maximum assumes that 200% of the RSUs awarded vest. See “Compensation Discussion and Analysis—2023 Compensation Decisions (Annual Cash Incentive Bonuses and Annual Equity Incentive Awards)” for a detailed description of the Annual Performance RSUs. |
2023 GRANTS OF PLAN-BASED AWARDS TABLE
| (3) The amounts in this column represent the number of time-based RSAs granted to the NEOs in 2023. See “Compensation Discussion and Analysis—2023 Compensation Decisions (Annual Cash Incentive Bonuses and Annual Equity Incentive Awards)” for a detailed description of the Annual Time-Based RSAs. |
2023 GRANTS OF PLAN-BASED AWARDS TABLE
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2023 GRANTS OF PLAN-BASED AWARDS TABLE
2023 GRANTS OF PLAN-BASED AWARDS
2023 GRANTS OF PLAN-BASED AWARDS TABLE
| (4) The grant date fair value for each of the time-based RSAs equals the number of time-based RSAs multiplied by the closing common stock price on the NYSE on the applicable grant date as reported in the table above, computed in accordance with ASC Topic 718. The amount shown for grant date fair value for each of the Annual Performance RSUs is calculated using a Monte Carlo simulation valuation model in accordance with ASC Topic 718. For more information, including the assumptions used to calculate such values, please see Note 12 (“Incentive Award Plan”) to our audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023. |
2023 GRANTS OF PLAN-BASED AWARDS TABLE
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OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END The following table sets forth information with respect to outstanding RSAs and RSUs held by the NEOs as of December 31, 2023.
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| | | Stock Awards | | | | | | | | | Equity Incentive | Equity Incentive Plan | | | | Number of | Market Value | Plan Awards: | Awards: Market or | | | | Shares of | of Shares of | Number of Unearned | Payout Value of | | | | Stock That | Stock That | Shares, Units | Unearned Shares, Units | | | Grant | Have Not | Have Not | or Other Rights That | or Other Rights That | | Name | Date | Vested (#)(1) | Vested ($)(2) | Have Not Vested (#) | Have Not Vested ($)(2) | | Bryan A. Giglia | 2/09/2023 | 53,848 | 577,789 | — | — | | | 2/09/2023 | — | — | 161,544(3) | 1,733,367 | | | 3/07/2022 | 56,401 | 605,183 | — | — | | | 3/07/2022 | — | — | 94,002(4) | 1,008,641 | | | 2/10/2022 | 18,698 | 200,630 | — | — | | | 2/10/2022 | 14,024 | 150,478 | — | — | | | 2/10/2022 | — | — | 84,143(3) | 902,854 | | | 2/10/2022 | 39,547(5) | 424,339 | — | — | | | 9/09/2021 | 52,066 | 558,668 | — | — | | | 2/10/2021 | 34,994 | 375,486 | — | — | | Robert C. Springer | 2/09/2023 | 42,352 | 454,437 | — | — | | | 2/09/2023 | — | — | 127,057(3) | 1,363,322 | | | 3/07/2022 | 56,401 | 605,183 | — | — | | | 3/07/2022 | — | — | 94,002(4) | 1,008,641 | | | 2/10/2022 | 15,826 | 169,813 | — | — | | | 2/10/2022 | 11,870 | 127,365 | — | — | | | 2/10/2022 | — | — | 71,223(3) | 764,223 | | | 2/10/2022 | 33,475(5) | 359,187 | — | — | | | 9/09/2021 | 44,205 | 474,320 | — | — | | | 2/10/2021 | 29,711 | 318,799 | — | — | | Aaron R. Reyes | 2/09/2023 | 19,361 | 207,744 | — | — | | | 2/09/2023 | — | — | 58,083(3) | 623,231 | | | 2/10/2022 | 18,948 | 203,312 | — | — | | | 2/10/2021 | 7,676 | 82,363 | — | — | | Christopher G. Ostapovicz | 2/09/2023 | 20,571 | 220,727 | — | — | | | 2/09/2023 | — | — | 61,713(3) | 662,180 | | | 2/10/2022 | 11,778 | 126,378 | — | — | | | 2/10/2022 | 8,834 | 94,789 | — | — | | | 2/10/2022 | — | — | 53,004(3) | 568,733 | | | 2/10/2022 | 24,912(5) | 267,306 | — | — | | | 9/09/2021 | 34,197 | 366,934 | — | — | | | 3/08/2021 | 13,970 | 149,898 | — | — | | David M. Klein | 2/09/2023 | 18,393 | 197,357 | — | — | | | 2/09/2023 | — | — | 55,179(3) | 592,071 | | | 2/10/2022 | 10,304 | 110,562 | — | — | | | 2/10/2022 | 7,729 | 82,932 | — | — | | | 2/10/2022 | — | — | 46,378(3) | 497,636 | | | 2/10/2022 | 21,798(5) | 233,893 | — | — | | | 9/09/2021 | 32,927 | 353,307 | — | — | | | 2/10/2021 | 18,741 | 201,091 | — | — |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
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OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| (1) The restricted stock awards listed in this column, excluding the Transition Performance RSUs, are scheduled to vest as set forth below. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| | | Bryan A. | Robert C. | Aaron R. | Christopher G. | David M. | | Grant Date | Vesting Date | Giglia | Springer | Reyes | Ostapovicz | Klein | | 2/10/2021 | 2/15/2024 | 34,994 | 29,711 | 7,676 | — | 18,741 | | 3/08/2021 | 2/15/2024 | — | — | — | 13,970 | — | | 9/09/2021 | 9/30/2024 | 52,066 | 44,205 | — | 34,197 | 32,927 | | 2/10/2022 | 2/15/2024 | 9,349 | 7,913 | 9,474 | 5,889 | 5,152 | | 2/10/2022 | 2/15/2025 | 9,349 | 7,913 | 9,474 | 5,889 | 5,152 | | 2/10/2022 | 2/15/2024 | 14,024 | 11,870 | — | 8,834 | 7,729 | | 3/07/2022 | 3/07/2024 | 6,267 | 6,267 | — | — | — | | 3/07/2022 | 3/07/2025 | 6,267 | 6,267 | — | — | — | | 3/07/2022 | 3/07/2026 | 6,267 | 6,267 | — | — | — | | 3/07/2022 | 3/07/2027 | 37,600 | 37,600 | — | — | — | | 2/09/2023 | 2/15/2024 | 17,950 | 14,118 | 6,455 | 6,859 | 6,133 | | 2/09/2023 | 2/15/2025 | 17,949 | 14,117 | 6,453 | 6,856 | 6,130 | | 2/09/2023 | 2/15/2026 | 17,949 | 14,117 | 6,453 | 6,856 | 6,130 | | | | 230,031 | 200,365 | 45,985 | 89,350 | 88,094 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| (2) The market value of the unvested restricted shares of common stock is based on the closing common stock price of $10.73 on the NYSE on December 31, 2023. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| (3) Reflects Target performance for the applicable Annual Performance RSUs. The Annual Performance RSUs subject to the awards are eligible to vest based on RSR performance over a three-year Performance Period commencing on the applicable grant date. In the event that Company TSR is negative for the Performance Period, the percentage of RSUs subject to the Annual Performance RSUs that vest will be reduced by 25%. For 2022 Annual Performance RSUs and 2023 Annual Performance RSUs, RSR would have been achieved above Threshold performance level but below Target performance level had the applicable performance period ended as of December 31, 2023. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| (4) Represents the one-time awards of performance-based RSUs in connection with Mr. Giglia’s appointment as our CEO and Mr. Springer’s appointment as our President and Chief Investment Officer in March 2022 (“Promotion Performance RSUs”), which may be earned as to one-fifth of the RSUs subject to such award upon achievement of average closing share price targets of $13.50, $15.00, $16.50, $18.00 and $19.50, in each case, during a 20 consecutive trading day period prior to the fifth anniversary of the grant date, assuming that each such share price target is met. Earned RSUs will vest, subject to the NEO’s continued service, on the later of the date on which the price per share target is achieved during a five-year performance period commencing March 7, 2022 and ending on March 7, 2027 (the “Promotion Performance Period”), and the third anniversary of the grant date (“Promotion Vesting Date”). |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
| (5) Reflects actual performance for the applicable Transition Performance RSUs. The RSUs subject to the award are eligible to vest subject to approval by the Compensation Committee in January 2024 based on RSR performance over a two-year Performance Period which ended on December 31, 2023. The Company’s TSR was negative for the Performance Period, resulting in a 25% reduction to the percentage of RSUs that vested on January 25, 2024. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END TABLE
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2023 OPTION EXERCISES AND STOCK VESTED
2023 OPTION EXERCISES AND STOCK VESTED The following table sets forth information with respect to the vesting of restricted stock in 2023 for each NEO. The number of shares acquired on vesting and the value of those shares do not reflect the withholding of shares to satisfy federal and state income tax withholdings. No NEO held stock options or exercised any stock options during 2023.
2023 OPTION EXERCISES AND STOCK VESTED TABLE
2023 OPTION EXERCISES AND STOCK VESTED TABLE
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| | Stock Awards | | | | Number of Shares | Value | | | Acquired on | Realized Upon | | Name | Vesting (#) | Vesting ($)(1) | | Bryan A. Giglia | 147,773 | 1,579,712 | | Robert C. Springer | 126,350 | 1,350,396 | | Aaron R. Reyes | 23,735 | 256,088 | | Christopher G. Ostapovicz | 62,891 | 671,931 | | David M. Klein | 80,831 | 864,569 |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| (1) Value realized upon vesting is calculated as the gross number of shares vested in February 2023 and March 2023 multiplied by the closing stock price on the vesting date on the NYSE ranging from $10.38 to $10.82. |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
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2023 OPTION EXERCISES AND STOCK VESTED TABLE
Our NEOs are entitled to certain payments and benefits upon a qualifying termination of employment as defined in the Employment Agreements including a qualifying termination upon a change in control. The following discussion describes the payments and benefits to which our NEOs would have become entitled to upon a qualifying termination with and without a change in control, as applicable, occurring on December 31, 2023.
POTENTIAL PAYMENTS
POTENTIAL PAYMENTS The following table summarizes the amounts that would have been paid to each of Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein in connection with the events listed below, assuming such events occurred on December 31, 2023.
POTENTIAL PAYMENTS
| | | Health | Unvested | | | | Severance | Insurance | Stock | | | Name | Amount ($) | Coverage ($) | Awards ($) | Total ($) | | Bryan A. Giglia | | | | | | By Company for “Cause” or By Executive without “Good Reason” | — | — | — | — | | By Company without “Cause” or By Executive with “Good Reason” | 4,349,313(1) | 42,991(2) | 3,892,948(3) | 8,285,252 | | Death or "Disability" | 1,527,500(4) | 42,991(2) | 3,287,765(5) | 4,858,256 | | By Company without “Cause” or By Executive for “Good Reason” upon a Change in Control | 4,349,313(1) | 42,991(2) | 5,198,653(6) | 9,590,957 | | Robert C. Springer | | | | | | By Company for “Cause” or By Executive without “Good Reason” | — | — | — | — | | By Company without “Cause” or By Executive with “Good Reason” | 3,917,078(1) | 49,249(2) | 3,323,357(3) | 7,289,684 | | Death or "Disability" | 1,351,250(4) | 49,249(2) | 2,718,175(5) | 4,118,674 | | By Company without “Cause” or By Executive for “Good Reason” upon a Change in Control | 3,917,078(1) | 49,249(2) | 4,363,527(6) | 8,329,854 | | Aaron R. Reyes | | | | | | By Company for “Cause” or By Executive without “Good Reason” | — | — | — | — | | By Company without “Cause” or By Executive with “Good Reason” | 2,077,500(1) | 12,803(2) | 688,501(3) | 2,778,804 | | Death or "Disability" | 800,000(4) | 12,803(2) | 688,501(5) | 1,501,304 | | By Company without “Cause” or By Executive for “Good Reason” upon a Change in Control | 2,077,500(1) | 12,803(2) | 1,078,676(6) | 3,168,979 | | Christopher G. Ostapovicz | | | | | | By Company for “Cause” or By Executive without “Good Reason” | — | — | — | — | | By Company without “Cause” or By Executive with “Good Reason” | 2,342,500(1) | 52,187(2) | 1,721,694(3) | 4,116,381 | | Death or "Disability" | 850,000(4) | 52,187(2) | 1,721,694(5) | 2,623,881 | | By Company without “Cause” or By Executive for “Good Reason” upon a Change in Control | 2,342,500(1) | 52,187(2) | 2,275,164(6) | 4,669,851 | | David M. Klein | | | | | | By Company for “Cause” or By Executive without “Good Reason” | — | — | — | — | | By Company without “Cause” or By Executive with “Good Reason” | 2,449,844(1) | 53,903(2) | 1,616,792(3) | 4,120,539 | | Death or "Disability" | 870,000(4) | 53,903(2) | 1,616,792(5) | 2,540,695 | | By Company without “Cause” or By Executive for “Good Reason” upon a Change in Control | 2,449,844(1) | 53,903(2) | 2,109,012(6) | 4,612,759 |
POTENTIAL PAYMENTS
| (1) Pursuant to the terms of each NEO’s Employment Agreement, if the NEO’s employment with the Company is terminated by the Company without “cause” or by the executive for “good reason”, the severance payment is the sum of the following: (A) (1) earned but unpaid base salary, (2) accrued but unpaid vacation pay through the date of termination, and (3) any vested amounts due under any plan, program or policy of the Company, to the extent not previously paid (if any) (together, the “Accrued Obligations”); and (B) a severance amount equal to the sum of: (1) two times the sum of (i) the NEO’s base salary in effect on the date of termination (which was $650,000, $575,000, $400,000, $425,000, and $435,000 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2023), and (ii) the greater of (x) the target annual cash bonus (which was $877,500, $776,250, $400,000, $425,000, and $435,000 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2023) and (y) the actual annual cash bonus paid to the NEO with respect to the last full calendar year immediately preceding the date of termination (which was $1,085,906, $995,414, $438,750, $533,750, and $572,422 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2022), and (2) a pro-rata portion of the annual cash bonus for the partial calendar year in which the date of termination occurs, determined by multiplying the target annual cash bonus (which was $877,500, $776,250, $400,000, $425,000, and $435,000 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2023) by a fraction, the numerator of which is the number of days elapsed in the calendar year through the date of termination and the denominator of which is 365. The severance figure in the table does not include any Accrued Obligations. |
POTENTIAL PAYMENTS
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POTENTIAL PAYMENTS
| (2) Pursuant to the terms of each NEO’s Employment Agreement, the Company shall provide group health coverage for the NEO and his eligible family members for a period of up to 18 months after termination. The health insurance coverage amount reflects 18 months of monthly premium totaling $42,991, $49,249, $12,803, $52,187, and $53,903 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2023. |
POTENTIAL PAYMENTS
| (3) Pursuant to the terms of each NEO’s Employment Agreement, if the NEO’s employment with the Company is terminated by the Company without “cause” or by the executive for “good reason”, the portion of any then-outstanding restricted stock and other equity awards granted prior to January 1, 2022 will vest to the extent that such awards were scheduled to vest within the 12-month period immediately following the date of termination, and any then-outstanding restricted stock and other equity awards granted on or after January 1, 2022 that vest solely based on the NEO’s continued employment or service will vest and become exercisable in full. Notwithstanding the foregoing, if any NEO experiences a “qualifying termination” (as defined in the NEO’s Employment Agreement), vesting of the restricted stock granted under the Retention Program will accelerate in full subject to the execution of a general release, excluding Mr. Reyes who did not participate in the Retention Program. In addition, pursuant to the applicable award agreements, if an NEO’s service is terminated by the Company without “cause” or by the NEO for “good reason”, prior to the completion of the applicable Performance Period, the Performance RSU Awards will vest with respect to a number of RSUs equal to the number of RSUs which would have vested based on actual performance as of and assuming the completion of the applicable Performance Period as of the date of such termination, prorated based on the number of days during the applicable Performance Period through and including the date of such termination. For Messrs. Giglia and Springer, the shares subject to the Promotion Time-Based RSAs will vest in full and the Promotion Performance RSUs will vest with respect to a number of RSUs equal to the number of RSUs which would have vested based on actual achievement of stock price targets as of the date of such termination and assuming the Promotion Vesting Date occurred as the date of such termination. Amounts reported are based on the closing common stock price of $10.73 on the NYSE as of December 31, 2023 and includes payable dividend equivalents associated with the Performance RSU Awards. |
POTENTIAL PAYMENTS
| (4) Pursuant to the terms of each NEO’s Employment Agreement, if the NEO’s employment with the Company is terminated by reason of death or “disability”, he or, as appropriate, his estate or beneficiaries will be paid a severance amount equal to the sum of: (i) the Accrued Obligations, (ii) 100% of his annual base salary then in effect (which was $650,000, $575,000, $400,000, $425,000, and $435,000 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2023) and (iii) a pro-rata portion of the annual cash bonus for the partial calendar year in which the date of termination occurs, determined by multiplying the target annual cash bonus (which was $877,500, $776,250, $400,000, $425,000, and $435,000 for Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein, respectively, in 2023) by a fraction, the numerator of which is the number of days elapsed in the calendar year through the date of termination and the denominator of which is 365. The severance figure in the table does not include any Accrued Obligations. |
POTENTIAL PAYMENTS
| (5) Pursuant to the terms of each NEO’s Employment Agreement, if the NEO’s employment with the Company is terminated by reason of death or “disability”, he or, as appropriate, his estate or beneficiaries will fully vest in all then-outstanding restricted stock and other equity awards to the extent such outstanding awards, excluding the Promotion Time-Based RSAs, were scheduled to vest solely based on the passage of time and the NEO’s continued employment or service with the Company. In addition, pursuant to the applicable award agreements, if an NEO’s service is terminated by reason of death or “disability” prior to the completion of the applicable Performance Period, the Performance RSU Awards will vest with respect to a number of RSUs equal to the number of RSUs which would have vested based on actual performance as of and assuming the completion of the applicable Performance Period as of the date of such termination, prorated based on the number of days during the applicable Performance Period through and including the date of such termination. For Messrs. Giglia and Springer, the Promotion Performance RSUs will vest with respect to a number of RSUs equal to the number of RSUs which would have vested based on actual achievement of stock price targets as of the date of such termination and assuming the Promotion Vesting Date occurred as the date of such termination. Amounts reported are based on the closing common stock price of $10.73 on the NYSE as of December 31, 2023 and includes payable dividend equivalents associated with the Performance RSU Awards. |
POTENTIAL PAYMENTS
| (6) Pursuant to the terms of each NEO’s Employment Agreement, if the executive’s employment with the Company is terminated by the Company without “cause” or by the executive for “good reason” in connection with a change of control, the portion of any then-outstanding restricted stock and other equity awards that vest solely based |
POTENTIAL PAYMENTS
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POTENTIAL PAYMENTS
| on the NEO’s continued employment or service will vest and become exercisable in full. In addition, pursuant to the applicable award agreements, if an NEO’s service is terminated by the Company without “cause” or by the NEO for “good reason,” in connection with a change of control prior to the completion of the applicable Performance Period, the Performance RSU Awards will vest with respect to a number of RSUs equal to the number of RSUs which would have vested based on actual performance as of and assuming the completion of the applicable Performance Period as of the date of such termination, and such RSUs shall become fully vested. For Messrs. Giglia and Springer, the shares subject to the Promotion Time-Based RSAs will vest in full and the Promotion Performance RSUs will vest with respect to a number of RSUs equal to the number of RSUs which would have vested based on actual achievement of stock price targets as of the date of such termination and assuming the Promotion Vesting Date occurred as the date of such change of control. Amounts reported are based on the closing common stock price of $10.73 on the NYSE as of December 31, 2023 and includes payable dividend equivalents associated with the Performance RSU Awards. |
POTENTIAL PAYMENTS
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PAY RATIO DISCLOSURE
PAY RATIO DISCLOSURE As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S - K, we are providing the following information regarding the relationship of the annual total compensation of our employees and the annual total compensation of Bryan A. Giglia, our CEO as of December 31, 2023. The pay ratio specified below is a reasonable estimate calculated in a manner that is intended to be consistent with Item 402(u) of Regulation S - K. For 2023, our last completed fiscal year:
PAY RATIO DISCLOSURE
| ● | the median of the annual total compensation of all of our employees (other than our CEO) was $213,303; and |
PAY RATIO DISCLOSURE
| ● | the annual total compensation of our CEO, as reported in the Summary Compensation Table included above in this Proxy Statement was $4,065,496. |
PAY RATIO DISCLOSURE
Based on this information, for 2023, our CEO’s annual total compensation was 19.1 times that of the median of the annual total compensation of all of our employees (other than our CEO).
PAY VERSUS PERFORMANCE TABLE
PAY VERSUS PERFORMANCE TABLE
PAY VERSUS PERFORMANCE TABLE
| | Summary Compensation | | | | | | Average | Average | Value of Initial Fixed | | | | | | Table Total (1) | | | Compensation Actually Paid (2) | | | Summary | Compensation | $100 Investment | | | | | | PEO 1 | PEO 2 | PEO 3 | PEO 1 | PEO 2 | PEO 3 | Compensation | Actually | Based On: | | | | | | John V. | Douglas M. | Bryan A. | John V. | Douglas M. | Bryan A. | Table Total | Paid | | Peer | Net Income | AFFO | | | Arabia | Pasquale | Giglia | Arabia | Pasquale | Giglia | Non-PEO NEOs | Non-PEO NEOs | Company | Group | (Loss) | Per Share | | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) (3) | ($) (3) (4) | TSR ($) | TSR ($) (5) | ($ thousands) | ($) (6) | | 2023 | — | — | 4,065,496 | — | — | 4,271,146 | 2,186,607 | 2,288,186 | 80.68 | 94.79 | 206,708 | 0.95 | | 2022 | — | 3,056,142 | 5,360,331 | — | 2,976,426 | 4,470,301 | 2,698,018 | 2,264,209 | 70.53 | 76.49 | 90,766 | 0.87 | | 2021 | 8,161,442 | 2,913,754 | — | 8,457,333 | 2,891,832 | — | 1,933,105 | 2,304,828 | 84.75 | 90.32 | 32,995 | 0.09 | | 2020 | 4,472,998 | — | — | 3,437,021 | — | — | 1,810,688 | 1,492,792 | 81.86 | 76.40 | (410,506) | (0.68) |
PAY VERSUS PERFORMANCE TABLE
| (1) Amounts represent the compensation reported in the “Total” column for the applicable PEO in the SCT. |
PAY VERSUS PERFORMANCE TABLE
| (2) Amounts reported under Compensation Actually Paid (“CAP”) represent the amount of CAP to the applicable PEO, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to the applicable PEO during each year. |
PAY VERSUS PERFORMANCE TABLE
| a. | Mr. Arabia separated from employment with the Company effective as of September 2, 2021 and Mr. Pasquale ceased to serve as Interim CEO upon the appointment of Mr. Giglia as CEO on March 7, 2022. |
PAY VERSUS PERFORMANCE TABLE
| b. | In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to the 2023 PEO’s total compensation presented to determine the CAP: |
PAY VERSUS PERFORMANCE TABLE
| | 2023 | | Name | Bryan A. Giglia | | SCT Total Compensation | $4,065,496 | | Minus SCT "Stock Awards" | (2,365,543) | | Plus Fair Value at Fiscal Year ("FY") End of Outstanding and Unvested Stock Awards Granted in FY | 2,330,541 | | Plus Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior FYs | 88,427 | | Plus Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior FYs | 152,225 | | CAP to PEO | $4,271,146 |
PAY VERSUS PERFORMANCE TABLE
| c. | Fair value or change in fair value, as applicable, of equity awards in the CAP columns was determined by (i) for time-based RSAs, the closing stock price on the applicable year-end date(s) or, in the case of awards vesting during the applicable year, the closing stock price on the applicable vesting date(s); and (ii) for performance-based RSUs, the same valuation methodology as the Performance RSUs in the SCT above, the fair value was calculated using a Monte Carlo simulation valuation model as of the applicable year-end date and including assumptions expected for volatility of our stock price, dividend yield, and risk-free rate. |
PAY VERSUS PERFORMANCE TABLE
| (3) The Non-PEO NEO’s include the individuals indicated in the table below for each fiscal year. |
PAY VERSUS PERFORMANCE TABLE
| Year | Non-PEO NEOs | | 2023 | Robert C. Springer, Aaron R. Reyes, Christopher G. Ostapovicz, and David M. Klein | | 2022 | Robert C. Springer, Aaron R. Reyes, Christopher G. Ostapovicz, and David M. Klein | | 2021 | Bryan A. Giglia, Robert C. Springer, David M. Klein, Christopher G. Ostapovicz, and Marc A. Hoffman | | 2020 | Bryan A. Giglia, Marc A. Hoffman, Robert C. Springer, and David M. Klein |
PAY VERSUS PERFORMANCE TABLE
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PAY VERSUS PERFORMANCE TABLE
| (4) Amounts reported under “Average Compensation Actually Paid” represent the amount of average CAP to the Average Non-PEO NEOs, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs during each year. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to the average Non-PEO NEOs total compensation for 2023 to determine the CAP: |
PAY VERSUS PERFORMANCE TABLE
| | 2023 | | Name | Average Non-PEO NEOs | | SCT Total Compensation | $2,186,607 | | Minus SCT "Stock Awards" | (1,105,688) | | Plus Fair Value at Fiscal Year ("FY") End of Outstanding and Unvested Stock Awards Granted in FY | 1,089,328 | | Plus Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior FYs | 41,737 | | Plus Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior FYs | 76,202 | | CAP to Average Non-PEO NEOs | $2,288,186 |
PAY VERSUS PERFORMANCE TABLE
| a. | Fair value or change in fair value, as applicable, of equity awards in the average CAP column was determined by (i) for time-based RSAs, the closing stock price on the applicable year-end date(s) or, in the case of awards vesting during the applicable year, the closing stock price on the applicable vesting date(s); and (ii) for performance-based RSUs, the same valuation methodology as the Performance RSUs in the SCT above, the fair value was calculated using a Monte Carlo simulation valuation model as of the applicable year-end date and including assumptions expected for volatility of our stock price, dividend yield, and risk-free rate. |
PAY VERSUS PERFORMANCE TABLE
| (5) For each applicable fiscal year, the cumulative Peer Group TSR (the “Peer Group TSR”) represents the FTSE Nareit Equity Lodging/Resorts Index. |
PAY VERSUS PERFORMANCE TABLE
| (6) AFFO per share is a non-GAAP measure. We compute the AFFO per share component by adjusting FFO, which we calculate in accordance with standards established by Nareit, for certain noncash or nonrecurring items. AFFO is then divided by our weighted average number of common shares outstanding, adjusted for the assumed issuance of all potentially dilutive shares, for each applicable year. For more information, see our “Non-GAAP Financial Measures” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023. Amortization of deferred stock compensation has been added to the Company adjustments to AFFO per share for 2020 and 2021 to conform to the current presentation. |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
2023 INDEPENDENT DIRECTOR COMPENSATION
2023 INDEPENDENT DIRECTOR COMPENSATION
2023 INDEPENDENT DIRECTOR COMPENSATION
| | Fees Earned or | Stock | Matching Charitable | | | Name | Paid in Cash ($)(1) | Awards ($)(2) | Contributions ($)(3) | Total ($) | | W. Blake Baird | 90,000 | 108,376 | — | 198,376 | | Andrew Batinovich | 80,000 | 108,376 | — | 188,376 | | Monica S. Digilio | 90,000 | 108,376 | — | 198,376 | | Kristina M. Leslie | 90,000 | 108,376 | — | 198,376 | | Murray J. McCabe | 70,000 | 108,376 | — | 178,376 | | Verett Mims | 70,000 | 108,376 | — | 178,376 | | Douglas M. Pasquale (4) | 130,000 | 170,312 | 5,000 | 305,312 |
2023 INDEPENDENT DIRECTOR COMPENSATION
| (1) The amounts in this column represent cash compensation earned by the applicable director during 2023. Compensation for service on the Board and its Committees is payable quarterly in arrears. |
2023 INDEPENDENT DIRECTOR COMPENSATION
| (2) The amounts in this column represent the grant date fair value for awards of fully vested stock made to the director in 2023 as prescribed by ASC Topic 718. To determine the number of shares granted to each director, the amount of the grant, $105,000 (or $165,000 in the case of Mr. Pasquale), was divided by the average closing price of the Company’s stock over the 20 trading days ending three trading days prior to the grant date. |
2023 INDEPENDENT DIRECTOR COMPENSATION
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2023 INDEPENDENT DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
2023 INDEPENDENT DIRECTOR COMPENSATION
| (3) The amounts in this column represent the aggregate annual cost to the Company of payments made in the form of charitable matching contributions. |
2023 INDEPENDENT DIRECTOR COMPENSATION
| (4) The Compensation Committee reviewed Mr. Pasquale’s independent chair compensation in conjunction with the full Board compensation review and the 2022 FPC Board Compensation Report and concluded that no changes should be made based on Mr. Pasquale’s REIT expertise, board experience, and substantial contributions to the Company. Additionally, the Compensation Committee recognized the significant additional time commitment and guidance provided by Mr. Pasquale that goes above and beyond what is typically required by other directors. |
INDEPENDENT REVIEW OF DIRECTOR COMPENSATION
INDEPENDENT REVIEW OF DIRECTOR COMPENSATION The Compensation Committee is responsible for reviewing and making recommendations to the Board on compensation and benefits for the independent directors. The Compensation Committee generally reviews the compensatory arrangement for the independent directors biennially. 2022 FPC Board Compensation Report. During the first quarter of 2022, FPC’s report detailed the 2020 director compensation programs (as disclosed in the 2021 proxy statements) for two select groups of publicly - traded REITs as of December 31, 2021, comprised of (a) a hotel peer group consisting of 10 companies with implied total capitalizations ranging from approximately $2.0 billion to $18.8 billion and (b) a size/geographic peer group consisting of 12 companies with implied total capitalizations ranging from approximately $2.5 billion to $9.7 billion compared to the Company’s consolidated total capitalization of $3.7 billion. Findings from the 2022 FPC Board Compensation Report were used to set the 2022 independent director compensation. Based on the 2022 FPC report and current market trends, the Compensation Committee recommended that no changes were necessary for the independent directors’ compensation for 2023.
INDEPENDENT REVIEW OF DIRECTOR COMPENSATION
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