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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant                               Filed by a Party other than the Registrant  

Check the appropriate box:

 

 

Preliminary Proxy Statement

  Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

  Definitive Proxy Statement

  Definitive Additional Materials

  Soliciting Material Pursuant to §240.14a-12

 

Hyatt Hotels Corporation

 

(Name of Registrant as Specified in Its Charter)
        
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LOGO  

 

 

 

2020  

Annual Meeting of Stockholders

and Proxy Statement

Wednesday, May 20, 2020 at 9:30 a.m., Central Time

 

 

 

 

 

LOGO


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LOGO

150 North Riverside Plaza, Chicago, IL 60606 • Tel: 312.750.1234

www.hyatt.com

April 6, 2020

Dear Stockholder:

You are cordially invited to attend the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) of Hyatt Hotels Corporation, which will be held online via live webcast, on Wednesday, May 20, 2020, at 9:30 a.m., Central Time. Due to the emerging public health threat of the coronavirus (COVID-19) pandemic and to support the health and wellbeing of our stockholders and other meeting participants, this year’s Annual Meeting will be held as a virtual meeting only. We also believe that the environmentally-friendly virtual meeting format will provide expanded access, improved communication, and cost savings for our stockholders and Hyatt. You will not be able to attend the Annual Meeting in person.

You will be able to attend the Annual Meeting online, vote your shares electronically, and submit questions during the meeting by visiting https://web.lumiagm.com/297849013; Meeting Code: Hyatt2020. To participate, you will need the control number located in the upper right corner of your proxy card or on the instructions that accompanied your proxy materials. The Annual Meeting live webcast will begin promptly at 9:30 a.m., Central Time, on May 20, 2020. Online check-in will begin promptly at 9:15 a.m., Central Time, and you should allow ample time for the online check-in procedures.

At the Annual Meeting you will be asked to (1) elect four directors to our board of directors, (2) ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm, (3) approve the Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan, (4) approve the Second Amended and Restated Hyatt Hotels Corporation Employee Stock Purchase Plan, (5) approve, on an advisory basis, the compensation paid to our named executive officers, and (6) transact any other business as properly may come before the Annual Meeting or any adjournment or postponement thereof.

It is important that your shares be represented and voted whether or not you plan to virtually attend the Annual Meeting. You may vote on the Internet, by telephone or by completing and mailing a proxy card. Voting over the Internet, by telephone or by written proxy will ensure your shares are represented at the Annual Meeting. If you do attend the Annual Meeting, you may withdraw your proxy should you wish to vote virtually at the Annual Meeting. Please read the enclosed information carefully before voting.

 

Sincerely,
LOGO    LOGO

Thomas J. Pritzker

Executive Chairman of the Board

  

Mark S. Hoplamazian

President and Chief Executive Officer

 


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LOGO

HYATT HOTELS CORPORATION

150 North Riverside Plaza,

Chicago, Illinois 60606

Notice of Annual Meeting of Stockholders

To Be Held May 20, 2020

NOTICE HEREBY IS GIVEN that the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) of Hyatt Hotels Corporation (“Hyatt”) will be held online via live webcast on Wednesday, May 20, 2020, at 9:30 a.m., Central Time, at https://web.lumiagm.com/297849013; Meeting Code: Hyatt2020, for the following purposes:

 

1.

To elect four directors to hold office until the 2023 annual meeting of stockholders;

 

2.

To ratify the appointment of Deloitte & Touche LLP as Hyatt’s independent registered public accounting firm for the fiscal year ending December 31, 2020;

 

3.

To approve the Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan;

 

4.

To approve the Second Amended and Restated Hyatt Hotels Corporation Employee Stock Purchase Plan;

 

5.

To conduct an advisory vote to approve the compensation paid to our named executive officers; and

 

6.

To transact any other business as properly may come before the Annual Meeting or any adjournment or postponement thereof.

Information relating to the above matters is set forth in the attached proxy statement. Stockholders of record at the close of business on March 20, 2020 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

This Notice of Annual Meeting of Stockholders, proxy statement and proxy card are being sent to stockholders beginning on or about April 6, 2020.

Thank you for your ongoing support of Hyatt Hotels Corporation.

 

LOGO

Margaret C. Egan

Executive Vice President, General Counsel

and Secretary

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to be Held on May 20, 2020.

The proxy statement for the Annual Meeting and Annual Report

for the fiscal year ended December 31, 2019 are available at http://wfss.mobular.net/wfss/h/.

PLEASE CAREFULLY READ THE ATTACHED PROXY STATEMENT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, EXECUTE, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES. YOU MAY ALSO VOTE ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. IF YOU VOTE BY INTERNET OR TELEPHONE, THEN YOU NEED NOT RETURN A WRITTEN PROXY CARD BY MAIL. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE VIRTUALLY AT THE ANNUAL MEETING IF THEY SO DESIRE.


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PROXY SUMMARY

     1  

CORPORATE GOVERNANCE

     3  

Proposal 1 — Election Of Directors

     3  

Communications with the Board of Directors

     10  

Code of Business Conduct and Ethics

     10  

Corporate Governance Guidelines

     10  

Director Independence

     10  

Stockholder Outreach

     11  

Global Environmental and Social Responsibility

     11  

Committees of the Board of Directors

     13  

Compensation of Non-Employee Directors

     18  

Talent and Compensation Committee Report

     21  

Talent and Compensation Committee Interlocks and Insider Participation

     21  

 

EXECUTIVE COMPENSATION

     22  

Compensation Discussion and Analysis

     22  

Summary Compensation Table

     33  

Grants of Plan-Based Awards — 2019

     34  

Outstanding Equity Awards at Fiscal Year End — 2019

     36  

Option Exercises and Stock Vested

     38  

Non-Qualified Deferred Compensation Table

     39  

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     44  

Proposal 2 — Ratification of Appointment of the Independent Registered Public Accounting Firm

     44  

Independent Registered Public Accounting Firm’s Fees

     44  

Policy on Audit Committee Preapproval of Audit and Permissible Nonaudit Services of the Independent Registered Public Accounting Firm

     45  

 

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     46  

FOURTH AMENDED AND RESTATED HYATT HOTELS CORPORATION LONG-TERM INCENTIVE PLAN

     47  

Proposal 3 — Approval of Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan

     47  

SECOND AMENDED AND RESTATED HYATT HOTELS CORPORATION EMPLOYEE STOCK PURCHASE PLAN

     56  

Proposal 4 — Approval of Second Amended and Restated Hyatt Hotels Corporation Employee Stock Purchase Plan

     56  

 

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     60  

Proposal 5 — Advisory Vote to Approve Executive Compensation

     60  

 

STOCK OWNERSHIP INFORMATION

     61  

Security Ownership of Certain Beneficial Owners and Management

     61  

Delinquent Section 16(a) Reports

     67  

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     68  

Certain Relationships and Related Party Transactions

     68  

Related Party Transaction Policy and Procedures

     72  

 

ANNUAL MEETING INFORMATION AND PROXY MATERIALS

     73  

Attending the Annual Meeting

     73  

Questions and Answers about the Proxy Materials and the Annual Meeting

     73  

Availability of Annual Report on Form 10-K

     78  

List of the Company’s Stockholders

     78  

Delivery of Proxy Materials to Households

     78  

Other Matters That May Come Before the Annual Meeting

     79  
 


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HYATT HOTELS CORPORATION

150 North Riverside Plaza

Chicago, Illinois 60606

 

 

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

To Be Held May 20, 2020

 

The board of directors of Hyatt Hotels Corporation (referred to herein as “Hyatt,” “we,” “us” or the “Company”) solicits your proxy to vote at the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 20, 2020, beginning 9:30 a.m., Central Time, online via live webcast accessible at https://web.lumiagm.com/297849013; Meeting Code: Hyatt2020, and at any adjournments or postponements thereof. This proxy statement is first being released to stockholders by the Company on or about April 6, 2020.

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to be Held on May 20, 2020.

The proxy statement for the Annual Meeting and Annual Report

for the fiscal year ended December 31, 2019 are available at http://wfss.mobular.net/wfss/h/.

PROXY SUMMARY

This summary sets forth certain performance highlights, as well as information contained elsewhere in this proxy statement. You should read the entire proxy statement before casting your vote.

Annual Meeting of Stockholders

 

 

LOGO

You may attend the Annual Meeting only if you were a holder of record of our common stock at the close of business on March 20, 2020, the record date. In order to attend and vote at the Annual Meeting, please follow the instructions in the section titled “Questions and Answers about the Proxy Materials and the Annual Meeting” beginning on page 73.

Voting Recommendations of the Board

 

 

Proposal    Description    For      Against    Page
1    Election of Directors      LOGO         3
2    Ratification of the appointment of Deloitte & Touche LLP as independent auditor      LOGO         44
3    Approval of the Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan      LOGO         47
4    Approval of the Second Amended and Restated Hyatt Hotels Corporation Employee Stock Purchase Plan      LOGO         56
5    Approval, on an advisory basis, of the compensation paid to named executive officers      LOGO           60

 

Hyatt Hotels Corporation    2020 Proxy Statement    1


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Director Nominees

 

Each Class II director nominee is listed below, and you can find additional information in the section titled “Corporate Governance — Proposal 1 — Election of Directors” beginning on page 3.

 

Name    Age    Director
Since
   Board Committees

Thomas J. Pritzker

   69    2004    Finance (Chair)

Pamela M. Nicholson

   60    2014    Nominating and Corporate Governance, Talent and Compensation

Richard C. Tuttle

   64    2004    Audit, Nominating and Corporate Governance (Chair)

James H. Wooten, Jr.

   71    2011    Audit, Talent and Compensation

Key Features of Our Executive Compensation Program

 

 

 

Pay-for-performance strategy that focuses on variable pay over fixed pay.

 

 

A mix of short- and long-term incentives is weighted such that a significant percentage of total opportunity is in the form of long-term equity awards linked to long-term stockholder return.

 

 

Alignment of executive officer and stockholder interests by providing equity based compensation in the form of time-vested stock appreciation rights, time-vested restricted stock units, and performance-vested restricted stock units which, together, encourage a focus on earnings, returns, and long-term stockholder value while incentivizing continued employment.

 

 

No hedging of our stock by our named executive officers, directors, officers, and certain other individuals.

 

 

Share ownership requirements align the long-term interests of named executive officers and directors with the interests of stockholders.

 

 

No “single trigger” severance or equity acceleration upon a change in control.

 

 

Annual incentive plans include a mix of corporate and individual performance metrics, including non-financial measures.

Stockholder Outreach

 

We believe that long-term stockholder value is supported by ongoing dialogue with the Company’s stockholders and the broader investment community. We value the perspective of our stockholders and will continue to seek their input on an ongoing basis. For additional information, see “Stockholder Outreach” on page 11.

Global Environmental and Social Responsibility

 

Through our global corporate responsibility program initiatives, we strive to advance our commitment to care by fostering environmental stewardship, supporting responsible business practices in our operations, strengthening our community impact through volunteerism, philanthropy, and disaster relief, advocating for human rights, and promoting an inclusive workplace that allows our colleagues to grow and be themselves. See “Global Environmental and Social Responsibility” on page 11 for additional information.

 

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CORPORATE GOVERNANCE

Proposal 1 — Election of Directors

 

Hyatt’s Amended and Restated Certificate of Incorporation provides that the total number of members of the board of directors shall consist of not less than five nor more than 15 members, with the precise number of directors to be determined by a vote of a majority of the entire board of directors. At present, the board of directors has fixed the number of members of the board of directors at 11. Hyatt’s Amended and Restated Certificate of Incorporation further provides that the board of directors will be divided into three classes, as nearly equal in number as is practicable, designated Class I, Class II and Class III. Members of each class of the board of directors are elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor is duly elected and qualified.

Class II, the class of directors whose term expires at the Annual Meeting, currently consists of four persons. In accordance with the recommendation of the nominating and corporate governance committee, the board of directors has unanimously nominated Thomas J. Pritzker, Pamela M. Nicholson, Richard C. Tuttle, and James H. Wooten, Jr., the four incumbent directors whose terms expire at the Annual Meeting, to stand for re-election to the board of directors. Each of Messrs. Thomas Pritzker, Tuttle and Wooten and Ms. Nicholson has been nominated to hold office until the 2023 annual meeting of stockholders and until their respective successors have been duly elected and qualified. Unless otherwise instructed by the stockholder, the persons named in the enclosed proxy card will vote the shares represented by such proxy for the election of the nominees named in this proxy statement.

Each of the nominees has consented to serve as a director if elected. If any of the nominees should be unavailable to serve for any reason, the board of directors may designate a substitute nominee or substitute nominees (in which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxy cards for the election of such substitute nominee or nominees). Alternatively, the board of directors may reduce the size of the board of directors or allow the vacancy or vacancies to remain open until a suitable candidate or candidates are identified by the board of directors.

The board of directors unanimously recommends that the stockholders vote “FOR” each of Thomas J. Pritzker, Pamela M. Nicholson, Richard C. Tuttle, and James H. Wooten, Jr. as directors to serve and hold office until the 2023 annual meeting of stockholders and until their respective successors have been duly elected and qualified.

 

Hyatt Hotels Corporation    2020 Proxy Statement    3


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Our Board of Directors

Set forth below is information regarding the business experience of each of our directors that has been furnished to us by the respective director. Each director has been principally engaged in the employment indicated for the last five years unless otherwise stated. Also set forth below for each director is a discussion of the experience, qualifications, attributes or skills that led the board of directors to conclude that the director is qualified and should serve as a director of Hyatt.

Directors Standing for Re-Election

 

THOMAS J. PRITZKER

Director since: 2004

 

Age: 69

  

Thomas J. Pritzker has been a member of our board of directors since August 2004 and our Executive Chairman since August 2004. Mr. Pritzker served as our Chief Executive Officer from August 2004 to December 2006. Mr. Pritzker was appointed President of Hyatt Corporation in 1980 and served as Chairman and Chief Executive Officer of Hyatt Corporation from 1999 to December 2006. Mr. Pritzker is Chairman and Chief Executive Officer of The Pritzker Organization, LLC (“TPO”), the principal financial and investment advisor to certain Pritzker family business interests. Mr. Pritzker also serves as a Director of Royal Caribbean Cruises Ltd. He served as a Director of TransUnion Corp., a credit reporting service company, until June 2010 and as Chairman of Marmon Holdings, Inc. until March 2014. Mr. Pritzker is Chairman of the Board of Trustees of the Center for Strategic & International Studies; Director and Vice President of The Pritzker Foundation, a charitable foundation; Director and President of the Pritzker Family Philanthropic Fund, a charitable organization; and Director, Chairman and President of The Hyatt Foundation, a charitable foundation which established The Pritzker Architecture Prize. Mr. Pritzker is the father of Mr. Jason Pritzker, who is also a member of our board of directors.

 

Mr. Pritzker brings to our board of directors a deep understanding of Hyatt’s operations and extensive knowledge of the hospitality industry as a result of his 40-year history with Hyatt, including as our former Chief Executive Officer. The Company also benefits from Mr. Pritzker’s extensive network of contacts and relationships with owners and developers of hotels around the world as we pursue new opportunities and seek to enter into new management and franchise agreements. Additionally, Mr. Pritzker has significant experience leading boards of directors of for-profit and not-for-profit organizations.

 

PAMELA M. NICHOLSON

Director since: 2014

 

Age: 60

  

Pamela M. Nicholson has been a member of our board of directors since March 2014. Ms. Nicholson served as President and Chief Executive Officer of Enterprise Holdings, Inc., an auto rental and leasing company that operates Alamo Rent A Car, National Car Rental and Enterprise Rent-A-Car, from 2004 to 2019. Ms. Nicholson served as President and Chief Operating Officer of Enterprise Holdings, Inc. from 2008 to 2013. Ms. Nicholson serves as a Director of the Humane Society of Missouri. She served as a Director of Enterprise Holdings, Inc. from 2004 to 2019 and as a Director of Energizer Holdings, Inc. from 2002 to 2014.

 

Ms. Nicholson brings to the board significant senior executive and operations experience at a major, multi-national company in the travel industry, with demonstrated success in achieving high levels of customer satisfaction. The board also values Ms. Nicholson’s experience as public company director. Ms. Nicholson also contributes to the gender diversity of the board.

 

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RICHARD C. TUTTLE

Director since: 2004

 

Age: 64

  

Richard C. Tuttle has been a member of our board of directors since December 2004. Mr. Tuttle is a founding Principal at Prospect Partners, LLC, a lower-middle-market private equity firm, and has held this position since 1998. Prior to founding Prospect Partners, he was Executive Vice President of Corporate Development for Health Care & Retirement Corp., now Manor Care, Inc., a healthcare services company. He served as a Director of Cable Design Technologies, Inc., now Belden Inc., for 17 years. Mr. Tuttle is Chairman of the boards of directors of ESI Lighting, Inc., Polymer Holding Corporation, QMI Holdings, Inc., World Data Products, Inc. and All Glass & Windows Holdings, Inc. He also serves as a Director of the Illinois Venture Capital Association.

 

Mr. Tuttle contributes to our board of directors’ expertise in financing transactions and experience in working with operating companies and management teams as a result of his over 30 years of experience in private equity. Having served as a director of the Company for fifteen years, Mr. Tuttle’s long-standing knowledge of and familiarity with Hyatt and our operations benefits the board of directors. Additionally, he is sophisticated in financial and accounting matters.

 

JAMES H. WOOTEN, JR.

Director since: 2011

 

Age: 71

  

James H. Wooten, Jr. served as the Senior Vice President, General Counsel and Secretary of Illinois Tool Works Inc. (“ITW”), a worldwide manufacturer of engineered products and equipment from 2006 until his retirement in 2012. Mr. Wooten joined ITW in 1988 as Senior Attorney. He was named Associate General Counsel in 2000, and in 2005, he was promoted to Vice President, General Counsel and Secretary. Prior to joining ITW, Mr. Wooten practiced law at the firm of Gardner, Carton & Douglas, which is currently part of Drinker Biddle & Reath LLP. Mr. Wooten currently serves as a Director of Ann & Robert H. Lurie Children’s Hospital of Chicago and Window to the World Communications, Inc. He also serves on the Audit Committee of Ann & Robert H. Lurie Children’s Hospital of Chicago. He served as a Director of Morae Global Corporation from 2015 to 2019.

 

Mr. Wooten brings to our board of directors extensive experience as an executive officer of a Fortune 200 company. Throughout his more than 20 years with ITW, Mr. Wooten developed deep expertise and experience in the areas of risk assessment and management, SEC reporting issues and the general financial and operational aspects of managing a global enterprise. The board of directors also values Mr. Wooten’s experience on various private and not-for-profit company boards of directors and committees. As an African-American, Mr. Wooten contributes to the diversity of the board of directors.

Continuing Directors

 

PAUL D. BALLEW

Director since: 2017

 

Age: 56

  

Paul D. Ballew has been a member of our board of directors since March 2017. Mr. Ballew has served as Chief Data and Analytics Officer at Loblaw Companies Limited since April 2019. Mr. Ballew previously served as Global Chief Data and Analytics Officer at the Ford Motor Company from December 2014 to April 2019. Prior to joining Ford, Mr. Ballew held senior positions in data and customer analytics at The Dun & Bradstreet Corporation, Nationwide Mutual Insurance Company, General Motors Corporation, and JD Power Associates. Mr. Ballew is also a former Research Officer and Senior Economist at the Federal Reserve Bank of Chicago. Mr. Ballew served as a Director of NeuStar, Inc. from June 2015 to June 2017.

 

Mr. Ballew brings to our board of directors extensive experience in customer analytics, data operations, and strategy. Mr. Ballew also provides valuable insight regarding the future technological needs of Hyatt and the hospitality industry. Through his years of executive and technological leadership, Mr. Ballew provides the board with operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. Additionally, Mr. Ballew is sophisticated in financial and accounting matters.

 

Hyatt Hotels Corporation    2020 Proxy Statement    5


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MARK S. HOPLAMAZIAN

Director since: 2006

 

Age: 56

  

Mark S. Hoplamazian was appointed to our board of directors in November 2006 and named President and Chief Executive Officer of Hyatt Hotels Corporation in December 2006. Prior to being appointed to his present position, Mr. Hoplamazian served as President of TPO, the principal financial and investment advisor to certain Pritzker family business interests. During his 17 year tenure with TPO, he served as advisor to various Pritzker family-owned companies, including Hyatt Hotels Corporation and its predecessors. He previously worked in international mergers and acquisitions at The First Boston Corporation in New York. Mr. Hoplamazian serves on the Board of Directors of VF Corporation and serves on the Council on the University of Chicago Booth School of Business, the Executive Committee of the Board of Directors of World Business Chicago, the Board of Directors of Brand USA, Skills for Chicagoland’s Future, and the Chicago Council on Global Affairs, and the Board of Trustees of the Aspen Institute and of the Latin School of Chicago. Mr. Hoplamazian is a member of the World Travel & Tourism Council, the Commercial Club of Chicago, and the Discovery Class of the Henry Crown Fellowship.

 

As Hyatt’s President and Chief Executive Officer, Mr. Hoplamazian provides our board of directors with valuable insight regarding Hyatt’s operations, management team, colleagues and culture, as a result of his day-to-day involvement in the operations of the business, and he performs a critical role in board discussions regarding strategic planning and development for the Company. The board of directors also benefits from Mr. Hoplamazian’s historical knowledge of Hyatt based on his experience advising Hyatt on business and financial matters in his various prior roles at TPO. Mr. Hoplamazian is financially sophisticated and also has significant mergers and acquisitions and corporate finance experience.

 

SUSAN D. KRONICK

Director since: 2009

 

Age 68

  

Susan D. Kronick has been a member of our board of directors since June 2009. Ms. Kronick has been an Operating Partner at Marvin Traub Associates, a retail business development firm, since 2012. From March 2003 until March 2010, Ms. Kronick served as Vice Chair of Macy’s, Inc., the operator of Macy’s and Bloomingdale’s department stores. Ms. Kronick served as Group President, Regional Department Stores of Macy’s, Inc. from April 2001 to February 2003; prior thereto she served as Chairman and Chief Executive Officer of Macy’s Florida from June 1997 to March 2001. Ms. Kronick serves as a Director of American Airlines Group Inc. Ms. Kronick served as a Director of The Pepsi Bottling Group, Inc. from March 1999 to February 2010.

 

Ms. Kronick brings to our board of directors a strong background in marketing and experience in building industry leading brands as a result of the various management positions she has held with Macy’s, Inc., most recently as Vice Chair. As a result of her positions with Macy’s, Inc., Ms. Kronick also has gained valuable financial and operations experience. The board also values Ms. Kronick’s experience as public company director. Additionally, she contributes to the gender diversity of the board of directors.

 

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MACKEY J. MCDONALD

Director since: 2009

 

Age: 73

  

Mackey J. McDonald has been a member of our board of directors since June 2009. Mr. McDonald served as a Senior Advisor to Crestview Partners, a private equity firm, from 2008 to 2019. Mr. McDonald served as Chairman and Chief Executive Officer of VF Corporation, an apparel manufacturer, from 1998 until his retirement in August 2008. From 1996 to 2006, he was the President of VF Corporation and prior thereto he served as VF Group Vice President. Mr. McDonald is a Director of Bernhardt Industries, Inc. Mr. McDonald served as a Director of The Kraft Heinz Company from 2015 to 2018, as a Director of Kraft Foods, Inc. from 2012 to 2015, as a Director of Wells Fargo & Company (formerly Wachovia Corporation) from 1997 to 2012, as a Director of VF Corporation from 1993 to 2008, as a Director of The Hershey Company from 1996 to 2007, and as a Director of Tyco International Ltd. from 2002 to 2007.

 

Mr. McDonald brings to our board of directors deep management and operations experience as well as experience building internationally recognized brands as a result of his leadership positions with VF Corporation. The board of directors also values Mr. McDonald’s experience as a chief executive officer and significant public company board of directors and executive compensation experience, including his former service on the Human Resources Committee of Wells Fargo & Company (formerly Wachovia Corporation) and former service as Chairman of the Compensation and Human Resources Committee of Tyco International Ltd. and on the Compensation and Executive Organization Committee of The Hershey Company.

 

CARY D. MCMILLAN

Director since: 2013

 

Age: 62

  

Cary D. McMillan has been a member of our board of directors since June 2013. Mr. McMillan is the Chief Executive Officer of True Partners Consulting LLC, a nationwide provider of tax and financial consulting services, headquartered in Chicago. Mr. McMillan co-founded True Partners Consulting LLC in 2005. Prior to joining True Partners Consulting LLC, he was Executive Vice President of Sara Lee Corporation, Chief Executive Officer of Sara Lee Branded Apparel and a member of Sara Lee Corporation’s board of directors. Before joining Sara Lee in 1999 as its Chief Financial Officer, he was managing partner of Arthur Andersen’s Chicago office. Mr. McMillan serves as a Director of American Eagle Outfitters, Inc. He served as a Director of Hewitt Associates from 2002 to 2010 and of McDonald’s Corporation from 2003 to 2015. He is also active in the Chicago non-profit community. He currently is a Trustee of The Art Institute of Chicago, Millennium Park, and WTTW.

 

Mr. McMillan brings to our board of directors extensive management and operations experience as a senior executive at a global, complex consumer brand company. The board of directors values Mr. McMillan’s knowledge of strategy and business development, finance and accounting skills and international operations experience. Mr. McMillan is also a certified public accountant and an audit committee financial expert. His experience as a former audit partner with Arthur Andersen LLP, as well as his service on the Audit Committee of American Eagle Outfitters, Inc. and prior service on the Audit Committee of McDonald’s Corporation, provides him with extensive knowledge of financial and accounting issues.

 

Hyatt Hotels Corporation    2020 Proxy Statement    7


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JASON PRITZKER

Director since: 2014

 

Age: 40

  

Jason Pritzker has been a member of our board of directors since March 2014. Mr. Pritzker serves as an investment professional at TPO. Mr. Pritzker co-founded Yapmo.com (now doing business as Konverse), where he also served as President from 2011 to 2013 and as a Director until March 2016. Mr. Pritzker also co-founded Visible Vote LLC, a mobile software company, where he served as President from March 2009 until May 2012. Mr. Pritzker is a Director of TMS International Corporation and Lithko Contracting LLC. Mr. Pritzker previously worked for Webb Wheel Products, a subsidiary of The Marmon Group, and as an analyst for Goldman, Sachs & Co. Mr. Pritzker is the son of Mr. Thomas J. Pritzker, our Executive Chairman.

 

The board of directors values Mr. Pritzker’s expanding relationships with many of the owners and developers of our hotels around the world as we strive to maintain valuable relationships, pursue new opportunities and enter into new management and franchise agreements.

 

MICHAEL A. ROCCA

Director since: 2008

 

Age: 75

  

Michael A. Rocca has been a member of our board of directors since March 2008. From 1994 to 2000, Mr. Rocca served as Senior Vice President and Chief Financial Officer of Mallinckrodt Inc., a pharmaceutical and medical device manufacturer. Prior to 1994, Mr. Rocca served in a variety of finance positions with Honeywell Inc., a diversified technology and manufacturing company, including Vice President, Treasurer and Vice President, Finance Europe. Mr. Rocca previously served as a Director of Lawson Software, Inc. from 2003 to 2011 and St. Jude Medical Inc. from 2004 to 2017.

 

Mr. Rocca is an audit committee financial expert and has extensive experience chairing public company audit committees. His background as Senior Vice President and Chief Financial Officer of Mallinckrodt Inc., various finance positions with Honeywell Inc. and overall financial and accounting expertise make Mr. Rocca particularly well-suited to assist our board of directors with its oversight responsibilities regarding Hyatt’s financial statements and its financial reporting and disclosure practices.

Other than the relationships of Mr. Thomas J. Pritzker and Mr. Jason Pritzker as described above, there are no family relationships among any of our directors or executive officers.

Our Class III directors, whose terms will expire at the 2021 annual meeting of stockholders, are Ms. Kronick, Mr. McDonald, and Mr. Jason Pritzker.

Our Class I directors, whose terms will expire at the 2022 annual meeting of stockholders, are Mr. Ballew, Mr. Hoplamazian, Mr. McMillan, and Mr. Rocca.

While voting agreements entered into with or among our major stockholders are in effect, they may provide our board of directors with effective control over the election of directors. Directors can be removed from our board of directors only for cause. Vacancies on our board of directors, and any newly created director positions created by the expansion of the board of directors, can be filled only by a majority of remaining directors then in office.

Pursuant to our letter agreement with Mr. Thomas J. Pritzker, we have agreed that so long as he is a member of our board of directors, we will use our commercially reasonable efforts to appoint him as our Executive Chairman as long as he is willing and able to serve in that office. If he is not re-appointed as Executive Chairman, he will be entitled to terminate his employment with the rights and entitlements available to him under our severance policies as if his employment were terminated by us without cause.

Pursuant to our letter agreement with Mr. Hoplamazian, we have agreed that so long as he is our President and Chief Executive Officer, we will use our commercially reasonable efforts to nominate him for re-election as a director prior to the end of his term. If he is not re-elected to the board of directors, he will be entitled to terminate his employment with the rights and entitlements available to him under our severance policies as if his employment were terminated by us without cause.

During the fiscal year ended December 31, 2019, Hyatt’s board of directors held seven meetings (and took action six times by unanimous written consent). The audit committee held eight meetings, the talent and compensation committee held five meetings (and took action two times by unanimous written consent), the nominating and corporate governance committee held five meetings, and the finance committee held five meetings (and took action seven times by unanimous written consent). No incumbent director attended fewer than 75% of the total number of meetings of the

 

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board of directors and committees on which such director served during 2019. We do not have a policy regarding attendance of directors at our annual meetings of stockholders. All of our directors attended our 2019 annual meeting of stockholders.

Board Leadership Structure

The Hyatt Hotels Corporation Corporate Governance Guidelines (the “Corporate Governance Guidelines”) provide that the offices of the Chairman of the board of directors and Chief Executive Officer may be either combined or separated at the discretion of the board of directors. Mr. Thomas J. Pritzker currently serves as our Executive Chairman and Mr. Hoplamazian currently serves as our President and Chief Executive Officer. Prior to Mr. Hoplamazian being named to this position in December 2006, Mr. Thomas J. Pritzker served as our Executive Chairman and Chief Executive Officer. Mr. Hoplamazian also serves on our board of directors. As President and Chief Executive Officer, Mr. Hoplamazian is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while Mr. Thomas J. Pritzker, as Executive Chairman, provides guidance to the President and Chief Executive Officer on a variety of key issues and sets, with input from Mr. Hoplamazian, the agenda for board of directors meetings and presides over meetings of the full board of directors. Our board of directors has determined that Mr. Thomas J. Pritzker’s active involvement as Executive Chairman while Mr. Hoplamazian serves as President and Chief Executive Officer and a Director benefits the Company as a result of Mr. Thomas J. Pritzker’s deep understanding of the Company’s operations, relationships with owners and developers, and extensive knowledge of the hospitality industry.

Our Corporate Governance Guidelines also provide that from time to time, the independent directors may determine that the board of directors should have a lead director. In the event that the independent directors make such a determination, the chairman of the nominating and corporate governance committee shall become the lead director on an ex officio basis. In the event that a lead director is designated, his or her duties would include: assisting the chairman of the board and board of directors in assuring compliance with, and implementation of, the Company’s Corporate Governance Guidelines, coordinating the agenda for and moderating sessions of the board of directors’ non-management directors and acting as principal liaison between the non-management directors and the chairman of the board on sensitive issues. The Company currently has eight independent directors and to date they have not determined that the board of directors should have a lead director.

Our board of directors believes that this current board leadership structure is in the best interests of the Company and its stockholders at this time. Our Corporate Governance Guidelines provide the flexibility for our board of directors to modify or continue our leadership structure in the future, as it deems appropriate.

Our non-management directors regularly meet in executive session without management present, and our independent directors meet in executive session at least once a year. The chairman of the nominating and corporate governance committee presides at such sessions.

Board Role in Risk Oversight

Management is responsible for the Company’s day-to-day risk management activities and processes, and our board of directors’ role is to engage in informed oversight of, and to provide direction with respect to, such risk management activities and processes. In fulfilling this oversight role, our board of directors focuses on understanding the nature of our enterprise risks, including risk in our operations, finances and strategic direction. Our board of directors performs this oversight function in a variety of ways, including the following:

 

 

the board of directors receives management updates on our business operations, including cybersecurity, financial results and strategy and, as appropriate, discusses and provides feedback with respect to risks related to those topics;

 

 

the Company maintains a risk council that is led by our senior vice president of internal audit and is comprised of certain members of management from different functional areas and business units. The risk council is responsible for identifying, assessing, prioritizing and monitoring critical risks of the Company and periodically reports to the board of directors and the audit committee regarding the Company’s risk management processes and procedures; and

 

 

while the full board is responsible to monitor enterprise risk management overall, the audit committee assists the board of directors in its oversight of risk management by discussing with management, the internal auditors and the independent auditors the Company’s policies and procedures with respect to the process governing risk assessment and risk management. To this end, the audit committee discusses with management the Company’s major financial, reporting and disclosure risk exposures and the steps management has taken to monitor and control such exposures. Additionally, the talent and compensation committee helps assess risk associated with the Company’s compensation policies and procedures.

 

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Communications with the Board of Directors

 

All interested parties who wish to communicate with any of our directors, including our non-management directors, can address their communications as follows:

 

Mail:    Hyatt Hotels Corporation
   Attention: Corporate Secretary
   150 North Riverside Plaza
   Chicago, Illinois 60606
Email:    shareholdercommunications@hyatt.com

Hyatt’s corporate secretary will maintain a record of all such communications and promptly forward to the chairman of the nominating and corporate governance committee those that the corporate secretary believes require immediate attention. The corporate secretary will also periodically provide the chairman of the nominating and corporate governance committee with a summary of all such communications. The chairman of the nominating and corporate governance committee shall notify the board of directors or the chairs of the relevant committees of the board of directors of those matters that he believes are appropriate for further action or discussion.

Code of Business Conduct and Ethics

 

The Company has adopted the Hyatt Hotels Corporation Code of Business Conduct and Ethics (the “Code of Ethics”), which is applicable to all of Hyatt’s directors, officers, and colleagues, including the Company’s President and Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or Controller and other senior financial officers performing similar functions. The Code of Ethics is posted on the Company’s website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Code of Business Conduct and Ethics.” The Company will furnish a copy of the Code of Ethics to any person, without charge, upon written request directed to: Treasurer and Senior Vice President, Investor Relations and Corporate Finance, Hyatt Hotels Corporation, 150 North Riverside Plaza, Chicago, Illinois 60606. In the event that the Company amends or waives any of the provisions of the Code of Ethics that applies to the Company’s Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or Controller, and other senior financial officers performing similar functions, the Company intends to disclose the relevant information on its website.

Corporate Governance Guidelines

 

The Company has adopted the Corporate Governance Guidelines to assist the board of directors in the exercise of its responsibilities. The Corporate Governance Guidelines are posted on the Company’s website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Corporate Governance Guidelines.” The Company will furnish a copy of the Corporate Governance Guidelines to any person, without charge, upon written request directed to: Treasurer and Senior Vice President, Investor Relations and Corporate Finance, Hyatt Hotels Corporation, 150 North Riverside Plaza, Chicago, Illinois 60606.

Director Independence

 

Under our Corporate Governance Guidelines, our board of directors will be comprised of a majority of directors who qualify as independent directors under the listing standards of the New York Stock Exchange (“NYSE”). Directors who do not meet the NYSE’s independence standards, including current and former members of management, also make valuable contributions to the board of directors and to Hyatt by reason of their experience and wisdom, and the board of directors expects that some minority of its members will not meet the NYSE’s independence standards.

Only those directors who the board of directors affirmatively determines have no direct or indirect material relationship with the Company will be considered independent directors, subject to any additional qualifications prescribed under the listing standards of the NYSE. A material relationship is one that would interfere with the director’s exercise of independent judgment in carrying out his or her duties and responsibilities as a director. The nominating and corporate governance committee and the board of directors annually review all relevant business relationships any director or nominee for director may have with Hyatt, including the relationships described in the section below titled “Certain Relationships and Related Party Transactions.” As a result of this review, the board of directors has determined that each of Messrs. Ballew, McDonald, McMillan, Rocca, Tuttle, Wooten and Mss. Kronick and Nicholson is an “independent director” under applicable SEC rules and the listing standards of the NYSE.

 

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In making independence determinations, in addition to the relationships described below under “Certain Relationships and Related Party Transactions,” the board of directors considered that certain of these directors serve or previously served together on other boards of directors, not-for-profit boards of directors and charitable organizations, certain directors serve as non-management directors or executive officers of companies with which Hyatt does business, and certain directors are affiliated with charitable organizations that received contributions from Hyatt of amounts within the criteria set forth in our Corporate Governance Guidelines. The board of directors also took into account that certain entities affiliated with the directors paid amounts to Hyatt for room accommodations and meeting space in the ordinary course of business.

Stockholder Outreach

 

Hyatt believes that long-term stockholder value is supported by ongoing dialogue with the Company’s stockholders and the broader investment community. Our management team engages with the investment community to discuss business fundamentals, strategy, and financial results each year. These engagements consist of numerous in-person meetings, teleconferences, participation in investor conferences and hosted visits at the Company’s headquarters in Chicago, and include a substantial number of our existing stockholders. We believe these meetings ensure that management and the Board are aware of our stockholders’ priorities and are able to address them as appropriate.

Global Environmental and Social Responsibility

 

2020 Goals

 

 

LOGO

 

   

LOGO

 

   

LOGO

 

   

LOGO

 

Reduce greenhouse gas emissions per square meter by 25% compared to 2006 in each region     Reduce water use per guest night by 25% compared to 2006 in each region     Divert 40% of landfill waste at managed properties     Hire 10,000 opportunity youth through our global initiative, RiseHY; as of February 2020, we have reached 2,261 hires

Our Purpose In Action

Our purpose — to care for people so they can be their best — is at the heart of how we care for our guests and colleagues and is an essential element to the advancement of care for all of our stakeholders, including our guests, colleagues, customers, owners, and the communities in which our hotels operate around the globe. Our global corporate responsibility program, an extension of our purpose, is focused on fostering environmental stewardship, supporting responsible business practices in our operations, strengthening our community impact through volunteerism, philanthropy, and disaster relief, advocating for human rights, and promoting an inclusive workplace that allows our colleagues to grow and be themselves. We continue to evolve our programs and develop meaningful goals to measure our progress and impact within and beyond the walls of our hotels. We recognize that by putting our purpose into action, we can have a positive impact on the communities we serve and help promote a world of understanding and care.

 

Key Areas for Advancing Environmental Responsibility

   Caring for the planet is an important way in which we care for people. A stable climate and access to clean air, water, and natural resources is essential for people to be their best. Since launching our 2020 Environmental Sustainability Vision in 2014, we have made significant strides towards our goals.
  

•   We focus on data-led progress using Hyatt EcoTrack, our global database, through which we track environmental sustainability metrics across hotels and which provides dashboards for monitoring performance and progress towards goals;

  

•   We surpassed our goal to reduce greenhouse gas emissions per square meter by 25% in all regions when compared to 2006, two years ahead of our goal date;

 

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•   We elevate the focus on reducing food waste through food waste management plans at hotels that focus on prevention as the primary focus. Excess edible food is donated when possible, and food scraps are composted or otherwise diverted where infrastructure allows;

  

•   In 2019, we announced a series of initiatives to curb single-use packaging and plastics, including transitioning to large format bathroom amenities, increasing the number of water stations in key public spaces for guests who wish to refill reusable water bottles, and offering water in carafes as the first choice for meetings and events, all no later than June 2021. This builds on guidance issued to all hotels and corporate offices to reduce single-use plastics, and past efforts like eliminating plastic straws across global hotels and offering recyclable earbuds in fitness centers at our hotels across North America;

  

•   We are partnering with our hotel owners on sustainability initiatives, such as the installation of a water filtration plant at Hyatt Regency Delhi, helping to avoid the use of 28 tons of plastic waste every year;

  

•   We work with suppliers on responsible sourcing, including but not limited to energy and water-efficient equipment, more sustainable seafood, and increasing the use of Forest Stewardship Council (FSC)-certified paper. Nearly 100 percent of Hyatt’s U.S. suppliers and distributors contracted for operational supplies have a sustainability policy in place; and

  

•   In continuing to evolve our sustainability efforts, we are developing post-2020 goals to drive meaningful action to address pressing needs including climate change, local environmental impacts, and preservation of natural resources.

Key Areas for Advancing
Community Involvement
   We recognize that our purpose of caring for people so they can be their best has
a broader impact on the communities in which our hotels operate.
  

•   Through our global RiseHY program, we strive to provide career opportunities for young people and help them reach their full potential;

  

•   We come together around the world during our Global Month of Community Service to give back locally, with colleagues from 146 properties in 34 countries volunteering nearly 25,000 hours of service in 2019;

  

•   We empower Hyatt hotels to support local non-profit organizations through the Hyatt Community Grants program. Since 2008, we have contributed almost $4 million to over 270 non-profit organizations around the world in 52 countries that align with our strategic initiatives, including RiseHY; and

  

•   We train our colleagues to recognize possible signs of human trafficking, partnering with Polaris, a global non-profit organization dedicated to ending human trafficking, to develop comprehensive training modules.

Key Areas for Advancing Diversity and Inclusion

   We are intensely focused on increasing the diverse representation amongst our colleagues, and further integrating inclusion into our talent management practices. By creating a culture where our colleagues are engaged to reach their fullest potential, we benefit from a diverse workforce that is collaborative, innovative, and loyal to our brand.
  

•   We are strongly committed to the engagement of all colleagues, with a fundamental belief in recognizing individuals for who they are and creating equal employment opportunity across a diverse population;

  

•   We sponsor seven colleague-led Diversity Business Resource Groups with chapters around the globe that provide career development programs and support workforce diversity;

  

•   We maintain a Global Inclusion and Diversity Council, led by our CEO, to shape and drive our diversity and inclusion strategy;

  

•   We celebrate our inclusive and diverse culture through several initiatives externally, including our three-year partnership with NYC Pride; and

  

•   We maintain a supplier diversity program as part of our overall program.

 

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Management and Board Oversight

A team of Hyatt executives and subject matter experts from across our Company help guide and oversee various facets of our global corporate responsibility program. Our board of directors receives periodic updates on corporate responsibility matters, including project plans, initiatives, and goals. We believe that an integrated approach to business strategy, corporate governance, and corporate citizenship creates long-term value, and we are committed to continuing to provide meaningful information as we measure our progress and set goals for improvement in key environmental and social metrics.

Committees of the Board of Directors

 

Our board of directors has a nominating and corporate governance committee, an audit committee, a talent and compensation committee, and a finance committee, each of which has the composition and responsibilities described below. Our board of directors may also establish from time to time any other committees that it deems necessary or desirable. The composition of each committee complies with the listing requirements and other rules of the NYSE.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Messrs. Tuttle and McDonald, and Ms. Nicholson, with Mr. Tuttle serving as chairman. Our board of directors has determined that each of Messrs. Tuttle and McDonald and Ms. Nicholson is independent within the meaning of the listing standards of the NYSE. The nominating and corporate governance committee is established to:

 

 

assist the board of directors in identifying individuals qualified to be members of the board of directors consistent with criteria approved by the board of directors and set forth in the Corporate Governance Guidelines and to recommend director nominees to the board of directors;

 

 

take a leadership role in shaping Hyatt’s corporate governance, including developing and recommending to the board of directors, and reviewing on at least an annual basis, the corporate governance guidelines and practices applicable to Hyatt;

 

 

recommend board committee nominees to the board of directors; and

 

 

oversee the evaluation of the board of directors’ and management’s performance.

Our board of directors has adopted a written charter for our nominating and corporate governance committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Committee Composition — Nominating and Corporate Governance Committee Charter.”

Selection of Director Nominees

At an appropriate time prior to each annual meeting of stockholders, or if applicable, a special meeting of stockholders at which directors are to be elected or re-elected, the nominating and corporate governance committee will recommend to the board of directors for nomination such candidates as the nominating and corporate governance committee has found to be well qualified and willing and available to serve, and in each case, providing the nominating and corporate governance committee’s assessment whether such candidate would satisfy the independence requirements of the NYSE.

Prior to making such recommendations to the board of directors, the nominating and corporate governance committee conducts inquiries into the background and qualifications of any potential candidates, including the following criteria set forth in our Corporate Governance Guidelines:

 

 

judgment, character, expertise, skills and knowledge useful to the oversight of Hyatt’s business;

 

 

diversity of viewpoints, backgrounds and experiences;

 

 

business or other relevant experience; and

 

 

the extent to which the integrity of the candidate’s expertise, skills, knowledge and experience with that of the other directors will build a board of directors that is effective, collegial and responsive to the needs of Hyatt.

The nominating and corporate governance committee also considers such other relevant factors as it deems appropriate, including requirements that the members of the board of directors as a group maintain the requisite qualifications under the applicable NYSE listing standards for independence for the board of directors as a whole and for populating the audit, talent and compensation, and nominating and corporate governance committees. While there

 

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are no specific minimum qualifications that a director candidate must possess, the nominating and corporate governance committee recommends those candidates who possess the highest personal and professional integrity, have prior experience in corporate management or our industry, maintain academic or operational expertise in an area relating to our business, and demonstrate practical and mature business judgment. As described above, our Corporate Governance Guidelines specify that the value of diversity of viewpoints, backgrounds, and experiences on the board of directors should be considered by the nominating and corporate governance committee in the director identification and nomination process. The nominating and corporate governance committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation, and backgrounds. The nominating and corporate governance committee does not assign specific weighting to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability, or any other basis proscribed by law.

The nominating and corporate governance committee will consider stockholder recommendations for candidates to be nominated by our board of directors for election at the 2021 annual meeting of stockholders. Stockholders who want to recommend a potential director candidate for consideration by the nominating and corporate governance committee should send a written notice, addressed to the corporate secretary at our principal executive offices at 150 North Riverside Plaza, Chicago, Illinois 60606. This notice must include the same information as would be required under our bylaws in a stockholder’s notice to nominate a director at the 2021 annual meeting of stockholders. These information requirements are set forth in Sections 3.8(a)(2)(x) and 3.8(a)(2)(z)(i)–(vii) of our bylaws. We also consider potential director candidates recommended by current directors, officers, employees and others. We may also retain the services of search firms to provide us with candidates, especially when we are looking for a candidate with a particular expertise, quality, skill or background.

The nominating and corporate governance committee screens all potential candidates in the same manner, regardless of the source of the recommendation. The review is typically based on any written materials provided with respect to potential candidates, and the nominating and corporate governance committee reviews the materials to determine the qualifications, experience and background of the candidates. Final candidates are typically interviewed by one or more members of the nominating and corporate governance committee. In making its determinations, the nominating and corporate governance committee evaluates each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best perpetuate the success of our company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, including input from our Executive Chairman and our President and Chief Executive Officer, the nominating and corporate governance committee makes a recommendation to the full board of directors regarding whom should be nominated by the board of directors.

The nominating and corporate governance committee did not receive any timely director recommendations from a stockholder for consideration at the 2020 Annual Meeting. December 1, 2020 is the deadline established by the nominating and corporate governance committee for submission of potential director nominees for consideration by the nominating and corporate governance committee for nomination at the 2021 annual meeting of stockholders.

Audit Committee

Our audit committee, which was established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), consists of Messrs. McMillan, Ballew, Rocca, Tuttle and Wooten, with Mr. McMillan serving as chairman. Our board of directors determined that each of Messrs. McMillan, Ballew, Rocca, Tuttle and Wooten is independent within the meaning of applicable SEC rules and the listing standards of the NYSE applicable to the audit committee members and has determined that each of Messrs. McMillan and Rocca is an audit committee financial expert, as such term is defined in the rules and regulations of the Securities and Exchange Commission (the “SEC”). The audit committee has oversight responsibilities regarding:

 

 

the integrity of our financial statements and our financial reporting and disclosure practices;

 

 

the soundness of our system of internal controls regarding finance and accounting compliance;

 

 

the annual independent audit of our consolidated financial statements;

 

 

the independent registered public accounting firm’s qualifications and independence;

 

 

the engagement of our independent registered public accounting firm;

 

 

the performance of our independent registered public accounting firm;

 

 

the performance of our internal audit function and approval of the internal audit plan;

 

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our compliance with legal and regulatory requirements in connection with the foregoing, including our disclosure controls and procedures;

 

 

compliance with our Code of Ethics;

 

 

assisting the board of directors in its oversight of risk management by discussing with management, the internal auditors and the independent auditors the Company’s policies and procedures with respect to the process governing risk assessment and risk management, and discussing with management the Company’s major financial, reporting and disclosure risk exposures and the steps management has taken to monitor and control such exposures;

 

 

reviewing and approving procedures with respect to employee submission of, and the Company’s response to, complaints received regarding accounting, internal accounting controls or auditing matters;

 

 

addressing requests for waivers of conflict of interest situations and addressing certain concerns related to accounting, internal accounting controls and auditing matters as provided in our Corporate Governance Guidelines; and

 

 

reviewing related party transactions pursuant to our written policy described below under “Certain Relationships and Related Party Transactions — Related Party Transaction Policy and Procedures.”

Our board of directors has adopted a written charter for our audit committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Committee Composition — Audit Committee Charter.”

Finance Committee

Our finance committee consists of Messrs. Thomas J. Pritzker, McMillan and Jason Pritzker, and Ms. Kronick, with Mr. Thomas J. Pritzker serving as chairman. The finance committee is responsible for reviewing with Company management strategies, plans, policies and significant actions relating to corporate finance matters, including, without limitation, the following matters (which are subject to the finance committee’s approval to the extent the amounts in question are greater than the minimum value thresholds set forth in the finance committee charter for such matters):

 

 

long and short-term financings, including, without limitation, borrowing of funds, issuance of debt securities and interest rate or foreign currency derivative contracts;

 

 

exemption elections regarding credit swaps that would otherwise be required to be cleared through the Commodities Future Trading Commission;

 

 

any development matters, including (i) initial investment in, (ii) initial management or licensing of, (iii) initial acquisition of, and/or (iv) the provision of any other financial commitments relating to, the chain of hotels, resorts, vacation ownership and residential properties that are to be wholly-owned, partially-owned, managed, leased, licensed or franchised by the Company;

 

 

asset management matters that impact the Company’s existing management agreements, license agreements, franchise agreements, joint venture agreements, contracts, financial instruments, and ownership interest of the Company’s full service and select service hotels and Hyatt-branded residential and vacation ownership properties licensed or managed by affiliates of the Company;

 

 

acquisitions and dispositions;

 

 

capital expenditures and leasing arrangements; and

 

 

over budget and unbudgeted managed cost commitments.

The above-listed items are subject to approval of the full board of directors in the event that the amounts in question exceed the maximum value thresholds set forth in the finance committee charter.

Our finance committee is also responsible for reviewing and making recommendations to the full board of directors regarding the following matters, which require approval of the full board of directors:

 

 

designation and issuance of equity securities of the Company and matters related to the sale and marketing thereof; and

 

 

changes in the Company’s capital structure, including, but not limited to (i) cash and stock dividend policies; (ii) programs to repurchase the Company’s stock; (iii) issues relating to the redemption and/or issuance of any preferred stock of the Company; and (iv) stock splits.

 

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Our board of directors has adopted a written charter for our finance committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Committee Composition — Finance Committee Charter.”

Talent and Compensation Committee

Our talent and compensation committee consists of Ms. Kronick, Ms. Nicholson, Mr. McDonald, and Mr. Wooten, with Ms. Kronick serving as chair. Our board of directors has determined that each member of our talent and compensation committee is independent within the meaning of the SEC rules and the listing standards of the NYSE applicable to compensation committee members. The talent and compensation committee has appointed a sub-committee (the “Section 16 subcommittee”) to take actions with respect to compensation that is intended to be exempt from the “short-swing” rules under Rule 16b-3 of the Exchange Act. The talent and compensation committee is authorized to discharge the responsibilities of the board of directors relating to:

 

 

the establishment, maintenance and administration of compensation and benefit policies and programs designed to attract, motivate and retain personnel with the requisite skills and abilities to enable the Company to achieve its business objectives;

 

 

the goals, objectives and compensation of our Executive Chairman and President and Chief Executive Officer, including evaluating the performance of the Executive Chairman and President and Chief Executive Officer in light of those goals;

 

 

the compensation of our other executive officers and non-management directors;

 

 

ensuring that succession planning takes place for the President and Chief Executive Officer and other senior management positions;

 

 

our compliance with the compensation rules, regulations and guidelines promulgated by the NYSE, the SEC and other law, as applicable; and

 

 

the issuance of an annual report on executive compensation for inclusion in our annual proxy statement, or Form 10-K, as applicable.

Our board of directors has adopted a written charter for our talent and compensation committee, which is available on our website at www.hyatt.com under the headings “Investor Relations — Corporate Governance — Committee Composition — Talent and Compensation Committee Charter.”

During 2019, the talent and compensation committee relied upon information provided by Mercer (US) Inc. (“Mercer”) in setting compensation for our named executive officers, as more thoroughly discussed below under the section titled “Compensation Consultant Fees and Services.”

In making decisions about executive compensation, the talent and compensation committee considered input from Mercer, our Executive Chairman, our President and Chief Executive Officer and our Chief Human Resources Officer. However, the talent and compensation committee ultimately makes all compensation decisions regarding our executive officers.

The talent and compensation committee may delegate its duties to a subcommittee under the terms of its charter. In addition, under the terms of our Third Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan, as amended (the “LTIP”), the talent and compensation committee may delegate to other members of the board of directors and to our officers the authority to make awards and to amend LTIP awards, except that it may not delegate to an officer the authority to make any awards to officers who are subject to Section 16 of the Exchange Act or who are “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), or to make awards to themselves. In addition to the delegation to the Section 16 subcommittee as described above, as part of the grant process the talent and compensation committee delegates its authority to Messrs. Thomas J. Pritzker, Hoplamazian and certain other executive officers to amend or modify award agreements made under the LTIP and take other actions with respect to such awards as they deem necessary, appropriate or advisable to carry out the purposes and intent of the talent and compensation committee’s grant.

Compensation Consultant Fees and Services

During 2019, Mercer was engaged by the talent and compensation committee to provide executive, director and other compensation services, including the following services:

 

 

provided information and data so that we could assess the competitiveness of our executive compensation programs;

 

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provided advice about our current base salaries and incentive compensation;

 

 

provided analysis regarding our total rewards program, equity awards, dilution and burn-rate under the LTIP; and

 

 

assisted with the preparation of the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement.

The talent and compensation committee’s decision to retain Mercer was based on Mercer’s knowledge of Hyatt and the talent and compensation committee’s satisfaction with Mercer’s prior services. Mercer first provided services to Hyatt prior to our initial public offering in 2009 and has provided services to the talent and compensation committee since then. The talent and compensation committee also reviewed the nature and extent of the relationship among the talent and compensation committee, Hyatt, Mercer, and the individuals at Mercer providing advice to the talent and compensation committee with respect to any conflicts or potential conflicts of interest. This analysis covered the SEC’s “six factor test” including the provision of other services by Mercer to Hyatt, the amount of fees received by Mercer from Hyatt as a percentage of total revenue of Mercer and its affiliates, the policies and procedures that are designed to prevent conflicts of interest, any business or personal relationship of the advisor with a member of the talent and compensation committee, any Hyatt stock owned by the advisor, and any business or personal relationship of the advisor between Mercer and any executive officer at Hyatt. Based on that review, the talent and compensation committee believes that there are no conflicts of interest or potential conflicts of interest that would unduly influence Mercer’s provision of advice to the talent and compensation committee. We note that the individual executive compensation consultants:

 

 

receive no incentive or other compensation based on the fees charged to Hyatt for other services from other lines of business provided by Mercer or any of its affiliates;

 

 

are not responsible for selling other Mercer or affiliate services; and

 

 

are prohibited by Mercer’s professional standards from considering any other relationships Mercer or any of its affiliates may have with Hyatt in rendering advice and recommendations.

The talent and compensation committee delegated to our President and Chief Executive Officer and Chief Human Resources Officer the authority to direct Mercer with respect to matters which are of general applicability to broad groups of employees at varying levels, do not involve equity compensation, are not limited to executive officers, and do not exceed $200,000 in fees per individual statement of work. As such, management has the sole authority to engage Mercer for any such additional services without further approval so long as such services remain within the scope of these established parameters. During 2019, Mercer performed the following additional services for us:

 

 

provided tools used for market pricing, global transfers, and benefit and employment guidelines;

 

 

reviewed our total rewards philosophy; and

 

 

conducted work for our international insurance program including vendor meetings and actuarial calculations.

The following is a summary of the fees for professional services, as well as commissions with respect to international insurance matters, paid to Mercer and its affiliates for services rendered in 2019:

 

Fee Category    2019  

Executive and Director Compensation Consulting

   $ 303,403  

Non-Executive Compensation Consulting

   $ 246,574  

Non-Executive Compensation Services by Affiliates of Mercer

   $ 808,000  

Total

   $ 1,357,977  

Compensation Risk Considerations

The talent and compensation committee reviews and evaluates, in conjunction with management, the incentives and material risks arising from, or relating to, the Company’s compensation programs and arrangements and determines whether such incentives and risks are appropriate. A team composed of members from our internal audit and human resources departments reviewed the Company’s incentive compensation plans and programs in order to assess whether or not any such plans or programs could create risks that are reasonably likely to have a material adverse effect on the Company. Management then reviewed this assessment with the talent and compensation committee. In its assessment, the Company did not identify any material risks arising from, or relating to, the Company’s compensation programs and arrangements, and further determined that the following policies, among others, discourage unreasonable or excessive risk-taking by executives:

 

 

base salary levels are set at all levels that we believe are commensurate with an officer’s, including our named executive officers (“NEOs”), or other employee’s overall experience, time in role, and performance, and are further in

 

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line with the competitive market such that our NEOs and other employees are sufficiently compensated regardless of goal attainment, and thus are not motivated to take excessive risks to achieve a level of financial security;

 

 

annual incentive plans include a mix of corporate and individual performance metrics, including non-financial measures;

 

 

annual incentive payouts are capped to ensure that no payout exceeds a specified percentage of salary, thereby moderating any incentive to overstate short-term incentive attainment;

 

 

the mix of short- and long-term incentives is weighted such that a significant percentage of total opportunity is in the form of long-term equity awards linked to long-term stockholder return;

 

 

awards made under our LTIP to our NEOs are generally granted as a mix of time-vested stock appreciation rights (“SARs”), time-vested restricted stock units (“RSUs”), and performance-vested restricted stock units (“PSUs”) which, together, encourage NEOs to focus on earnings, returns, and long-term stockholder value while incentivizing continued employment;

 

 

annual audit process and activities, controls, and monitoring procedures are in place, including but not limited to talent and compensation committee oversight, that mitigate risks associated with incentive compensation plans;

 

 

in addition to our Chief Executive Officer and Chief Financial Officer being subject to the claw-back provisions of the Sarbanes-Oxley Act of 2002, our executives are subject to a compensation recovery policy;

 

 

hedging of our stock by our NEOs, directors, officers, and certain other individuals is prohibited; and

 

 

share ownership requirements align the long-term interests of NEOs and directors with the interests of stockholders.

Based on these and other considerations, the talent and compensation committee concluded that there are no compensation policies or practices that create risks that are reasonably likely to have a material adverse effect on the Company.

Compensation of Non-Employee Directors

 

Pursuant to our Amended and Restated Summary of Non-Employee Director Compensation Policy (the “Non-Employee Director Compensation Policy”), we use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our board of directors. In setting non-employee director compensation, we consider the significant amount of time that directors expend in fulfilling their duties as well as the skill level required of members of our board of directors. The talent and compensation committee reviews director compensation periodically and recommends to the board of directors changes to director compensation when it deems them appropriate. The talent and compensation committee periodically requests and considers analyses prepared by Mercer, the talent and compensation committee’s independent executive compensation consultant, of publicly-reported non-employee director compensation practices at our peer companies used to benchmark our executive compensation and generally seeks to target non-employee directors’ total compensation (which includes total cash compensation and total equity compensation) at or near the median total compensation of the non-employee directors of such peers. In September 2018, at the request of our talent and compensation committee, Mercer performed and presented to the talent and compensation committee its biennial study of publicly-reported non-employee director compensation practices at our peer group companies. Based on its review of that study, and in order to more closely align the compensation of our non-employee directors with those of our peer companies, the talent and compensation committee recommended, and the board of directors approved, an increase in the Annual Fee (as defined and discussed below) payable to directors, effective January 1, 2019.

Retainers and Committee Fees

Our directors who are also our employees do not receive any additional compensation for their services as directors. Accordingly, Messrs. Thomas J. Pritzker and Mark S. Hoplamazian did not receive any compensation for their services as directors during 2019. For 2019, members of the board of directors who were not our employees were entitled to receive annual retainers in the form of (i) a cash retainer of $85,000 (the “Annual Fee”) and (ii) shares of Class A common stock with a grant date fair value of $150,000 (the “Annual Equity Retainer”).

Directors are permitted to elect to receive the Annual Fee, which is paid on a quarterly basis, in shares of Class A common stock. Directors who choose to receive shares in lieu of cash are granted such shares on the 15th day of the last month of the quarter (or the next NYSE trading day if such day is not a trading day). The Annual Fee is prorated and paid in cash in the event that any director does not serve for a full fiscal quarter.

 

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Directors receive their Annual Equity Retainer on the date of the Company’s annual meeting of stockholders, payable in arrears for service since the prior annual meeting. The Annual Equity Retainer is fully vested on the date of grant in respect of the prior years’ service and is prorated and paid in cash in the event the director terminates service prior to the annual meeting at which the grant is made.

The number of shares granted (i) for the Annual Equity Retainer and (ii) in the event a director elects to receive shares in lieu of cash as part of the Annual Fee, is calculated by dividing the value of the Annual Equity Retainer or Annual Fee (if and as applicable) by the Company’s closing stock price on the date of grant.

Committee members and the chair of each committee received additional annual cash retainers in the amounts set forth below for 2019:

 

     2019 Retainers  
Committee Name    Committee
Member
     Committee
Chair
 

Audit Committee

   $  15,000      $  25,000  

Talent and Compensation Committee

   $ 10,000      $ 25,000  

Nominating and Corporate Governance Committee

   $ 10,000      $ 15,000  

Finance Committee(1)

   $ 10,000      $ 15,000  

 

(1)

As an employee of the Company, Mr. Thomas J. Pritzker was not eligible to receive and did not receive a retainer for his service as chairman of the finance committee in 2019.

The chair of each committee receives only the chair retainer for such committee and does not also receive the committee member retainer. Committee retainers are paid in quarterly installments at the end of each fiscal quarter. All of our directors are reimbursed for reasonable expenses incurred in connection with attending board of director meetings and committee meetings and for attending corporate functions on our behalf. To encourage our directors to visit and personally evaluate our properties, our non-employee directors are eligible for complimentary and discounted rooms at Hyatt-owned, operated or franchised hotels, as well as the use of hotel services when on personal travel.

New Directors

In addition to the cash and stock retainers discussed above, any new non-employee director receives an initial retainer, with a grant date fair value of $75,000 (the “Initial Equity Retainer”), paid in the form of shares of our Class A common stock. The initial retainer is granted on the date the director is first elected or appointed to the board of directors. The number of shares granted is calculated by dividing the grant date fair value of the initial equity retainer by the Company’s closing stock price on the date of grant.

Non-Employee Director Stock Ownership Guidelines and Insider Trading Compliance Policy

Our Corporate Governance Guidelines require that each non-employee director accumulate and own, directly or indirectly, shares (or share equivalents under the Director Deferred Compensation Plan (as defined below) worth at least five times the Annual Fee (i.e., $425,000 in 2019). Non-employee directors have up to five years to meet this ownership requirement. If, after the relevant accumulation period, the market value of such director’s stock should fall below the target level, the director will not be permitted to sell any of our common stock during his or her tenure until the market value again exceeds the target level. These sale limitations do not apply where the decline in value of the director’s holdings of our common stock occurs in connection with a change of control transaction. As of December 31, 2019, each of our non-employee directors met these guidelines; however, due to the substantial decline in the market value of our common stock associated with the COVID-19 pandemic, Mr. Ballew no longer meets these ownership guidelines. As Mr. Ballew joined the board of directors on March 23, 2017, he has until March 2022 to again meet the guidelines.

Additionally, our directors are subject to our Insider Trading Compliance Policy (the “Insider Trading Policy”) which includes anti-hedging and anti-pledging policies. For additional information regarding these policies, see below in the CD&A section of this proxy statement titled “Share Ownership Requirement, Compensation Recovery Policy, and Anti-Hedging/Anti-Pledging Policies.”

Deferred Compensation Plan for Directors

Pursuant to the Hyatt Hotels Corporation Deferred Compensation Plan for Directors (as amended and restated effective January 1, 2019, the “Director Deferred Compensation Plan”), each non-employee director may elect to defer all or any portion of his or her Annual Fee and/or Annual Equity Retainer until the earlier of (i) either January 31st of the year following the director’s departure from the board of directors or the last business day of March of the fifth year following the year in which such retainer would have otherwise been paid (as elected by the director) or (ii) a change in

 

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control of the Company. Once an election to defer a retainer is made and becomes irrevocable it can be changed only for subsequent calendar years. During 2019, a director who elected to defer any of his or her Annual Fee and/or Annual Equity Retainer would have such amount denominated in RSUs representing the right to receive Class A common stock and credited to a notional RSU account. Any corresponding dividend equivalents that become payable on such RSUs are paid to the director in cash on or about the applicable dividend payment date.

2019 Director Compensation

The following table provides information related to the compensation our non-employee directors earned for 2019:

 

Name   

Fees Earned or

Paid in Cash(1)

    

Stock

Awards(2)(3)

     Total  

Paul D. Ballew

   $  100,038      $  149,962      $  250,000  

Susan D. Kronick

   $ 120,038      $ 149,962      $ 270,000  

Mackey J. McDonald

   $ 105,038      $ 149,962      $ 255,000  

Cary D. McMillan

   $ 120,038      $ 149,962      $ 270,000  

Pamela M. Nicholson

   $ 105,038      $ 149,962      $ 255,000  

Jason Pritzker

   $ 95,038      $ 149,962      $ 245,000  

Michael A. Rocca

   $ 100,038      $ 149,962      $ 250,000  

Richard C. Tuttle

   $ 115,038      $ 149,962      $ 265,000  

James H. Wooten, Jr.

   $ 110,038      $ 149,962      $ 260,000  

 

(1)

Messrs. McDonald and Tuttle elected to receive their Annual Fee of $85,000 in the form of our Class A common stock. Pursuant to the Director Deferred Compensation Plan, Messrs. Jason Pritzker and Wooten and Ms. Nicholson elected to defer their Annual Fees in the form of RSUs. As a result, Messrs. McDonald and Tuttle each received 1,105 shares in respect of the Annual Fee and Messrs. Jason Pritzker and Wooten and Ms. Nicholson each had 1,105 RSUs credited to their deferred compensation accounts under the Director Deferred Compensation Plan. Calculation of the number of shares or RSUs received or credited to the accounts of the directors was based on the fair market value of our Class A common stock on the date the retainers were payable (prior to the application of any applicable deferral). RSUs are reflected in the table contained in footnote (3) below. Amounts shown in this column reflect cash delivered to the director in lieu of delivery of any fractional shares or RSUs, as applicable.

 

(2)

Amounts shown represent the grant date fair value of stock or RSUs in payment of the Annual Equity Retainers in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC Topic 718”). Messrs. McMillan, Jason Pritzker, Rocca, Wooten, and Ms. Nicholson elected to defer their Annual Equity Retainers into the Director Deferred Compensation Plan.

 

(3)

As described above under “Director Deferred Compensation Plan,” directors are able to elect to defer their Annual Equity Retainers and/or Annual Fees into RSUs that carry divided equivalent rights. Prior to January 1, 2019, these were credited as additional RSUs. Effective January 1, 2019, dividend equivalent rights began being credited as cash and paid to the director on the date of the corresponding dividend payment. The table below sets forth the aggregate number of outstanding RSUs (including the dividend equivalent rights credited as RSUs) prior to January 1, 2019 held by directors under the Director Deferred Compensation Plan during 2019.

 

Name   

RSUs
Beginning

of Year

Balance

     RSUs
Credited
during
the Year
    

RSUs
Settled

during

the Year

    

RSUs
End of

Year
Balance

 

Mackey J. McDonald

     6,107                          6,107  

Cary D. McMillan

     10,937        1,934               12,871  

Pamela M. Nicholson

     15,266        3,039               18,305  

Jason Pritzker(1)

     15,266        3,039        1,179        17,126  

Michael A. Rocca(2)

     10,937        1,934        2,018        10,853  

Richard C. Tuttle

     21,327                      21,327  

James H. Wooten, Jr.

     16,778        3,039               19,817  

 

  (1)

Mr. Jason Pritzker’s 2014 deferred RSUs in respect of 1,179 shares of our Class A common stock and associated dividend equivalents were settled in March 2019. The total fair market value of the stock and associated dividend equivalents upon settlement was $85,590 (based upon the closing price of our Class A common stock on the date of settlement).

 

  (2)

Mr. Rocca’s May 14, 2014 deferred RSUs in respect of 2,018 shares of our Class A common stock and associated dividend equivalents were settled in March 2019. The total fair market value of the stock and associated dividend equivalents upon settlement was $146,454 (based upon the closing price of our Class A common stock on the date of settlement).

 

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Talent and Compensation Committee Report

 

The talent and compensation committee has reviewed the Compensation Discussion and Analysis set forth below and discussed its contents with the Company’s management. Based on this review and discussion, the talent and compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

 

  Talent and Compensation Committee of the Board of Directors
  Susan D. Kronick, Chair
  Mackey J. McDonald
  Pamela M. Nicholson
  James H. Wooten, Jr.

Talent and Compensation Committee Interlocks and Insider Participation

 

During 2019, each of Mses. Kronick and Nicholson, and Messrs. McDonald and Wooten served on our talent and compensation committee, with Ms. Kronick serving as chair. None of these members of our talent and compensation committee has at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the talent and compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our talent and compensation committee or board of directors.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

 

The following discussion describes the compensation elements of our total rewards program for our NEOs, consisting of our Executive Chairman, Principal Executive Officer (“PEO”), Principal Financial Officer (“PFO”), and our two other most highly compensated executive officers.

Our NEOs for 2019 were:

 

Name

  

Position

Thomas J. Pritzker

   Executive Chairman of the Board

Mark S. Hoplamazian (PEO)

   President and Chief Executive Officer

Joan Bottarini (PFO)

   Executive Vice President, Chief Financial Officer

H. Charles Floyd

   Executive Vice President, Global President of Operations

Mark R. Vondrasek

   Executive Vice President, Chief Commercial Officer

Our talent and compensation committee is responsible for establishing, maintaining, and administering our compensation programs for our NEOs and other executives.

Philosophy and Goals of Our Executive Compensation Program

Our Purpose

We care for people so they can be their best.

Our Vision

A world of understanding and care.

Our Mission

We deliver distinctive experiences for our guests.

We believe that our purpose, vision, and mission promote value creation for our stockholders. Our strategy to drive long-term sustainable growth and create value is focused on three areas: (i) maximizing our core business; (ii) integrating new growth platforms; and (iii) optimizing capital deployment. Our compensation philosophy is to provide an appropriate base salary and to align our annual incentive and long-term components of compensation to support business objectives and promote long-term value creation for our stockholders. To attract, recruit, develop, engage, and retain the talent needed to deliver on our business strategy, our compensation programs are designed to:

 

 

appropriately motivate colleagues through the alignment of total rewards with performance goals;

 

 

be innovative and competitive, recognizing the ever-changing dynamics of the labor market and acknowledging that, in attracting, retaining, and developing talent globally, we need to offer compelling career opportunities;

 

 

address the needs and preferences of colleagues as individuals and as members of high-performing teams;

 

 

retain colleagues with the capabilities required to execute our strategy; and

 

 

be cost effective and financially sustainable over time under varying business conditions.

To accomplish these goals, our executive compensation program provides:

 

 

compensation, including cash (salary and short-term incentive compensation), as well as long-term stock-based compensation;

 

 

benefits, including retirement-related, healthcare and other welfare programs;

 

 

work/lifestyle programs, including paid-time off (“PTO”), a specified number of free hotel stays, and other programs that promote wellbeing; and

 

 

individual development.

 

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Executive Compensation Practices and Alignment with Stockholder Interests and Good Governance

 

What We Do:

 

  

What We Don’t Do:

 

•   we do emphasize pay for performance by focusing on variable pay over fixed pay

 

•   we do utilize the services of an independent compensation consultant to assist our talent and compensation committee

 

•   we do align executive officer and stockholder interests by providing equity based compensation in the form of SARs (which will only deliver value if our stock price increases), RSUs (which create baseline equity value and deliver additional value if our stock price increases), and PSUs (which are only earned based on performance against specified three-year financial goals)

 

•   we do require executive officers and non-employee directors to maintain specific market-competitive stock ownership levels to align their interests with stockholders

 

•   we do have policies in place that provide for the forfeiture of vested and unvested equity awards as well as recovery of cash and equity compensation received in the event that a NEO or any other executive officer violates certain restrictive covenants or engages in fraudulent or willful misconduct that results in a restatement of Hyatt’s financial statements

 

•   we do annually conduct risk assessments with respect to our compensation practices

 

•   we do generally provide limited severance protections for NEOs (see the section below titled “Potential Payments on Termination or Change in Control”)

  

•   we don’t allow repricing of stock options or SARs without stockholder approval

 

•   we don’t provide for tax reimbursement payments or gross-ups in the event of any “golden parachute” excise taxes or otherwise (except in limited cases for employees experiencing increased taxes due to temporary expatriate assignments and/or Company-requested relocations)

 

•   we don’t provide for “single trigger” severance or equity acceleration upon a change in control

 

•   we don’t allow hedging or, except in very limited circumstances, pledging by our executive officers and non-employee directors as stated in our Insider Trading Policy

 

•   we don’t provide supplemental defined benefit pensions to executives

 

•   we don’t provide excessive executive perquisites

 

•   we don’t pay dividend equivalents with respect to unvested equity awards unless and until the underlying award subsequently vests

Impact of Advisory Vote Approving Executive Compensation

At the Company’s 2019 annual meeting of stockholders, stockholders were provided the opportunity to cast an advisory vote approving the compensation programs for our NEOs (“say-on-pay”). That say-on-pay proposal received support from approximately 99.9% of the shares present and entitled to vote at the annual meeting, indicating strong stockholder approval of the compensation paid to our NEOs. The talent and compensation committee considered this high level of support for our say-on-pay proposal, among other considerations, and did not change its approach to executive compensation in 2019. The talent and compensation committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for our NEOs.

Market Data

Mercer helps us assess the market competitiveness of our NEOs’ annual cash compensation and long-term incentives. In doing so, Mercer uses several sources of information:

 

 

data on the amounts and types of compensation provided by a peer group of publicly traded companies in the hospitality industry;

 

 

survey data for comparable positions in the hospitality/restaurant or lodging industry; and

 

 

general industry survey data for the talent and compensation committee’s consideration which includes companies with which we compete for management talent, have a similar business profile to ours, have global operations and scope, and are in a consumer-facing and customer oriented service business.

 

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In 2019, we reviewed the competitiveness of our NEO compensation against our peer group. Our peer group for 2019 was the same as the primary peer group used to assess compensation in 2018. The peer group was selected based on several factors, including business mix and model, revenues, global presence, and the strength of their brands. In 2019, we decided to stop using a secondary peer group which was a subset of the primary peer group with revenue and market capitalization most similar to our own since, historically, the primary group and the secondary group were substantially similar with only a few primary peers not included in the secondary peer group. In 2019, the peer group included:

 

•   Boyd Gaming Corporation

  

•   MGM Resorts International

•   Brinker International, Inc.

  

•   Royal Caribbean Cruises, Ltd.

•   Carnival Corporation

  

•   Starbucks Corporation

•   Darden Restaurants, Inc.

  

•   The Wendy’s Company

•   Hilton Worldwide Holdings Inc.

  

•   Wyndham Hotels & Resorts, Inc.

•   Host Hotels & Resorts, Inc.

  

•   Wynn Resorts, Ltd.

•   Las Vegas Sands Corporation

  

•   YUM! Brands, Inc.

•   Marriott International, Inc.

  

For 2019, we set our base salaries, annual incentive targets, and long-term incentives so that total compensation references the market 50th percentile of the peer group with the opportunity for upside based on superior performance. We believe that our pay mix is generally consistent with market practice.

 

LOGO

Role of Outside Consultant

Mercer provides consulting services to our talent and compensation committee to help:

 

 

assess the competitiveness of our executive compensation programs;

 

 

advise on current base salaries, incentive compensation, and long-term stock-based compensation;

 

 

provide analysis regarding our equity awards and dilution and burn-rate under the LTIP;

 

 

review our incentive plan design, including the performance share unit program; and

 

 

assist with the preparation of this CD&A.

Mercer consultants also conduct studies on our plan design for retirement and international benefits and provide other total rewards consulting services. See the section above titled “Corporate Governance — Committees of the Board of Directors — Talent and Compensation Committee — Compensation Consultant Fees and Services” for further information regarding services performed by Mercer in 2019.

Role of Executive Officers

In making decisions about executive compensation, the talent and compensation committee invites our Executive Chairman, our President and Chief Executive Officer, and our Chief Human Resources Officer to present various compensation proposals at committee meetings and to answer any questions the committee may have. The talent and compensation committee meets in executive session to determine the compensation of our Executive Chairman. With respect to the compensation of our President and Chief Executive Officer, the talent and compensation committee

 

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meets in executive session with our Executive Chairman and, from time to time, our Chief Human Resources Officer is present at such meetings. Mr. Hoplamazian provides input and recommendations to the talent and compensation committee for each NEO (other than Mr. Thomas J. Pritzker and himself) with respect to achievement of their individual goals under our annual incentive plan.

Key Elements of Total Rewards in 2019

Our total rewards program includes fixed and variable compensation as well as other benefits. We provide the following compensation elements to our NEOs:

 

 

Compensation Element

 

  

 

Purpose

 

  

 

Description

 

Base Salary    Fixed component of pay that fairly compensates the individual based upon level of responsibilities    Fixed cash payments

Annual Incentive

   Aligns short-term compensation with performance at the enterprise and regional or functional level    Variable annual cash award based on achievement of performance objectives as outlined in this CD&A

Long-Term Incentive

   Reward for creating long-term stockholder value, provides alignment with stockholder interests    Value delivered as 30% SARs, 30% time-vested RSUs and 40% PSUs (based on an average Adjusted Return on Gross Assets (“ROGA”) goal and Managed and Franchised Adjusted EBITDA goal), with the exception of Mr. Thomas J. Pritzker who receives 100% of his long-term incentives in the form of SARs and Mr. Hoplamazian who receives 25% SARs, 25% RSUs, and 50% PSUs

Employee Benefits

   Retirement, health and other benefits that provide comprehensive long-term financial security to a globally mobile workforce, enables us to maintain a healthy and productive workforce and attract and retain employees    401(k) plan and deferred compensation programs with matching and retirement contributions, PTO, health, life and disability insurance, and limited perquisites

Severance Benefits

   Severance benefits provided to NEOs upon an involuntary termination of employment without cause and within the three months prior to, or the twenty-four months following, a change in control, upon termination of employment for good reason    Severance facilitates recruitment and retention of NEOs by providing income security in the event of involuntary job loss, as outlined in this CD&A, and further enables NEOs to focus on our best interests and those of our stockholders in the event of a potential transaction that could result in the NEO’s termination

Salary

Salaries for our NEOs are reviewed annually. Our NEOs’ salaries for 2019 reflected several factors, including overall experience, time in the role, performance, market levels, and the desire to provide an appropriate base as part of their overall total rewards. During 2019, the talent and compensation committee increased salaries in connection with our annual merit review based on the factors above resulting in the year-over-year increases set forth in the following table.

 

  Name    Year-End
2018
Salary
     Year-End
2019
Salary
     Salary
Increase %
 

Thomas J. Pritzker

  

$

564,000

 

  

$

578,000

 

  

 

2.5

Mark S. Hoplamazian

  

$

1,208,000

 

  

$

1,238,000

 

  

 

2.5

Joan Bottarini(1)

  

$

675,000

 

  

$

675,000

 

  

 

0.0

H. Charles Floyd

  

$

788,000

 

  

$

808,000

 

  

 

2.5

Mark R. Vondrasek

  

$

640,000

 

  

$

656,000

 

  

 

2.5

 

(1)

Upon Ms. Bottarini’s promotion to Executive Vice President, Chief Financial Officer on November 2, 2018, her salary was increased to $675,000.

 

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Annual Incentive

The Hyatt Hotels Corporation Amended and Restated Executive Incentive Plan (the “EIP”) provides at-risk compensation designed to reward executives for achievement of operating results over a one-year performance period. Incentives are based on both financial and non-financial metrics that are intended to balance overall focus on enterprise performance, regional/functional performance, and other strategic priorities that will strengthen our competitive position.

Under the terms of his letter agreement with us, Mr. Thomas J. Pritzker is not eligible for annual incentives under the EIP as his role is to focus on Hyatt’s long-term growth and strategy. As such, he is eligible to receive only long-term incentive awards under the LTIP. The target and maximum annual incentive opportunities under the EIP for our other NEOs are determined annually by the talent and compensation committee based on references to market data and the individual’s role in the organization, overall experience, and time in the role. In particular, the talent and compensation committee considered the total compensation market data for these positions to design compensation packages that would attract high level of talent while weighting more of the NEOs’ total compensation potential on variable and long-term incentives, thereby aligning their interests with those of our stockholders. For 2019 performance, the target and maximum annual incentive opportunities as a percentage of base salary for each NEO who participated in the EIP were as follows:

 

Name

  

Target

   

Maximum

 

Mark S. Hoplamazian

  

 

175

 

 

350

Joan Bottarini

  

 

100

 

 

200

H. Charles Floyd

  

 

100

 

 

200

Mark R. Vondrasek

  

 

100

 

 

200

The talent and compensation committee applied the following incentive goals (similar to those used in prior years) to determine our NEOs’ annual incentives:

 

 

Hyatt’s Financial Performance (60% of overall target award): Similar to prior years, the talent and compensation committee used Adjusted Compensation EBITDA (defined below) for purposes of determining the payout of this component.

 

     

Threshold

    

Target

    

Maximum

 

Hyatt Adjusted Compensation EBITDA Goal

  

$

 732 million

 

  

$

 814 million

 

  

$

 936 million

 

Payout

  

 

50%

 

  

 

100%

 

  

 

200%

 

For 2019, we achieved Adjusted Compensation EBITDA of $786 million1. Applying the payout scale for Hyatt Adjusted Compensation EBITDA, the talent and compensation committee awarded the NEOs 83.1% of their respective target annual incentives for this component. The results are interpolated for performance between threshold and target and maximum.

 

 

Strategic Priorities (20% of overall target award): In 2019, four strategic priorities were identified: (i) cultivate the best people and evolve the culture, (ii) drive guest and customer personalization, (iii) operate with excellence, and (iv) grow with intent. In support of these priorities, a dashboard was developed with various metrics under each priority to help the talent and compensation committee assess achievement of the applicable priority. Based on an assessment of the progress made towards the four strategic priorities in 2019, the talent and compensation committee awarded the NEOs 80% of their respective target annual incentives related to this component.

 

 

Individual Business Goals (IBGs) and Discretion (20% of overall target award): In 2019, the payout of this component was determined by reference to the attainment of certain IBGs designed to incentivize the applicable NEO in his or her area of responsibility (described in additional detail below), as well as build brand value over time. The talent and compensation committee awarded NEOs between 100% and 150% of their respective target annual incentive for this component, as set forth in more detail below.

  

 

1 

“Adjusted Compensation EBITDA” means our Adjusted EBITDA as described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics Evaluated by Management — Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as further adjusted to exclude $32 million of expenses relating to the annual incentive.

 

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Hoplamazian’s 2019 Annual Incentive

Mr. Hoplamazian’s IBGs for 2019 included:

 

 

Guest and Customer Personalization. Ensure organization alignment, planning, resource requirements, and leadership to support digital transformation, data strategy and analytics, and innovation.

 

 

Growth. Achieve net rooms growth goals. Execute asset sales to support capital strategy. Integrate new growth platforms such as integration of newly acquired brands and an integrated wellbeing strategic plan.

 

 

Organization. Strengthen agility and resiliency in the organization. Elevate succession planning.

Based on input from our Executive Chairman and the review of our performance during 2019, the talent and compensation committee awarded Mr. Hoplamazian 100% of his IBG and discretion component.

Bottarini’s 2019 Annual Incentive

Ms. Bottarini’s IBGs for 2019 included:

 

 

Operate with Excellence. Integrate newly acquired brands and properties. Enable new investments to fuel growth through disciplined reporting and analysis. Collaborate with operations to prioritize business improvements.

 

 

Capital Strategy and Growth. Improve capital efficiency and returns to stockholders and enable pipeline growth while ensuring optimal capital deployment.

 

 

Leadership Development. Continue to elevate the Finance function globally, focusing on communications, talent and career development, and capability to deliver analytical insights.

Based on input from our President and Chief Executive Officer and the review of our performance during 2019, the talent and compensation committee awarded Ms. Bottarini 150% of her IBG and discretion component.

Floyd’s 2019 Annual Incentive

Mr. Floyd’s IBGs for 2019 included:

 

 

Growth. Successful launch of new brands. Achieve new openings and pipeline growth goals.

 

 

Core Business. Optimize operating performance such as revenue growth, profitability, margin growth, and service goals. Integrate new brands.

 

 

Organization. Focus on leadership and succession planning initiatives. Evaluate, manage, and prioritize resources in ongoing review of operations.

Based on input from our President and Chief Executive Officer and the review of our performance during 2019, the talent and compensation committee awarded Mr. Floyd 100% of his IBG and discretion component.

Vondrasek’s 2019 Annual Incentive

Mr. Vondrasek’s IBGs for 2019 included:

 

 

Guest and Customer Engagement. Deliver roadmap for digital transformation. Ensure organizational alignment, clarity, and deliverables that span all guest touchpoints.

 

 

Operate with Excellence. Expand capabilities for global contact centers. Drive business through World of Hyatt and increase member satisfaction. Elevate distribution and revenue management functions. Refine brand positioning and deliver brand partnerships.

 

 

Growth. Integrate new brands across platforms. Deliver integrated wellbeing strategy.

 

 

Cultivate Talent. Resource teams and ensure development plans are in place to strengthen talent.

Based on input from our President and Chief Executive Officer and the review of our performance during 2019, the talent and compensation committee awarded Mr. Vondrasek 100% of his IBG and discretion component.

 

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Accordingly, based on Hyatt’s 2019 financial performance and the factors and considerations discussed above, the talent and compensation committee awarded the following amounts for each NEO, expressed as a percentage of base salary as in effect at year-end and the resulting percentage of target incentive:

 

Name

  

Actual $(1)

    

Actual % of salary and % of target

Mark S. Hoplamazian

  

$

1,860,200

 

  

150.3% of year-end salary (85.9% of target)                

Joan Bottarini

  

$

647,100

 

  

95.9% of year-end salary (95.9% of target)                

H. Charles Floyd

  

$

693,700

 

  

85.9% of year-end salary (85.9% of target)                

Mark R. Vondrasek

  

$

563,200

 

  

85.9% of year-end salary (85.9% of target)                

 

(1)

The annual incentive payments were rounded to the nearest hundred dollar increment.

Long-Term Incentive

Annual Long-Term Incentive Grants

In 2019, we granted our NEOs equity incentive awards in the form of SARs, RSUs, and PSUs under our LTIP. These grants were designed to:

 

 

drive and reward performance over an extended period of time to promote creation of long-term value for our stockholders;

 

 

create strong alignment with the long-term interests of our stockholders;

 

 

assist in retaining highly qualified executives; and

 

 

contribute to competitive total rewards.

In determining the value of long-term incentive grants, we considered market data, the individual’s potential contribution to our success, and the relationship between each NEO’s short-term and long-term compensation. For 2019, the talent and compensation committee determined that the value of long-term incentive awards to NEOs, other than Messrs. Thomas J. Pritzker and Hoplamazian, would be delivered 30% in SARs, 30% in RSUs, and 40% (at target performance) in PSUs. Mr. Hoplamazian received his 2019 long-term incentive award as 25% SARs, 25% RSUs, and 50% (at target performance) in PSUs. The talent and compensation committee believes that awarding a mix of SARs, RSUs, and PSUs achieves a balance in linking NEO long-term rewards to Company performance. SARs do not provide any value unless the stock price appreciates, the value of RSUs increases or decreases in the same way stockholders’ stock value increases or decreases, and PSUs focus NEOs on the attainment of specified long-term Company performance objectives. Mr. Pritzker received his 2019 long-term incentive award entirely in the form of SARs to further focus Mr. Pritzker on long-term stockholder value creation.

The total 2019 target long-term incentive grant values determined by the talent and compensation committee for awards of PSUs, SARs, and RSUs are shown below for each NEO.

 

     Target LTIP Values  
Name    PSUs(1)      SARs      RSUs  

Thomas J. Pritzker

          $ 5,000,000         

Mark S. Hoplamazian

   $ 4,750,000      $ 2,375,000      $ 2,375,000  

Joan Bottarini

   $ 560,000      $ 420,000      $ 420,000  

H. Charles Floyd

   $ 1,000,000      $ 750,000      $ 750,000  

Mark R. Vondrasek

   $ 600,000      $ 450,000      $ 450,000  

 

(1)

Values set forth in this table represent the grant amounts determined by the talent and compensation committee at their meeting on March 20, 2019, which amounts were converted into numbers of shares underlying the awards on that date based on our then-current closing stock price of $71.67. Because the grants of PSUs were not made until May 15, 2019, at which time our closing stock price had increased to $77.95, the values of these awards set forth in the Summary Compensation Table and Grants of Plan-Based Awards Table are greater, reflecting the valuation of these awards on the subsequent grant date.

Additional Long-Term Incentive Grants

In March 2019, in addition to the annual long-term incentive grants described above, the talent and compensation committee granted performance-based RSU awards to each of Messrs. Hoplamazian and Floyd. These awards were intended to, among other things, reinforce our goals of retaining and incentivizing the NEOs and continuing to align pay with performance.

These additional performance-based RSU awards vested 100% in March 2020 based on achievement of an Adjusted Compensation EBITDA performance metric, which for 2019 was the same as the threshold for the Adjusted

 

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Compensation EBITDA Goal applied in respect of the 2019 EIP (described in additional detail in the section above in the CD&A section of this proxy statement titled “Annual Incentive”), and contingent on continued employment through the vesting date (subject to accelerated vesting upon death or disability or involuntary termination following a change in control of the Company). For 2019, we achieved Adjusted Compensation EBITDA of $786 million so the Adjusted Compensation EBITDA Threshold Goal was met.

The grant date fair value of these performance-based RSUs and the number of shares of common stock underlying these RSUs, are set forth in the following table:

 

  Name    RSU Value      Number of RSUs  

Mark S. Hoplamazian

   $ 567,483        7,918  

H. Charles Floyd

   $ 189,209        2,640  

Further, in order to retain Mr. Hoplamazian and ensure he remains focused on fulfilling the Company’s strategic objectives over the next five years, on May 15, 2019, we entered into an agreement to grant him 140,000 PSUs (the “CEO PSUs”), which are eligible to performance-vest based upon both (i) the satisfaction of a continued employment requirement described below (the “Service Component”) and (ii) the attainment of specified performance-vesting conditions (the “Performance Component”). The CEO PSUs are eligible to satisfy the Performance Component during each of calendar years 2019 through 2023 in “tranches” as follows:

 

Tranche    Performance Period    Number of PSUs  

Tranche I PSUs

   January 1, 2019 — December 31, 2019      14,000  

Tranche II PSUs

   January 1, 2020 — December 31, 2020      21,000  

Tranche III PSUs

   January 1, 2021 — December 31, 2021      21,000  

Tranche IV PSUs

   January 1, 2022 — December 31, 2022      28,000  

Tranche V PSUs

   January 1, 2023 — December 31, 2023      56,000  

The talent and compensation committee will annually set performance goals that are part of the Performance Component for the tranche eligible to performance-vest during the relevant performance period (as set forth in the table above), and will determine at the end of each performance period whether those goals have been attained. If the applicable performance goals are attained for the relevant performance period at or above target level, that tranche will be earned for purposes of the Performance Component and their vesting will not be conditioned upon the attainment of any future performance goals (but will remain subject to vesting based on satisfaction of the Service Component).

As a condition to the full vesting and payout of each tranche that has been “banked” for purposes of the Performance Component, Mr. Hoplamazian must also satisfy the Service Component, meaning that he must remain continuously employed with us through March 16, 2024, and will generally forfeit all of his CEO PSUs (whether or not such CEO PSUs have been “banked”) upon his termination of employment prior to March 16, 2024 or in the event that he engages in certain “detrimental conduct.” However, Mr. Hoplamazian is eligible for accelerated vesting of some or all of the tranches of CEO PSUs in the case of his death, disability, qualifying retirement or qualifying termination (whether in connection with a change in control of the Company or otherwise) as discussed in more detail under “Potential Payments on Termination or Change in Control” below. Each CEO PSU that becomes fully vested (satisfying both the Performance Component and Service Component) will be settled in shares of our Class A common stock.

The talent and compensation committee established the following performance goals for the Tranche I CEO PSU (i) achievement of the annual threshold Adjusted Compensation EBITDA and (ii) a minimum of 7% net rooms growth. Both goals were achieved for 2019 and the Tranche I PSUs have been “banked” for purposes of the Performance Component. These Tranche I PSUs will become fully vested if Mr. Hoplamazian satisfies the Service Component (and will be eligible for accelerated vesting, as noted above).

In addition, in May 2019, the talent and compensation committee granted an additional RSU award to Mr. Vondrasek covering 3,224 shares of our common stock to recognize the additional responsibilities he assumed in 2019 relating to information technology, data and analytics, and innovation functions. The RSU award had a grant date fair value of $250,000 and vests equally over four years, subject to Mr. Vondrasek’s continued service through each applicable vesting date (subject to accelerated vesting in the case of his death, disability, or involuntary termination following a change in control of the Company).

SARs

SARs are designed to deliver value to the NEOs only if our stock price increases over the grant date value. Each vested SAR gives the holder the right to receive the appreciation in the value of one share of our Class A common stock at the exercise date over the value of one share of our Class A common stock at the date of grant. Generally, SARs vest equally over four years based on continued service and are settled by delivery of shares of our Class A common stock

 

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(but may be subject to accelerated vesting upon a recipient’s death or disability, or his or her involuntary termination following a change in control of the Company).

RSUs

RSUs are designed to align the interests of our NEOs with the interests of our stockholders, to reward performance and to promote retention of our executives by providing equity-based compensation that fluctuates with our stock price. RSUs also help reduce the volatility of our overall long-term incentive package that arises in part due to the cyclical nature of the lodging industry since the volatility of the value of an RSU is lower than the volatility of the value of a SAR.

RSUs, accordingly, are intended to create a sense of ownership and to better align executives’ interests with our stockholders’ interests. Generally, RSUs vest equally over four years (but may be subject to accelerated vesting upon a recipient’s death or disability, or his or her involuntary termination following a change in control of the Company) and are settled by delivery of shares of our Class A common stock. RSUs granted to employees have dividend equivalent rights, which entitle RSU holders to the same dividend value per share as our stockholders. Dividend equivalents are subject to the same vesting and other terms and conditions as the corresponding RSUs. Dividend equivalents are accumulated and paid in cash when the underlying RSUs vest.

PSUs

PSUs are designed to align the interests of our NEOs with the interests of our stockholders, to reward the cumulative attainment of longer-term performance objectives linked to three-year financial goals, and to thereby promote greater retention of our executives while providing equity-based compensation that fluctuates with our stock price. PSUs vest based on achievement of a three-year average “Adjusted ROGA” goal (weighted at 60% of the award) and achievement of annual “Managed and Franchised Adjusted EBITDA” goals averaged over the three-year performance period (weighted at 40% of the award). The number of PSUs that vest based on the foregoing may be further modified based on a three-year “Relative TSR Modifier,” and are generally subject to continued employment through the three-year performance period (except in the case of certain qualifying terminations of employment due to death or disability, retirement, or in the case of a change in control of the Company).

 

 

“Adjusted ROGA” is generally defined as Adjusted EBITDA divided by Average Gross Assets for each year of the three-year performance period.

 

 

“Gross Assets” is generally defined as total assets plus accumulated depreciation of property and equipment.

 

 

Adjusted EBITDA is defined as set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Depreciation, and Amortization,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

 

 

“Managed and Franchised Adjusted EBITDA” is generally defined as the sum of Adjusted EBITDA for the three management and franchising segments (Americas, ASPAC and EAME/SWA) for each fiscal year of the three-year performance period; and

 

 

“Relative TSR Modifier” is generally defined as the rank order (including Hyatt) of total stockholder return over the three-year performance period from each of the following: Hilton Worldwide Holdings Inc., Marriott International, Inc., InterContinental Hotels Group PLC, Host Hotels & Resorts, Inc., Sunstone Hotel Investors, Inc., and Park Hotels & Resorts Inc. Hyatt’s ranking among the foregoing results in the number of vesting PSUs being increased or decreased by a modifier that ranges from 120% (for the highest rank) to 80% (for the lowest rank).

The performance metrics used in determining PSU vesting were established such that the relative difficulty of achievement would be challenging but reasonable in light of past performance, future expectations, and market conditions.

We believe that disclosure of information regarding the specific performance goals for each metric used in determining PSU vesting will cause substantial competitive harm to Hyatt, both directly and indirectly. Therefore, in accordance with applicable SEC rules, the specific performance goals used in determining PSU vesting have been omitted from this proxy statement; however, we expect to disclose these goals in accordance with applicable SEC rules, following the conclusion of the applicable performance period.

Dividend equivalents for PSUs are subject to the same vesting and other terms and conditions as the corresponding PSUs. Dividend equivalents are accumulated and paid in cash when the underlying PSUs vest.

Determination of Performance for 2017-2019 PSUs

In 2017, the talent and compensation committee granted PSUs with a three-year performance period that would only be earned if the NEOs achieved a three-year average Adjusted ROGA goal (as defined above), as may be further modified based on achievement of a three-year “Relative EBITDA Growth Rank.” “Relative EBITDA Growth Rank” was

 

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generally defined as the rank order (including Hyatt) of cumulative growth of EBITDA figures, to the extent publicly reported for the performance period, from each of the following: Accor Group, Hilton Worldwide Holdings Inc., Host Hotels & Resorts, Inc., Intercontinental Hotels & Resorts, and Marriott International, Inc. The vesting and payout of these PSUs was conditioned upon meeting the threshold goal and further subject to continued service through the end of the three-year performance period (except in the case of certain qualifying terminations of employment due to death or disability, retirement, or in the case of a change in control of the Company).

The three-year average Adjusted ROGA for the 2017-2019 performance period was 8.2% which would have resulted in a vesting/payout of 100%. In 2017, Hyatt accelerated its asset disposition strategy to increase the mix of earnings driven by its Managed and Franchised business while reducing exposure to Real Estate. From 2017 to 2019, as part of this adjustment in business strategy, Hyatt sold a number of assets which decreased Real Estate Adjusted EBITDA by $167M, causing Hyatt’s Relative EBITDA Growth Rank to drop to five out of six (which would have resulted in an adjustment to the payout of 95% of the target award). Absent this adjustment in business strategy, Hyatt’s Relative EBITDA Growth Rank would have been three out of six, which ranking would not have impacted the payout of 100%. Accordingly, the Talent & Compensation Committee determined that vesting/payout of 100% of the target award was warranted.

Equity Practices

The Company makes equity grants pursuant to our Non-Employee Director Compensation Policy and the LTIP during regularly scheduled board meetings or during periods when we are not in possession of material non-public information. Pursuant to our Insider Trading Policy, neither the Company, nor executive officers, directors or “blackout covered employees” (as defined in the Insider Trading Policy) may trade in any securities of the Company during the period beginning seven calendar days before the end of any fiscal quarter of the Company and ending two full trading days after the public release of earnings data for such quarter, whether or not the Company or its executive officers, directors or blackout covered employees are in possession of material, non-public information.

Employee Benefits

Our NEOs receive employee benefits similar to other salaried colleagues, such as participation in our 401(k) Plan, and our health, life and disability plans and severance benefits, as described in more detail below and in the section below in the CD&A section of this proxy statement titled “Potential Payments on Termination or Change in Control.” In addition, we provide certain additional retirement and deferred compensation benefits to our NEOs, including participation in our Deferred Compensation Plan (“DCP”), as well as limited perquisites. These additional employee benefits and perquisites make up the benefits/work/lifestyle portion of our total rewards package and allow us to compete in attracting and retaining executives.

Termination and Severance Benefits

In the event of certain qualifying terminations of employment, NEOs are entitled to severance payments and benefits under the Hyatt Hotels Corporation Executive Officer Severance and Change in Control Plan (the “Severance and Change in Control Plan”). All severance payments and benefits under the Severance and Change in Control Plan that are payable in connection with a change in control are “double trigger,” meaning that a NEO will not receive severance benefits in connection with a change in control unless the NEO also experiences a qualifying termination of service. We do not provide “single trigger” severance payments, equity acceleration, or benefits to our NEOs in connection with a change in control. For a description of the material terms of the Severance and Change in Control Plan, see the section below in the CD&A section of this proxy statement titled “Potential Payments on Termination or Change in Control.”

We do not provide for tax reimbursement payments or tax gross-ups related to a change in control.

Retirement Programs

In addition to our 401(k) plan that is available to employees generally, our NEOs may participate in the DCP, which is a non-qualified deferred compensation plan.

401(k) Plan

Our 401(k) plan is an ongoing, tax-qualified 401(k) plan under which we match 100% on the first 3% of compensation that an employee contributes and 50% on the next 2% of compensation that an employee contributes, up to a total match of 4% of an employee’s compensation (subject to the Internal Revenue Service (“IRS”) limits for tax qualified plans).

 

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Deferred Compensation Plan

The DCP allows executives to defer up to 75% of their base salaries and all or a portion of their annual incentives. We also make an employer contribution to the plan based on a designated contribution schedule. For 2019, each of Messrs. Thomas J. Pritzker, Hoplamazian, and Floyd received a dollar for dollar match on deferrals up to $12,000 and each of Ms. Bottarini and Mr. Vondrasek received a 3% employer contribution for their respective base salaries up to $16,000. Executives who participate in the DCP can select among various market-based investment options and are eligible to receive their account balances when they terminate employment.

Perquisites

We offer limited perquisites to our executives which we believe are reasonable and consistent with our total rewards program and our goal of attracting and retaining key executives. Perquisites that are provided include:

 

 

limited use of Hyatt properties per the policy that is applicable to all Hyatt colleagues;

 

 

complimentary parking; and

 

 

relocation for new executives as necessary.

Messrs. Thomas J. Pritzker and Hoplamazian are permitted to use our leased corporate aircraft for personal travel. Under our aircraft usage policy, Mr. Hoplamazian may use up to 30 hours per year with Mr. Thomas J. Pritzker’s prior approval, and the talent and compensation committee’s approval for personal travel over 30 hours. Mr. Hoplamazian used the corporate aircraft for one personal trip in 2019 and the aggregate incremental cost of his personal use of the corporate aircraft was $7,792. We determined the incremental cost of his personal use of our corporate aircraft based on the variable operating costs to us, which include items such as (i) aircraft fuel and oil expenses per hour of flight; (ii) landing, ramp, and parking fees and expenses; (iii) crew travel expenses; (iv) supplies and catering; (v) customs, foreign permit, and similar fees; (vi) crew travel; and (vii) passenger ground transportation. Because our aircraft is used primarily for business travel, this methodology excludes fixed costs that do not change based on usage, such as the salaries of pilots and crew, purchase or lease costs of aircraft, and costs of maintenance and upkeep. Mr. Hoplamazian incurs taxable income, calculated using the non-commercial flight valuation method, for all personal use of our corporate aircraft. We do not grant bonuses to cover, reimburse, or otherwise “gross-up” any income tax owed for personal travel on our corporate aircraft.

Share Ownership Requirement, Compensation Recovery Policy, and Anti-Hedging/Anti-Pledging Policies

Pursuant to our share ownership guidelines, each of our NEOs (other than Mr. Thomas J. Pritzker) is required to hold vested in-the-money SARs, vested or unvested RSUs or restricted or unrestricted shares of common stock with a value equal to no less than the following amounts (as applicable):

 

  NEO    Multiple of salary  

Mr. Hoplamazian (CEO)

     6 times base salary  

Ms. Bottarini, Mr. Floyd and Mr. Vondrasek (EVPs)

     3 times base salary  

Once a NEO reaches age 55, his or her ownership guideline reduces by 10% per year until age 60. Our NEOs have five years to meet these goals from when they become NEOs. We adopted these share ownership guidelines as a means of requiring executives to hold equity and tie their interests to the interests of our stockholders. As of December 31, 2019, Mr. Hoplamazian and Mr. Floyd met the guidelines. Mr. Vondrasek and Ms. Bottarini have until 2022 and 2023 to meet the guidelines, respectively. In light of the substantial direct and indirect ownership of our outstanding common stock by trusts established for the benefit of Mr. Thomas J. Pritzker and his descendants, Mr. Thomas J. Pritzker is not subject to the share ownership guidelines.

We also have a compensation recovery policy which, if the board of directors determines that an executive has engaged in fraudulent or willful misconduct that resulted in a restatement of our financial results, allows the board of directors (or a committee thereof) in its discretion to recover from such executive any bonus, equity compensation or profits received on equity compensation by such executive.

Pursuant to our Insider Trading Policy, our NEOs, directors, officers, and “colleagues” (as defined in the Insider Trading Policy) are prohibited from “hedging” their ownership in shares of our common stock or other equity-based interests in the Company (including by engaging in short sales relating to our common stock), and are generally prohibited from pledging shares of our common stock as collateral for loans, except in limited, pre-approved circumstances where the individual clearly demonstrates the financial capacity to repay the loan without resorting to the pledged securities.

 

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Regulatory Considerations

Section 162(m) generally disallows a federal tax deduction to public companies for compensation greater than $1 million paid in any tax year to specified executive officers. Pursuant to the Tax Cuts and Jobs Act of 2017, the exception for “qualified performance-based compensation” under Section 162(m) of the Code was eliminated with respect to all remuneration other than remuneration payable pursuant to a written binding contract in effect on November 2, 2017 which was not modified in any material respect on or after such date.

ASC Topic 718

Grants of stock-based compensation are accounted for under ASC Topic 718. The talent and compensation committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to equity-based compensation awards. As accounting standards change, we may revise certain programs to appropriately align the cost of our equity-based compensation awards with our overall executive compensation philosophy and objectives.

Our incentive compensation programs have been designed and administered in a manner generally intended to preserve federal income tax deductions. However, the talent and compensation committee considers the tax and accounting consequences of utilizing various forms of compensation and retains the discretion to pay compensation that is not tax deductible or could have adverse accounting consequences.

Summary Compensation Table

 

 

 

  Name and Principal Position   Year     Salary     Bonus    

Stock

Awards
(1)(2)

   

Option

Awards
(1)

   

Non-Equity

Incentive Plan

Compensation
(3)

   

All Other

Compensation
(4)

    Total  

Thomas J. Pritzker

    2019     $ 575,667     $ 0     $ 0     $ 4,999,987     $ 0     $ 18,491     $ 5,594,145  

Executive Chairman of the Board

    2018     $ 561,667     $ 0     $ 0     $ 4,499,993     $ 0     $ 18,335     $ 5,079,995  
    2017     $ 547,917     $ 0     $ 0     $ 3,999,995     $ 0     $ 30,478     $ 4,578,390  

Mark S. Hoplamazian

    2019 (5)    $ 1,233,000     $ 0     $ 9,194,108     $ 2,374,988     $ 1,860,200     $ 39,925     $ 14,702,221  

President and Chief

    2018     $ 1,203,167     $ 0     $ 6,633,532     $ 1,999,997     $ 2,591,800     $ 31,933     $ 12,460,429  

Executive Officer
(Principal Executive Officer)

    2017     $ 1,174,167     $ 0     $ 4,416,809     $ 1,999,997     $ 2,250,000     $ 31,683     $ 9,872,656  

Joan Bottarini

    2019     $ 675,000     $ 0     $ 1,029,009     $ 419,999     $ 647,100     $ 24,674     $ 2,795,782  

Executive Vice President,

Chief Financial Officer
(Principal Financial Officer)

    2018 (6)    $ 379,762     $ 0     $ 399,923     $ 0     $ 252,400     $ 45,714     $ 1,077,799  

H. Charles Floyd

    2019     $ 804,667     $ 0     $ 2,026,722     $ 750,000     $ 693,700     $ 32,133     $ 4,307,222  

Executive Vice President,

    2018     $ 784,833     $ 0     $ 1,544,472     $ 666,652     $ 966,100     $ 32,133     $ 3,994,190  

Global President of Operations

    2017     $ 765,833     $ 0     $ 1,472,251     $ 666,655     $ 810,900     $ 45,258     $ 3,760,897  

Mark R. Vondrasek

    2019 (7)    $ 653,333     $ 0     $ 1,352,452     $ 449,993     $ 563,200     $ 16,399     $ 3,035,377  

Executive Vice President,

Chief Commercial Officer

    2018     $ 637,500     $ 0     $ 799,931     $ 399,991     $ 784,600     $ 181,921     $ 2,803,943  

 

(1)

Amounts shown in the “Stock Awards” column represent the aggregate grant date fair value of RSUs and PSUs and the amounts shown in the “Option Awards” column represent the aggregate grant date fair value of SARs, in each case, granted in the year indicated, with such grant date fair values prepared in accordance with ASC Topic 718. For a discussion of the assumptions made in the valuation reflected in these columns, see Note 17 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019. With regard to the PSU awards, the values set forth above reflect the vesting of PSUs based on the probable outcome of target levels. For a discussion of threshold, target, and maximum levels of vesting on PSU awards, see the section in the CD&A section of this proxy statement titled “Grants of Plan-Based Awards — 2019.”

 

(2)

For 2019 PSU awards, amounts shown reflect the grant date fair value of the awards at target payout. The grant date fair value of the PSU awards assuming the highest level of performance (i.e., 200% of target) are as follows: Mr. Hoplamazian $10,332,273, Ms. Bottarini $1,218,047, Mr. Floyd $2,175,117, and Mr. Vondrasek $1,305,039.

 

(3)

See the section in the CD&A section of this proxy statement titled “Annual Incentive” for a more detailed description of the incentive compensation program.

 

Hyatt Hotels Corporation    2020 Proxy Statement    33


Table of Contents
(4)

All Other Compensation for 2019 includes that shown in the table below:

 

  Name     

401(k) Match

and

Contributions

to DCP

      

Life Insurance

and Long-Term

Disability

Premiums

       Perquisites and
Other Personal
Benefits(1)
       Total  

 

Thomas J. Pritzker

 

    

 

$

 

 

 

17,751

 

 

 

 

 

 

    

 

$

 

 

 

740

 

 

 

 

 

 

    

 

$

 

 

 

0

 

 

 

 

 

 

    

 

$

 

 

 

 18,491

 

 

 

 

 

 

 

Mark S. Hoplamazian

 

 

     $

 

 

23,200

 

 

 

 

 

     $

 

 

1,133

 

 

 

 

 

     $

 

 

15,592

 

 

 

 

 

     $

 

 

 39,925

 

 

 

 

 

 

Joan Bottarini

 

 

     $

 

 

20,989

 

 

 

 

 

     $

 

 

765

 

 

 

 

 

     $

 

 

2,920

 

 

 

 

 

     $

 

 

 24,674

 

 

 

 

 

 

H. Charles Floyd

 

 

     $

 

 

23,200

 

 

 

 

 

     $

 

 

1,133

 

 

 

 

 

     $

 

7,800

 

 

 

     $

 

 

 32,133

 

 

 

 

 

 

Mark R. Vondrasek

 

 

     $

 

15,500

 

 

 

     $

 

899

 

 

 

     $

 

0

 

 

 

     $

 

 16,399

 

 

 

 

  (1)

Amounts shown reflect: the aggregate incremental cost of his personal use of the corporate aircraft (Mr. Hoplamazian), parking benefits ($7,800 for each of Messrs. Hoplamazian and Floyd), and tax filing preparation relating to prior expatriate assignment ($2,920 for Ms. Bottarini).

 

(5)

To retain Mr. Hoplamazian and ensure he remains focused on fulfilling the Company’s strategic objectives over the next five years, we entered into an agreement on May 15, 2019 to grant him 140,000 CEO PSUs, which are eligible to performance-vest in “tranches.” The first tranche is 14,000 shares.

 

(6)

Ms. Bottarini commenced her position as Executive Vice President, Chief Financial Officer on November 2, 2018. Accordingly, the amounts paid to her for 2018 and set forth in this Summary Compensation Table reflect partial year compensation in her current role and partial year compensation in her former role.

 

(7)

Mr. Vondrasek received an additional one-time award of RSUs that had a grant-date fair value of $250,000 in May 2019 in recognition of additional responsibilities related to information technology, data and analytics, and innovation functions he assumed during the year.

The actual value, if any, which an executive may realize from a SAR, RSU or PSU award is contingent upon the satisfaction of the conditions to vesting applicable to that award, and with respect to SARs, is determined solely by reference to stock price increase from the date of exercise over the base price on the date the award is granted. Thus, there is no assurance that the value, if any, eventually realized by the executive will correspond to the amount shown in the table above. The amounts shown in the table above are prepared in accordance with ASC Topic 718.

Grants of Plan-Based Awards — 2019

 

 

Name  

Grant

Date

   

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards(1)

   

Estimated Future Payouts Under

Equity Incentive Plan Awards(2)

   

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units(#)

   

All Other

Option

Awards:

Number of

Securities

Underlying

Options(#)

   

Exercise or

Base Price of

Option Awards

($)(3)

   

Grant Date

Fair Value

of Stock

and

Options

Awards(4)

 
   
          Threshold     Target     Maximum     Threshold(#)     Target(#)     Maximum(#)                          

 

Thomas J. Pritzker

 

                   

SARs

    3/20/2019                     292,226     $ 71.67     $ 4,999,987  

Mark S. Hoplamazian

 

                   
    $ 1,083,250     $ 2,166,500     $ 4,333,000                

PSUs

    5/15/2019             19,883       66,275       132,550           $ 5,166,136  

SARs

    3/20/2019                     138,807     $ 71.67     $ 2,374,988  

RSUs

    3/20/2019                   33,137         $ 2,374,929  

RSUs(5)

    3/20/2019               7,918             $ 567,483  

PSUs(6)

    5/15/2019               14,000             $ 1,085,560  

Joan Bottarini

 

                   
    $ 337,500     $ 675,000     $ 1,350,000                

PSUs

    5/15/2019             2,344       7,813       15,626           $ 609,023  

SARs

    3/20/2019                     24,547       71.67     $ 419,999  

RSUs

    3/20/2019                   5,860         $ 419,986  

H. Charles Floyd

 

                   
    $ 404,000     $ 808,000     $ 1,616,000                

PSUs

    5/15/2019             4,186       13,952       27,904           $ 1,087,558  

SARs

    3/20/2019                     43,834     $ 71.67     $ 750,000  

RSUs

    3/20/2019                   10,464         $ 749,955  

RSUs(5)

    3/20/2019               2,640             $ 189,209  

Mark R. Vondrasek

 

                   
          $328,000     $656,000     $1,312,000                                            

PSUs

    5/15/2019             2,511       8,371       16,742           $ 652,519  

SARs

    3/20/2019                     26,300     $ 71.67     $ 449,993  

RSUs

    3/20/2019                   6,278         $ 449,944  

RSUs

 

   

 

5/15/2019

 

 

 

                                                   

 

3,224

 

 

 

                  $

 

249,989

 

 

 

 

34    Hyatt Hotels Corporation    2020 Proxy Statement


Table of Contents
(1)

The amounts shown represent the threshold, target and maximum potential payments under the EIP based on multiples of the NEO’s base salary as of December 31, 2019. See “Annual Incentives” in the CD&A section of this proxy statement above for a more detailed description of the EIP.

 

(2)

Except with respect to the performance-based RSUs granted to Messrs. Hoplamazian and Floyd and the CEO PSUs granted to Mr. Hoplamazian referenced in footnotes (5) and (6) below, the amounts shown represent the potential PSUs that may be earned under the LTIP at each of the threshold, target and maximum performance levels. Each NEO was granted PSUs at target, but the number of PSUs that will vest and be retained by the NEO will be determined at the conclusion of the 2019 through 2021 performance period. PSUs will vest based on achievement of three-year average “Adjusted ROGA” goal weighted at 60% and a three-year average “Managed and Franchised Adjusted EBITDA” goal weighted at 40%, both of which may be further modified based on three-year “Relative TSR Modifier”, and are generally subject to continued employment through the vesting date. “Adjusted ROGA” is generally defined as Adjusted EBITDA divided by Average Gross Assets for each year of the three-year performance period. “Managed and Franchised Adjusted EBITDA” is generally defined as the sum of Adjusted EBITDA for the three management and franchising segments (Americas, ASPAC and EAME/SWA) for each year of the three-year performance period. For this purpose Adjusted EBITDA is defined as set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics Evaluated by Management—Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization,” of our Annual Report on Form 10-K for the year ended December 31, 2019. If the threshold of neither the Adjusted ROGA goal nor the Average Managed and Franchised EBITDA is achieved at the end of the three-year performance period, then all of the PSUs will be forfeited and none will vest. If the threshold Adjusted ROGA goal is achieved, 22.5% of the PSUs will vest. If the threshold of the Average Managed and Franchised EBITDA is achieved, an additional 15% of the PSUs will vest. If the target performance goal is achieved for both measures, 100% of the PSUs granted will vest. If the maximum performance goal is achieved for both measures, 166.7% of the PSUs will vest. Achievement between the threshold and maximum performance goals will be interpolated linearly based on level of achievement. The number of PSUs vesting will further be modified up to plus or minus 20% by Relative TSR Rank so that overall the threshold number of PSUs to vest is 30% of target and the maximum number of PSUs to vest is 200% of target.

 

(3)

The strike price of SARs is the closing price of the Company’s stock on the date of grant.

 

(4)

Amounts shown represent the grant date fair value of SARs, RSUs and PSUs granted in the year indicated computed in accordance with ASC Topic 718. For a discussion of the assumptions made in the valuation reflected in these columns, see Note 17 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019. With regard to the valuation of PSU awards, the grant date fair values set forth above reflect the vesting of PSUs based upon the probable outcome at target levels, and were determined based on a Monte Carlo simulation model as of May 15, 2019, the grant date of the PSUs.

 

(5)

On March 20, 2019, each of Messrs. Hoplamazian and Floyd received an additional RSU grant under the LTIP which vested 100% in March 2020 and was subject to achievement of the Adjusted Compensation EBITDA Threshold Goal and continued service through the vesting date. Amounts shown represent the potential PSUs earned under the LTIP at the target performance level, as there is neither a threshold nor a maximum performance measurement for these awards.

 

(6)

On May 15, 2019, Mr. Hoplamazian was granted an award of 140,000 CEO PSUs, which are eligible to performance-vest in annual “tranches” over five years (as described in more detail under “Additional Long-Term Incentive Grants” above). The amount shown represents the grant-date fair value of the target number Tranche I PSUs under such award, eligible to performance-vest in respect 2019 performance if annual performance goals, set by the talent and compensation committee, are attained at “target performance” during the applicable performance period. Neither threshold nor maximum performance measurements apply to the Tranche I PSUs. If the CEO PSUs for a given tranche performance-vest, those CEO PSUs will be “banked” for purposes of performance-vesting and will be eligible to fully vest if Mr. Hoplamazian remains continuously employed through March 16, 2024 (subject to accelerated vesting on certain qualifying terminations). The talent and compensation committee established the following performance hurdles for the Tranche I PSUs: (i) achievement of the annual threshold Adjusted Compensation EBITDA and (ii) a minimum of 7% net rooms growth. Both goals were achieved for 2019 and therefore the Tranche I PSUs have been “banked” and remain eligible to vest if Mr. Hoplamazian satisfies the applicable continued employment requirement.

The actual value, if any, which an executive may realize from a SAR, RSU or PSU award is contingent upon the satisfaction of the conditions to vesting applicable to that award, and with respect to SARs, is determined solely by reference to stock price increase from the date of exercise over the base price on the date the award is granted. Thus, there is no assurance that the value, if any, eventually realized by the executive will correspond to the amount shown in the table above. The amounts shown in the table above are prepared in accordance with ASC Topic 718.

Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table

Thomas J. Pritzker and Hoplamazian Employment Letters

Messrs. Thomas J. Pritzker and Hoplamazian are parties to employment letter agreements with us, each of which became effective as of January 1, 2013. Each letter agreement has a current term that continues through December 31, 2020, subject to automatic one-year renewals unless either party provides 180 days’ prior notice to the other not to renew.

Under their respective letter agreements, Messrs. Thomas J. Pritzker and Hoplamazian are entitled, respectively, to (i) current base salaries equal to $578,000 and $1,238,000, (ii) annual equity awards under the LTIP with target grant date fair values equal to $5,000,000 and $9,500,000 in each case, subject to adjustment by the talent and

 

Hyatt Hotels Corporation    2020 Proxy Statement    35


Table of Contents

compensation committee, and (iii) in the case of Mr. Hoplamazian, an annual incentive payment under our EIP, with a target annual incentive payment in an amount equal to 175% of Mr. Hoplamazian’s base salary and a maximum annual incentive payment in an amount equal to 350% of his base salary, in each case, subject to adjustment by the talent and compensation committee.

Each letter agreement provides that, upon the executive’s termination of employment, he will be eligible to receive severance payments and benefits in accordance with the terms of the Severance and Change in Control Plan. In addition, pursuant to their respective letter agreements, we will use commercially reasonable efforts to (i) appoint Mr. Thomas J. Pritzker as Executive Chairman for so long as he is a member of our board and as long as he is willing and able to serve in that office, and (ii) nominate Mr. Hoplamazian for re-election as a member of our board for so long as he is our President and Chief Executive Officer. If he is not so appointed (Mr. Thomas J. Pritzker) or re-elected (Mr. Hoplamazian), the applicable executive will be entitled to terminate his employment and to the rights and entitlements under the Severance and Change in Control Plan as if his employment were terminated by us without cause. For additional information regarding the Severance and Change in Control Plan, please see the section below in the CD&A section of this proxy statement titled “Potential Payments on Termination or Change in Control.”

Bottarini Employment Letter

Ms. Bottarini is party to an employment letter agreement with us, which became effective as of November 2, 2018. This letter agreement does not have a fixed term. Under her letter agreement, Ms. Bottarini is entitled to receive (i) an annual base salary of $675,000, (ii) target incentive award of 100% of base salary under our EIP, (iii) annual grants under our LTIP (which, for grants made during 2019, had an aggregate value equal to $1,400,000), (iv) a one-time grant of RSUs with a value equal to $250,000, granted in December 2018, which vest annually over four years, subject to Ms. Bottarini’s continued employment through the applicable vesting date, (v) employee benefits and perquisites available to our senior executive officers from time to time, and (vi) severance in accordance with our Severance and Change in Control Plan. For additional information regarding our Severance and Change in Control Plan, please see the section below in the CD&A section of this proxy statement titled “Potential Payments on Termination or Change in Control.”

Vondrasek Employment Letter

Mr. Vondrasek is party to a letter agreement with us, which became effective as of August 28, 2017. This letter agreement does not have a fixed term. Under his letter agreement, Mr. Vondrasek is entitled to receive (i) a current base salary equal to $656,000, (ii) a current target incentive award of 100% of base salary under our EIP, (iii) annual grants under our LTIP (which, for grants made during 2019, had an aggregate value equal to $1,750,000 consisting of $1,500,000 granted during the annual cycle and an additional award of $250,000 in May 2019 in recognition of additional responsibilities related to information technology, data and analytics, and innovation functions), and (iv) employee benefits and perquisites available to our senior executive officers from time to time. In addition, the letter agreement provided for certain one-time equity awards each of which was granted on or about September 25, 2017.

Outstanding Equity Awards at Fiscal Year-End — 2019

 

 

          Option Awards     Stock Awards  
  Name   Grant Date    

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable
(1)(5)

   

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable
(1)(5)

   

Option

Exercise

Price

   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)(2)(5)

   

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

(4)(5)

   

 

Equity Incentive

Plan Awards:

Number of
Unearned
Shares or

Units of Stock
That Have Not
Vested

(#)(3)

   

 

Equity Incentive

Plan Awards:

Market Value of

Unearned

Shares or
Units of Stock

That Have Not

Vested

(4)

 

 

Thomas J. Pritzker

 

 

 

 

3/20/2019

 

 

 

 

 

 

 

 

 

 

 

 

292,226

 

 

 

 

$

 

71.67

 

 

 

 

 

 

3/20/2029

 

 

       
    3/21/2018       53,241       159,726     $ 80.02       3/21/2028          
    3/22/2017       122,324       122,324     $ 52.65       3/22/2027          
    3/23/2016       206,325       68,778     $ 47.36       3/23/2026          
    3/25/2015       180,353           $ 56.27       3/25/2025          
    2/13/2014       140,191           $ 49.39       2/13/2024          
    3/15/2013       207,381           $ 43.44       3/15/2023          
    3/16/2012       140,601           $ 41.29       3/16/2022          
    3/16/2011       127,410           $ 41.74       3/16/2021          
   

 

5/11/2010

 

 

 

   

 

119,707

 

 

 

   

 

 

 

 

  $

 

40.96

 

 

 

   

 

5/11/2020

 

 

 

       

 

36    Hyatt Hotels Corporation    2020 Proxy Statement


Table of Contents
          Option Awards     Stock Awards  
  Name   Grant Date    

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable
(1)(5)

   

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable
(1)(5)

   

Option

Exercise

Price

   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)(2)(5)

   

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

(4)(5)

   

 

Equity Incentive

Plan Awards:

Number of
Unearned
Shares or

Units of Stock
That Have Not
Vested

(#)(3)

   

 

Equity Incentive

Plan Awards:

Market Value of

Unearned

Shares or
Units of Stock

That Have Not

Vested

(4)

 

 

Mark S. Hoplamazian

 

 

 

 

5/15/2019

 

(5a) 

             

 

 

 

14,000

 

 

 

 

$

 

1,255,940

 

 

    5/15/2019                   66,275     $ 5,945,530  
    3/20/2019             138,807     $ 71.67       3/20/2029          
    3/20/2019 (5b)                  7,918     $ 710,324  
    3/20/2019               33,137     $ 2,972,720      
    3/21/2018       23,663       70,989     $ 80.02       3/21/2028          
    3/21/2018                   48,721     $ 4,370,761  
    3/21/2018               18,745     $ 1,681,614      
    3/22/2017       61,162       61,162     $ 52.65       3/22/2027          
    3/22/2017               18,994     $ 1,703,952      
    3/22/2017                   37,986     $ 3,407,724  
    3/23/2016       77,370       25,793     $ 47.36       3/23/2026          
    3/23/2016       103,161       34,390     $ 47.36       3/23/2026          
    3/23/2016               10,558     $ 947,158      
    3/25/2015       72,674           $ 56.27       3/25/2025          
    2/13/2014       56,490           $ 49.39       2/13/2024          
    3/15/2013       83,565           $ 43.44       3/15/2023          
    3/16/2012       86,755           $ 41.29       3/16/2022          
   

 

3/16/2011

 

 

 

   

 

69,881

 

 

 

   

 

 

 

 

  $

 

41.74

 

 

 

   

 

3/16/2021

 

 

 

       

 

Joan Bottarini

 

 

 

 

5/15/2019

 

 

             

 

 

 

7,813

 

 

 

 

$

 

700,904

 

 

    3/20/2019             24,547     $ 71.67       3/20/2029          
    3/20/2019               5,860     $ 525,701      
    12/13/2018               2,784     $ 249,753      
    3/21/2018               1,406     $ 126,132      
    3/22/2017               1,141     $ 102,359      
   

 

3/23/2016

 

 

 

           

 

662

 

 

 

  $

 

59,388

 

 

 

   

 

H. Charles Floyd

 

 

 

 

5/15/2019

 

 

             

 

 

 

13,952

 

 

 

 

$

 

1,251,634

 

 

    3/20/2019             43,834     $ 71.67       3/20/2029          
    3/20/2019 (5b)                  2,640     $ 236,834  
    3/20/2019               10,464     $ 938,725      
    3/21/2018       7,887       23,663     $ 80.02       3/21/2028          
    3/21/2018                   8,120     $ 728,445  
    3/21/2018               6,249     $ 560,598      
    3/22/2017       20,386       20,388     $ 52.65       3/22/2027          
    3/22/2017                   12,662     $ 1,135,908  
    3/22/2017               6,332     $ 568,044      
    3/23/2016       25,788       8,599     $ 47.36       3/23/2026          
    3/23/2016       34,386       11,464     $ 47.36       3/23/2026          
    3/23/2016               3,519     $ 315,689      
    3/25/2015       30,684           $ 56.27       3/25/2025          
    3/25/2015       41,373           $ 56.27       3/25/2025          
    2/13/2014       4,430           $ 49.39       2/13/2024          
    2/13/2014       23,851           $ 49.39       2/13/2024          
    3/15/2013       35,283           $ 43.44       3/15/2023          
    3/16/2012       36,630           $ 41.29       3/16/2022          
    3/16/2011       33,193           $ 41.74       3/16/2021          
   

 

5/11/2009

 

(5c) 

 

           

 

3,073

 

 

 

  $

 

 275,679

 

 

 

   

 

Mark R. Vondrasek

 

 

 

 

5/15/2019

 

 

             

 

 

 

8,371

 

 

 

 

$

 

750,962

 

 

    5/15/2019               3,224     $ 289,225      
    3/20/2019             26,300     $ 71.67       3/20/2029          
    3/20/2019                   6,278     $  563,199      
    3/21/2018       4,732       14,198     $ 80.02       3/21/2028          
    3/21/2018                   4,872     $  437,067  
    3/21/2018       1,249             3,749     $ 336,323      
    9/25/2017       5,034       10,071     $ 61.50       9/25/2027          
    9/25/2017       3,048             3,049     $ 273,526      
     

 

9/25/2017

 

(5d) 

 

   

 

13,008

 

 

 

                            3,252     $ 291,737                  

 

(1)

Represents outstanding SARs held by the NEOs as of December 31, 2019. The SARs vest and become exercisable based on continued service through the applicable vesting date (but may be subject to accelerated vesting upon a recipient’s death or disability, or his or her involuntary termination following a change of control of the Company).

 

Hyatt Hotels Corporation    2020 Proxy Statement    37


Table of Contents
(2)

Represents RSUs held by the NEOs as of December 31, 2019. The RSUs vest and settle upon the applicable vesting dates based on continued service unless otherwise noted (subject to accelerated vesting upon a recipient’s death or disability, or his or her involuntary termination following a change of control of the Company).

 

(3)

Represents the target value and number of PSUs granted in 2019, 2018, and 2017; actual performance for the applicable performance period may result in (or may have resulted in) more or less PSUs becoming earned for such award. PSUs only vest based on performance and continued service through the last day of the performance period. Or, in the case of Mr. Hoplamazian’s Tranche I PSUs, through March 16, 2024). Except in the case of Mr. Hoplamazian’s Tranche I PSUs (discussed under 5(a) below), in the event of a participant’s death or disability prior to the end of the applicable performance period, PSUs will vest based on actual performance through the most recent fiscal quarter end (projected through the remainder of the performance period based on actual performance), pro-rated based on the number of months in the performance period elapsed through the date of death or disability. In the event of a participant’s retirement, the participant’s PSUs will remain outstanding and eligible to vest based on actual performance through the end of the performance period, pro-rated based on the number of months in the performance period elapsed through the date of retirement (except that pro-rating will not apply if the executive provides at least one year’s advance notice of his or her retirement). In the event of a change in control, PSUs will vest immediately prior to the change in control based on actual performance through the most recent fiscal quarter end (projected through the remainder of the performance period based on actual performance).

 

(4)

Based on $89.71 per share, which was the closing price of our Class A common stock on December 31, 2019.

 

(5)

Unless otherwise indicated, all RSU and SAR awards vest in four equal, annual installments commencing on March 16th of the year following the applicable Grant Date

 

  5(a)

On May 15, 2019, Mr. Hoplamazian was granted an award of 140,000 CEO PSUs, which are eligible to performance-vest in annual “tranches” over five years (as described in more detail under “Additional Long-Term Incentive Grants” above). The amount of such CEO PSUs granted on May 15, 2019 represents the target number of Tranche I PSUs under such award that are eligible to performance-vest in respect of 2019 performance if annual performance goals, set by the talent and compensation committee, are attained at “target performance” during the applicable performance period. If the CEO PSUs for a given tranche performance-vest, those CEO PSUs will be “banked” for purposes of performance-vesting and will be eligible to fully vest if Mr. Hoplamazian remains continuously employed through March 16, 2024 (subject to accelerated vesting on certain qualifying terminations). The talent and compensation committee established the following performance hurdles for the Tranche I PSUs: (i) achievement of the annual threshold Adjusted Compensation EBITDA and (ii) a minimum of 7% net rooms growth. Both goals were achieved for 2019 and therefore the Tranche I PSUs have been “banked” and remain eligible to vest on March 16, 2024 if Mr. Hoplamazian satisfies the applicable continued employment requirement.

 

  5(b)

Vests 100% on March 16th of the year following the Grant Date.

 

  5(c)

Vests 2% on June 9, 2009, then 2% on each April 1st thereafter through April 1, 2014, 68% on April 1, 2015 and 4% per year thereafter on each April 1st with final vesting on April 1, 2020. Settles on earlier of May 1, 2020, separation from service, or a change in control.

 

  5(d)

Vests 50% on September 16, 2018, 30% on September 16, 2019, and 20% on September 16, 2020.

Under our Amended and Restated Policy Regarding Equity Vesting and Exercise (“Retirement Policy Regarding Equity Vesting and Exercise”) and unless otherwise specified in the award agreement, RSUs and SARs under the LTIP will continue to become exercisable (if applicable) and payable following an employee’s retirement, as long as the retiree continues to comply with the policy. “Retirement” for this purpose means a voluntary termination of employment after the sum of the individual’s age and continuous service with us equals or exceeds 65, provided that they are at least age 55. Messrs. Thomas J. Pritzker, Hoplamazian, and Floyd are currently retirement eligible.

Option Exercises and Stock Vested

 

 

     SAR Awards

 

     Stock Awards

 

 

  Name

 

  

Number of Shares

Acquired on

Exercise(#)(1)

 

    

Value

Realized on

Exercise($)(1)

 

    

Number of Shares
Acquired on

Vesting(#)(1)

 

    

Value

Realized
on

Vesting(1)

 

 

 

Mark S. Hoplamazian

 

  

 

 

 

 

83,795

 

 

 

 

  

 

$

 

 

3,945,925

 

 

 

 

  

 

 

 

 

40,884

 

 

 

 

  

 

$

 

 

2,959,184

 

 

 

 

 

Joan Bottarini

 

        

 

 

 

 

2,957

 

 

 

 

  

 

$

 

 

223,419

 

 

 

 

 

H. Charles Floyd

 

        

 

 

 

 

26,176

 

 

 

 

  

 

$

 

 

1,898,486

 

 

 

 

 

Mark R. Vondrasek

 

                    

 

 

 

 

7,651

 

 

 

 

  

 

$

 

 

576,763

 

 

 

 

 

(1)

For each NEO listed above, shares of Class A common stock underlying vested RSUs were delivered upon vesting, except for Mr. Floyd where delivery of shares of Class A common stock underlying 3,069 vested RSUs was deferred until the earlier of May 1, 2020, Mr. Floyd’s termination of service, or a change in control.

 

38    Hyatt Hotels Corporation    2020 Proxy Statement


Table of Contents

Shares of Class A common stock underlying vested RSUs were delivered or deferred during 2019 as follows:

 

    Delivered Upon Vesting     Delivery Deferred  
  Name  

Number of

Shares(1)

    Closing
Price on
Vesting
Date
   

Date of

Vesting

   

Number of

Shares

   

Date of

Vesting

    Closing
Price on
Vesting
Date
   

Deferral

Period

 

 

Mark S. Hoplamazian

 

 

 

 

 

 

40,884

 

 

 

 

 

 

$

 

 

 72.38

 

 

 

 

 

 

 

 

 

March 16, 2019

 

 

 

 

       

 

Joan Bottarini

 

 

 

 

 

 

2,029

 

 

 

 

 

 

$

 

 

72.38

 

 

 

 

 

 

 

 

 

March 16, 2019

 

 

 

 

       
   

 

928

 

 

 

 

 

$

 

82.50

 

 

   

 

December 12, 2019

 

 

 

       

 

H. Charles Floyd

 

 

 

 

 

 

23,107

 

 

 

 

 

 

$

 

 

72.38

 

 

 

 

 

 

 

 

 

March 16, 2019

 

 

 

 

 

 

 

 

3,069

 

 

 

 

 

 

April 1, 2019

 

 

 

 

$

 

 73.64

 

 

 

 

 

 

 

Earlier of May 1, 2020,
termination of service or
a change in control

 

 



 

 

 

Mark R. Vondrasek

 

 

 

 

 

 

1,249

 

 

 

 

 

 

$

 

 

72.38

 

 

 

 

 

 

 

 

 

March 16, 2019

 

 

 

 

       
     

 

6,402

 

 

 

  $

 

75.97

 

 

 

   

 

September 16, 2019

 

 

 

                               

 

(1)

Ms. Bottarini had five awards vest in 2019. Four awards vested on March 16, 2019, while the fifth vested on December 12, 2019. Mr. Vondrasek had three awards vest in 2019. Two awards vested on March 16, 2019, while the third vested on September 16, 2019.

Shares of Class A common stock underlying vested RSUs with a deferred delivery period are also reflected in the “Non-Qualified Deferred Compensation Table.”

Non-Qualified Deferred Compensation Table

 

The table below sets forth certain information as of December 31, 2019, with respect to the non-qualified deferred compensation plans in which our NEOs participate.

 

  Name

 

  

Plan Name

 

    

Executive

Contributions

in Last Fiscal

Year(1)

 

    

Registrant

Contributions

in Last Fiscal

Year(2)

 

   

Aggregate

Earnings (Losses) in

Last Fiscal

Year

 

    

Aggregate

Withdrawals/

Distributions

 

    

Aggregate

Balance at

Last Fiscal

Year

End

 

 

 

Thomas J. Pritzker

 

  

 

 

 

 

 

DCP

 

 

 

 

 

 

  

 

$

 

 

 

431,313

 

 

 

 

 

 

  

 

$

 

 

 

12,000

 

 

 

 

 

 

 

 

$

 

 

 

20,089,634

 

 

 

 

 

 

  

 

$

 

 

 

 

 

 

 

 

 

   $

 

 

79,274,454

 

 

(3) 

 

 

 

Mark S. Hoplamazian

 

    

 

DCP

 

 

 

   $

 

518,360

 

 

 

   $

 

12,000

 

 

 

  $

 

985,777

 

 

 

   $

 

 

 

 

   $

 

6,970,103

 

(3) 

 

 

Joan Bottarini

 

    

 

DCP

 

 

 

   $

 

12,942

 

 

 

   $

 

16,000

 

 

 

  $

 

102,595

 

 

 

   $

 

 

 

 

   $

 

678,996

 

(3) 

 

 

H. Charles Floyd

 

    

 

DCP

 

 

 

   $

 

265,490

 

 

 

   $

 

12,000

 

 

 

  $

 

3,703,747

 

 

 

   $

 

 

 

 

   $

 

15,080,631

 

(3) 

 

    

 

RSUs

 

 

 

      $

 

226,001

 

(4) 

 

        $

 

6,607,859

 

(5) 

 

 

Mark R. Vondrasek

 

    

 

DCP

 

 

 

   $

 

0

 

 

 

   $

 

16,000

 

 

 

  $

 

1,908

 

 

 

   $

 

 

 

 

   $

 

17,908

 

(3) 

 

 

(1)

Includes amounts reflected under “All Other Compensation” in the Summary Compensation Table for 2019 for Messrs. Thomas J. Pritzker and Floyd and amounts reflected under “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table above for 2018 for Mr. Hoplamazian which was paid in 2019.

 

(2)

Registrant contributions are paid in February following the plan year. Registrant contributions were paid in February 2020, including Mr. Vondrasek’s registrant contribution of $15,500, and are not reflected in the Aggregate Balance at Last Fiscal Year End.

 

(3)

Of the total amounts shown in each NEO’s Aggregate DCP Balance through fiscal year 2019, the following amounts have been reported as “Salary,” “Bonus,” “Non-Equity Incentive Plan Compensation,” or “All Other Compensation” in the Summary Compensation Table (in 2019 and in previous years) for Mr. Thomas J. Pritzker: $7,488,363; Mr. Hoplamazian: $4,630,758; and Mr. Floyd: $1,525,236. For Ms. Bottarini and Mr. Vondrasek, $32,520 and $15,500 respectively, has been reported as “All Other Compensation” (in 2019 and in previous years).

 

(4)

Based on the fair market value (closing stock price) of our Class A common stock on the date of vesting.

 

(5)

Based on $89.71, the closing price of our Class A common stock on December 31, 2019.

Narrative to Non-Qualified Deferred Compensation Table

See description of the Deferred Compensation Plan in the section above in the CD&A section of this proxy statement titled “Employee Benefits — Retirement Programs — Deferred Compensation Plan.”

 

Hyatt Hotels Corporation    2020 Proxy Statement    39


Table of Contents

Potential Payments on Termination or Change in Control

Severance

The Severance and Change in Control Plan provides each of the Company’s NEOs with payments and benefits upon a termination of employment without “cause” (other than due to death or disability) or upon the NEO’s resignation from employment for “good reason,” in either case, within the three months prior to or 24 months following a “change in control” (each, as defined in the Severance and Change in Control Plan). All severance payments and benefits under the Severance and Change in Control Plan that are payable in connection with a change in control are “double trigger,” meaning that a NEO will not receive severance benefits in connection with a change in control unless the NEO also experiences a qualifying termination of service. We do not provide “single trigger” severance payments, equity acceleration, or benefits (i.e., “walk-away rights”) to our NEOs in connection with a change in control.

In the event of a termination of employment without cause (other than due to death or disability) which occurs outside of the 24-month period following a change in control, the NEO is entitled to the following payments and benefits:

 

 

if the NEO is (i) the Chairman or the President and Chief Executive Officer, cash severance equal to two times the sum of annual base salary and average annual cash bonus for the three fiscal years prior to the termination of employment (the “three-year average bonus”), or (ii) not the Chairman or the President and Chief Executive Officer, cash severance equal to one times the sum of annual base salary and three-year average bonus, subject to increase to two times the sum of annual base salary and three-year average bonus if a change in control occurs within three months following the NEO’s termination of employment, in each case, payable in equal installments over the applicable severance period; and

 

 

a cash amount equal to the difference between the COBRA premiums that would be applicable to the NEO and the amount the NEO would have paid as an active employee of the Company for the same coverage (the “COBRA benefit”), payable in equal installments over the applicable severance period.

In the event of a termination of employment without cause (other than due to death or disability) or for good reason, in each case, within the 24-month period following a change in control, a NEO is entitled to the following payments and benefits:

 

 

cash severance equal to two times the sum of annual base salary and target annual cash bonus, generally payable in equal installments over the severance period (however, if the change in control constitutes a change in control under applicable tax regulations, such cash severance will be paid in a lump sum);

 

 

a cash payment equal to the NEO’s target annual cash bonus, prorated based on the number of days elapsed during the applicable calendar year prior to the termination of employment; and

 

 

the COBRA benefit, payable in equal installments over the severance period.

Receipt of severance payments and benefits under the Severance and Change in Control Plan is contingent on the NEO’s timely execution and delivery to the Company of an effective release of claims.

We do not provide for tax reimbursement payments or gross-ups to our NEOs related changes in control.

For purposes of the Severance and Change in Control Plan:

 

 

“Cause” is defined by reference to the applicable NEO’s employment agreement or, if not so defined, “cause” means, whether or not such events are discovered or known by the Company at the time of the NEO’s termination: (I) engaging in illegal or unethical conduct which is or could reasonably be expected to be injurious to the business reputation of the Company; (ii) misconduct in the performance of the NEO’s duties, including, without limitation, refusal to carry out any proper direction by the Company or superior officers; neglect of duties; (iii) fraud, theft, embezzlement or comparable dishonest conduct; or (iv) any act that has or threatens to have a substantial adverse effect on the Company’s reputation, revenue or profitability. The board of directors (or its applicable designee) has full and final authority to determine conclusively whether “cause” exists pursuant to this definition.

 

 

“Good Reason” is defined by reference to the applicable NEO’s employment agreement or, if not so defined, “good reason” means, without the NEO’s written consent, (i) any material adverse change in the nature or status of the NEO’s duties, authority or responsibilities, including lines of reporting responsibility; (ii) a material reduction in the NEO’s base salary; (iii) a material relocation of the NEO’s principal place of employment; or (iv) any other action or inaction of the Company that would constitute a material breach by the Company of the material terms of the NEO’s employment, in each case, subject to customary notice and cure by the Company.

 

40    Hyatt Hotels Corporation    2020 Proxy Statement


Table of Contents

Equity Awards

Unless otherwise set forth in an applicable award agreement, outstanding SAR and RSU awards under our LTIP will fully vest if a participant’s employment is terminated by us without cause or by the participant with good reason, in either case, within 12 months following a change in control, provided such awards are assumed by a successor in the change in control. If awards are not assumed by a successor, the talent and compensation committee may in its discretion fully vest the awards upon the change in control.

In addition, upon a change in control outstanding PSUs will vest, with the number of PSUs vested and earned determined based on actual performance through the most recent fiscal quarter end (projected through the remainder of the performance period based on actual performance).

Outstanding SAR and RSU awards will fully vest if a participant’s employment is terminated by reason of death or disability. If a participant’s employment is terminated by reason of death or disability, PSUs will vest based on actual performance through the most recent fiscal quarter end (projected through the remainder of the performance period based on actual performance) pro-rated based on the number of months elapsed through the date of disability or death. If Messrs. Thomas J. Pritzker or Hoplamazian are terminated other than for cause, provided they execute a general release of claims and do not compete with us, following termination they will continue to earn their SARs and RSUs on the vesting dates set forth in their respective award agreements.

Messrs. Hoplamazian and Floyd are retirement eligible under our Retirement Policy Regarding Equity Vesting and Exercise, and as a result, their RSU and SAR awards under the LTIP will continue to become exercisable and payable following retirement, subject only to forfeiture for violating the retirement policy. Additionally, their PSUs will remain outstanding and eligible to vest based on actual performance through the end of the performance period, pro-rated based on the number of months in the performance period elapsed through the date of retirement (except that pro-rating will not apply if the executive provides at least one year’s advance notice of retirement).

Mr. Hoplamazian is eligible for accelerated vesting of some or all of the “tranches” of CEO PSUs granted to him in May 2019 upon certain terminations of service. If Mr. Hoplamazian’s employment is terminated (i) due to his death or disability, (ii) by us without cause or by him for good reason, in either case, on or after May 15, 2022 or on or within 12 months following a change in control, or (iii) due to his “qualifying retirement,” then (A) with respect to each tranche of CEO PSUs relating to performance periods for which the attainment of performance goals was finally determined on or prior to the date of such termination (each, a “Completed Tranche”), all of the CEO PSUs for each such Completed Tranche for which the Performance Component was satisfied shall immediately become fully vested and (B) with respect to each tranche that is not yet a Completed Tranche, all of the CEO PSUs for such tranche shall immediately become fully vested (without regard to the satisfaction of the Performance Component). For purposes of the CEO PSUs, “qualifying retirement” means Mr. Hoplamazian’s termination of service within 30 days after the talent and compensation committee has certified that an approved succession plan has been developed, is satisfactorily implemented and is in the Company’s best interest.

The following table summarizes the severance, the value of SARs, RSUs, PSUs (based on actual performance as of December 31, 2019), that would vest, and the value of other benefits that our NEOs would receive upon (i) retirement/voluntary termination; (ii) termination of employment by the Company without cause not in connection with a change in control; or (iii) termination of employment without cause or for good reason in connection with a change in control. The following assumptions were used in creating the table:

 

 

a stock price of $89.71 per share, which was the closing price of our Class A common stock on December 31, 2019; and

 

 

termination of employment as of December 31, 2019 (for the scenarios that include a termination of employment).

 

Hyatt Hotels Corporation    2020 Proxy Statement    41


Table of Contents

The amounts shown do not include payments of vested benefits under our tax qualified and non-qualified retirement and deferred compensation plans or the value of vested SARs, RSUs, and PSUs that vested prior to December 31, 2019.

 

  Item

 

  

Name

 

  

Retirement/

Voluntary

Termination

 

    

Termination of

Employment

by Company

Without
Cause

 

    

Change in Control

Termination of

Employment

Without Cause

or for Good
Reason

 

 

 

Cash Severance

  

 

Thomas J. Pritzker

     

 

$

 

1,151,333

 

 

  

 

$

 

1,151,333

 

 

   Mark S. Hoplamazian       $ 7,307,800      $ 6,781,500  
   Joan Bottarini       $ 861,133      $ 2,700,000  
   H. Charles Floyd       $ 1,693,167      $ 3,218,667  
  

Mark R. Vondrasek

 

      $

 

1,315,383

 

 

 

   $

 

2,613,333

 

 

 

 

Annual Incentive

(Year of Termination)

  

 

Thomas J. Pritzker

        
   Mark S. Hoplamazian    $ 1,860,200         $ 2,157,750  
   Joan Bottarini          $ 675,000  
   H. Charles Floyd    $ 693,700         $ 804,667  
  

Mark R. Vondrasek

 

         $

 

653,333

 

 

 

 

Equity Vesting

  

 

Thomas J. Pritzker

  

 

$

 

14,265,578

 

 

  

 

$

 

14,265,578

 

 

  

 

$

 

14,265,578

 

 

   Mark S. Hoplamazian    $ 35,083,294      $ 14,220,486      $ 42,306,558  
   Joan Bottarini          $ 2,207,065  
   H. Charles Floyd    $ 6,958,622         $ 8,636,862  
  

Mark R. Vondrasek

 

         $

 

3,838,173

 

 

 

 

Medical Benefits

  

 

Thomas J. Pritzker

     

 

$

 

18,561

 

 

  

 

$

 

18,561

 

 

   Mark S. Hoplamazian       $ 27,543      $ 27,543  
   Joan Bottarini       $ 13,771      $ 27,543  
   H. Charles Floyd       $ 13,771      $ 27,543  
  

Mark R. Vondrasek

 

      $

 

13,724

 

 

 

   $

 

27,447

 

 

 

 

Total

  

 

Thomas J. Pritzker

  

 

$

 

14,265,578

 

 

  

 

$

 

15,435,472

 

 

  

 

$

 

15,435,472

 

 

   Mark S. Hoplamazian    $ 36,943,494      $ 21,555,829      $ 51,273,351  
   Joan Bottarini    $ 0      $ 874,904      $ 5,609,608  
   H. Charles Floyd    $ 7,652,322      $ 1,706,938      $ 12,687,739  
    

Mark R. Vondrasek

 

   $

 

0

 

 

 

   $

 

1,329,107

 

 

 

   $

 

7,132,286

 

 

 

As described, the amounts shown in the table above under “Equity Vesting” in the “Change in Control Termination of Employment Without Cause or for Good Reason” column would be pro-rated based on the executive’s actual service period in the event of the executive’s death or disability. For Mr. Hoplamazian’s CEO PSUs, we have assumed for purposes of this disclosure that his retirement constitutes a “qualifying retirement.” For PSUs, we have assumed for purposes of this disclosure that amounts are pro-rated based on the number of months in the performance period elapsed through the date of retirement (noting that pro-rating will not apply if the executive provides at least one year’s advance notice of his or her retirement).

 

42    Hyatt Hotels Corporation    2020 Proxy Statement


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CEO Pay Ratio

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 ratio of the annual total compensation of our median employee to the annual total compensation of Mark S. Hoplamazian, our President and Chief Executive Officer (our “CEO”). We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements Item 402(u) of Regulation S-K.

For 2019, our last completed fiscal year:

 

 

the annual total compensation of the employee who represents our median compensated employee (other than our CEO) was $35,358; and

 

 

the annual total compensation of our CEO, as reported in the Summary Compensation Table included above in the CD&A section of this proxy statement, was $14,702,221.

Based on this information, for 2019, the annual total compensation of our CEO was approximately 416 times the median of the annual total compensation of all of our employees (other than the CEO).

Determining the Median Employee

Employee Population

We used our employee population data as of October 1, 2019 as the reference date for identifying our median employee. As of such date, our employee population consisted of approximately 55,000 individuals, with approximately 87% of these individuals located in the United States and approximately 5% of these individuals located in the Asia Pacific (ASPAC) region, and 4% in the Europe-Africa-Middle East/Southwest Asia (EAME/SWA) and Latin America, Caribbean and Canada regions. Hyatt acquired Two Roads Hospitality in November 2018 and because of this, we did not use the same median employee as last year. As of October 1, 2019 approximately 7,400 of the 55,000 employees are part of the Two Roads Hospitality brands. For purposes of the pay ratio calculation, our employee population consists of (i) in the United States, all full- and part-time employees at all owned, managed, leased and joint venture locations, offices and service centers and (ii) outside of the United States, all colleagues who serve at the leadership committee level or above at all locations, and all other full- and part-time employees at all owned and consolidated joint venture locations, offices and service centers. Seasonal and temporary employees employed as of that date were also included in that sample.

Methodology for Determining Our Median Employee

In 2019, to identify the median employee from our employee population, we used gross earnings as reflected in local payroll records. In identifying the median employee, we annualized the compensation of all full-time permanent employees who were new-hires in 2019 and we did not make any cost-of-living adjustments.

Earnings of our employees outside the U.S. were converted to U.S. dollars using the applicable average October 2019 exchange rates.

Compensation Measure and Annual Total Compensation of Median Employee

With respect to the annual total compensation of the median employee, we calculated such employee’s compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.

Annual Total Compensation of CEO

With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2019 Summary Compensation Table included above in the CD&A section of this proxy statement.

 

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Proposal 2 — Ratification of Appointment of the Independent Registered Public Accounting Firm

 

The audit committee of the board of directors has appointed Deloitte & Touche LLP (“D&T”) as our independent registered public accounting firm for the fiscal year ending December 31, 2020. D&T also served as Hyatt’s independent registered accounting firm for fiscal year 2019, and the services provided to us by D&T in fiscal year 2019 are described under “Independent Registered Public Accounting Firm’s Fees” below. Representatives of D&T will be present virtually at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.

Stockholder ratification of the selection of D&T as our independent registered public accounting firm is not required by our bylaws or otherwise. However, the board of directors is submitting the selection of D&T to the stockholders for ratification as a matter of good corporate governance practice. Furthermore, the audit committee will take the results of the stockholder vote regarding D&T’s appointment into consideration in future deliberations. Even if the selection is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Hyatt and our stockholders.

The board of directors unanimously recommends that the stockholders vote “FOR” Proposal No. 2 to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of Hyatt Hotels Corporation for the fiscal year ended December  31, 2020.

Independent Registered Public Accounting Firm’s Fees

 

In addition to retaining D&T to audit the Company’s consolidated financial statements, the audit committee retained D&T to provide various other services in fiscal years 2019 and 2018. The following table presents fees for professional services rendered by D&T for fiscal years 2019 and 2018. The audit committee approved all of the fees presented in the table below.

 

Type of Fees

  

FY 2019

    

FY 2018

 

Audit Fees(1)

  

$

5,682,772

 

  

$

6,338,011

 

Audit-Related Fees(2)

  

$

936,925

 

  

$

799,145

 

Tax Fees(3)

  

$

1,420,270

 

  

$

1,151,870

 

All Other Fees(4)

  

$

768,000

 

  

$

546,121

 

  

 

 

    

 

 

 

Total

  

$

8,807,967

 

  

$

8,835,147

 

The following are footnotes to the above table, in accordance with SEC definitions:

 

(1)

Audit fees represent D&T fees for professional services for the audit of the Company’s consolidated financial statements included in our Annual Reports on Form 10-K for the fiscal years ended December 31, 2019 and December 31, 2018 filed with the SEC, review of quarterly financial statements, accounting consultation and other attest services that are typically performed by the independent public accountant, and services that are provided by D&T in connection with statutory and regulatory filings.

 

(2)

Audit-related fees consist principally of fees for audits required under agreements with our hotels owners.

 

(3)

Tax fees are fees for tax compliance, tax advice and tax planning.

 

(4)

All other fees are fees billed by D&T to Hyatt for any services not included in the first three categories. The 2019 and 2018 fees were for permitted advisory services.

 

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Policy on Audit Committee Preapproval of Audit and Permissible Nonaudit Services of the Independent Registered Public Accounting Firm

 

The audit committee has adopted a policy requiring that all audit, audit-related and non-audit services provided by the independent auditor be pre-approved by the audit committee. The policy also requires additional approval of any engagements that were previously approved but are anticipated to exceed pre-approved fee levels. The policy permits the audit committee chair to pre-approve principal independent auditor services where the Company deems it necessary or advisable that such services commence prior to the next regularly scheduled meeting (provided that the audit committee chair must report to the full audit committee on any pre-approval determinations). All services provided to us by D&T for fiscal years 2019 and 2018 were pre-approved by the audit committee. D&T may only perform non-prohibited non-audit services that have been specifically approved in advance by the audit committee. In addition, before the audit committee will consider granting its approval, the Company’s management must have determined that such specific non-prohibited non-audit services can be best performed by D&T based on its in-depth knowledge of our business, processes and policies. The audit committee, as part of its approval process, considers the potential impact of any proposed work on the independent auditors’ independence.

The audit committee has adopted a policy that prohibits our independent auditors from providing:

 

 

bookkeeping or other services related to the accounting records or financial statements of the Company;

 

 

financial information systems design and implementation services;

 

 

appraisal or valuation services, fairness opinions or contribution-in-kind reports;

 

 

actuarial services;

 

 

internal audit outsourcing services;

 

 

management functions or human resources services;

 

 

broker or dealer, investment adviser or investment banking services;

 

 

legal services and expert services unrelated to the audit; and

 

 

any other service that the Public Company Accounting Oversight Board (the “PCAOB”) or the SEC determines, by regulation, is impermissible.

 

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS1

The audit committee reviews the Company’s financial reporting process on behalf of the board of directors. Management has the primary responsibility for the financial statements, the reporting process and maintaining an effective system of internal controls over financial reporting. The Company’s independent auditors are engaged to audit and express opinions on the conformity of the Company’s financial statements to United States generally accepted accounting principles.

In addition to fulfilling its oversight responsibilities as set forth in its charter and further described above in the section titled “Corporate Governance — Committees of the Board of Directors — Audit Committee,” the audit committee has done the following things:

 

 

Prior to the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, reviewed and discussed with management and D&T the Company’s audited consolidated financial statements.

 

 

Discussed with D&T the matters required to be discussed by Auditing Standard No. 1301 (Communications with Audit Committees), Auditing Standard No. 3101 related to the requirement for auditors to communicate critical audit matters in auditor reports, and any other matters required to be communicated to the committee by D&T under auditing standards established from time to time by the PCAOB or SEC rules and regulations.

 

 

Evaluated D&T’s qualifications, performance and independence (consistent with SEC requirements), which included the receipt and review of the written disclosures and the letter from D&T required by applicable requirements of the PCAOB regarding D&T’s communications with the audit committee concerning independence and discussions with D&T regarding its independence.

Based on the reviews and discussions with management and D&T cited above, including the review of D&T’s disclosures and letter to the audit committee and review of the representations of management and the reports of D&T, the audit committee recommended to the board of directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC.

Audit Committee of the Board of Directors

Cary D. McMillan, Chairman

Paul D. Ballew

Michael A. Rocca

Richard C. Tuttle

James H. Wooten, Jr.

 

1 

This report is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any Hyatt filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.

 

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FOURTH AMENDED AND RESTATED HYATT HOTELS CORPORATION LONG-TERM INCENTIVE PLAN

Proposal 3 — Approval of Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan

 

We originally adopted the Hyatt Hotels Corporation Long-Term Incentive Plan (the “Original LTIP”) as a means of assisting the Company in attracting and retaining qualified non-employee directors, executives, and other key employees and to promote the success of the Company by providing certain non-employee directors, executives, and other key employees of the Company with a shared interest in increasing the value of the Company and sustaining its growth. The Original LTIP was most recently amended and restated effective December 15, 2015 in the form of the Third Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan (the “2015 LTIP”). The 2015 LTIP was subsequently amended effective March 21, 2018 by the First Amendment to the Third Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan (as so amended, the “Existing LTIP”).

We are now requesting that our stockholders vote in favor of approving the Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan (the “2020 LTIP”) to increase the number of shares available under the 2020 LTIP for awards and to implement “fungible” share counting to maximize the efficiency of awards under the 2020 Plan in order to allow us to continue providing equity compensation to employees and members of our board of directors as a competitive compensation practice and to align the interests of our employees and board members with our stockholders. In addition, we are proposing to clarify certain existing provisions and make certain updates to reflect current best practices and applicable law. The 2020 LTIP was approved by our board of directors on March 25, 2020, subject to and effective upon stockholder approval. If the stockholders do not approve the 2020 LTIP, then the 2020 LTIP will not become effective and the Existing LTIP will continue in effect with the current share limit set forth in the Existing LTIP. Because certain of our directors and executive officers may be eligible to receive awards under the 2020 LTIP, such directors and executive officers may be considered to have an interest in this proposal.

A summary of the 2020 LTIP appears below. This summary is qualified in its entirety by the text of the 2020 LTIP, which is included as Appendix A to this proxy statement. The following is an overview of the key changes and clarifications to the Existing LTIP contained in the 2020 LTIP:

 

 

Increase the 2020 LTIP’s share limit by 8,000,000 shares and establish a fungible share counting mechanism to more accurately reflect the cost of awards issued under the 2020 LTIP and debit the share reserve accordingly;

 

 

Remove provisions intended to enable awards to qualify as “performance-based compensation” under Section 162(m) of the Code due to changes in law pursuant to the Tax Cuts and Jobs Act of 2017 eliminating this concept;

 

 

Limit the value of compensation paid (including compensation paid in the form of awards under the 2020 LTIP) to non-employee directors in any calendar year to $750,000;

 

 

Permit tax withholding up to the maximum statutory rate under the 2020 LTIP to provide better flexibility for employees to satisfy applicable tax obligations;

 

 

Extend the term of the 2020 LTIP by 10 years until the 10th anniversary of the date on which the 2020 LTIP is approved by our stockholders;

 

 

Limit payment of dividend equivalents until vesting of the underlying award with respect to all awards (broadening the prior limitation applicable to performance-vesting awards); and

 

 

Add clarifying changes to emphasize each of the following existing provisions: (i) liberal share recycling is not permitted (specifically, shares withheld to satisfy exercise price and tax withholding obligations will not be added back to the pool of shares available for grant), (ii) reload stock option grants are not permitted, and (iii) awards are subject to our stock ownership guidelines and anti-hedging/pledging policies.

As discussed above, equity compensation is a key component of our total rewards program and is the mechanism pursuant to which we provide long-term incentives to our employees. We believe that equity incentives are critical to attracting and retaining the most talented employees. As of March 25, 2020, the Existing LTIP had approximately 847,100 shares available for future awards. If the 2020 LTIP is not approved, we estimate that we will have enough shares remaining under the Existing LTIP to continue making awards for less than one year, assuming we continue to grant awards consistent with our historical usage and expected practices, and noting that future circumstances may require us to make changes to our expected practices. By increasing our share reserve and establishing a fungible share counting mechanic (as discussed in more detail below), we expect to be able to continue to use equity awards to attract, retain, and motivate employees for approximately the next four to five years.

 

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Significant Historical Award Information

Historically, we have granted predominantly SARs, RSUs, PSUs, and performance-vested restricted shares. The table below presents the number of shares that were subject to the various outstanding equity awards as of March 25, 2020:

 

 

Number of SARs

 

 

 

 

 

 

5,032,238

 

 

 

 

 

Weighted-average base price

 

 

 

 

 

 

$53.97

 

 

 

 

 

Weighted-average remaining term (years)

 

 

 

 

 

 

6.7

 

 

 

 

 

Number of RSUs(1)

 

 

 

 

 

 

994,726

 

 

 

 

 

Number of PSUs

 

 

 

 

 

 

198,184

 

 

 

 

 

(1)

Excludes 33,858 RSUs that are settled in cash and includes restricted stock units with performance requirements.

As of March 25, 2020, we had 101,033,327 shares of our Class A Common stock issued and outstanding. The closing price of a share of our Class A common stock on the NYSE on March 25, 2020 was $51.86.

The following table shows how we have used equity compensation over the last three years:

 

Key Equity Metrics    2019      2018      2017  

Percentage of equity awards granted to NEOs

     61.2      58.3      51.3

Equity burn rate

     1.1      0.8      1.0

Dilution

     7.4      8.0      7.8

Overhang

     4.8      4.3      4.2

Our burn rate in 2020 is higher than in recent years given the market volatility associated with the coronavirus (COVID-19) pandemic. However, we anticipate that future years will return to consistent rates with the burn rates above.

All full-time employees are eligible to receive equity awards. At present, approximately 400 employees, 0 consultants and 9 non-employee directors are eligible to receive awards under the Existing LTIP. If approved, the same number of employees, consultants and non-employee directors would be eligible for grants under the 2020 LTIP. Currently 495 current and former employees, 0 consultants and all 9 non-employee directors hold awards granted under the Original and Existing LTIPs.

As noted above, we included a fungible share counting mechanic in the 2020 LTIP for purposes of administering the 2020 LTIP’s share limit. Fungible share counting functions (through a fungible unit limit, discussed below) to debit the share limit more with respect to “full value” awards than it does with respect to “non-full value” awards. Full value awards, including restricted stock, RSUs and other share-denominated awards for which no payment is required, count more against the limit because they confer the entire value of the shares underlying such awards and are thus more dilutive to stockholder value. By contrast, non-full value awards, including stock options, SARs and similar awards, confer only the post-grant appreciation of the underlying shares and are thus less dilutive to stockholder value. Specifically, full value awards count as two fungible units for every one share of common stock subject to the award, while non-full value awards count as one fungible unit for every one share of common stock subject to the award. Inclusion of a fungible share counting mechanic enables us to use our share reserve more efficiently.

Under fungible share counting, based on an aggregate of 8,847,100 shares available for grant of new awards under the 2020 LTIP if the proposed share increase is approved by our stockholders, a maximum of 4,423,550 shares could be issued pursuant to awards under the 2020 LTIP following the effective date if all new awards were full value awards, while awards covering 8,847,100 shares (i.e., the entire share limit that remains available) could be issued if all new awards were non-full value awards. Based on the closing price of the Company’s common shares as reported by the NYSE on March 25, 2020 of $51.86, the maximum aggregate market value of those 8,847,100 common shares was $458,810,606. Though the award types count differently against the share limit, in no event will the actual number of shares issued under the 2020 LTIP exceed the share limit.

In light of the factors described above, the Board believes the share limit represents reasonable potential equity dilution and provides a significant incentive for officers, employees, non-employee directors and consultants to increase the value of the Company for all stockholders.

Summary of the 2020 LTIP

A summary of the principal provisions of the 2020 LTIP is set forth below. The summary is qualified by reference to the full text of the 2020 LTIP, which is attached as Appendix A to this proxy statement.

 

48    Hyatt Hotels Corporation    2020 Proxy Statement


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The 2020 LTIP was approved by our board of directors on the recommendation of our talent and compensation committee on March 25, 2020, subject to and effective upon approval by our stockholders. The 2020 LTIP provides for the grant of options (both nonqualified and incentive stock options), SARs, restricted stock, RSUs, performance awards, dividend equivalents, stock payments, and deferred stock (collectively, “Awards”).

Share Limit; Award Limits

Under the 2020 LTIP, the Company may issue up to a total of 8,847,100 shares in respect of awards (including incentive stock options (“ISOs”)) (representing 847,100 shares that remain available for issuance under the Existing LTIP plus the increase from the Existing LTIP’s share limit of 8,000,000 shares). As discussed above, the 2020 LTIP includes a fungible share counting mechanic pursuant to which full value awards count against a fungible unit limit of two fungible units per share subject to the award, while non-full value awards count against the fungible unit limit as one fungible unit per share subject to the award. Accordingly, if all new awards were to be issued as full value awards, the shares that remain available under the increased share limit would be exhausted after issuance of awards covering only 4,423,550 actual shares (i.e., the point at which the fungible unit limit is reached by these new awards due to the fact that full value awards debit the fungible unit limit at a higher rate). By contrast, if all new awards were issued as non-full value awards, the fungible unit limit would be reached by such awards at the same time as the specified share limit was reached by the shares underlying such awards, meaning that all shares subject to the share limit could be used for new awards.

The 2020 LTIP also contains specific limits on the level of awards that may be issued to certain participants, as follows:

 

 

no more than 1,000,000 shares of our Class A common stock may be granted in any calendar year to any one employee;

 

 

no employee may receive cash-based Awards with a value exceeding $5,000,000 in any one calendar year; and

 

 

no non-employee director may receive compensation for any calendar year in excess of $750,000.

The shares of our Class A common stock available under the 2020 LTIP may be either previously authorized and unissued shares or treasury shares. The 2020 LTIP provides for appropriate adjustments in the number and kind of shares subject to the 2020 LTIP and to outstanding Awards thereunder in the event of a corporate event or transaction, including any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares or the share price of our stock.

If any shares subject to an Award under the 2020 LTIP terminate, expire, are settled in cash in lieu of shares or lapse for any reason without the delivery of shares, then the shares subject to such Award under the 2020 LTIP shall be available again for grant under the plan and shall be added back to the fungible unit limit in the same manner as such Award was (or would have been if granted after the effective date of the 2020 LTIP) debited from the fungible unit limit upon grant. In addition, shares repurchased by the Company at the same price paid by the participant so that such shares are returned to the Company will be available for future grants under the 2020 LTIP. To the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards or an entity acquired by the Company or any of its subsidiaries will not be counted against the shares available for grant under the 2020 LTIP. Shares tendered or withheld to satisfy the exercise price of an option granted under the 2020 Plan and any shares tendered or withheld to satisfy any tax withholding obligation with respect to Awards granted under the 2020 Plan will not again be available for grant under the 2020 LTIP.

On March 25, 2020, the closing price of a share of our Class A common stock on the NYSE was $51.86.

Administration

The 2020 LTIP is generally administered by our talent and compensation committee or any subcommittee thereof; provided that a subcommittee of our board of directors may also function as the talent and compensation committee (the “Administrator”). The Administrator is authorized to determine the individuals who will receive Awards (the “participants”), the terms and conditions of such Awards, the types of Awards to be granted, the number of shares to be subject to each Award, the price of the Awards granted, any performance criteria, any reload provisions, payment terms, payment method, and the expiration date applicable to each Award. The Administrator is also authorized to establish, adopt or revise rules relating to the administration of the 2020 LTIP. The Administrator may delegate its authority to grant or amend Awards or take other administrative actions with respect to participants other than senior executive officers subject to Section 16 of the Exchange Act or the officers to whom the authority to grant or amend Awards has been delegated.

 

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Amendment and Termination

The Administrator or the board of directors may terminate, amend, suspend or modify the 2020 LTIP at any time; provided, however, that stockholder approval will be required for any amendment to increase the number of shares available under the 2020 LTIP or to decrease the exercise price or any outstanding option or SAR granted under the 2020 LTIP. In no event may an Award be granted or awarded during any period of suspension or termination of the 2020 LTIP. The 2020 LTIP will expire and no further Awards may be granted after May 20, 2030, the tenth anniversary of its approval by our stockholders.

Eligibility

Awards under the 2020 LTIP may be granted to individuals who are our employees, consultants or our non-employee directors. However, options which are intended to qualify as ISOs may only be granted to employees.

Awards

The following briefly describes the principal features of the various Awards that may be granted under the 2020 LTIP.

Options — Options provide for the right to purchase our Class A common stock at a specified price, and usually will become exercisable in the discretion of the Administrator in one or more installments after the grant date. The option exercise price may be paid in:

 

 

cash;

 

 

check;

 

 

shares of our Class A common stock (including shares issuable pursuant to the exercise of an Award or shares which have been held by the participant for such period required by the Administrator to avoid any adverse accounting consequences);

 

 

broker assisted cash-less exercise; or

 

 

such other property acceptable to the Administrator.

Options may take two forms, non-statutory options (“NSOs”) and ISOs. NSOs may be granted for any term specified by the Administrator, but shall not exceed ten years. ISOs will be designed to comply with the provisions of the Code and will be subject to certain restrictions contained in the Code in order to qualify as ISOs. Among such restrictions, ISOs must:

 

 

have an exercise price not less than the fair market value of our Class A common stock on the date of grant, or if granted to certain individuals who own or are deemed to own at least 10% of the total combined voting power of all of our classes of stock (“10% stockholders”), then such exercise price may not be less than 110% of the fair market value of our Class A common stock on the date of grant;

 

 

be granted only to our employees;

 

 

expire within a specified time following the option holder’s termination of employment;

 

 

be exercised within ten years after the date of grant, or with respect to 10% stockholders, no more than five years after the date of grant; and

 

 

not be exercisable for the first time for shares of our Class A common stock with an aggregate fair market value in excess of $100,000, determined based on the exercise price.

No ISO may be granted under the 2020 LTIP after ten years from the date the 2020 LTIP is approved by our stockholders.

Restricted Stock — A restricted stock award is the grant of shares of our Class A common stock at a price determined by the Administrator (which price shall be no less than the par value of such shares) that is nontransferable and, unless otherwise determined by the Administrator at the time of award, may be forfeited upon termination of employment or service during a restricted period. Participants will have all rights as a stockholder, including the right to vote the shares of restricted stock and receive dividends on such shares, unless otherwise provided by the Administrator, in its sole discretion. Restricted stock granted to employees will vest according to the terms of each individual Award agreement, as determined by the Administrator.

Stock Appreciation Rights — SARs provide for the payment to the holder based upon increases in the price of our Class A common stock over a set base price. SARs may be granted in connection with stock options or other Awards

 

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or separately. The term and conditions of each SAR, including the period during which a vested SAR may be exercised, is set by the Administrator. Payment for SARs will be made in shares of our Class A common stock unless, due to the occurrence of unusual events, the Administrator determines that such payment should be made in cash.

Restricted Stock Units — Restricted stock units represent the right to receive shares of our Class A common stock at a specified date in the future, subject to forfeiture of such right. If the restricted stock unit has not been forfeited, then on the date specified in the Award agreement we shall deliver to the holder of the restricted stock unit, unrestricted shares of our Class A common stock which will be freely transferable. The Administrator will specify the vesting requirements, and other terms and conditions of such restricted stock units, in each Award agreement.

Dividend Equivalents — Dividend equivalents represent the value of the dividends per share of our Class A common stock we pay, calculated with reference to the number of shares covered by an Award (other than a dividend equivalent award) held by the participant. These may be paid in cash or stock. Dividend Equivalents paid in cash do not count against the share and award limits under the 2020 LTIP. Payments in respect of dividend equivalents linked to another Award will only be paid to a participant if and at such time as the underlying Award vests.

Performance Awards — Performance awards are denominated in cash, shares of our Class A common stock, or both, and are linked to the satisfaction of performance criteria established by the Administrator. Performance criteria on which the awards will be based may include, but are not limited to, the following: earnings (either before or after one or more of the following: interest, taxes, depreciation and amortization), economic value-added (as determined by the talent and compensation committee), sales or revenue, net income (either before or after taxes), cash flow (including, but not limited to, operating cash flow and free cash flow), return on capital, return on invested capital, return on assets, return on stockholders’ equity, stockholder return, return on sales, gross or net profit, costs, funds from operations, expenses, productivity, operating margin, operating efficiency, customer satisfaction, working capital, earnings per share, price per share of common stock, market share, chain results, gross operating profit, capital development, implementation or completion of critical projects, branding, organizational or succession planning, management or licensing fee growth, guest satisfaction top box scores, Net Promoter Score, net rooms growth, RevPAR (revenue per available room), management fees, and growth in hotels, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.

Stock Payments — Payments to participants of bonuses or other compensation under the 2020 LTIP may be made in the form of our Class A common stock.

Deferred Stock — Deferred stock typically is awarded without payment of consideration and is subject to vesting conditions, including satisfaction of performance criteria. Like restricted stock, deferred stock may not be sold, or otherwise transferred until the vesting conditions are removed or expire. Unlike restricted stock, deferred stock is not actually issued until the deferred stock award has vested. Recipients of deferred stock also will have no voting or dividend rights prior to the time when the vesting conditions are met and the underlying Class A common stock is delivered.

Change in Control

In connection with a change in control, all outstanding Awards will be assumed or an equivalent award substituted by the successor corporation. If an Award is assumed or substituted for an equivalent Award and a participant’s service is terminated upon or within 12 months following the change in control, then such participant will become fully vested in such assumed or substituted Award. In the event the outstanding Awards are not assumed or substituted, then the Administrator may cause all such Awards to become fully exercisable immediately prior to the change in control and all forfeiture restrictions on such Awards to lapse.

Adjustments upon Certain Events

In the event of a stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or other similar changes affecting the shares or share price of Company stock, the Administrator shall make equitable adjustments to reflect changes with respect to (i) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria), (ii) the number and kind of shares of Class A common stock (or other securities or property) subject to an Award, (iii) the aggregate number and kind of shares that may be issued under the 2020 LTIP (including the maximum number of shares of Class A common stock and the limits on the amount of awards to employees and non-employee directors), and (iv) the grant or exercise price per share for any outstanding Awards.

 

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In addition, upon such events the Administrator may provide for (i) the termination of any Awards in exchange for cash equal to the amount the participant would otherwise be entitled to receive if he or she had exercised the Award, (ii) the full vesting, exercisability or payment of any Award, (iii) the assumption of such Award by any successor, (iv) the replacement of such Award with other rights or property, (v) the adjustment of the number and type of shares and/or the terms and conditions of the Awards which may be granted in the future, or (vi) the result that Awards cannot vest, be exercised or become payable after such event.

Awards Not Transferable

Generally the Awards may not be sold, pledged, assigned or otherwise transferred other than by will or by laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a domestic relations order, as defined in the Code. The Administrator may allow Awards other than ISOs to be transferred for estate or tax planning purposes to members of the holder’s family, charitable institutions or trusts for the benefit of family members.

Prohibition on Repricing

The 2020 LTIP prohibits the Administrator from repricing options and SARs without the approval of stockholders, including a repricing accomplished through the cancellation of an option or SAR in exchange for cash or another award when the exercise price of the option or the base measurement price of the SAR exceeds the current fair market value of the Class A common stock subject to such option or SAR.

Claw-back

The 2020 LTIP allows the Administrator to subject Awards under the 2020 LTIP to rights of forfeiture and recovery in the event that the participant has a termination of service prior to a specified date or within a specified period following receipt or exercise of an Award, competes with the Company or acts in a manner inimical, contrary or harmful to the interests of the Company, or is otherwise terminated for cause. In addition, all Awards (including any proceeds, gains or other economic benefit actually or constructively received) are subject to the provisions of any claw-back policy implemented by the Company, including the Company’s compensation recovery policy.

Miscellaneous

As a condition to the issuance or delivery of shares of Class A common stock or payment of other compensation pursuant to the exercise or lapse of restrictions on any Award, the Company has the authority to require participants to discharge all applicable withholding tax obligations. Shares held by or to be issued to a participant may also be used to discharge tax withholding obligations, subject to the discretion of the Administrator to disapprove of such use.

U.S. Federal Income Tax Consequences

The tax consequences of the 2020 LTIP under current U.S. federal law are summarized in the following discussion. This discussion is limited to the general tax principles applicable to the 2020 LTIP for U.S. taxpayers, and is intended for general information only. State, local or foreign taxes are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The tax information summarized is not tax advice.

Nonqualified Stock Options — For U.S. federal income tax purposes, an optionee generally will not recognize taxable income at the time a non-qualified stock option is granted under the 2020 LTIP. The optionee will recognize ordinary income, and the Company will be entitled to a deduction, upon the exercise of a non-qualified stock option. The amount of income recognized (and the amount generally deductible by the Company) generally will be equal to the excess, if any, of the fair market value of the shares at the time of exercise over the aggregate exercise price paid for the shares, regardless of whether the exercise price is paid in cash, shares or other property. An optionee’s basis for the stock for purposes of determining his or her gain or loss upon a subsequent disposition of the shares generally will be the fair market value of the stock on the date of exercise of the non-qualified stock option, and any subsequent gain or loss will generally be taxable as capital gain or loss.

Incentive Stock Options — An optionee generally will not recognize taxable income either at the time an incentive stock option is granted or when it is exercised. However, the amount by which the fair market value of the shares at the time of exercise exceeds the exercise price will be an item of tax preference to the optionee for purposes of alternative minimum tax. Generally, upon the sale or other taxable disposition of the shares acquired upon exercise of an incentive stock option, the optionee will recognize taxable income. If shares acquired upon the exercise of an incentive stock option are held for the longer of two years from the date of grant or one year from the date of exercise, the gain or loss

 

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(in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction. If this holding period is not met and the stock is sold for a gain, then the difference between the option price and the fair market value of the stock on the date of exercise will be taxed as ordinary income and any gain over that will be eligible for long or short term capital gain treatment. If the holding period is not met and the shares are disposed of for less than the fair market value on the date of exercise, then the amount of ordinary income is limited to the excess, if any, of the amount realized over the exercise price paid. The Company generally will be entitled to a deduction in the amount of any ordinary income recognized by the optionee.

Stock Appreciation Rights — No taxable income is generally recognized upon the receipt of a SAR. Upon exercise of a SAR, the cash or the fair market value of the shares received generally will be taxable as ordinary income in the year of such exercise. The Company generally will be entitled to a compensation deduction for the same amount which the recipient recognizes as ordinary income.

Restricted Stock — A participant to whom restricted stock is issued generally will not recognize taxable income upon such issuance and the Company generally will not then be entitled to a deduction, unless an election is made by the participant under Section 83(b) of the Code. However, when restrictions on shares of restricted stock lapse, such that the shares are no longer subject to a substantial risk of forfeiture, the participant generally will recognize ordinary income and the Company generally will be entitled to a deduction for an amount equal to the excess of the fair market value of the shares on the date such restrictions lapse over the purchase price thereof. If an election is made under Section 83(b) of the Code, then the participant generally will recognize ordinary income on the date of issuance equal to the excess, if any, of the fair market value of the shares on that date over the purchase price therefor and the Company will be entitled to a deduction for the same amount.

Restricted Stock Unit — A participant will generally not recognize taxable income upon the grant of a restricted stock unit. However, when the shares are delivered to the participant, the value of such shares at that time will be taxable to the participant as ordinary income. Generally, the Company will be entitled to a deduction for an amount equal to the amount of ordinary income recognized by the participant.

Deferred Stock — A participant will generally not recognize taxable income upon the grant of deferred stock. However, when the shares are delivered to the participant, the value of such shares at that time will be taxable to the participant as ordinary income. Generally, the Company will be entitled to a deduction for an amount equal to the amount of ordinary income recognized by the participant.

Stock Payments — A participant will recognize taxable ordinary income on the fair market value of the stock delivered as payment of bonuses or other compensation under the Plan and generally the Company will be entitled to a corresponding deduction.

Performance Awards — A participant who has been granted a performance award (either performance unit or stock) generally will not recognize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. When an award is paid, whether in cash or shares, the participant generally will recognize ordinary income, and the Company will be entitled to a corresponding deduction.

Code Section 409A — Certain Awards under the 2020 LTIP, depending in part on particular Award terms and conditions, may be considered non-qualified deferred compensation subject to the requirements of Code Section 409A. If the terms of such Awards do not meet the requirements of Code Section 409A, then the violation may result in an additional 20% tax obligation, plus penalties and interest for such participant.

New Plan Benefits

Except with respect to equity awards that may be granted to our non-employee directors pursuant to our non-employee director compensation program described above under “Compensation of Non-Employee Directors,” including the equity awards that will be awarded to each non-employee director serving on our board of directors on the date of our Annual Meeting, the number of Awards that our named executive officers, directors, other executive officers and other employees may receive under the 2020 LTIP is in the discretion of the Administrator. Therefore, it is not possible to determine the future benefits that will be received by these participants under the 2020 LTIP, or the benefits that would have been received by such participants if the 2020 LTIP had been in effect in the year ended December 31, 2019.

 

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Plan Benefits

The following table shows the number of shares of our common stock subject to equity awards under the Existing LTIP since its inception through March 25, 2020 for certain individuals:

 

  Name and Position    Number of
SARs
     Number of
RSUs(1)
     Number of
PSUs(2)
     Number of
Performance
Restricted
Shares(2)
     Number of
Common
Shares(3)
 

Thomas J. Pritzker, Executive Chairman of the Board

     2,503,650                              

Mark S. Hoplamazian, President and Chief Executive Officer

     1,803,232        498,308        202,600        40,324         

Joan Bottarini, Executive Vice President, Chief Financial Officer

     78,601        46,184        7,813                

H. Charles Floyd, Executive Vice President, Global President of Operations

     702,641        341,536        53,037        17,025         

Mark R. Vondrasek, Executive Vice President, Chief Commercial Officer

     124,490        47,646        13,243                

All current executive officers as a group

     5,779,528        1,124,725        333,679        57,349         

All current non-executive directors as a group

            123,674                      115,479  

Nominees for election as directors

     N/A        N/A        N/A        N/A        N/A  

Associates of any such directors, executive officers or nominees

     N/A        N/A        N/A        N/A        N/A  

Each other person who received or is to receive 5% of such options, warrant or rights

     N/A        N/A        N/A        N/A        N/A  

Employees other than executive officers as a group

     3,456,648        4,622,034        34,451        43,625         

 

(1)

Includes restricted stock units with performance requirements.

 

(2)

With respect to completed performance periods, reflects shares earned. With respect to ongoing performance periods, reflects target PSUs granted.

 

(3)

Represents common shares issued to directors that have elected to receive such shares in lieu of cash retainer(s).

Securities Authorized for Issuance Under Equity Compensation Plans

We have two compensation plans approved by our stockholders under which our equity securities are authorized for issuance to employees and directors for goods or services, the Existing LTIP and the Existing ESPP. The following table provides certain information about these equity compensation plans as of March 25, 2020:

 

Plan Category    Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
    Weighted-
Average Exercise
Price of
Outstanding
Options
    Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in the First
Column)
 

Equity Compensation Plans Approved by Security Holders

     6,679,585 (1)    $ 53.97 (2)      1,186,598 (3) 

Equity Compensation Plans Not Approved by Security Holders

     —         —         1,469,195 (4) 

Total

     6,679,585     $ 53.97       2,655,793  

 

(1)

Includes (a) SARs covering 5,032,238 shares of Class A common stock issued under the Existing LTIP with a weighted-average exercise price of $53.97 (calculated on a one-for-one basis), (b) 1,647,347 shares of Class A common stock to be issued or retained, as applicable, upon the vesting of RSUs and PSUs issued under the Existing LTIP for which no exercise price will be paid (assuming maximum payout of PSU awards), and (c) 0 shares of Class A common stock issued pursuant to the Existing ESPP in connection with the January 2020 to March 25, 2020 purchase period (for which shares will be issued in April and May 2020). As of March 25, 2020, the total intrinsic value of nonvested PSUs if target performance is achieved was $10 million.

 

(2)

The calculation of weighted-average exercise price includes only outstanding SARs.

 

(3)

Includes (a) 847,100 shares of Class A common stock that remain available for issuance under the Existing LTIP and (b) 339,498 shares of Class A common stock that remain available for issuance pursuant to the Existing ESPP.

 

(4)

Includes (a) 1,169,195 shares of Class A common stock that remain available for issuance pursuant to the DCP and (b) 300,000 shares of Class A common stock that remain available for issuance pursuant to the Hyatt International Hotels Retirement Plan (commonly known as the Field Retirement Plan) (“FRP”).

The DCP provides eligible participants employed in the United States with the opportunity to defer a portion of their compensation and receive employer contributions. Compensation deferred under the DCP as well as employer contributions, if any, are credited to a participant’s account under the DCP and are held in a rabbi trust on behalf of the participants. A participant may direct the investment of funds in such participant’s account in certain investment funds. In 2010, certain participants were offered a one-time election to have up to 15% of certain fully vested and

 

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nonforfeitable accounts invested in Class A common stock (with the account balances calculated as of June 1, 2010). In connection with such elections, 30,805 shares of Class A common stock were issued to the trustee of the DCP. The number of shares of Class A common stock to be allocated to each electing participant’s account was determined by dividing the dollar amount of such participant’s elected percentage of such participant’s account balance by the closing price of Class A common stock on June 2, 2010. The shares of Class A common stock held in such accounts are held in the trust on behalf of the participant until distributed upon termination of employment. Participants’ accounts under the DCP generally are distributed in cash. However, the portion of the participant’s account invested in Class A common stock will be distributed in shares of Class A common stock. The material terms of the FRP are the same as the material terms of the DCP. Participants in the FRP are employees located outside of the United States. Participants in the FRP have not been given an election to invest their accounts in Class A common stock due to international securities law considerations. However, the board of directors has reserved 300,000 shares of Class A common stock for issuance under the FRP in the event that participants in the FRP are given such an election in the future.

The board of directors unanimously recommends that the stockholders vote FOR Proposal No. 3 to approve the Fourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan.

 

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SECOND AMENDED AND RESTATED HYATT HOTELS CORPORATION EMPLOYEE STOCK PURCHASE PLAN

Proposal 4 — Approval of Second Amended and Restated Hyatt Hotels Corporation Employee Stock Purchase Plan

 

We originally adopted the Hyatt Hotels Corporation Employee Stock Purchase Plan (the “Original ESPP”), effective July 1, 2010, for the purpose of providing employees of the Company and its designated subsidiaries with the opportunity to purchase shares of our Class A common stock through accumulated payroll deductions. The Original ESPP was subsequently amended and restated effective December 14, 2017 in the form of the Amended and Restated Employee Stock Purchase Plan (the “Existing ESPP”).

We are now requesting that our stockholders vote in favor of approving the Second Amended and Restated Hyatt Hotels Employee Stock Purchase Plan (the “2020 ESPP”) to increase the number of shares available for issuance under the 2020 ESPP and to provide flexibility for the talent and compensation committee to set the option price per share of Class A common stock under the 2020 ESPP at or above 85% of the lesser of the fair market value of a share of Class A common stock on the date of exercise and the date of grant for the offering period. The 2020 ESPP was approved by our board of directors on March 25, 2020, subject to and effective upon stockholder approval. If the stockholders do not approve the 2020 ESPP, then the 2020 ESPP will not become effective, and the Existing ESPP will continue in effect until July 1, 2020 with the current share limit set forth in the Existing ESPP. Because certain of our executive officers may be eligible to participate in the 2020 ESPP, such executive officers may be considered to have an interest in this proposal.

A summary of the 2020 ESPP appears below. This summary is qualified in its entirety by the text of the 2020 ESPP, which is included as Appendix B to this proxy statement. The following is an overview of the key changes to the Existing ESPP contained in the 2020 ESPP:

 

 

Increase the 2020 ESPP’s share limit by 650,000 shares, so that there are a total of 989,498 shares of Class A common stock available for issuance under the 2020 ESPP;

 

 

Provide flexibility for the talent and compensation committee to set the option price per share of Class A common stock under the 2020 ESPP at or above 85% of the lesser of the fair market value of a share of Class A common stock on the date of exercise and the date of grant for the offering period;

 

 

Extend the term of the 2020 ESPP by 10 years until the 10th anniversary of the date on which the 2020 ESPP is approved by our stockholders; and

 

 

Provide flexibility for purposes of administration of the 2020 ESPP with respect to participants in non-U.S. jurisdictions (if any).

We believe that maintaining an employee stock purchase plan enhances employees’ sense of participation in our performance, aligns their interests with those of our stockholders, and provides a significant retention incentive that ultimately benefits our stockholders. As of March 25, 2020, the Existing ESPP had 339,498 shares available for future issuance. If the 2020 ESPP is not approved, the Existing ESPP will terminate effective July 1, 2020 (and, if the Existing ESPP were not set to expire on July 1, 2020, we estimate that we would have enough shares remaining under the Existing ESPP to continue making awards for approximately four years), assuming we continue to grant awards consistent with our historical usage and expected practices, and noting that future circumstances may require us to make changes to our expected practices. By increasing our share reserve, we expect to be able to continue to provide our employees with the opportunity to purchase shares of our Class A common stock under the 2020 ESPP for approximately the next ten years, assuming employee participation in the 2020 ESPP is consistent with historical levels, and noting that future circumstances may require us to make changes to our expected practices.

Significant Historical Award Information

The number of shares of Class A common stock that were eligible for issuance and sale under the Existing ESPP as of March 25, 2020 was 339,498.

Employees eligible to participate in the Existing ESPP generally include employees who have been employed by us or one of our designated subsidiaries for at least one year. Employees who own (or are deemed to own through attribution) 5% or more of the combined voting power or value of all classes of our stock or the stock of one of our subsidiaries are not allowed to participate in the Existing ESPP. As of March 2020, the number of employees eligible to

 

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participate in the Existing ESPP was approximately 38,000. During the most recent offering period, which ended December 31, 2019, 1,847 employees purchased shares under the Existing ESPP.

Summary of the 2020 ESPP

A summary of the principal provisions of the 2020 ESPP is set forth below. The summary is qualified in its entirety by reference to the full text of the 2020 ESPP, which is attached as Appendix B to this proxy statement. The 2020 ESPP was approved by our board of directors on the recommendation of our talent and compensation committee on March 25, 2020, subject to and effective upon approval by our stockholders.

Administration

The 2020 ESPP is administered by the talent and compensation committee of the board of directors. The talent and compensation committee has the discretionary authority to administer and interpret the 2020 ESPP. The talent and compensation committee may delegate administrative tasks to employees.

Shares Available Under the 2020 ESPP

The maximum number of shares of our Class A common stock originally authorized for sale under the Existing ESPP is 1,000,000. The total number of shares of Class A common stock reserved under the 2020 ESPP is 1,650,000, which represents an increase of 650,000 shares over the authorized share reserve under the Existing ESPP (meaning that, based on 339,498 shares of Class A common stock that remained available as of March 25, 2020 out of the original reserve, a total of 989,498 shares of Class A common stock are available for issuance after taking into account the 650,000 shares of Class A common stock added pursuant to the 2020 ESPP). The Class A common stock made available for sale under the 2020 ESPP may be authorized but unissued shares or reacquired shares reserved for issuance under the 2020 ESPP. Based solely on the closing price of our Class A common stock on March 25, 2020 of $51.86, the maximum aggregate market value of those 989,498 shares of Class A common stock was $51,315,366.

Eligible Employees

Employees eligible to participate in the 2020 ESPP generally include employees who have been employed by us or one of our designated subsidiaries for at least one year. Employees who own (or are deemed to own through attribution) 5% or more of the combined voting power or value of all classes of our stock or the stock of one of our subsidiaries are not allowed to participate in the 2020 ESPP. As of March 2020, the approximate number of employees eligible to participate in the 2020 ESPP was approximately 38,000.

Participation

Employees may enroll under the 2020 ESPP by completing a payroll deduction authorization form permitting the deduction of at least 1% but not more than 15% from their compensation. However, in no case may a participant subscribe for more than $25,000 of fair market value of Class A common stock during any calendar year or purchase more than 6,250 shares of our Class A common stock during any offering period. If the aggregate subscriptions exceed the number of authorized shares of Class A common stock available for purchase under the 2020 ESPP, they are reduced on a pro rata basis.

Offering

The 2020 ESPP is intended to qualify under Section 423 of the Code. Under the 2020 ESPP, participants are offered the option to purchase shares of our Class A common stock at a discount on the exercise date for each offering period. Offering periods under the 2020 ESPP commence on the first day of each calendar quarter and end on the last trading day of such calendar quarter, with this last trading day being the exercise date for the offering period.

The option purchase price is determined by the talent and compensation committee, provided that in all events the option price will be no less than 85% of the lesser of the fair market value of a share of Class A common stock on the date of exercise for the offering period, and the fair market value of a share of Class A common stock on the date of grant for the offering period.

Unless a participant has previously canceled his or her participation in the 2020 ESPP, the participant is deemed to have exercised his or her option in full as of each exercise date. Upon exercise, the participant may purchase the number of whole and fractional shares of Class A common stock that his or her accumulated payroll deductions may buy at the option purchase price.

A participant may cancel his or her payroll deduction authorization at any time prior to the end of the offering period.

 

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Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale

The number of shares of our Class A common stock available for purchase under the 2020 ESPP, as well as the option purchase price and the number of shares covered by each option under the 2020 ESPP that has not yet been exercised shall be proportionately adjusted for adjustments made in the number of outstanding shares of our Class A common stock or an exchange of the shares of Class A common stock resulting from a stock split, stock dividend, or any other subdivision.

If there is a proposal to (i) merge or consolidate us with or into another corporation, (ii) sell all or substantially all of our assets, or (iii) dissolve or liquidate us, then the current offering period will end on the business day immediately preceding the effective date of such event unless each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation in accordance with Section 424 of the Code.

Amendment and Termination

The board of directors, in its sole discretion, may amend, suspend or terminate the 2020 ESPP at any time. However, the board of directors may not amend the 2020 ESPP to either increase the maximum number of shares that may be purchased under the 2020 ESPP or to change the designation or class of employees eligible to participate in the 2020 ESPP without obtaining stockholder approval within 12 months before or after such action. Unless terminated earlier by the board of directors, the 2020 ESPP will terminate automatically on the 10th anniversary of the date on which the 2020 ESPP is approved by our stockholders. The 2020 ESPP will automatically terminate once all shares of Class A common stock available for purchase thereunder have been purchased unless stockholders approve an amendment authorizing new shares under the 2020 ESPP.

The talent and compensation committee may, without approval of our stockholders or board of directors, change offering periods, limit the amount and frequency of amounts contributed to the 2020 ESPP, or alter the exercise price, in each case, to avoid unfavorable financial accounting consequences.

U.S. Federal Income Tax Consequences

Generally, no federal income tax consequences will arise at the time an employee purchases Class A common stock under the 2020 ESPP. If an employee disposes of Class A common stock purchased under the 2020 ESPP less than one year after the Class A common stock is purchased or within two years of the offering date, the employee will be deemed to have received compensation taxable as ordinary income for the taxable year in which the disposition occurs in the amount of the difference between the fair market value of the Class A common stock at the time of purchase and the amount paid by the employee for the Class A common stock. The amount of such ordinary income recognized by the employee will be added to the employee’s basis in the Class A common stock for purposes of determining capital gain or loss upon the disposition of the Class A common stock by the employee.

If an employee does not dispose of the Class A common stock purchased under the 2020 ESPP until at least one year after the Class A common stock is purchased and at least two years after the offering date, the employee will be deemed to have received compensation taxable as ordinary income for the taxable year in which the disposition occurs in an amount equal to the lesser of (i) the excess of the fair market value of the Class A common stock on the date of disposition over the purchase price paid by the employee, or (ii) the excess of the fair market value of the Class A common stock on the offering date over the purchase price paid by the employee. The amount of such ordinary income recognized by the employee will be added to the employee’s basis in the Class A common stock for purposes of determining capital gain or loss upon the disposition of the Class A common stock by the employee. If an employee dies before disposing of the Class A common stock purchased under the 2020 ESPP, he or she will be deemed to have received compensation taxable as ordinary income in the taxable year closing with the employee’s death in an amount equal to the lesser of clauses (i) or (ii) as set forth in the first sentence of this paragraph. The employee will not realize any capital gain or loss at death.

We generally will not be entitled to a deduction with respect to the Class A common stock purchased by an employee under the 2020 ESPP, unless the employee disposes of the Class A common stock less than one year after the Class A common stock is transferred to the employee or less than two years after the offering date.

New Plan Benefits

Benefits under the 2020 ESPP will depend on the employees’ enrollment and contribution elections, and the fair market value of the shares at various future dates. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the 2020 ESPP.

 

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Plan Benefits

As of March 25, 2020, each of our named executive officers and the various indicated groups have purchased the following shares under the Existing ESPP:

 

Name and Position    Dollar
Value ($)
     Number of Shares
Purchased Under
Employee Stock
Purchase Plan (#)
 

Thomas J. Pritzker, Executive Chairman of the Board

   $ 0        0  

Mark S. Hoplamazian, President and Chief Executive Officer

   $ 0        0  

Joan Bottarini, Executive Vice President, Chief Financial Officer

   $ 0        0  

H. Charles Floyd, Executive Vice President, Global President of Operations

   $ 0        0  

Mark R. Vondrasek, Executive Vice President, Chief Commercial Officer

   $ 0        0  

All current executive officers as a group

   $ 51,017        1,267  

All current non-executive directors as a group(1)

   $ 0        0  

Nominees for election as directors(1)

     N/A        N/A  

Associates of any such directors, executive officers or nominees

     N/A        N/A  

Each other person who received or is to receive 5% of such options, warrant or rights

     N/A        N/A  

Employees other than executive officers as a group

   $ 25,787,155        659,235  

 

(1)

Directors who are not Company employees are not eligible to participate in the Existing ESPP.

The board of directors unanimously recommends that the stockholders vote FOR Proposal No. 4 to approve the Second Amended and Restated Hyatt Hotels Corporation Employee Stock Purchase Plan.

 

Hyatt Hotels Corporation    2020 Proxy Statement    59


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ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Proposal 5 — Advisory Vote to Approve Executive Compensation

 

As required pursuant to Section 14A of the Exchange Act, the Company requests stockholder approval, on an advisory basis, of the compensation paid to our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis and the accompanying compensation tables and related narrative in this proxy statement).

As described under “Compensation Discussion and Analysis,” our executive compensation program is designed to promote long-term brand value for the Company, a goal which we believe, in turn, is central to the creation of long-term economic value for our stockholders. Our compensation program is designed to attract, recruit, develop, engage and retain the talent needed to achieve long-term brand value and to appropriately motivate our executive officers. As such, we believe that our executive compensation program and the corresponding executive compensation detailed in the compensation tables and related narrative set forth above are strongly aligned with the long-term interests of our stockholders.

As an advisory vote, this proposal is not binding upon the Company. However, our talent and compensation committee, which is responsible for designing and administering our executive compensation program, values the opinions expressed by stockholders in their vote on this proposal, and will carefully consider the outcome of the vote when making future compensation decisions for named executive officers.

At the Company’s 2017 annual meeting of stockholders, the Company’s stockholders determined, on an advisory basis, to hold an advisory vote on executive compensation every year. Subsequently, the board of directors considered this determination and agreed that it will hold a non-binding advisory vote on executive compensation on an annual basis. As such, following the advisory vote to approve executive compensation that will take place at the Annual Meeting, the next advisory vote on executive compensation will occur at the Company’s 2021 annual meeting of stockholders.

The board of directors strongly endorses the Company’s executive compensation program and recommends that stockholders vote in favor of the following resolution:

RESOLVED, that the compensation paid to the Company’s named executive officers as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and any related discussion as disclosed in this proxy statement, is hereby APPROVED.

The board of directors unanimously recommends that the stockholders vote FOR Proposal No. 5 to approve, on an advisory basis, the compensation paid to our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules.

 

60    Hyatt Hotels Corporation    2020 Proxy Statement


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STOCK OWNERSHIP INFORMATION

Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth as of March 20, 2020 information regarding:

 

 

each person known to us to be the beneficial owner of more than 5% of our outstanding shares of Class A common stock or Class B common stock;

 

 

each of our NEOs;

 

 

each of our directors and nominees for the board of directors; and