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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. _____)

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Dear Stockholder:

It is a pleasure to invite you to the 2022 annual meeting of stockholders (the “Annual Meeting”) of Sunstone Hotel Investors, Inc. (“Sunstone”), a Maryland corporation, to be held at the Boston Park Plaza hotel, located at 50 Park Plaza, Boston, MA 02116, on Thursday, April 28, 2022 at 9:30 a.m. local time, for the following purposes:

Only stockholders of record of shares of Sunstone common stock, par value $0.01 per share, at the close of business on March 2, 2022 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement of the meeting.

Whether you own a few or many shares and whether or not you plan to attend the Annual Meeting, it is important that your shares be voted on matters that come before the meeting. You can ensure that your shares are voted at the meeting by completing, signing, dating and returning the enclosed proxy card in the envelope provided or, if you own shares through a bank or broker that provides for voting by telephone or over the Internet, by submitting your authorization to vote by telephone or over the Internet in accordance with your bank’s or broker’s instructions. If your proxy card is signed and returned without specifying your choices, your shares will be voted on each proposal in accordance with our Board of Directors’ recommendations.

We would like to take this opportunity to thank you for your continued support of Sunstone. We believe that our continued refinement of our compensation and corporate governance practices, coupled with our commitment to building long - term value make Sunstone well positioned for a promising future. We continue to focus on improvements to Sunstone’s corporate compensation and governance practices, as reflected by the following previously implemented initiatives: Proxy Access; Director Holdover Resignation Guidelines; Limitations on Stockholder Rights Plans; Right of Stockholders to Amend Company Bylaws; Restrictions on Classifying Directors; Anti-Hedging and Pledging policies; Clawback Policy; Double-Trigger accelerated vesting; a Pay-For-Performance structure that is aligned with both our stockholders and the expansion of Environmental, Social and Governance initiatives; and on-going Director refreshment and commitment to diversity.

Again, we thank you for your continued support and look forward to a promising future.

By Order of the Board of Directors

David M. Klein
Executive Vice President—General Counsel
and Secretary

March 17, 2022

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 28, 2022

This proxy statement and our Annual Report are available at our Investor Relations website at www.sunstonehotels.com.

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PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider, so please read the entire proxy statement before voting. In addition, for more complete information about our 2021 financial performance, please see our Annual Report on Form 10 - K for the fiscal year ended December 31, 2021 available at www.sunstonehotels.com.

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DIRECTOR NOMINEES

A – Audit CommitteeC – Compensation CommitteeI – Investment CommitteeNCG – Nominating and Corporate Governance Committee

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CORPORATE GOVERNANCE HIGHLIGHTS

The Company is committed to the values of transparency, stockholder friendly corporate governance and the highest ethical standards. Our Board of Directors believes that these values provide the framework to support the Company in creating long-term stockholder value. Our detailed governance framework can be found in the Corporate Governance section of our website. The following highlights selections of this framework and adopted governance policies that we believe are in the best interests of our stockholders:

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PROXY SUMMARY

OUR COMPENSATION PRACTICES

Objectives. We seek to attract, motivate and retain our Named Executive Officers (“NEOs”) through competitive compensation arrangements that we believe, within appropriate risk parameters, provide strong financial incentives for the NEOs to maximize stockholder value. Our 2021 NEOs included Messrs. Pasquale, Giglia, Springer, Klein and Ostapovicz (the “Current NEOs”). In addition, per SEC rules, our former President and CEO, John V. Arabia, and our former Executive Vice President and COO, Marc A. Hoffman, were also NEOs for 2021. In order to achieve our objectives and mitigate compensation related risks to our stockholders, we utilize the following practices:

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2021 Company Highlights

Improved the quality of our portfolio and increased concentration of Long-Term Relevant Real Estate®.

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PROXY SUMMARY

We reduced our debt balance and the cost of our preferred equity capital while maintaining substantial liquidity.

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QUESTIONS AND ANSWERS ABOUT HOW TO VOTE YOUR SHARES

What matters will be voted on at the Annual Meeting?

The Annual Meeting will be held for the following purposes:

With respect to any other matter that properly comes before the meeting or any adjournment or postponement thereof, the representatives holding proxies will vote as recommended by the Board of Directors, or if no recommendation is given, in their own discretion.

Who is entitled to vote?

Stockholders of record of our common stock as of the close of business on March 2, 2022 (“Record Date”) are entitled to vote on matters that properly come before the meeting. Shares of common stock can be voted only if the stockholder is present at the Annual Meeting or is represented by proxy. At the close of business on the Record Date, there were 219,490,509 shares of common stock outstanding and entitled to vote. The holders of common stock will vote together as a single class on all matters that properly come before the meeting.

How many votes do I have?

Each share of common stock has one vote.

How do I vote?

You can ensure that your shares are voted at the meeting by completing, signing, dating and returning the enclosed proxy form in the envelope provided.

If you own your shares through a bank or broker, you may be eligible to authorize a proxy to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms are participating in the ADP Investor Communication Services (“ADP”) online program. This program provides eligible stockholders who receive a paper copy of the Annual Report and proxy statement the opportunity to authorize a proxy to vote via the Internet or by telephone. If your bank or brokerage firm is participating in ADP’s online program, your voting form will provide instructions. Stockholders who authorize a proxy to vote through the Internet or telephone should be aware that they may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers, and that these costs must be borne by the stockholder. Stockholders who authorize a proxy to vote by Internet or telephone need not return a proxy card by mail. If your voting form does not reference Internet or telephone information, please complete and return the paper proxy card provided by your bank or broker.

If you attend the Annual Meeting in person, you may request a ballot when you arrive. If a bank, broker or other nominee is the record holder of your stock on the record date, prior to attending the meeting you must obtain a legal proxy from your bank, broker or other nominee as the record holder and a letter from your bank, broker or other nominee showing that you were the beneficial owner of your shares on the record date in order to vote at the Annual

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Meeting. The legal proxy must be presented to vote these shares in person at the Annual Meeting. If you have previously authorized a proxy, you may still vote in person at the Annual Meeting, which will serve as a revocation of your previous proxy.

Does Sunstone have a policy for confidential voting?

Sunstone has a confidential voting policy. All proxies and other materials, including telephone and Internet proxy authorization, are kept confidential and are not disclosed to third parties. Such voting documents are available for examination by the inspector of election and certain personnel associated with processing proxy cards and tabulating the vote. We plan to appoint one inspector of election who will review and confirm the tabulation of votes at the Annual Meeting.

What if I return my proxy but do not mark it to show how I am voting?

If your proxy card is signed and returned without specifying your choices, your shares will be voted as recommended by the Board of Directors.

What are the Board of Directors’ recommendations?

The Board of Directors recommends that you vote FOR each of the nominees for director in Proposal 1; FOR Proposal 2 to ratify the Audit Committee’s appointment of Ernst & Young LLP to act as the independent registered public accounting firm for the fiscal year ending December 31, 2022; FOR Proposal 3 to approve, on a non - binding, advisory basis, the compensation of our NEOs as set forth in this proxy statement; and FOR Proposal 4 to approve the 2022 Plan.

What vote is required to approve each proposal?

Election of Directors: There is no cumulative voting in the election of directors. In an uncontested election, a director shall be elected by an affirmative vote of a majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present; that is, a nominee will be elected as a director only if the number of votes cast “for” such nominee exceeds the number of votes “against” or “withheld” with respect to that nominee. Any shares not voted, whether by abstention or “broker non - vote” (i.e., shares held by a broker or nominee which are represented at the meeting, but with respect to which such broker or nominee is not instructed to vote and has not voted on a particular proposal, or otherwise), have no effect on the vote.

Ratification of Appointment of Independent Registered Public Accounting Firm: This proposal requires the affirmative vote of a majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present. Any shares not voted (whether by abstention, “broker non - vote” or otherwise) have no effect on the vote.

Advisory Vote on Executive Compensation:  This proposal requires the affirmative vote of a majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present. Any shares not voted (whether by abstention, “broker non-vote” or otherwise) have no effect on the vote.

Approval of the 2022 Plan:  This proposal requires the affirmative vote of a majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present. Any shares not voted (whether by abstention, “broker non-vote” or otherwise) have no effect on the vote.

What constitutes a quorum?

The presence of the owners of at least a majority (greater than 50%) of the aggregate number of shares of common stock entitled to vote at the Annual Meeting constitutes a quorum. Presence may be in person or by proxy. You will be considered part of the quorum if you return a signed and dated proxy card, if you authorize a proxy to vote by telephone or the Internet, or if you attend the Annual Meeting.

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Abstentions and “broker non - votes” are counted as present and entitled to vote for purposes of determining a quorum. A “broker non - vote” occurs when the broker or other entity is unable to vote on a proposal because the proposal is non - routine and the owner does not provide instructions. Rules of the New York Stock Exchange (“NYSE”) determine whether proposals presented at stockholder meetings are “routine” or “non - routine.” If a proposal is routine, a broker or other entity holding shares for an owner in street or beneficial name may vote on the proposal without voting instructions from the owner. If a proposal is non - routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. The ratification of independent public accountants is the only routine matter to be voted on at the Annual Meeting. There are no rights of appraisal or similar dissenters’ rights with respect to any matter to be acted upon pursuant to this proxy statement.

What if other items come up at the Annual Meeting and I am not there to vote?

We are not now aware of any matters to be presented at the Annual Meeting other than those described in this proxy statement. When you return a signed and dated proxy card or provide your voting instructions by telephone or the Internet, you give the proxy holders (the names of whom are listed on your proxy card) the discretionary authority to vote on your behalf on any other matter that is properly brought before the Annual Meeting.

Can I change my vote?

You can change your vote by revoking your proxy at any time before it is exercised in one of four ways:

What does it mean if I receive more than one proxy card?

Some of your shares are likely registered differently or are in more than one account. You should vote each of your accounts by mail, or if such service is provided by a bank or broker that holds your shares, by telephone or the Internet. If you mail proxy cards, please sign, date and return each proxy card to ensure that all of your shares are voted.

If you hold your shares in registered form and wish to combine your stockholder accounts in the future, you should contact our transfer agent, American Stock Transfer and Trust Company, LLC, at 1 - 800 - 937 - 5449. Combining accounts reduces excess printing and mailing costs, resulting in savings for Sunstone, that benefit you as a stockholder.

What if I receive only one set of proxy materials although there are multiple stockholders at my address?

If you and other residents at your mailing address own shares in “street name” (that is, through a broker or other nominee), your broker or bank may have sent you a notice that your household will receive only one Annual Report and proxy statement, or Notice Regarding the Availability of Proxy Materials, for each company in which you hold shares through that broker or bank. This practice of sending only one copy of proxy materials is known as “householding.” If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. If the foregoing procedures apply to you, your broker has sent one copy of our Annual Report and proxy statement, or Notice Regarding the Availability of Proxy Materials, to your address. You may revoke your consent to householding at any time by contacting your broker or bank. The revocation of your

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consent to householding will be effective 30 days following its receipt. In any event, if you did not receive an individual copy of this proxy statement or our Annual Report, we will send a copy to you without charge if you address your written request to Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary. If you currently receive multiple copies of the Annual Report and proxy statement, or Notice Regarding the Availability of Proxy Materials, at your address and you would like to request householding of your communications, you should contact your broker or bank.

How do I submit a stockholder proposal for inclusion in the proxy statement for next year’s annual meeting?

Stockholder proposals may be submitted for inclusion in the proxy statement for our 2023 annual meeting of stockholders (“2023 Annual Meeting”), after the Annual Meeting, but must be received no later than 5:00 p.m. Pacific Time on November 17, 2022. Proposals should be sent via registered, certified, or express mail to Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary. See also “Stockholder Proposals for the 2023 Annual Meeting” later in this proxy statement.

What do I need to do to attend the Annual Meeting?

If you are a holder of record, you should indicate on your proxy card that you plan to attend the Annual Meeting by marking the box on the proxy card provided for that purpose.

For the safety and comfort of our stockholders, admission to the Annual Meeting will be restricted to:

Please note that space limitations may make it necessary to limit attendance. Admission to the meeting will be on a first come, first-served basis. No more than two representatives of any corporate of institutional stockholder will be admitted to the Annual Meeting.

You may obtain directions to the Annual Meeting in the Investor Relations section of our website at www.sunstonehotels.com or by calling us at 949-330-4000.

If you attend the meeting, you may be asked to present valid government-issued photo identification, such as a driver’s license or passport, before being admitted. Cameras, recording devices and other electronic devices will not be permitted, and attendees may be subject to security inspections or other security precautions, including adherence to any COVID-19-related vaccination or mask ordinances.

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PROPOSALS

Board of Directors. The business and affairs of Sunstone are managed under the direction of our Board of Directors. Our Board of Directors has responsibility for establishing broad corporate policies and for the overall performance of Sunstone, rather than for day - to - day operating details. Our Board of Directors currently consists of seven directors.

The proxy holders named on the proxy card intend to vote for the election of the seven nominees listed below. The Nominating and Corporate Governance Committee selected these nominees, which selection was ratified by the Board of Directors. If you do not wish your shares to be voted for particular nominees, you can so indicate on the proxy card or, if your shares are held through a bank or broker and you are authorizing a proxy to vote by telephone or the Internet, by following the instructions provided when you access the telephone or Internet proxy facilities.

If at the time of the meeting one or more of the nominees have become unable to serve, shares represented by proxies will be voted for the remaining nominees and for any substitute nominee or nominees designated by the Nominating and Corporate Governance Committee. If one or more nominees have become unable to serve, the Board of Directors may, in accordance with our bylaws, reduce the size of the Board of Directors or may leave a vacancy until a nominee is identified. Each of the nominees has consented to act as a director if duly elected and qualified and the Nominating and Corporate Governance Committee knows of no reason why any of the nominees will be unable to serve.

Directors elected at the Annual Meeting will hold office until the 2023 Annual Meeting and until their successors have been elected and qualified. For each nominee, there follows a brief listing of principal occupation for at least the past five years, other major affiliations and age as of March 1, 2022. Each of the nominees is currently a director of the Company.

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Nominees for Election as Directors

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Vote required. Directors will be elected by a majority of the votes cast. Any shares not voted, whether by abstention, “broker non - vote” or otherwise, will have no impact on the vote.

Our Corporate Governance Guidelines and bylaws provide a majority voting standard in uncontested director elections. A director nominee will be elected to the Board only if the number of votes cast “for” such nominee’s election exceeds the number of votes cast “against” or “withheld” with respect to such nominee’s election (with abstentions and broker non-votes not counted as votes cast either for or withheld in such election).

If an incumbent nominee for director fails to receive the required majority vote in a director election, our Corporate Governance Guidelines require that he or she tender his or her resignation as a director for consideration by the Nominating and Corporate Governance Committee, and, ultimately the Board. Our Nominating and Corporate Governance Committee will evaluate the circumstances of the failed election, and will make a recommendation regarding how to act upon the tendered resignation to the full Board, taking into consideration the best interests of the Company and its stockholders. After considering the recommendation of the Nominating and Corporate Governance Committee, the full Board will then act upon the resignation, and will publicly disclose its decision regarding the tendered resignation and its rationale within 90 days of the certification of the election results. If the Board accepts the resignation, the nominee will no longer serve on the Board. If the Board rejects the resignation, the nominee will continue to serve until his or her successor has been duly elected and qualified or until his or her earlier disqualification, death, resignation or removal. Notwithstanding the foregoing, the Board shall be required to accept any resignation tendered by a nominee who is already serving as a director if such nominee shall have received more votes “against” or “withheld” than “for” his or her election at each of two consecutive annual meetings of stockholders for the uncontested election of directors at which a quorum was present.

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The Audit Committee has selected and appointed the firm of Ernst & Young LLP to act as our independent registered public accounting firm for the year ending December 31, 2022. Ernst & Young LLP has audited the financial statements for us since our initial public offering on October 26, 2004.

Although stockholder ratification of the appointment of our independent auditor is not required by our bylaws or otherwise, we are submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate governance practice. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company. If our stockholders do not ratify the Audit Committee’s selection, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of our independent registered public accounting firm.

In selecting Ernst & Young LLP as the Company’s independent registered public accounting firm, the Audit Committee considered many factors, including the quality of its ongoing discussions with Ernst & Young LLP’s representatives, the length of time the firm has been engaged, the appropriateness of fees, the experience and professional qualifications of Ernst & Young LLP, and Ernst & Young LLP’s programs and processes for maintaining its independence. Furthermore, in accordance with SEC rules and Ernst & Young LLP’s policies, lead engagement partners are subject to rotation requirements to limit the number of consecutive years the lead partner may provide services. For lead audit partners, the maximum number of consecutive years of service in that capacity is five years. We select the Company’s lead audit partner pursuant to this rotation policy following meetings between the Chairman of the Audit Committee and candidates for that role, as well as discussions by the full Audit Committee, members of the Board of Directors and management.

The Audit Committee believes that the continued retention of Ernst & Young LLP as the Company’s independent external auditor is in the best interests of the Company and its stockholders. The Board of Directors believes the Company receives significant benefits from the extensive history Ernst & Young LLP has with the Company. These benefits include:

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. These representatives will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

You can find more information about our relationship with Ernst & Young LLP on page 77 of this proxy statement.

Vote required. Ratification of the appointment of Ernst & Young LLP requires a majority of the votes cast. Any shares not voted, whether by abstention, “broker non - vote” or otherwise, have no impact on the vote.

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Section 14A of the Securities Exchange Act of 1934, as enacted as part of the Dodd - Frank Wall Street Reform and Consumer Protection Act in July 2010 (“Dodd Frank Act”) requires us to submit to our stockholders a non - binding advisory vote to approve the compensation of the NEOs listed in the Summary Compensation Table of this proxy statement, commonly referred to as a “say - on - pay” vote.

The Board of Directors has approved the submission of the following resolution to the Company’s stockholders for approval at the Annual Meeting:

“Resolved, that the stockholders hereby approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Company’s 2022 proxy statement pursuant to the disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other executive compensation tables and related discussion).”

As described more fully in the “Compensation Discussion and Analysis” beginning on page 46 of this proxy statement, the Company’s executive compensation program is designed to attract, motivate and retain talented executives through competitive compensation arrangements that, within appropriate risk parameters, provide strong financial incentives for the NEOs to maximize stockholder value. The compensation program is designed to achieve these objectives through a combination of the following types of compensation: base salary, annual cash incentive bonus and equity incentive awards. Base salary is intended to provide a baseline level of compensation for our NEOs. The remaining types of compensation, which in the aggregate represent the majority of our NEOs’ target total compensation opportunities, tie compensation directly to the achievement of corporate and individual objectives. Highlights of the Company’s executive compensation program include the following:

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The Compensation Committee and the Board believe that these policies are effective at incentivizing the achievement of the Company’s strong financial performance.

At the 2017 annual meeting, the Company’s stockholders voted in favor of holding annual say-on-pay votes. Our Board of Directors has continued to accept the stockholders’ advisory vote with respect to the frequency of say-on-pay votes, and has resolved to hold annual advisory say-on-pay votes. Accordingly, the next say-on-pay vote will be held at our 2023 Annual Meeting.

Vote required. The affirmative vote of a majority of the votes cast will be required to approve, on a non - binding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement. Any shares not voted, whether by abstention, “broker non - vote” or otherwise, have no impact on the vote.

The stockholder vote on executive compensation is an advisory vote only, and it is not binding on the Company, the Board of Directors or the Compensation Committee. Although the vote is non - binding, the Compensation Committee and the Board of Directors value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions.

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INTRODUCTION

We are asking you to approve the Sunstone Hotel Investors, Inc. and Sunstone Hotel Partnership, LLC 2022 Incentive Award Plan (the “2022 Plan”). On March 15, 2022, our Board of Directors adopted, subject to stockholder approval, the 2022 Plan, pursuant to which we may grant equity and equity-based awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, LTIP Units and other stock or cash based awards to members of our Board of Directors, our employees and consultants, employees and consultants of Sunstone Hotel Partnership, LLC (the “Partnership”) and employees and consultants of our subsidiaries.

The 2022 Plan is intended to replace our 2004 Plan. If the 2022 Plan is approved by our stockholders, the 2004 Plan will terminate as of the date of such approval, and no further awards will be granted under the 2004 Plan; however, the terms and conditions of the 2004 Plan will continue to govern any outstanding awards granted under the 2004 Plan. If the 2022 Plan is not approved, the 2004 Plan will remain in effect.

As of March 15, 2022, the date on which our Board of Directors adopted the 2022 Plan, 129,348 shares of our common stock remained available for grant under the 2004 Plan, and 2,361,117 shares of our common stock were subject to outstanding awards under the 2004 Plan (assuming that all performance-based restricted stock unit awards are paid at maximum). The 2022 Plan authorizes the issuance of the sum of (1) 3,750,000 shares of our common stock, and (2) any shares subject to outstanding awards under the 2004 Plan which, on or after the effective date of the 2022 Plan, are forfeited or otherwise terminate or expire for any reason without the issuance of shares and become available for future issuance under the 2022 Plan pursuant to its terms.  No additional awards will be granted under the 2004 Plan prior to the Annual Meeting.

The closing price of our common stock on March 15, 2022 was $11.33 per share.  

STOCKHOLDER APPROVAL

Stockholder approval of the 2022 Plan is necessary in order for the Company to satisfy the terms of the 2022 Plan, to meet the stockholder approval requirements of the New York Stock Exchange and to satisfy the stockholder approval requirement under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) so that the Compensation Committee has the discretion to grant incentive stock options (“ISOs”) under the 2022 Plan. If the 2022 Plan is not approved by stockholders, the 2022 Plan will not become effective, and the 2004 Plan will remain in effect. This would limit our ability to grant stock-settled awards in the future.

Background for Determination of the Share Reserve Under the 2022 Plan

We are asking our stockholders to approve the 2022 Plan because we believe that grants of equity incentive awards are important to our continued growth and success. The purpose of the 2022 Plan is to assist us in attracting, motivating and retaining selected individuals who will serve as our employees, directors and consultants, and who are expected to contribute to our success and the achievement of our long-term objectives. We believe that the equity-based awards to be issued under the 2022 Plan will motivate recipients to offer their maximum effort to us and will help focus them on the creation of long-term value, consistent with the interests of our stockholders. In addition, we believe we are disciplined in our use of equity incentive awards.

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Commencing with awards granted in 2022, the Compensation Committee determined to transition the Company’s annual grant practices for performance-based equity awards from a program granting time-based awards based on prior performance to a program granting performance-based awards tied to future performance. Furthermore, in an effort to best align the interests of our NEOs with our stockholders, performance-based awards that vest based on multi-year, forward-looking RSR performance constitute 75% of the target value of each of our NEO’s 2022 long-term incentive award.

In determining whether to approve the 2022 Plan, our Board of Directors considered the following:

The material features of the 2022 Plan are summarized below. This description is qualified in its entirety by reference to the 2022 Plan, attached as Exhibit A to this proxy statement. We intend to register shares available for issuance under the 2022 Plan on a Registration Statement on Form S-8 under the Securities Act of 1933 as soon as is practicable if we receive stockholder approval.

MATERIAL FEATURES OF THE 2022 PLAN

The 2022 Plan authorizes the Compensation Committee of our Board of Directors (or, if our Board of Directors determines, another committee of our Board of Directors) to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, LTIP Units and other stock or cash based awards within parameters set forth in the 2022 Plan, for the purpose of providing our directors, employees and consultants, employees and consultants of the Partnership and the employees and consultants of our subsidiaries equity compensation, incentives and rewards for superior performance. Some of the key features of the 2022 Plan that reflect our commitment to effective management of incentive compensation are as follows:

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SUMMARY OF THE PLAN

Administration

The 2022 Plan is administered by our Board of Directors with respect to awards to non-employee directors and by the Compensation Committee with respect to other participants.  Both the Board of Directors and the Compensation Committee may delegate their respective authority and duties to committees of our directors and/or officers (referred to collectively as the “plan administrator”), subject to certain limitations that may be imposed under Section 162(m) of the Internal Revenue Code, Section 16 of the Exchange Act and/or stock exchange rules, as applicable.

Eligibility

Any employee or consultant of the Company, the Partnership or any subsidiary and any non-employee director of the Company is eligible to participate in the 2022 Plan as selected by the Compensation Committee in its discretion.  As of March 15, 2022, approximately 42 employees, 0 consultants and 6 non-employee directors are eligible to receive awards under the 2022 Plan; however, this number is subject to change as the number of individuals in our business is adjusted to meet our operational requirements.

Share Authorization

The 2022 Plan provides that the maximum aggregate number of shares of common stock that may be issued pursuant to awards is equal to the sum of (i) 3,750,000 shares, and (ii) any shares subject to outstanding awards under the 2004 Plan which, on or after the effective date of the 2022 Plan, are forfeited or otherwise terminate or expire for any reason without the issuance of shares and become available for future issuance under the 2022 Plan pursuant to its terms. The maximum number of shares of common stock that may be issued in connection with awards of ISOs under the 2022 Plan is 3,750,000 shares.  Each LTIP unit of the Partnership subject to an award will count as one share for purposes of calculating the aggregate number of shares available for issuance under the 2022 Plan and for purposes of calculating the individual award limits under the 2022 Plan. As of the effective date of the 2022 Plan, no further awards will be granted under the 2004 Plan; provided, however, that awards outstanding under the 2004 Plan as of the effective date of the 2022 Plan will remain outstanding and subject to the terms of the 2004 Plan and the applicable award agreement governing such awards. Under the 2022 Plan, no person may be granted awards covering more than 950,000 shares in any calendar year and the maximum

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aggregate amount of cash that may be paid in cash during any calendar year with respect to one or more awards payable in cash is $5,000,000.  The sum of any cash compensation and the value (determined as of the date of grant) of awards that may be granted to any non-employee director during any calendar year may not exceed $750,000.

If shares subject to an award under the 2022 Plan are forfeited, expire or are settled cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used for new grants under the 2022 Plan.  However the following shares may not be used again for a grant under the 2022 Plan: (i) shares subject to a stock appreciation right (a "SAR") that are not issued in connection with the settlement of the SAR on its exercise, (ii) shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award, or (iii) shares purchased on the open market with the cash proceeds from the exercise of an option.

To the extent permitted under applicable securities exchange rules without stockholder approval, awards granted under the 2022 Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity awards in the context of a corporate acquisition or merger will not reduce the shares authorized for grant under the 2022 Plan.

Awards

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Foreign Participants, Clawback Provisions, Transferability and Participant Payments

The plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. All awards will be subject to the provisions of any clawback policy implemented by our Company to the extent set forth in such clawback policy and/or in the applicable award agreement.  With limited exceptions for estate planning, domestic relations orders, certain beneficiary designations and the laws of descent and distribution, awards under the 2022 Plan are generally non-transferable prior to vesting, and are exercisable only by the participant, unless otherwise provided by the plan administrator. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2022 Plan, the plan administrator may, in its discretion, accept cash or check, shares of our common stock that meet specified conditions, a “market sell order” or such other consideration as it deems suitable.

Amendment and Termination

The Board of Directors may amend or terminate the 2022 Plan at any time; however, except in connection with certain changes in our capital structure, stockholder approval will be required for any amendment that increases the aggregate number of shares available under the 2022 Plan or any individual award limit under the 2022 Plan, “reprices” any stock option or SAR, or cancels any stock option or SAR in  exchange for cash or another award when the option or SAR price per share exceeds the fair market value of the underlying shares. In addition, no amendment, suspension or termination of the 2022 Plan may, without the consent of the affected participant, impair any rights or obligations under any previously-granted award, unless the award itself otherwise expressly so provides. No ISO may be granted pursuant to 2022 Plan after the tenth anniversary of the date on which our Board of Directors adopted the 2022 Plan.

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scheduled to vest based on the attainment of performance-based vesting conditions) will become fully vested and, as applicable, exercisable in connection with the transaction.

Certain Material U.S. Federal Income Tax Consequences

The following is a brief description of the principal United States federal income tax consequences related to grants made under the 2022 Plan and certain other United States federal income tax issues. It is not intended as tax advice to participants, who should consult their own tax advisors.

Non-Qualified Stock Options. A participant will not be subject to tax at the time a non-qualified stock option is granted, and no tax deduction will then be available to the Company. Upon the exercise of a non-qualified stock option, an amount equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise will be included in the participant’s ordinary income and we will generally be entitled to deduct the same amount. Upon disposition of shares acquired upon exercise, appreciation or depreciation after the date of exercise will generally be treated by the participant or transferee of the non-qualified stock option as either capital gain or capital loss.

Incentive Stock Options. A participant will not be subject to regular income tax at the time an ISO is granted or exercised, and no tax deduction will then be available to the Company; however, the participant may be subject to the alternative minimum tax on the excess of the fair market value of the shares received upon exercise of the ISO over the exercise price. Upon disposition of the shares acquired upon exercise of an ISO, capital gain or capital loss will generally be recognized in an amount equal to the difference between the sale price and the exercise price, as long as the participant has not disposed of the shares within two years after the date of grant or within one year after the date of exercise and has been employed by us at all times from the grant date until the date three months before the date of exercise (one year in the case of permanent disability). If the participant disposes of the shares without satisfying both the holding period and employment requirements, the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price but, in the case of a failure to satisfy the holding period requirement, not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss.

We are not entitled to a tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.

LTIP Units. Participants generally are not expected to recognize taxable income at the time of the grant of LTIP Units or the vesting of those units, provided that (i) the LTIP Units qualify as “profits interests” within the meaning of the Code and related IRS guidance; (ii) the participant does not dispose of the LTIP Units within two years of issuance; and (iii) certain other requirements are met. As a holder of LTIP Units, however, a participant will be required to report on his or her income tax return his or her allocable share of our Operating Partnership’s income, gains, losses, deductions and credits in accordance with the partnership agreement of our Operating Partnership, regardless of whether our Operating Partnership actually makes a distribution of cash to the participant. Distributions of money by our Operating Partnership to the participant, on account of all interests in our Operating Partnership held by the participant, will generally be taxable to the participant to the extent that such distributions exceed the participant’s tax basis in such interests in our Operating Partnership. Any such gain generally will be capital gain, but a portion may be treated as ordinary income, depending on the assets of our Operating Partnership at that time. Upon the exchange of the LTIP Units (or the common partnership units into which the LTIP Units may be convertible) for Company shares, or the sale of such units, the participant will generally recognize gain or loss to the extent that the amount the participant receives plus the portion of our Operating Partnership’s liabilities allocated to such units exceeds the participant’s tax basis in such units. The gain generally will be taxable at capital gain rates, but may be subject to tax at higher rates depending on the assets of our Operating Partnership at the time of such disposition. The tax consequences may be similar with respect to any redemption by our Operating Partnership of such interests in exchange for cash. Generally, no deduction is available to us upon the grant, vesting or disposition of the LTIP Units.

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Other Grants. The current federal income tax consequences of other grants authorized under the 2022 Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse; and RSUs, dividend equivalents, and unrestricted stock are generally subject to tax at the time of payment. Compensation otherwise effectively deferred is taxed when paid (other than employment taxes which are generally owed at the time such compensation is deferred or vested). In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes income, subject to Section 162(m) with respect to covered employees.

Section 162(m) of the Internal Revenue Code. Section 162(m) generally places a $1,000,000 annual limit on a publicly held corporation’s tax deduction for compensation paid to certain executive officers. Prior to the enactment of the Tax Cuts and Jobs Act, this limit did not apply to compensation that satisfied the applicable requirements for the “qualified performance-based compensation” exception to the Section 162(m) deductibility limitation. However, under the Tax Cuts and Jobs Act enacted in 2017, effective for tax years commencing after December 31, 2017, the performance-based compensation exception, and our ability to rely on this exception, were eliminated (other than with respect to certain grandfathered arrangements in effect on November 2, 2017), and the limitation on deductibility generally was expanded to include all named executive officers.

We are organized as a REIT under the Code and generally are not subject to federal income taxes, to the extent that we distribute to our stockholders an amount at least equal to our REIT taxable income each year. As a result of the Company’s tax status as a REIT, the loss of a deduction under Section 162(m) may not affect the amount of federal income tax payable by the Company, provided that we continue to distribute 100% of our REIT taxable income to our stockholders.

Section 280G of the Internal Revenue Code. If awards under the 2022 Plan are granted, vest or are paid contingent on a change in control or a subsequent termination of employment, some or all of the value of the award may be considered an “excess parachute payment” under Section 280G of the Internal Revenue Code, which would result in the imposition of a 20% federal excise tax on the recipients of the excess parachute payments and a loss of our deduction for the excess parachute payments.

Section 409A of the Internal Revenue Code. Certain types of awards under the 2022 Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest penalties and additional state taxes). To the extent applicable, the 2022 Plan and awards granted under the 2022 Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the plan administrator, the 2022 Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.

New Plan Benefits

Other than with respect to awards to non-employee directors, because grants under the 2022 Plan are generally within the discretion of the Compensation Committee, it is not possible to determine the future grants that will be made under the 2022 Plan.

As described below under “Director Compensation,” pursuant to our director compensation arrangements, our non-employee directors receive annual stock retainers. The table below sets forth the aggregate grant value that all non-employee directors as a group are expected to receive in 2022 pursuant to our current director compensation

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arrangements. If our stockholders do not approve the 2022 Plan, we expect that sufficient shares will remain available for grant to our non-employee directors at the Annual Meeting under the 2004 Plan.

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COMPANY INFORMATION

CORPORATE GOVERNANCE

In light of applicable legal requirements, such as the Sarbanes - Oxley Act of 2002 and related rules promulgated by both the NYSE and the SEC, we provide the following discussion to inform you of our efforts to assure that we employ best practices in our corporate governance. A copy of our Corporate Governance Guidelines is available in the Corporate Governance section of our website at www.sunstonehotels.com. In addition, a printed copy of the Corporate Governance Guidelines will be provided without charge upon request to Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary.

We have also established conflict of interest and other policies to serve the long - term interests of our stockholders and further align the interests of our directors and management with our stockholders.

CONFLICT OF INTEREST POLICY

We have adopted a policy which provides that the approval of our Nominating and Corporate Governance Committee is required for any transaction involving the Company and any of our directors, officers or employees, or any entity in which any of our directors, officers or employees is employed or has an interest of more than 5%.

CODE OF BUSINESS CONDUCT AND ETHICS

We have adopted a Code of Business Conduct and Ethics, which requires, among other things, that directors, officers and employees act with integrity. The Code of Business Conduct and Ethics also prohibits our directors, officers and employees from taking (or directing to a third party) a business opportunity that is originated through the use of corporate property, information or position, unless we have already been offered the opportunity and turned it down, in which case our Nominating and Corporate Governance Committee must in any event approve the director, officer or employee interest therein. More generally, our directors, officers and employees are prohibited from using corporate property, information, or position for personal gain. The Code of Business Conduct and Ethics is posted in the Corporate Governance section of our website at www.sunstonehotels.com. In addition, a copy of the Code of Business Conduct and Ethics will be provided without charge upon request to Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary.

POLITICAL CONTRIBUTIONS POLICY AND TRADE ASSOCIATION MEMBERSHIPS

It is the Company’s policy that funds are not used directly to contribute to candidates, campaigns and political party committees. The Legal Department oversees compliance with our Company policy and may make exceptions where permissible under law and regulations. However, we are a member of certain industry associations which have a fee for membership or contribution for specific activities. The Company believes participation in these industry associations provides the opportunity to enhance stockholder value through involvement in public policy processes, networking, building of business skills, sharing collective best practices and monitoring industry policies and market trends. Pursuant to the Company’s Code of Business Conduct and Ethics, total Company contributions for political advocacy purposes are reported as less than $25,000 in 2021.

PLEDGING AND HEDGING POLICIES

We maintain pledging and hedging policies applicable to our directors, officers and other employees (collectively referred to in this section only as “insiders” and individually as an “insider”).

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COMPANY INFORMATION

Margin Accounts and Pledges. Securities held in a margin account or pledged as collateral for a loan may be sold without the insider’s consent by the broker if the insider fails to meet a margin call or by the lender in foreclosure if the insider defaults on the loan. Because a margin or foreclosure sale may occur at a time when the insider is aware of material nonpublic information or otherwise is not permitted to trade in Company securities, insiders are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan.

Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero - cost collars and forward sale contracts, involve the establishment of a short position in the Company’s securities and limit or eliminate an insider’s ability to profit from an increase in the value of the Company’s securities. Such transactions are complex and involve many aspects of the federal securities laws, including filing and disclosure requirements. Therefore, the Company prohibits insiders from any hedging transactions.

CORPORATE RESPONSIBILITY: ENVIRONMENTAL, SOCIAL AND GOVERNANCE PRACTICES

Purpose and Governance of ESG Initiatives

We are committed to ensuring ESG initiatives are part of our operating and investment strategies. We continuously seek opportunities to invest in renovations, implement initiatives intended to reduce energy, water and waste impacts, enhance the overall environment and well-being of guests and associates at our properties, and improve the local communities in which we conduct business or own hotels. As owners of Long-Term Relevant Real Estate®, we take a holistic view in investing in our assets, balancing the best interests of our stockholders, the environment, our employees, the hotel associates and the communities in which we own hotels. Our commitment to the promotion and advancement of ESG initiatives support our holistic view and strengthens Board and management accountability.

Board of Directors and Management Oversight. Our Board of Directors understands how environmental and social issues may impact the long-term interests of our stockholders and stakeholders. The Board of Directors has assigned our Nominating and Corporate Governance Committee with direct oversight of the Company’s ESG-related objectives, policies, procedures and evaluation of risks and opportunities, including those related to climate change, resource scarcity, Diversity, Equity and Inclusion (“DE&I”), board refreshment and human rights. To ensure our ESG initiatives are continuously managed and integrated into our business strategy, we have an ESG Committee composed of dedicated internal resources and external advisors. Our ESG Committee is responsible for evaluating potential ESG risks and opportunities that have been identified as focus items by our stockholders, leading ESG frameworks and ESG rating agencies. Additionally, our ESG Committee is responsible for reviewing all ESG-related policies outlined in this section annually. Our ESG Committee reports to the Nominating and Corporate Governance Committee quarterly and to the entire Board of Directors annually.

Disclosures and Transparency. As part of our strong corporate governance, we aim to provide transparent disclosures to our stakeholders. In 2021, we published our annual Corporate Responsibility Report which provides details on our ESG program, including strategy, performance statistics, initiatives, alignment with the United Nations Sustainable Development Goals and our 2025 reduction targets. We published disclosures in-line with leading ESG frameworks, including the Sustainability Accounting Standards Board (“SASB”), the Global Reporting Initiative (“GRI”) and the Task Force on Climate-related Financial Disclosures (“TCFD”).

Our Corporate Responsibility Report, SASB, GRI and TCFD disclosures are posted in the Corporate Responsibility section of our website at www.sunstonehotels.com. Our Environmental Policy, Human Rights & Labor Rights Policy and Vendor and Business Partner Code of Conduct are also posted in the Corporate Responsibility section of our website. In addition, a hard copy of these policies will be provided without charge upon request to Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary. The contents posted on, or accessible through, our website are not incorporated by reference into this Proxy Statement or any of our filings with the SEC and may be revised by us (in whole or in part) at any time and from time to time.

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COMPANY INFORMATION

Environmental Sustainability

Sunstone is committed to promoting environmental sustainability and protecting the natural resources that support our hotel operations and our corporate office. Sunstone’s comprehensive environmental efficiency program is designed to make our hotels more energy efficient, reduce carbon emissions and create a resilient and eco - friendly environment, while still enhancing profitability at our hotels.

Climate Change, Resiliency and Risk Mitigation. We focus on assessing and minimizing the physical, transitional, regulatory and market risks associated with climate change. Our environmental efficiency program includes retro - fitting lighting systems with new LED fixtures, guestroom “smart” thermostats that adjust room conditions based on whether the room is occupied or not, removable flood mitigation barriers at high-risk locations, central plant efficiency upgrades, bulk amenity dispensers for guestrooms, food waste prevention strategies, water recycling for laundry operations or laundry outsourcing, low - flow toilet systems, electric vehicle charging and renewable solar energy.

Sunstone is committed to seeking and investing in new ESG innovations and practices to implement across our portfolio, including low-carbon solutions, initiatives to reduce the environmental footprint of our hotels and programs that result in positive community impact.

Environmental Sustainability Management. Our environmental sustainability program and initiatives include monitoring, reporting and investing in efficiency programs and operating procedures. We have an Environmental Policy designed to identify our environmental impact, drive sustainability within our portfolio and raise environmental awareness among our stakeholders. We have adopted an ISO 14001 aligned Environmental Management System (“EMS”) that is integrated across all Company departments and is designed to monitor performance and risks. We also seek to continuously improve our EMS by setting performance goals, collecting, reviewing and monitoring environmental data, and reporting on environmental performance throughout our entire portfolio.

Social Responsibility

We strive to create a healthy and supportive workplace for Sunstone employees, including the establishment of a safe, inclusive and accommodating work environment, together with competitive wages and benefits, and career development opportunities. We also work with our hotel brands and operators to offer the financial resources that enable them to provide the same support for hotel associates. Furthermore, we seek to support the communities where we work and own hotels through community outreach programs and fundraising efforts.

Social Responsibility Governance. We maintain a Human Rights & Labor Rights Policy, Code of Business Conduct and Ethics and a Vendor and Business Partner Code of Conduct. All three policies are designed to drive social impact including DE&I and to raise social responsibility and awareness among our stakeholders. Our program and initiatives include addressing social responsibility at our corporate office, our hotels and the communities in which we work and own hotels.

In our Human Rights & Labor Rights Policy, we outline our aim to ensure that our operations and our portfolio of properties adhere to the principles defined in the UN Universal Declaration of Human Rights and the UN Guiding Principles on Business and Human Rights, and comply with all applicable human rights and labor rights laws. Likewise, our Vendor and Business Partner Code of Conduct encourages our suppliers, vendors, tenants and all other business partners to operate in a manner that seeks to minimize environmental and social risks and the impacts of their products and services.

Community Engagement. Sunstone’s Community Involvement Program aims to improve community health and well-being, provide assistance or support in case of disaster, and support charities and community groups. Our employees and Board of Directors have the opportunity to donate to qualifying organizations through our Matching Charitable Gifts Program. In response to the COVID-19 pandemic and particularly when operations at the majority of our hotels were temporarily suspended, Sunstone recognized the importance of supporting our hotel associates and the local communities in which our hotels are located. As part of our Hotel Associate Food Assistance Program, the Company spent approximately $225,000 in 2021 on food drives for working and furloughed hotel associates across several of our hotels.

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COMPANY INFORMATION

Diversity, Equity and Inclusion. Sunstone recognizes the value of different perspectives, backgrounds and experiences in our workplace, and seeks to foster a Company culture of belonging, where all employees are comfortable to be their authentic selves. We are a signatory to the CEO Action for Diversity & Inclusion™ pledge to promote DE&I in the workplace and we created a management led DE&I Committee in 2020 for advancing our DE&I commitment. In 2021, 100% of Sunstone employees participated in unconscious bias and microaggressions training through interactive workshops.  At December 31, 2021, we had 42 employees, of which 40% identified as female and 60% identified as male. Additionally, 24% of our workforce identified as being from an underrepresented community.

Hotel Associate Health, Safety and Well-Being. Throughout our portfolio, we aim to protect and promote our guests and hotel associates’ health, safety and well-being. We worked diligently to ensure all hotels have updated safety, cleaning and sanitizing protocol and procedures. We also deployed a portfolio-wide emergency preparedness program that requires every hotel to have an emergency protocol, as well as on-hand equipment to promote the safety of hotel associates and guests and to mitigate loss and damage in the event of a catastrophe.

We fully support and encourage all of our operators to adopt and abide by the principles of the American Hotel & Lodging Association’s 5-Star Promise. This promise enhances policies, trainings and resources related to the safety of hotel associates and guests. Sunstone has deployed employee safety devices in nearly all our hotels in alignment with initiatives by third-party managers and franchisors.

INDEPENDENCE OF DIRECTORS AND COMMITTEES

Although the Board of Directors does not have a formal policy as to whether the chairman should be an independent director, an affiliated director, or a member of management, the roles of chairman and CEO were held separately from our inception in October 2004 until September 2021. In September 2021, following the separation with our former CEO, our Chairman of the Board, Douglas M. Pasquale, was appointed as our Interim CEO. Prior to his appointment as Interim CEO, Mr. Pasquale resigned from all of his committee assignments, which included the Compensation Committee and the Nominating and Corporate Governance Committee. The Board of Directors determined that it was in the best interests of the Company and its stockholders to combine the roles of Interim CEO and Chairman of the Board to provide stability while the Company conducted a search for and hired a new CEO. On March 7, 2022, a new CEO was named and Mr. Pasquale transitioned from Interim CEO to the Company’s Executive Chairman. We currently do not have a lead independent director.

The Board of Directors has determined that a majority of the current Board of Directors is independent as defined under the NYSE’s rules and that a majority of the Board of Directors will be independent if the slate of directors up for election in Proposal 1 of this proxy statement are elected. Directors who serve on the Compensation Committee and the Nominating and Corporate Governance Committee are also subject to these independence requirements. Directors who serve on the Audit Committee are subject to these and additional independence requirements.

To be considered independent under the NYSE’s rules, the Board of Directors must determine that a director does not have a material relationship with Sunstone and/or its consolidated subsidiaries (either directly or as a partner, stockholder, or officer of an organization that has a relationship with any of those entities).

The Board of Directors undertakes on an annual basis a review of the independence of the directors nominated for election at the upcoming annual meeting. During this review, the Board of Directors considers the transactions and relationships between each director or any member of his or her immediate family and Sunstone and its subsidiaries and affiliates as reported under “Certain Relationships and Related Party Transactions” below. The Board of Directors also examines transactions and relationships between directors or their affiliates and members of senior management or their affiliates. The purpose of this review is to determine whether any such relationships or transactions are inconsistent with a determination that such director is independent.

As a result of this review, the Board of Directors affirmatively determined that each member of the Board of Directors, other than Mr. Pasquale, is independent of Sunstone and its management under the independence standards of the NYSE.

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THE BOARD OF DIRECTORS LEADERSHIP STRUCTURE

From May 1, 2015 to present, Mr. Pasquale has served as our Chairman of the Board, from September 2, 2021 to March 7, 2022, Mr. Pasquale also served as our Interim CEO, and from March 7, 2022 to present Mr. Pasquale now serves as our Executive Chairman. Assuming that the nominees listed in Proposal 1 are elected as directors at the Annual Meeting, we expect Mr. Pasquale will continue to serve as our Executive Chairman.

Historically, the role of the Chairman of the Board or lead independent director is to coordinate the activities of the independent directors, coordinate with the CEO, or management, and the corporate secretary to set the agenda for Board of Directors’ meetings, chair executive sessions of the independent directors, provide leadership to the Board of Directors and uphold high corporate governance and ethical standards, communicate effectively with management on a regular basis, provide support and advice to the CEO and management, facilitate communication between and among the independent directors and management, take a lead role in the Board of Director’s self - assessment and evaluation processes, and perform the other duties either specified in the Corporate Governance Guidelines or assigned from time to time by the Board of Directors. In his previous capacity as Interim CEO and Chairman of the Board and current capacity as Executive Chairman, Mr. Pasquale continues to fulfill the duties identified above.

Furthermore, our Board of Directors currently has six independent members and one non - independent member, Mr. Pasquale. Assuming that the nominees listed in Proposal 1 are elected as directors at the Annual Meeting, our Board of Directors will continue to have six independent members and one non - independent member. A number of the members of our Board of Directors are currently serving or have served as members of senior management of other public companies and have served as directors of other public companies. We currently have four Board of Directors committees comprised solely of independent directors.

Our Board of Directors believes its leadership structure is appropriate as it effectively allocates authority, responsibility and oversight between management and the independent members of our Board of Directors. It accomplishes this by giving primary responsibility for the operational leadership and strategic direction of the Company to our management, while facilitating our Board of Directors’ independent oversight of management, promoting communication between management and our Board of Directors, and supporting our Board of Directors’ consideration of key governance matters.

RISK OVERSIGHT

Our Audit Committee is primarily responsible for overseeing the Company’s risk management processes, which includes a review of all enterprise risks, including cybersecurity risks, on behalf of the full Board of Directors. The Audit Committee receives reports from management at least quarterly regarding the Company’s assessment of risks. Once a year, management provides its quarterly risk assessment to the entire Board of Directors. In addition, the Audit Committee reports regularly to the full Board of Directors, which also considers the Company’s risk profile. The Audit Committee and the full Board of Directors focus on the most significant risks facing the Company and the Company’s general risk management strategy, and also ensure that risks undertaken by the Company are consistent with the Board of Directors’ appetite for risk. While the Board of Directors oversees the Company’s risk management, Company management is responsible for the day - to - day risk management processes. The Audit Committee also conducts confidential executive sessions with our external auditors and internal auditors. We, together with the Board of Directors, believe this division of responsibilities is the most effective approach for addressing the risks facing the Company.

Our Compensation Committee oversees risk management as it relates to our compensation plans, policies and procedures and has met with management to review and confirm that our compensation programs do not create incentives to our employees to take excessive or inappropriate risks that could have a material adverse effect on the Company. We believe that features of our programs, including the mix of long- and short - term incentives and equity grants, as well as our internal financial and legal controls, appropriately mitigate the risk of employees taking actions that may benefit the employee in the short-term, but ultimately harm the Company.

Our Nominating and Corporate Governance Committee oversees risk management as it relates to our ESG program, including climate change, resource scarcity, DE&I, board refreshment and human rights. The

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COMPANY INFORMATION

Company’s ESG Committee is responsible for incorporating the ESG program into the overall Company risk assessment provided quarterly to the Audit Committee. The Nominating and Corporate Governance Committee receives reports from management at least quarterly regarding the Company’s ESG program and performance. Once a year, management provides an ESG program update, including associated risks, to the entire Board of Directors.

Our Board of Directors oversees the corporate culture of the Company and assesses its effectiveness on advancing the Company’s strategy. To assess culture and any potential risks, among other actions, the independent members of the Board of Directors regularly confers with the Company’s General Counsel who oversees the Company’s human resources. Additionally, the Board of Directors has direct access to all Company employees and is able to communicate with individuals as needed.

DIRECTOR ATTENDANCE AT MEETINGS

Each of our directors is encouraged to attend each annual meeting of stockholders and all meetings of the Board of Directors. The Board of Directors held eleven Board of Directors meetings and acted by written consent seven times in 2021. The Compensation Committee acted by written consent two times in 2021. During 2021, all directors attended 100% of the committee meetings on which they served during the periods in which they served on such committees. All directors attended each Board of Director meeting, except one director who missed one meeting, and two directors who recused themselves from one meeting due to a conflict of interest (such attendance was greater than 75% for each director). Although we do not have a policy requiring directors to attend our annual meetings of stockholders, all of our directors virtually attended our annual meeting of stockholders in 2021.

STOCKHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS AND NON - EMPLOYEE DIRECTORS

Stockholders may communicate any matters they wish to raise with the directors by writing to the Board of Directors, Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary. Stockholders should provide proof of stock ownership with their correspondence. All communications from verified stockholders will be received and processed by the Secretary and then directed to the appropriate member(s) of the Board of Directors. In addition, any interested party who wishes to communicate directly with our non - employee directors may address such communication to the independent directors at the mailing address of the Company’s executive offices at 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary. All communications will be received and processed on a confidential basis by the Secretary and then directed to the appropriate non - employee director(s). From time to time our non-employee directors meet with our stockholders.

During 2021, our Executive Chairman, Mr. Pasquale, met with investors on a regular basis following the Company’s separation from our former CEO and Mr. Pasquale’s transition to Interim CEO.

COMMITTEES OF THE BOARD OF DIRECTORS

Our Board of Directors complements its oversight responsibilities through the following four standing committees, each of which is briefly described below: the Compensation Committee, the Audit Committee, the Nominating and Corporate Governance Committee and the Investment Committee. The Company also established an ad hoc Communications Committee during the CEO transition in 2021 and a Search Committee in connection with selecting our new CEO, each of which has since been dissolved. Each of our standing committees has a charter, current copies of which may be viewed in the Corporate Governance section of our website at www.sunstonehotels.com. In addition, printed copies of our committee charters will be provided without charge upon request to Sunstone Hotel Investors, Inc., 200 Spectrum Center Drive, 21^st Floor, Irvine, California 92618, Attention: Secretary.

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Compensation Committee

As of March 17, 2022, the members of our Compensation Committee are:

For the majority of 2021, the Compensation Committee included Mr. Baird, Mr. Batinovich (who served as the chair), Ms. Digilio and Mr. Pasquale. In the third quarter of 2021, Mr. Baird and Mr. Pasquale resigned from the Compensation Committee and Ms. Leslie joined the Compensation Committee. On January 1, 2022, Ms. Digilio was appointed as the chair.

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Audit Committee

As of March 17, 2022, the members of our Audit Committee are:

At the beginning of 2021, the Audit Committee included Mr. Baird, Mr. Batinovich, Ms. Digilio and a former member of the Board of Directors, Keith P. Russell who served as the chair. Mr. Russell did not stand for reelection and his term expired at the 2021 Annual Meeting. At the 2021 Annual Meeting, Mr. Baird resigned from the committee while Ms. Leslie and Ms. Mims joined the committee, and Mr. Batinovich was appointed as the chair. In the third quarter of 2021, Ms. Digilio resigned from the committee, and Ms. Leslie was appointed as the chair.

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Nominating and Corporate Governance Committee

As of March 17, 2022, the members of our Nominating and Corporate Governance Committee are:

At the beginning of 2021, the Nominating and Corporate Governance Committee included Mr. McCabe, Mr. Pasquale who served as the chair and a former member of the Board of Directors, Keith P. Russell. Mr. Russell did not stand for reelection and his term expired at the 2021 Annual Meeting. At the 2021 Annual Meeting, Mr. Baird joined the committee. During the third quarter of 2021, Mr. Pasquale resigned from the committee, Ms. Digilio joined the committee, and Mr. Baird was appointed as the chair.

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Investment Committee

As of March 17, 2022, the members of our Investment Committee are:

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COMPANY INFORMATION

Board Refreshment. Our Board of Directors remains committed to active board refreshment to ensure optimal board structure, composition and diversity. The Nominating and Corporate Governance Committee focuses on obtaining a desired mix of skills, experience, perspective and diversity relevant to the Company’s strategic direction. The Nominating and Corporate Governance Committee recommends, among other things, whether the existing Board of Directors contains the appropriate size, structure and composition, whether some or all of the incumbent directors should be recommended to the Board of Directors for re - nomination and whether the Board of Directors should be enlarged to include additional directors.

The Nominating and Corporate Governance Committee will consider as potential director nominees candidates recommended by various sources, including any member of the Board of Directors or senior management. The Nominating and Corporate Governance Committee may also retain a third - party search firm to identify candidates. The Nominating and Corporate Governance Committee also considers recommendations for nominees that are timely submitted by stockholders and only if such recommendations are delivered in the same manner prescribed by the advance notice provisions contained in Article II, Section 2.11 of our bylaws for stockholder proposals. In addition to satisfying the timing, ownership and other requirements specified in Article II, Section 2.11 of our bylaws, a stockholder’s notice must set forth as to each person whom the stockholder proposes to recommend that the Committee nominate for election to the Board of Directors all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act and our bylaws (including such person’s written consent to being named in the proxy statement as a nominee and to serve as a director if elected). Properly communicated stockholder recommendations will be considered in the same manner as recommendations received from other sources.

Commitment to Diversity at the Company and on the Board. The Company is committed to diversity at the Board level. Our Board considers diversity, including gender, ethnicity and other underrepresented communities when considering nominations to the Board and will continue to endeavor to include women, individuals from minority groups and underrepresented communities in the qualified pool from which new director candidates are selected. The Board’s objective is to have a Board comprised of individuals who by occupation, background and experience are in a position to make a strong, positive contribution to the Company and its stockholders.

Current Committee Membership. The table below summarizes the membership information for the committees of the Board of Directors as of March 17, 2022:

C = Chair M = Member

F = Audit Committee Financial Expert

The Board of Directors, at the recommendation of the Nominating and Corporate Governance Committee, periodically reviews and modifies committee appointments.

Executive Sessions of the Board of Directors. The Board of Directors held executive sessions at least once each quarter in 2021 and held other meetings relating to corporate governance during the year. Following the Annual Meeting, we expect that all of our directors will continue to be members of the Board of Directors, and that Mr. Pasquale will continue to preside over executive sessions of the directors, other than while acting as Executive Chairman until September 1, 2022, during which time executive sessions will continue to be held both with and without Mr. Pasquale.

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STOCK OWNERSHIP

STOCK OWNERSHIP REQUIREMENTS

We maintain a stock ownership policy for our executive officers because we believe that requiring our executive officers to maintain a meaningful ownership interest in the Company aligns the interests of the executive officers with those of our stockholders (i.e., the executive officer will experience the same downside risk and upside potential as our stockholders experience). The policy provides that, on or before January 1 of the year following the fourth anniversary of the CEO’s appointment to such position, the CEO will own and retain shares of the Company’s common stock having a value equal to at least six times his or her annual base salary rate in effect on the December 31 immediately preceding the applicable January 1 determination date (described below). The policy further provides that, on or before January 1 of the year following the fourth anniversary of the other executive officer’s appointment to such position, each executive officer will own and retain shares of the Company’s common stock having a value equal to at least: (i) three times for Executive Vice Presidents, and (ii) two times for Senior Vice Presidents, his or her annual base salary rate in effect on the December 31 immediately preceding the applicable January 1 determination date (described below).

We also maintain a stock ownership policy for our non-employee directors, under which each existing non-employee director, on or before January 1 of the year following the third anniversary of such director’s election to the Board of Directors, is required to hold stock valued at no less than three times the amount of the annual cash retainer paid to such director. In February 2022, we updated our stock ownership policy on a forward basis for our non-employee directors under which each existing non-employee director, on or before January 1 of the year following the fifth anniversary of such director’s election to the Board of Directors, is required to hold stock valued at no less than five times the amount of the annual cash retainer paid to such director.

To determine compliance with the stock ownership guidelines, (a) we include, in addition to shares the individual director or executive officer owns outright, time-based restricted shares of Company stock  and (b) we calculate the value of each individual’s stock holdings based on the average closing price on the NYSE of the Company’s common stock for the year ended immediately prior to the applicable January 1 determination date.

As of January 1, 2022, each of our executive officers (other than Mr. Pasquale) and each applicable non-employee member of the Company's Board of Directors (other than Mses. Leslie and Mims) met or exceeded the stock ownership requirements. Mr. Pasquale met or exceeded the stock ownership requirements for the Board of Directors. Based on the policy in place as of January 1, 2022, Mses. Leslie and Mims, both of whom joined the Board of Directors in 2021, must achieve compliance by January 1, 2025.

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COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

Overview. This Compensation Discussion and Analysis explains our compensation philosophy and policies that applied in 2021 to our NEOs listed in the Summary Compensation Table below. It explains the structure and rationale associated with each material element of the compensation program for the NEOs, describes the actual compensation paid to our NEOs for 2021, and provides important context for the more detailed disclosure relating to our NEOs in the compensation tables following this Compensation Discussion and Analysis.

Our Current NEOs for 2021 included Messrs. Pasquale, Giglia, Springer, Klein and Ostapovicz. In addition, per SEC Rules, our former President and CEO, John V. Arabia, and our former Executive Vice President and COO, Marc A. Hoffman, were also NEOs for 2021.

The Board of Directors and our Compensation Committee consider it our responsibility to structure our compensation program in a way that is highly aligned with the interests of our stockholders. Although the advisory stockholder vote on executive compensation is non - binding, the Compensation Committee has considered and will continue to consider the outcome of the vote when making future compensation decisions for NEOs. At our 2021 annual meeting of stockholders, 95.2% of votes cast were in favor of our “say-on-pay” proposal. The members of the Compensation Committee believe that the stockholder vote on our 2021 “say - on - pay” proposal endorses the Company’s compensation program; however, the Compensation Committee endeavors to continuously improve the Company’s compensation program to more closely align compensation with the interests of our stockholders. For example, in response to feedback from stockholders, in 2019 the Compensation Committee adopted a Compensation Recovery Policy (“Clawback Policy”), and eliminated single trigger acceleration for unvested equity awards in connection with a change of control. The Compensation Committee believes that these changes further align management with the long-term interests of our stockholders. Following the 2017 advisory vote on the frequency of say-on-pay votes, our Board of Directors resolved to continue to hold annual say-on-pay votes. Following the say-on-pay vote at the Annual Meeting, the next say-on-pay vote will be held in 2023. The next advisory vote on frequency of say-on-pay votes will also be held in 2023.

In addition, the Compensation Committee seeks to attract, motivate and retain Sunstone’s NEOs through competitive compensation arrangements that the Compensation Committee believes, within appropriate risk parameters, provide strong financial incentives for the NEOs to maximize stockholder value.

With respect to our NEOs, our executive compensation program is weighted towards variable, rather than fixed, compensation. Specifically, all at-risk compensation, including annual cash bonuses, are designed to reward performance relative to financial and other metrics that we believe will result in favorable total stockholder returns, both in terms of absolute appreciation in the value of our shares, and in terms of relative performance as compared to our peers, taking into consideration our competitive position within the real estate industry and each executive’s contributions to the Company. The Compensation Committee has also designed the compensation program for NEOs to reward our NEOs at levels that the Compensation Committee believes to be competitive for companies in its industry, including in part, a review of NEOs compensation levels at certain companies in a peer group, as identified below.

In 2022, our Compensation Committee made significant changes to the Company’s long-term incentive compensation program. Commencing with awards granted in 2022, the Compensation Committee determined to transition the Company’s annual grant practices for performance-based equity awards from a program granting time-based awards based on prior performance to a program granting performance-based awards tied to future performance.  As a result of this change, in order to bridge the transition period between the old and new programs, in addition to annual awards consisting of time-based restricted stock (25%) and performance-based restricted stock unit awards tied to future performance (75%), the awards granted by the Compensation Committee in 2022 included one-time transition awards for each NEO in the form of an award of time-based restricted stock that vests over a two-year period and an award of performance-based restricted stock units eligible to vest over a two-year performance period allowing the Company to maintain the same level of target stock compensation throughout the transition period. A summary of the key plan features and the transition awards is provided below:

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Company Highlights

We improved the quality of our portfolio by focusing on Long-Term Relevant Real Estate®:

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COMPENSATION DISCUSSION AND ANALYSIS

We improved an already strong balance sheet and maintained appropriate levels of liquidity:

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2021 COMPENSATION DECISIONS

The Compensation Committee assists the Board of Directors in determining the compensation of our NEOs. It evaluates and recommends to the Board of Directors appropriate policies and decisions relative to NEO salary, benefits, bonus, incentive compensation, severance, equity-based and other compensation plans.

As described in more detail below, fiscal year 2021 compensation for each of our NEOs was determined by the Compensation Committee based upon a review of the Company’s performance (including the Company’s stockholder returns), the individual performance of each NEO, total compensation paid by the Company to each NEO in prior years, and, in certain instances, taking into account certain peer group information.

In 2021, the Compensation Committee selected one stockholder return metric for the 2021 Annual Cash Incentive Bonus which is discussed in detail below.

Historically, the Compensation Committee has awarded annual equity awards to our NEOs in the form of time-based restricted shares in amounts determined based on achievement of trailing three- and five- year relative stockholder return performance metrics. Commencing with awards granted in 2022, the Compensation Committee determined to transition the Company’s annual grant practices with respect to performance-based equity awards to a program granting performance-based awards tied to future performance.  Under the modified program, annual equity awards granted in 2022 consist of time-based restricted stock (25%) and performance-based restricted stock units (75%). Performance-based restricted stock units are subject to vesting based on achievement of RSR metrics over a three-year performance period following the date of grant.  In addition to these annual awards, awards granted by the Compensation Committee in 2022 included one-time transition awards for each NEO in the form of an additional performance-based award of restricted stock units and a time-based award of restricted common stock.  The NEOs did not receive annual equity awards in 2022 based on past stockholder return performance.  

Management’s Involvement in Compensation Decisions. The Compensation Committee exercises independent discretion and judgment in making compensation decisions after evaluating the Company’s performance, the NEO’s past performance (including the extent to which the NEO has met or exceeded specified targets or affected the Company’s performance), and the NEO’s long - term potential to enhance stockholder value. From time to time, the Compensation Committee will direct management to work with its consultant(s) in providing proposals, program design and compensation recommendations. The CEO (including the Interim CEO) does not provide recommendations for changes in his or her own compensation. Any proposed changes to CEO compensation, as well as final determinations regarding CEO compensation, are made in executive session of the Compensation Committee, without the CEO present. With respect to the Interim CEO compensation, such determination was evaluated, approved and adopted by the Compensation Committee.

Independent Consultant. FPC advises our Compensation Committee on compensation program design and the amounts payable to our NEOs. FPC provides our Compensation Committee with information on executive compensation trends, best practices and advice for potential improvements to the executive compensation program. FPC does not work for management, receives no compensation from the Company other than fees for its work in advising our Compensation Committee, and maintains no other economic relationships with the Company.

Annual Base Salary. The Compensation Committee reviews base salaries annually, but base salaries are not automatically increased pursuant to pre - determined formulas (or otherwise) and may not be increased if, among other things, the Compensation Committee believes that other elements of compensation are more appropriate in light of the Company’s stated objectives or that increases are not appropriate for other reasons. Each NEO’s base salary serves as the base amount for determining annual cash bonuses and equity incentive award opportunities, which are calculated as percentages of such NEO’s base salary.

The base salary payable to each of our NEOs is based on the review of the Compensation Committee described above and the following:

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The foregoing determination is not formulaic and is not based on specific Company or individual performance objectives, but rather, is subjective and made in light of our compensation philosophy and objectives described above. In 2020, our NEOs showed outstanding performance in managing the Company and navigating the unprecedented challenges resulting from the COVID-19 pandemic. Despite their significant efforts on behalf of the Company and our stockholders, due to the impact of the pandemic on the Company and our stockholders, the Compensation Committee determined that the NEOs’ 2021 base salaries would remain the same as in 2020. The following table includes the 2021 base salary determinations for each of our NEOs.

Annual Cash Incentive Bonuses and Annual Equity Incentive Awards. We use annual cash incentive bonuses, granted under our Incentive Bonus Plan, and annual equity incentive awards to further motivate our NEOs by establishing relationships between the bonuses and awards, on the one hand, and the performance of the NEO and/or the Company, including total stockholder returns on the other. We believe that tying our NEOs’ cash bonus and long-term equity compensation to quantitative metrics, including total stockholder returns (discussed below), aligns the interests of our NEOs with those of our stockholders and provides a strong financial incentive to maximize stockholder value.

The annual cash incentive bonus and equity incentive awards are intended to compensate our NEOs for achieving our annual financial goals at both the corporate and hotel asset levels, for achieving RSRs, for implementing long-term plans and strategies and for achieving individual objective goals. The annual cash incentive bonus and annual equity incentive award programs are based on performance and responsibility level rather than on the basis of seniority, tenure or other entitlement. Each year, the Compensation Committee establishes performance-based criteria, both corporate and individual, for each NEO, and the level of achievement of those criteria determines the size of the annual bonuses made to the NEO in the next calendar year. Historically, the level of achievement of such performance-based criteria also determined the size of the NEOs’ annual equity incentive awards.  As discussed above, commencing with awards granted in 2022, the Compensation Committee determined to transition the Company’s annual grant practices for performance-based equity awards from a program granting time-based awards based on prior performance to a program granting performance-based awards tied to future performance. Performance-based compensation is intended to encourage our NEOs to continually improve their capabilities to enhance performance and deliver positive business results.

Annual equity incentive awards are also intended to encourage ownership, foster retention through post - grant vesting schedules and align the NEOs’ interests with the long - term interests of our stockholders. Historically, we have used restricted stock awards, the size of which is determined based on achievement of pre-established performance goals, including, with respect to the majority of the annual equity incentive, RSR goals, which vest over a three-year period following grant. We have historically used restricted stock for these awards in order to confer the full value of the equity, since these awards were granted in respect of prior attainment of performance objectives, but we subjected these awards to three-year vesting to provide retention and integrity incentives

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(subject to accelerated vesting in certain circumstances, as discussed below in the table “—Potential Payments Upon Termination or Change in Control”). Because the awards were only granted if certain performance criteria were met, we generally did not subject these awards to additional performance-based vesting criteria.

Commencing in 2022, with the change in our equity award program, equity-based awards granted to our NEOs will be in the form of time-based restricted stock (25%) and performance-based restricted stock units that vest based on the Company’s RSR over a multi-year performance period commencing in the year of grant (75%).  As a result of this change, the NEOs did not receive annual equity awards in 2022 based on past stockholder return performance.

As described further below, the Compensation Committee set the annual cash incentive bonus levels for each NEO based on the achievement of objective corporate performance criteria as well as subjective individual performance criteria. The award thresholds are set at levels intended to provide the NEOs with a significant incentive to enhance stockholder value. Accordingly, as discussed below, the target annual incentive cash bonus and annual equity incentive award for each of our NEOs represent a significant percentage of such officer’s overall compensation arrangements.

Criteria and Metrics for 2021 Incentive Compensation. In the first quarter of 2021, the Compensation Committee established quantitative and qualitative performance measures for the annual cash incentive bonuses for the Current NEOs other than Mr. Pasquale, whose cash incentive bonus is provided for under the terms of his employment agreement as described below. Other than Mr. Pasquale, each Current NEO’s annual cash incentive bonus was based on the achievement of a stockholder return goal and the achievement of each Current NEO’s individual objective goals (discussed below) weighted as follows:

The relative weighting of the annual cash incentive bonus goals and each Current NEO’s individual goals are established by the Compensation Committee and reflect its analysis of the appropriate amount of emphasis to place on both objective corporate and subjective individual goals, and not any pre - determined formula or methodology. The Compensation Committee may, at its discretion, adjust criteria to account for significant intra - year transactions and circumstances.

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COMPENSATION DISCUSSION AND ANALYSIS

The Committee selected one stockholder return metric for the 2021 Annual Cash Incentive Bonus which is discussed in detail below.

Annual Cash Incentive Bonus Goal. The Compensation Committee determined that the amount of the cash bonus paid to each Current NEO, other than Mr. Pasquale, would be based on the achievement of both: (i) the following goal (the “Cash Incentive Bonus Goal”), weighted as described below, and (ii) individual performance:

Mr. Pasquale’s annual Cash Incentive Bonus Goal is based on his individual performance as Interim CEO and was evaluated by the Compensation Committee upon completion of his role as Interim CEO.

For the Company’s Cash Incentive Bonus Goal, the Compensation Committee established three achievement levels—“Threshold,” “Target” and “High,” and for each achievement level, a corresponding multiple of base salary for each Current NEO. For each of the components, the amount paid to the applicable Current NEO was the product of (a) his base salary, (b) the weighting for that component, (c) the multiple corresponding to the level of achievement and (d) the Compensation Committee’s subjective assessment as to whether the Current NEO’s performance warranted an increase or decrease.

The Compensation Committee determined the range for each of the RSR components for fiscal year 2021 as follows:

We calculated RSR as the Company’s percentile rank, comparing the annualized increase (or decrease) in the value of the Company’s common stock on the NYSE as of the last trading day in 2021, assuming any dividends paid on the Company’s common stock during the applicable period have been reinvested, over the price of the Company’s common stock on the NYSE as of the last trading day in 2020, among the equivalent total stockholder return metrics for the 14 companies included in the FTSE Nareit Equity Lodging/Resorts Index, as of the first trading day of 2021, adjusted for companies no longer listed on a stock exchange. For 2021, the Company’s 1-year return was below the Threshold resulting in zero payout.

Individual Objective Goals. The primary objective of this component was to drive individual performance and to ensure accountability with respect to individual performance throughout the calendar year. Each of the NEOs, other than Mr. Pasquale, had individualized goals for 2021 as follows:

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Additionally, each such Current NEO’s individual performance was determined in part based on the Current NEO’s contribution towards advancing the Company’s strategy of owning a portfolio of Long-Term Relevant Real Estate®, as well as the preparation for and implementation of ESG initiatives in 2021.

To determine the cash incentive bonus payable to each Current NEO, in February 2022, the Compensation Committee reviewed and assessed the performance of the Company and each Current NEO in comparison to the subjective and objective performance measures established in 2021 and described above, subject to the Compensation Committee’s subjective assessment as to whether the Current NEO’s performance warranted an increase or decrease. The Compensation Committee did not exercise discretion in respect of the performance measure established for fiscal 2021, and no cash bonus was awarded with respect to the component if performance for such component was deemed to be below Threshold. For 2021, the Company’s one-year return was below the Threshold resulting in zero payout. Mr. Hoffman was not eligible to earn a cash incentive bonus in 2021 as a result of his retirement on May 14, 2021.  Mr. Arabia’s severance payments in connection with his termination of employment on September 2, 2021 and provided for under his Employment Agreement included a pro rata portion of his 2021 target annual bonus.

The following table summarizes all of the components of the Cash Incentive Bonus Goals with respect to fiscal year 2021, paid in February 2022 for Messrs. Giglia, Springer, Klein and Ostapovicz, and paid within 30 days of either September 2, 2022 or the end of his service as Interim CEO for Mr. Pasquale (dollar values rounded to the nearest whole dollar). For Mr. Pasquale, the cash bonus reflects the terms of his employment agreement (threshold performance (minimum) – $750,000; target performance – $1,850,000; high performance (maximum) – $3,000,000). No bonus is reflected in the table for Mr. Pasquale because Mr. Pasquale’s bonus was not earned or paid with respect to fiscal year 2021, but was paid in March 2022 in connection with the completion of his service as Interim CEO. For Messrs. Giglia and Springer, the cash bonus reflects the product of base salary multiplied by the weighting of each goal and the interpolated achieved goal multiplier (threshold – 62.5%; target – 112.5%; high (maximum) – 162.5%). For Messrs. Klein and Ostapovicz, the cash bonus reflects the product of base salary multiplied by the weighting of each goal and the interpolated achieved goal multiplier (threshold – 60.0%; target – 102.5%; high (maximum) – 145.0%).

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Equity Incentive Awards. Historically, in determining the equity incentive awards granted to our NEOs, in February of each year, the Compensation Committee would review and assess the performance of the Company and each NEO in comparison to the subjective and objective performance measures established in the preceding year, subject to the Compensation Committee’s subjective assessment as to whether the NEO’s performance warranted an increase or decrease.

In 2022, the Compensation Committee approved a change in the structure of our long-term equity based compensation program for the NEOs.  Beginning with annual equity awards granted in 2022, each NEO will be granted equity awards in the form of time-based restricted stock and performance-based restricted stock units.  Twenty-five percent of the award will be in the form of restricted stock, which will be subject to time-based vesting, and will vest in substantially equal installments on each of the first three anniversaries of the applicable vesting commencement date, subject to the NEO’s continued service on the applicable vesting date.  Seventy-five percent of the award will be in the form of performance-based restricted stock units, which will vest based on achievement of RSR metrics over a three-year performance period.  In addition to the 2022 annual awards, awards granted by the Compensation Committee in 2022 included one-time transition awards for each NEO in the form of an additional performance-based award of restricted stock units eligible to vest following a two-year performance period and a time-based award of restricted common stock which vests ratably over two years subject to continued employment. The NEOs did not receive annual equity awards in 2022 based on past stockholder return performance.

In connection with the commencement of their employment as our Interim CEO and Chief Operating Officer, respectively, Messrs. Pasquale and Ostapovicz were granted one-time awards of restricted stock under the 2004 Plan. The restricted stock awards granted to Mr. Pasquale covered a number of shares of our common stock  having a dollar-denominated value of $2,250,000 and will vest in full on the one-year anniversary of Mr. Pasquale’s employment commencement date, subject to his continued employment on the vesting date. If Mr. Pasquale experiences a “qualifying termination” (as defined in his employment agreement) prior to the one-year anniversary of his employment commencement date, vesting of the restricted stock will accelerate in full subject to his execution of a general release. The restricted stock award granted to Mr. Ostapovicz covered a number of shares of our common stock having a dollar-denominated value of $500,000 and will vest as to one-third of the restricted shares on each of the first three anniversaries of February 15, 2021, subject to his continued employment on the vesting date.

Benefits and Perquisites. Our benefit programs are based on an assessment of competitive market factors, and a determination of what is needed to attract and retain qualified executives. Our primary benefits for executives include participation in our broad-based plans at the same cost and on the same terms as other employees. These plans include a tax qualified 401(k) savings plan (with safe harbor contributions equal to 3% of a participant’s pay up to $8,700), a profit-sharing plan (with Company contributions deposited directly into a participant’s 401(k) plan), health, dental and vison insurance plans, term life insurance and disability coverage and a matching charitable gift program up to a maximum of $5,000 for each executive. In addition, each of our executives receives a maximum reimbursement credit of $5,000 for room and tax expenditures at the Company’s hotels and resorts.

The Company does not provide non - qualified deferred compensation or pension benefits to any of its employees, including its NEOs.

Retention Program. Following the separation with Mr. Arabia as CEO of the Company, the Board of Directors approved a one-time retention program (the “Retention Program”) pursuant to which each of Messrs. Giglia, Springer, Klein and Ostapovicz received awards in September 2021. Historically, the Board of Directors has not approved grants for NEOs outside of our annual compensation program other than negotiated new hire awards or promotion awards. Under the Retention Program, each NEO was eligible to receive a cash bonus subject to his continued employment with the Company through February 28, 2022. In addition, under the Retention Program, the Company granted each NEO a restricted stock award pursuant to our 2004 Plan, which vests as to 50% of the stock award on each of February 28, 2023 and September 30, 2024, subject to the NEO’s continued employment through the applicable date. Notwithstanding the foregoing, upon a termination of the NEO’s employment by the Company without “cause”, by the NEO for “good reason” (each as defined in the applicable NEO’s employment agreement) or by reason of the NEO's death or disability, then (i) any then-unpaid cash bonus under the Retention Program will be paid to the Executive and (ii) any then-unvested equity award under the Retention

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