SUNSTONE HOTEL INVESTORS, INC. Dear Stockholder:
It is a pleasure to invite you to the 2024 annual meeting of stockholders (the "Annual Meeting") of Sunstone Hotel Investors, Inc. ("Sunstone"), a Maryland corporation, to be held at the Hilton San Diego Bayfront hotel, located at 1 Park Boulevard, San Diego, CA 92101, on Friday, May 3, 2024 at 8:00 a.m. local time, for the following purposes:
- Election of eight directors to serve until the next annual meeting and until their successors are elected and qualified;
- Ratification of 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, 2024;
- Advisory vote to approve the compensation of Sunstone's Named Executive Officers, as set forth in the proxy statement for Sunstone's Annual Meeting ("Say-on-Pay Vote"); and
- Transaction of other business as may properly come before the Annual Meeting, including any motion to adjourn to a later date to permit further solicitation of proxies, if necessary, or before any adjournment or postponement thereof.
Only stockholders of record of shares of Sunstone common stock, par value $0.01 per share, at the close of business on March 6, 2024 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 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 for our stockholders, positions Sunstone for a promising future. We continue to focus on improvements to our compensation and corporate 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; comprehensive Insider Trading 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 20, 2024
WHEN:
May 3, 2024,
8:00 a.m. local time
WHERE:
Hilton San Diego
Bayfront
1 Park Boulevard
San Diego, CA 92101
AGENDA:
- Election of eight directors to serve until the next annual meeting and until their successors are elected and qualified;
- Ratify the appointment of Ernst & Young LLP to act as the independent registered public accounting firm for the fiscal year ending December 31, 2024; and
- Advisory Say-on-Pay Vote
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
March 20, 2024
You are invited to Sunstone's 2024 annual meeting of stockholders, or the Annual Meeting. Only stockholders of record at the close of business on March 6, 2024 are entitled to notice of and to vote at the Annual Meeting.
Stockholders can vote online, by telephone, by completing and returning the proxy card, or by attending the Annual Meeting. This Notice and the proxy card itself have detailed instructions for voting, including voting deadlines.
Internet | Telephone | In Person | |
Visit the website noted on | Use the toll-free | Sign, date, and return | Cast your vote in person |
your proxy card to vote | telephone number on | your proxy card in the | at the Annual Meeting. |
online. | your proxy card to vote | enclosed envelope to vote | |
by telephone. | by mail. | ||
Stockholders may revoke a proxy (change or withdraw their votes) at any time prior to the Annual Meeting by following the instructions in the Proxy Statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
Pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), we are primarily furnishing proxy materials to our stockholders via the Internet rather than mailing paper copies of the materials. This Proxy Statement and Sunstone's annual report on Form 10--K for the fiscal year ended December 31, 2023 ("Annual Report") are available on the Internet at www.proxyvote.com. Internet distribution of the proxy materials is designed to expedite receipt by stockholders, lower costs and reduce the environmental impact of the Annual Meeting.
The Notice of Internet Availability of Proxy Materials ("Notice Card"), has instructions on how to access and review our proxy materials online, as well as instructions for online or telephone voting. We sent the Notice Card to our stockholders on or about March 20, 2024. Stockholders who previously indicated a preference for paper copies of our proxy materials received paper copies. If you received a Notice Card but would like to request paper copies of our proxy materials, you may do so by following the instructions described in the Notice Card.
TABLE OF CONTENTS
- | 0 |
Proxy Summary | 1 |
Voting Instructions | 1 |
Invitation to the Annual Meeting | 1 |
Voting Matters | 1 |
Director Nominees | 2 |
Corporate Governance Highlights | 4 |
Our Compensation Practices | 6 |
2023 Company Highlights | 7 |
Questions and Answers About How to Vote Your Shares | 9 |
Proposals | 13 |
Proposal 1 Election of Directors | 13 |
Proposal 2 Ratification of the Audit Committee's Appointment of Independent Registered Public | |
Accounting Firm | 23 |
Proposal 3 Advisory Say-on-Pay Vote | 24 |
Company Information | 26 |
Corporate Governance | 26 |
Conflict of Interest Policy | 26 |
Code of Business Conduct and Ethics | 26 |
Political Contributions Policy and Trade Association Memberships | 26 |
Pledging and Hedging Policies | 26 |
Corporate Responsibility: Environmental, Social, and Governance Practices | 27 |
Independence of Directors and Committees | 29 |
The Board Leadership Structure | 30 |
Director Attendance at Meetings | 30 |
Stockholder Engagement | 30 |
Risk Oversight | 31 |
Stockholder Communication with the Board | 32 |
Committees of the Board | 32 |
Stock Ownership | 37 |
Stock Ownership Requirements | 37 |
Security Ownership by Directors, Named Executive Officers, and Five Percent Stockholders | 38 |
Compensation Discussion and Analysis | 40 |
Executive Summary | 40 |
Compensation Composition | 41 |
2023 Compensation Decisions | 41 |
Compensation Committee Report to Stockholders | 51 |
Executive Compensation | 52 |
Summary Compensation Table | 52 |
2023 Grants of Plan-Based Awards | 54 |
2023 Grants of Plan-Based Awards Table | 54 |
TABLE OF CONTENTS (continued)
Employment Agreements | 56 |
Employment Agreements (Giglia, Springer, Reyes, Ostapovicz, and Klein) | 56 |
Outstanding Equity Awards at 2023 Fiscal Year End | 57 |
Outstanding Equity Awards at 2023 Fiscal Year End Table | 57 |
2023 Option Exercises and Stock Vested | 59 |
2023 Option Exercises and Stock Vested Table | 59 |
Potential Payments Upon Termination or Change in Control | 60 |
Employment Agreements (Giglia, Springer, Reyes, Ostapovicz, and Klein) | 60 |
Equity Award Agreements (Giglia, Springer, Reyes, Ostapovicz, and Klein) | 60 |
Potential Payments | 62 |
Pay Ratio Disclosure | 65 |
Determining the Median Employee | 65 |
Compensation Measure and Annual Total Compensation of Median Employee | 65 |
Annual Total Compensation of CEO | 65 |
Pay Versus Performance Disclosure | 66 |
Pay Versus Performance Table | 66 |
Tabular List of Most Important Performance Measures | 67 |
Description of Relationship Between Pay and Performance | 68 |
Director Compensation | 69 |
Board Member Cash and Equity-Based Compensation (2023) | 69 |
2023 Independent Director Compensation | 69 |
Independent Review of Director Compensation | 70 |
Certain Relationships and Related Party Transactions | 71 |
Our Independent Registered Public Accounting Firm | 72 |
Appointment of Ernst & Young LLP | 72 |
Fee Information | 72 |
Audit Committee Pre-Approval Policies and Procedures | 72 |
Report of the Audit Committee of the Board of Directors | 73 |
Miscellaneous | 75 |
Stockholder Proposals for the 2025 Annual Meeting | 75 |
Householding of Proxy Materials | 75 |
Other Matters to Come Before the Annual Meeting | 75 |
Compensation Committee Interlocks and Insider Participation | 76 |
Other Information | 76 |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 3, 2024
This proxy statement and our Annual Report are available at our Investor Relations website at www.sunstonehotels.com.
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 2023 financial performance, please see our Annual Report on Form 10--K for the fiscal year ended December 31, 2023 available at www.sunstonehotels.com.
VOTING INSTRUCTIONS
Your vote is very important. For this reason, our Board of Directors (the "Board"), is soliciting the enclosed proxy to allow your shares of common stock, par value $0.01 per share, to be represented and voted, as you direct, by the proxy holders named in the enclosed proxy card at the 2024 annual meeting of stockholders ("Annual Meeting") of Sunstone Hotel Investors, Inc. "We," "our," the "Company" and "Sunstone" refer to Sunstone Hotel Investors, Inc.
Record Date:
March 6, 2024
Number of Common Shares Eligible to Vote at the Meeting as of the Record Date:
203,694,178
Company Principal Executive Offices:
15 Enterprise, Suite 200
Aliso Viejo, California 92656
Date of First Mailing of Proxy Statement and Accompanying Materials to Stockholders:
March 20, 2024
INVITATION TO THE ANNUAL MEETING
Stockholders are invited to attend the Annual Meeting on May 3, 2024, beginning at 8:00 a.m. local time.
The Annual Meeting will be
held at:
Hilton San Diego Bayfront
1 Park Boulevard
San Diego, CA 92101
VOTING MATTERS
Proposal
1
2
3
Matter
Election of Eight Directors Identified in this Proxy Statement
Ratification of Independent Registered Public Accounting Firm for 2024
Advisory Say-on-Pay Vote
Board Page Recommendation Reference
FOR | 13 |
each nominee | |
FOR | 23 |
FOR | 24 |
2024 Proxy Statement
1
PROXY SUMMARY
DIRECTOR NOMINEES1
2024 Committee Membership and | |||||||||||
Director | Other Roles (2) | Other Public | |||||||||
Name, Age | Since | Primary Occupation | A | C | NCG | Company Boards | |||||
Co-Founder, Chairman of the | |||||||||||
W. Blake Baird, 63 | 2016 | Board and Chief Executive | Terreno Realty Corporation | ||||||||
Officer, Terreno Realty | (Chair) | ||||||||||
Corporation | |||||||||||
Andrew Batinovich, 65 | 2011 | President and Chief Executive | |||||||||
Officer, Glenborough, L.P. | |||||||||||
Monica S. Digilio, 60 | 2020 | Founder and Chief Executive | |||||||||
Officer, Compass Advisors, LLC | (Chair) | ||||||||||
Bryan A. Giglia, 47 | _ | Chief Executive Officer, Sunstone | |||||||||
Hotel Investors, Inc. | |||||||||||
Kristina M. Leslie, 59 | 2021 | Former Chief Financial Officer, | |||||||||
DreamWorks Animation | (Chair) | ||||||||||
Murray J. McCabe, 56 | 2016 | Founder and Managing Partner, | |||||||||
Montgomery Street Partners, L.P. | |||||||||||
Verett Mims, 61 | 2021 | Chief Financial Officer, Blum | Sila Realty Trust, Inc. | ||||||||
Capital Partners, L.P. | |||||||||||
Douglas M. Pasquale, 69 | Founder and Chief Executive | Alexander and Baldwin, Inc. | |||||||||
2011 | Officer, Capstone Enterprises | Terreno Realty Corporation | |||||||||
Chairman of the Board | |||||||||||
Corporation | Dine Brands Global, Inc. | ||||||||||
A - Audit Committee | C - Compensation Committee | NCG - Nominating and Corporate Governance Committee |
- Director Nominee information presented is as of March 1, 2024.
- Committee assignments reflect appointments that are expected to be made following the Annual Meeting.
Tenure
Average 6.5 years
4 | |
2 | 2 |
Less than 5 years | 5 to 9 years | 10 or more years |
Gender Diversity
Male Female
53
Age | Ethnic/Racial Diversity |
Average 60 years
3 | 3 | Diverse |
12% | ||
2 | ||
Non- | ||
Diverse | ||
88% | ||
59 and under | 60 to 64 | 65 and over |
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Sunstone Hotel Investors
PROXY SUMMARY
Director Nominees' Diversity and Skills
Our Director nominees exhibit a comprehensive mix of knowledge, skills, and experience, along with diversity of thoughts, backgrounds and perspectives. Three new independent directors joined the Board since 2020. The Nominating and Corporate Governance Committee and the Board seek a balanced mix of new and experienced directors.
W. Blake | Andrew | Monica S. | Bryan A. | Kristina M. | Murray J. | Verett | Douglas M. |
Baird | Batinovich | Digilio | Giglia | Leslie | McCabe | Mims | Pasquale |
Knowledge, Skills and Experience |
Accounting / Financial Expert
Board Experience
Capital Markets
Corporate Governance / Investor Relations
Cyber Security
ESG / Corporate
Responsibility
Executive Leadership
Hotel / Real Estate Investments
Hotels / Operations
Human Resources / Compensation
Legal
Public Company REIT Experience
Risk Management
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Gender
Female
Male
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Race/Ethnicity
African American
Asian / Pacific Islander
White / Caucasian
Hispanic / Latino
Native American
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2024 Proxy Statement
3
PROXY SUMMARY
CORPORATE GOVERNANCE HIGHLIGHTS
The Company is committed to the values of transparency, stockholder-friendly corporate governance and the highest ethical standards. Our Board 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:
✔ All current directors are independent. Assuming that the nominees listed in Proposal 1 are elected as directors at the Annual Meeting, all current directors, other than our Chief Executive Officer ("CEO"), will be independent.
Board Independence | ✔ All of our directors who served on the Board during 2023 attended 100% of the committee meetings | ||
on which they served. In 2023, the Board met four times, with all directors attending each meeting. | |||
✔ Our directors participate in ongoing director education. | |||
✔ | All directors are elected annually at the annual meeting of stockholders. | ||
✔ We maintain a majority vote standard in uncontested elections. | |||
✔ We conduct annual Board and committee self-evaluations. | |||
Board Composition | ✔ Commitment to include women and individuals from underrepresented communities in the qualified | ||
pool from which new director candidates are selected. | |||
✔ 38% of our directors identify as women and 12% identify as ethnically diverse. | |||
✔ Commitment to Board refreshment with three new independent directors in the last four years. | |||
Leadership Structure | ✔ | Our Chair of the Board is independent of the CEO. | |
✔ | Three standing Board committees (the "Committees") - Audit Committee, Compensation | ||
Committee, and Nominating and Corporate Governance Committee. | |||
Board Committees | ✔ All Committees are comprised solely of independent directors. | ||
✔ All of our current Audit Committee members are "financial experts." | |||
✔ Two of our Committees, Audit Committee and Compensation Committee, are chaired by women. | |||
✔ Executive sessions of independent directors are held at each regularly scheduled Board meeting. | |||
✔ | Our Board is responsible for risk oversight and delegates the oversight of key risks to specific | ||
committees; the Board and its Committees oversee management in its duty to assess and mitigate | |||
enterprise-level risks. | |||
✔ Our Audit Committee oversees risk management as it relates to the integrity of the Company's | |||
financial statements, fraud prevention and detection measures, and the adequacy of the | |||
Company's cybersecurity protocols. Additionally, a review of management's assessment of | |||
Risk Oversight | enterprise-level risks is conducted quarterly by the Audit Committee and annually by the full Board. | ||
✔ Our Nominating and Corporate Governance Committee oversees risk management as it relates to | |||
our Corporate Responsibility program, including climate change, resource scarcity, public | |||
disclosure strategy, Diversity, Equity, Inclusion and Belonging ("DEI&B"), board refreshment, and | |||
human rights. | |||
✔ Our Compensation Committee oversees risk management as it relates to our compensation plans, | |||
policies and procedures, human capital, and talent management plans and practices. | |||
✔ | We encourage a strong working relationship between the Chair of the Board, other directors, the | ||
Communication | CEO, and the President. | ||
✔ Directors have open access to senior management and all employees. | |||
✔ Directors have access to communicate with our stockholders. | |||
4
Sunstone Hotel Investors
PROXY SUMMARY
✔ Each independent director is required to own and retain shares of the Company's common stock having a value equal to at least five times his or her annual cash retainer no later than January 1
of the year following the fifth anniversary of his or her election as a director. | ||
✔ The CEO and the President are required to 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 no later than January 1 | ||
of the year following the fourth anniversary of his or her appointment to CEO or President. | ||
Stock Ownership & | ✔ Each Executive Vice President is required to own and retain shares of the Company's common | |
stock having a value equal to at least three times his or her annual base salary, and each Senior | ||
Governance | Vice President who is considered an executive officer is required to own and retain shares of the | |
Company's common stock having a value equal to at least two times his or her annual base salary | ||
no later than January 1 of the year following the fourth anniversary of his or her appointment to | ||
such position. | ||
✔ We maintain a prohibition on anyhedging or pledging of shares of Company stock. | ||
✔ We maintain a Compensation Recovery Policy ("Clawback Policy"). | ||
✔ We maintain a comprehensive Insider Trading Policy. | ||
✔ | We maintain a non-classified Board with annual election of alldirectors. | |
✔ The Company is prohibited from classifying the Board without stockholder approval. | ||
✔ We maintain majority voting in uncontested director elections. | ||
✔ Common stock is the only class of voting securities outstanding. | ||
✔ We maintain proxy access. | ||
✔ We opted out of the Maryland Business Combination and Control Share Acquisitions Act | ||
Accountability to | (eliminating certain takeover defenses). | |
✔ We maintain a policy prohibiting the adoption of a stockholder rights plan or "poison pill" without | ||
Stockholders | ||
prior stockholder approval, unless the plan provides that it will expire within 12 months of adoption | ||
absent ratification by the Company's stockholders. | ||
✔ We maintain a policy requiring the Board to accept a resignation tendered by a nominee who is | ||
already serving as a director if such nominee received more votes "against" or "withheld" than "for" | ||
on his or her election at each of two consecutive annual meetings of stockholders. | ||
✔ We provide stockholders access to our Board through on-going interactions and communication | ||
with our directors. | ||
✔ We maintain a stockholder's right to amend our bylaws. | ||
Environmental, Social | ✔ | Our Nominating and Corporate Governance Committee monitors our programs and initiatives on |
and Governance | our Corporate Responsibility Program, including environmental sustainability and social | |
responsibility. | ||
2024 Proxy Statement
5
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 2023 NEOs were Messrs. Giglia, Springer, Reyes, Ostapovicz, and Klein. In order to achieve our objectives and mitigate compensation-related risks to our stockholders, we utilize the following practices:
WHAT WE DO
-
WE PAY FOR PERFORMANCE
Our executive compensation program is weighted towards performance-basedat-risk compensation, rather than fixed compensation. Specifically, the at-risk portion of our executive compensation program is designed to reward performance relative to financial, stockholder return and other metrics that we believe best align management with stockholder interests. - WE TIE OBJECTIVES TO CORPORATE STRATEGY A portion of our NEOs' individual objectives are tied to advancing the Company's strategy of actively recycling capital, investing in our portfolio, and returning capital to stockholders, as well as advancing our Environmental, Social and Governance ("ESG") initiatives.
- WE HAVE A CLAWBACK POLICY
Consistent with SEC and NYSE rules, our NEOs and Vice Presidents are subject to a compensation recovery policy that provides for the recovery of portions of the employee's incentive compensation following an accounting restatement. - WE REQUIRE OUR CEO AND OTHER NEOS TO HAVE A MEANINGFUL OWNERSHIP INTEREST IN THE COMPANY
Our executive officer stock ownership policy requires that on or before January 1 of the year following the fourth anniversary of the appointment to such position, the CEO or President and Executive Vice Presidents will own and retain shares of the Company's common stock having a value equal to at least six times and three times his or her annual base salary, respectively. - WE HOLD AN ANNUAL SAY-ON-PAY VOTE
We conduct an annual Say-On-Pay advisory vote to solicit our stockholders' view on our compensation program. - WE DESIGN COMPENSATION TO MITIGATE EXCESSIVE RISK TAKING
Our Compensation Committee regularly reviews the Company's compensation plans and program to ensure they are designed to create stockholder value and avoid excessive risk-taking. - WE SOLICIT INDEPENDENT COMPENSATION ADVICE
Our Compensation Committee retains Ferguson Partners Consulting ("FPC"), an independent compensation consultant, for purposes of rendering advisory services related to the compensation of our NEOs.
WHAT WE DO NOT DO
-
WE DO NOT PROVIDE GUARANTEED INCENTIVE COMPENSATION
There are no minimum payout levels on either our annual incentive bonus plan or our equity incentive award plan. A material portion of our equity incentive award plan is tied to achievement of Relative Total Stockholder Return ("RSR") objectives. - WE DO NOT PAY "GROSS UPS" FOR
CHANGE IN CONTROL OR SEVERANCE PAYMENTS We do not provide excise or other tax "gross up" payments in connection with any change in control or severance payment made to an NEO. - WE DO NOT PROVIDE "SINGLE TRIGGER" BENEFITS UPON A CHANGE IN CONTROL
The Employment Agreements (as defined below) with our NEOs require a "double trigger" (requiring both a change in control and qualifying termination of employment) to receive cash or equity payments or vesting in connection with a change in control. - WE DO NOT PAY DIVIDEND EQUIVALENTS ON PERFORMANCE-BASEDRESTRICTED STOCK UNITS UNLESS THE AWARDS ACTUALLY VEST Our NEOs only receive dividend equivalent payments on performance-based restricted stock unit awards to the extent the award vests.
- WE DO NOT ALLOW HEDGING OR PLEDGING OF COMPANY STOCK BY EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are prohibited from engaging in pledging our stock or in hedging transactions designed to offset decreases in the market value of our stock.
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Sunstone Hotel Investors
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Sunstone Hotel Investors Inc. published this content on 18 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 March 2024 21:23:29 UTC.
