SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
MARRIOTT INTERNATIONAL, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Corporate Headquarters: Mailing Address:
10400 Fernwood Road Marriott Drive
Bethesda, Maryland 20817 Washington, D.C. 20058
[LOGO OF MARRIOTT]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 4, 2001
----------------
To our Shareholders: March 30, 2001
The 2001 annual meeting of shareholders of Marriott International, Inc.
(the "Company") will be held at the J.W. Marriott Hotel, 1331 Pennsylvania
Avenue, N.W., Washington, D.C. on Friday, May 4, 2001, beginning at 10:30 a.m.
Doors to the meeting will open at 9:30 a.m. At the meeting, shareholders will
act on the following matters:
(1) Election of three directors, each for a term of three years;
(2) Ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors for fiscal 2001;
(3) Consideration of one shareholder proposal; and
(4) Any other matters that properly come before the meeting.
Shareholders of record at the close of business on March 13, 2001 will be
entitled to notice of and to vote at this meeting.
For the convenience of our shareholders, proxies may be given either by
telephone, electronically through the Internet, or by completing, signing and
returning the enclosed proxy card. In addition, shareholders may elect to
receive future shareholder communications, including proxy materials, through
the Internet. Instructions for each of these options can be found in the
enclosed materials.
By order of the Board of Directors,
/s/ Dorothy M. Ingalls
Dorothy M. Ingalls
Secretary
PLEASE REFER TO THE OUTSIDE BACK COVER FOR DIRECTIONS TO THE MEETING AND
INFORMATION ON PARKING, PUBLIC TRANSPORTATION AND LODGING.
TABLE OF CONTENTS
Page
----
About the Meeting......................................................... 1
What is the purpose of the annual meeting?.............................. 1
Who is entitled to vote?................................................ 1
Who can attend the meeting?............................................. 1
What constitutes a quorum?.............................................. 2
How do I vote?.......................................................... 2
Can I vote by telephone or electronically?.............................. 2
Can I change my vote after I return my proxy card, or after I vote by
telephone or electronically?........................................... 2
What are the Board's recommendations?................................... 2
What vote is required to approve each item?............................. 3
Who will count the vote?................................................ 3
What shares are included on the proxy card(s)?.......................... 3
What does it mean if I receive more than one proxy card?................ 3
How will voting on any other business be conducted?..................... 3
When are shareholder proposals for the 2002 annual meeting of
shareholders due?...................................................... 3
Can a shareholder nominate someone to be a director of the Company?..... 4
How much did this proxy solicitation cost?.............................. 4
Can I receive future shareholder communications electronically through
the Internet?.......................................................... 4
Stock Ownership........................................................... 5
Who are the largest owners of the Company's stock?...................... 5
How much stock do the Company's directors and executive officers own?... 5
Section 16(a) Beneficial Ownership Reporting Compliance................. 7
Item 1--Election of Directors............................................. 8
Directors Standing for Election......................................... 8
Directors Continuing in Office.......................................... 9
Committees of the Board of Directors.................................... 12
Directors' Compensation................................................. 14
Compensation Committee Interlocks and Insider Participation............. 14
Executive Compensation.................................................. 15
Summary Compensation Table............................................ 15
Stock Options......................................................... 17
Report on Executive Compensation by the Compensation Policy Committee... 18
Shareholder Return Performance Graph.................................... 22
Certain Transactions.................................................... 23
Item 2--Ratification of Appointment of Independent Auditors............... 26
Item 3--Shareholder Proposal.............................................. 27
Other Matters............................................................. 28
Appendix A--Audit Committee Report........................................ A-1
Appendix B--Independent Auditor Fee Disclosure............................ B-1
Appendix C--Audit Committee Charter....................................... C-1
i
[LOGO OF MARRIOTT]
MARRIOTT INTERNATIONAL, INC.
10400 FERNWOOD ROAD, BETHESDA, MARYLAND 20817
----------------
PROXY STATEMENT
----------------
This proxy statement contains information related to the annual meeting of
shareholders of Marriott International, Inc. (the "Company") to be held on
Friday, May 4, 2001, beginning at 10:30 a.m., at the J.W. Marriott Hotel, 1331
Pennsylvania Avenue, N.W., Washington, D.C., and at any postponements or
adjournments thereof. This Proxy Statement is first being mailed to
shareholders on March 30, 2001.
Marriott International, Inc. conducts the lodging, senior living services
and distribution services businesses formerly conducted by "old" Marriott
International, Inc. ("Old Marriott"), now known as Sodexho Marriott Services,
Inc. The Company was spun off as a separate public company from Old Marriott on
March 27, 1998 (the "Spinoff").
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the Company's annual meeting, shareholders will act upon the matters
described in the accompanying notice of meeting. This includes the election of
three directors, ratification of the Company's independent auditors, and
consideration of one shareholder proposal. In addition, the Company's
management will report on the performance of the Company during fiscal 2000 and
respond to questions from shareholders.
Who is entitled to vote?
Only shareholders of record at the close of business on the record date,
March 13, 2001, are entitled to receive notice of and to vote at the meeting,
or any postponement or adjournment of the meeting. Each outstanding share of
the Company's Class A common stock entitles its holder to cast ten votes on
each matter to be voted upon.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed proxies, may
attend the meeting. Cameras, recording devices and other electronic devices
will not be permitted at the meeting.
Directions to the meeting, and information on parking, public transportation
and lodging, can be found on the back cover of this proxy statement.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Class A common stock of the Company outstanding on
the record date will constitute a quorum. A quorum is required for business to
be conducted at the meeting. As of the record date, 244,181,386 shares of
Class A common stock of the Company were outstanding. If you submit a properly
executed proxy card, even if you abstain from voting, then you will be
considered part of the quorum. However, abstentions are not counted in the
tally of votes FOR or AGAINST a proposal. A WITHHELD vote is the same as an
abstention.
How do I vote?
Sign and date each proxy card you receive and return it in the prepaid
envelope. If you return your signed proxy card but do not mark the boxes
showing how you wish to vote, your shares will be voted FOR items 1 and 2, and
AGAINST item 3.
Can I vote by telephone or electronically?
You may vote by telephone or electronically through the Internet, by
following the instructions attached to your proxy card.
The telephone and Internet voting procedures are designed to authenticate
votes cast by use of a personal identification number. The procedures, which
comply with Delaware law, allow shareholders to appoint a proxy to vote their
shares and to confirm that their instructions have been properly recorded.
Can I change my vote after I return my proxy card, or after I vote by telephone
or electronically?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised at the meeting. Regardless of the way in
which you submitted your original proxy, you may change it by:
(1) Returning a later-dated signed proxy card;
(2) Delivering a written notice of revocation to First Chicago Trust
Company of New York, P.O. Box 8089, Edison, New Jersey 08818-9355;
(3) Voting by telephone or the Internet; or
(4) Voting in person at the meeting.
What are the Board's recommendations?
The Board's recommendations are set forth after the description of each item
in this proxy statement. In summary, the Board recommends a vote:
. FOR election of the nominated directors (see Item 1 on page 8);
. FOR ratification of the appointment of Arthur Andersen LLP as the
Company's independent auditors for fiscal 2001 (see Item 2 on page 26);
. AGAINST approval of the shareholder proposal regarding cumulative
voting (see Item 3 on page 27).
2
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors.
What vote is required to approve each item?
For each item, the affirmative vote of the holders of a majority of the
shares of Class A common stock represented in person or by proxy and entitled
to vote on the item will be required for approval. A properly executed proxy
marked "ABSTAIN" with respect to any item will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the items to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
items and will not be counted in determining the number of shares necessary for
approval for each item. Shares represented by such "broker non-votes" will,
however, be counted in determining whether there is a quorum.
Who will count the vote?
Representatives of First Chicago Trust Company of New York, our independent
stock transfer agent, will count the votes and act as the inspector of
election.
What shares are included on the proxy card(s)?
The shares on your proxy card(s) represent ALL of your shares of Class A
common stock, including any shares you may hold through the DirectSERVICE
Investment Program administered by First Chicago Trust Company of New York, or
if you are a Marriott employee, any shares that may be held in custody for your
account by Bankers Trust Company as custodian for the Marriott International,
Inc. Employees' Profit Sharing, Retirement and Savings Plan (the "Profit
Sharing Plan"). If you have shares in the Profit Sharing Plan and do not vote
by proxy, or return your proxy card with an unclear voting designation or no
voting designation at all, then Bankers Trust will vote your Profit Sharing
Plan shares in proportion to the way the other Profit Sharing Plan participants
voted their shares held in the Profit Sharing Plan.
What does it mean if I receive more than one proxy card?
If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. To ensure that all your shares are
voted, sign and return all proxy cards, or if you choose, vote by telephone or
through the Internet using the personal identification number printed on each
proxy card. We encourage you to have all accounts registered in the same name
and address (whenever possible). You can accomplish this by contacting our
transfer agent, First Chicago Trust Company of New York, at (800) 311-4816.
How will voting on any other business be conducted?
Although we do not know of any business to be considered at the 2001 annual
meeting other than the proposals described in this proxy statement, if any
other business is presented at the Annual Meeting, your proxy gives authority
to J.W. Marriott, Jr. and Richard E. Marriott to vote on such matters at their
discretion.
When are shareholder proposals for the 2002 annual meeting of shareholders due?
The Company's 2002 annual meeting of shareholders is scheduled to be held on
May 3, 2002. To be considered for inclusion in the Company's proxy statement
for that meeting, shareholder
3
proposals must be received at the Company's offices no later than November 26,
2001. Proposals must be in compliance with Rule 14a-8 under the Securities
Exchange Act of 1934 and the Company's bylaws, and must be submitted in writing
delivered or mailed to the Secretary, Marriott International, Inc., Department
52/862, Marriott Drive, Washington, D.C. 20058.
In addition, the Company's bylaws require that, if a shareholder desires to
introduce a shareholder proposal or nominate a director candidate from the
floor of the 2002 annual meeting of shareholders, such proposal or nomination
must be submitted in writing to the Company's Secretary at the above address
not later than February 3, 2002. The written proposal or nomination must be in
compliance with the Company's bylaws. The Chairman of the meeting may refuse to
acknowledge or introduce any shareholder proposal or the nomination of any
person made later than February 3, 2002, or not in compliance with the
Company's bylaws.
Can a shareholder nominate someone to be a director of the Company?
As a shareholder, you may recommend any person as a nominee for director of
the Company by writing to the Nominating and Corporate Governance Committee of
the Board of Directors, c/o Marriott International, Inc., Marriott Drive,
Washington, D.C. 20058. Recommendations must be received by February 3, 2002
for the 2002 annual meeting of shareholders, and must comply with the
requirements in the Company's bylaws.
How much did this proxy solicitation cost?
MacKenzie Partners, Inc. was hired to assist in the distribution of proxy
materials and solicitation of votes for $7,500, plus reimbursement of certain
out-of-pocket expenses. We also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to shareholders.
Proxies will be solicited by mail, telephone, or other means of communication.
Solicitation also may be made by directors, officers, and regular employees of
the Company not specifically employed for proxy solicitation purposes.
Can I receive future shareholder communications electronically through the
Internet?
Yes. You may elect to receive future notices of meetings, proxy materials
and annual reports electronically through the Internet. If you have previously
consented to electronic delivery, your consent will remain in effect until
withdrawn. To consent to electronic delivery:
. If your shares are registered in your own name, and not in "street
name" through a broker or other nominee, fill out the consent form at
the Internet site maintained by our transfer agent, First Chicago Trust
Company of New York, at www.econsent.com/mar.
. If your shares are registered in "street name" through a broker or
other nominee, you must first vote your shares using the Internet, at
www.proxyvote.com, and immediately after voting, fill out the consent
form that appears on-screen at the end of the Internet voting
procedure.
You may withdraw this consent at any time and resume receiving shareholder
communications in print form. More information on electronic delivery of
materials is set forth in an insert accompanying this proxy statement.
4
STOCK OWNERSHIP
Who are the largest owners of the Company's stock?
As of January 31, 2001 the following persons or groups beneficially owned 5%
or more of the Company's outstanding shares of Class A common stock:
J.W. Marriott, Jr...................................................... 12.6%
Richard E. Marriott.................................................... 12.2%
Southeastern Asset Management, Inc..................................... 9.5%
Montag & Caldwell, Inc................................................. 7.3%
How much stock do the Company's directors and executive officers own?
The following table sets forth the beneficial ownership of Class A common
stock by the Company's directors and executive officers as of January 31, 2001,
as well as additional information about beneficial owners of 5% or more of the
Company's Class A common stock.
Shares
Beneficially Percent of
Name Owned Class(1)
---- ------------ ----------
Directors:
J.W. Marriott, Jr. ............................ 30,911,787(2)(3)(6) 12.6
Richard E. Marriott............................ 29,793,457(2)(4) 12.2
Henry Cheng Kar-Shun........................... 2,600(5) *
Gilbert M. Grosvenor........................... 3,600(5) *
Floretta Dukes McKenzie........................ 870(5) *
Harry J. Pearce................................ 10,000(5) *
W. Mitt Romney................................. 10,000(5) *
Roger W. Sant.................................. 20,000(5) *
William J. Shaw................................ 1,175,695(6)(7) *
Lawrence M. Small.............................. 80,000(5) *
Named Executive Officers:
Joseph Ryan.................................... 299,741(6)(7) *
James M. Sullivan.............................. 501,658(6)(7) *
Arne M. Sorenson............................... 205,067(6)(7) *
All Directors and Executive Officers as a
Group:
(20 persons including the foregoing)........... 52,837,357(2)(8) 21.3
Other 5% Beneficial Owners:
Southeastern Asset Management, Inc. ........... 22,763,600(9) 9.5
Montag & Caldwell, Inc......................... 17,561,637(10) 7.3
--------
* Less than 1 percent.
(1) Based on the number of shares outstanding (243,655,082) on January 31,
2001, plus the number of shares acquirable by the specified person(s)
within 60 days of January 31, 2001.
(2) Includes: (i) 3,150,040 shares held by J.W. Marriott, Jr. and Richard E.
Marriott as co-trustees of 16 trusts for the benefit of their children;
(ii) 5,073,574 shares owned by The J. Willard & Alice S. Marriott
Foundation, a charitable foundation in which J.W. Marriott, Jr. and
Richard E. Marriott serve as co-trustees; (iii) 3,334,770 shares held by
a charitable annuity trust created by the Will of J. Willard Marriott in
which J.W. Marriott, Jr. and Richard E. Marriott have a
5
remainder interest and are co-trustees; and (iv) 112,654 shares held by
the Alice S. Marriott Lifetime Trust, a trust in which J.W. Marriott, Jr.
and Richard E. Marriott serve as co-trustees. These shares are reported as
beneficially owned by both J.W. Marriott, Jr. and Richard E. Marriott, but
are included only once in reporting the number of shares owned by all
directors and executive officers as a group.
(3) Includes, in addition to the shares referred to in footnote (2): (i)
2,013,486 shares subject to options exercisable within 60 days after
January 31, 2001, (ii) 656,060 shares held as trustee of two trusts for
the benefit of Richard E. Marriott, (iii) 138,620 shares owned by J.W.
Marriott, Jr.'s wife (Mr. Marriott disclaims beneficial ownership of
such shares), (iv) 1,340,534 shares owned by four trusts for the benefit
of J.W. Marriott, Jr.'s children, in which his wife serves as a co-
trustee, (v) 48,728 shares owned by six trusts for the benefit of J.W.
Marriott, Jr.'s grandchildren, in which his wife serves as a co-trustee,
(vi) 160,000 shares owned by JWM Associates Limited Partnership, whose
general partner is J.W. Marriott, Jr. and (vii) 5,415,180 shares owned
by JWM Family Enterprises, L.P., whose general partner is a corporation
in which J.W. Marriott, Jr. is a controlling shareholder.
(4) Includes, in addition to the shares referred to in footnote (2): (i)
122,634 shares subject to options exercisable within 60 days after
January 31, 2001, (ii) 404,878 shares held as trustee of two trusts
established for the benefit of J.W. Marriott, Jr., (iii) 136,438 shares
owned by Richard E. Marriott's wife, (iv) 1,207,656 shares owned by four
trusts for the benefit of Richard E. Marriott's children, in which his
wife serves as a co-trustee, and (v) 4,588,946 shares owned by First
Media Limited Partners, whose general partner is a corporation in which
Richard E. Marriott is the controlling shareholder.
(5) The shares included herein do not include non-employee director annual
deferred share awards or stock units representing fees deferred at the
election of non-employee directors under the Company's 1998
Comprehensive Stock and Cash Incentive Plan. The combined number of
shares (i) subject to deferred share awards and (ii) in stock unit
accounts of non-employee directors as of December 29, 2000, were as
follows: Dr. Cheng: 2,345; Mr. Grosvenor: 16,049; Dr. McKenzie: 11,483;
Mr. Pearce: 12,619; Mr. Romney: 12,843; Mr. Sant: 12,891; and Mr. Small:
11,943. Neither share awards nor stock units carry voting rights or are
transferable. Stock unit accounts are credited with dividend equivalents
in the form of additional stock units. Share awards and stock units are
distributed following retirement as a director.
(6) Includes shares of unvested restricted stock awarded under the 1998
Comprehensive Stock and Cash Incentive Plan as follows: J.W. Marriott,
Jr.: 92,500 shares; Mr. Ryan: 95,525 shares; Mr. Shaw: 92,808 shares;
Mr. Sorenson: 95,403 shares; and Mr. Sullivan: 91,606 shares. Shares of
restricted stock are voted by the holder thereof. See "Executive
Compensation: Summary Compensation Table" at page 15.
(7) Includes shares subject to options exercisable within 60 days after
January 31, 2001, as follows: Mr. Ryan: 205,866 shares; Mr. Shaw:
1,014,782 shares; Mr. Sorenson: 86,331 shares; and Mr. Sullivan: 354,478
shares.
(8) All directors, nominees and executive officers as a group (other than
J.W. Marriott, Jr. and Richard E. Marriott) beneficially owned an
aggregate of 3,803,151 shares, or 1.5 percent of Class A common stock
outstanding as of January 31, 2001.
(9) Based on a Schedule 13G amendment filed with the Securities and Exchange
Commission on February 13, 2001, reflecting ownership of Class A common
stock as of December 31, 2000, and total outstanding shares of Class A
common stock as of December 31, 2000. The following information is taken
from that filing. The Schedule 13G was filed by Southeastern Asset
Management, Inc., as a registered investment advisor, and by its
Chairman and Chief Executive Officer, O. Mason Hawkins in the event he
could be deemed to be a controlling person of that
6
firm as the result of his official position with or ownership of its
voting securities, although Mr. Hawkins disclaims beneficial ownership of
the shares covered by the report (together, "Southeastern").
Southeastern's address is 6410 Poplar Avenue, Suite 900, Memphis, TN
38119. All shares covered by the report are owned legally by
Southeastern's investment advisory clients and none are owned directly or
indirectly by Southeastern. The reporting persons reported sole voting
power over 9,524,500 shares and shared or no voting power over 10,831,900
shares, and sole dispositive power over 11,868,700 shares and shared
dispositive power over 10,831,900 shares.
(10) Based on a Schedule 13G filed with the Securities and Exchange
Commission on February 5, 2001, reflecting ownership of Class A common
stock as of December 31, 2000, and total outstanding shares of Class A
common stock as of December 31, 2000. The following information is taken
from that filing. The Schedule 13G was filed by Montag & Caldwell, Inc.,
as a registered investment advisor ("Montag & Caldwell"). Montag &
Caldwell's address is 3455 Peachtree Road, N.E., Suite 1200, Atlanta, GA
30326-3248. Montag & Caldwell reported sole or shared voting power over
no shares and sole dispositive power over all 17,561,637 shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, the Company
believes that all of the Company's directors, and all of the Company's
officers who are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, complied with such reporting requirements
during fiscal 2000.
7
ITEM 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with approximately
one-third of the directors standing for election each year for a three-year
term. Sterling D. Colton holds the title of director emeritus.
Directors Standing for Election
Three directors are standing for re-election: Richard E. Marriott, Gilbert
M. Grosvenor, and Harry J. Pearce. Each has consented to serve for an
additional term ending at the 2004 annual meeting of shareholders.
If any of the nominees should become unavailable to serve as a director, the
Board may designate a substitute nominee. In that case, the persons named as
proxies will vote for the substitute nominee designated by the Board.
The Board recommends a vote FOR the nominees.
The following are the nominees for director for three-year terms ending in
2004:
Richard E. Marriott Mr. Marriott is Chairman of the Board of Host
Age: 62 Marriott Corporation. He is also Chairman of the
Board of First Media Corporation and serves on the
Federal City Council, the Board of Associates for
Gallaudet University, the National Advisory Council
of Brigham Young University, the Board of Directors
of the Polynesian Cultural Center, and as a trustee
of the Boys and Girls Clubs of America. He is
Chairman of the Board of Trustees of The J. Willard
& Alice S. Marriott Foundation and the Marriott
Foundation for People with Disabilities. Prior to
1993, Mr. Marriott served as an Executive Vice
President and member of the Board of Directors of
Marriott Corporation. Mr. Marriott has been a
director of Marriott Corporation (now known as Host
Marriott Corporation) since 1979, served as a
director of Old Marriott from October 1993 to March
1998, and has served as a director of the Company
since March 1998. He is the brother of J.W.
Marriott, Jr.
[PHOTO]
Gilbert M. Grosvenor Mr. Grosvenor is Chairman of the Board of the
Age: 69 National Geographic Society (a publisher of books
and magazines and producer of television
documentaries) and a director or trustee of Chevy
Chase Federal Savings Bank, Ethyl Corporation, B.F.
Saul REIT and Saul Centers, Inc. He is on the Board
of Visitors of the Nicholas School of the
Environment of Duke University. Mr. Grosvenor
served as a member of the Board of Directors of Old
Marriott (and prior to October 1993 of Marriott
Corporation) from 1987 to March 1998, and has
served as a director of the Company since March
1998.
[PHOTO]
8
Harry J. Pearce Mr. Pearce is Vice Chairman of the Board of General
Age: 58 Motors Corporation (an automobile manufacturer) and
a director of General Motors Acceptance
Corporation, Hughes Electronics Corporation,
Alliance of Automobile Manufacturers and MDU
Resources Group, Inc. He is also Chairman of the
U.S. Air Force Academy's Board of Visitors and
Chairman of The Marrow Foundation's Board of
Directors. He also serves on the Board of Trustees
of Howard University and Northwestern University.
Mr. Pearce served as a director of Old Marriott
from 1995 to March 1998, and has served as a
director of the Company since March 1998.
[PHOTO]
Directors Continuing in Office
J.W. Marriott, Jr. Mr. Marriott is Chairman of the Board and Chief
(Chairman of the Board) Executive Officer of the Company. He joined
Age: 69 Marriott Corporation (now known as Host Marriott
Corporation) in 1956, became President and a
director in 1964, Chief Executive Officer in 1972
and Chairman of the Board in 1985. Mr. Marriott
also is a director of Host Marriott Corporation,
General Motors Corporation and the Naval Academy
Endowment Trust. He serves on the Board of Trustees
of the National Geographic Society and The J.
Willard & Alice S. Marriott Foundation, and the
Board of Directors of Georgetown University, and is
a member of the Executive Committee of the World
Travel & Tourism Council and the Business Council.
Mr. Marriott has served as Chief Executive Officer
of the Company since its inception in 1997, and
served as Chairman and Chief Executive Officer of
Old Marriott from October 1993 to March 1998. Mr.
Marriott has served as a director of the Company
since March 1998. Mr. Marriott is currently serving
a three-year term expiring at the 2002 Annual
Meeting of Shareholders. He is the brother of
Richard E. Marriott.
[PHOTO]
9
Henry Cheng Kar-Shun Dr. Cheng has served as Managing Director of New
Age: 54 World Development Company Limited ("New World
Development"), a publicly held Hong Kong real
estate development and investment company, since
1989. He is the Chairman of New World China Land
Limited, New World CyberBase Limited, New World
Infrastructure Limited and Tai Fook Group Limited
and a director of HKR International Limited and
Kwoon Chung Bus Holding Limited, all of which are
publicly-held Hong Kong companies. Dr. Cheng serves
as an executive officer of Chow Tai Fook
Enterprises Limited, a privately-held family
company that controls New World Development. Dr.
Cheng served as Chairman and Director of
Renaissance Hotel Group N.V. from June 1995 until
its purchase by the Company in March 1997. He is
Chairman of the Advisory Council for The Better
Hong Kong Foundation and as a Committee Member of
the Eighth and Ninth Chinese People's Political
Consultative Committee of the People's Republic of
China. Dr. Cheng has also served as a member of the
Election Committee of the Hong Kong Special
Administrative Region. Dr. Cheng served as a
director of Old Marriott from June 1997 to March
1998, and has served as a director of the Company
since March 1998. Dr. Cheng is currently serving a
three-year term expiring at the 2003 Annual Meeting
of Shareholders.
[PHOTO]
Floretta Dukes McKenzie Dr. McKenzie is the founder, Chairwoman and Chief
Age: 65 Executive Officer of The McKenzie Group, Inc. (an
educational consulting firm). She is also a
director or trustee of Potomac Electric Power
Company (PEPCO), National Geographic Society,
Acacia Group, Group Hospitalization and Medical
Services, Inc. (GHMSI), CareFirst (Blue Cross/Blue
Shield), Howard University, White House Historical
Association, American Association of School
Administrators Leadership of Learning Foundation,
Lightspan Partnership, Inc., Impact II-The Teachers
Network, National School Board Foundation,
Institute for Educational Leadership, Inc., Forum
for the American School Superintendent, Harvard
Graduate School of Education Urban Superintendents
Program and Johns Hopkins Leadership Development
Program. From 1981 to 1988, she served as
Superintendent of the District of Columbia Public
Schools and Chief State School Officer. Dr.
McKenzie served as a director of Old Marriott (and
prior to October 1993 of Marriott Corporation) from
1992 to March 1998, and has served as a director of
the Company since March 1998. Dr. McKenzie is
currently serving a three-year term expiring at the
2003 Annual Meeting of Shareholders.
[PHOTO]
10
W. Mitt Romney Mr. Romney was appointed President and Chief
Age: 54 Executive Officer of the Salt Lake Olympic
Committee on February 11, 1999. He is also a
director of Staples, Inc. Mr. Romney is a member of
the Executive Board of the Boy Scouts of America
and the board of the National Points of Light
Foundation. Mr. Romney served as a member of the
Board of Directors of Old Marriott (and of Marriott
Corporation prior to October 1993) from 1993 to
March 1998 and has served as a director of the
Company since March 1998. Mr. Romney is currently
serving a three-year term expiring at the 2002
Annual Meeting of Shareholders.
[PHOTO]
Roger W. Sant Mr. Sant is Chairman of the Board of The AES
Corporation, a global power company, which he co-
Age: 69 founded in 1981. Mr. Sant chairs the Board of The
Summit Foundation and is a Board member of WWF-
International, Resources for The Future, and The
National Symphony. He was Board Chairman of the
World Wildlife Fund-US from 1994 to 2000. Mr. Sant
served as a director of Old Marriott from 1993 to
March 1998, and has served as a director of the
Company since March 1998. Mr. Sant is currently
serving a three-year term expiring at the 2003
Annual Meeting of Shareholders.
[PHOTO]
William J. Shaw Mr. Shaw has served as President and Chief
Operating Officer of the Company since March 1997
Age: 55 (including service in the same capacity with Old
Marriott until March 1998). Mr. Shaw joined
Marriott Corporation in 1974, was elected Corporate
Controller in 1979 and a Vice President in 1982. In
1986, Mr. Shaw was elected Senior Vice President--
Finance and Treasurer of Marriott Corporation. He
was elected Chief Financial Officer and Executive
Vice President of Marriott Corporation in April
1988. In February 1992, he was elected President of
the Marriott Service Group. Mr. Shaw is also
Chairman of the Board of Directors of Sodexho
Marriott Services, Inc. He also serves on the Board
of Trustees of the University of Notre Dame and the
Suburban Hospital Foundation. Mr. Shaw has served
as a director of Old Marriott (now named Sodexho
Marriott Services, Inc.) since May 1997, and as a
director of the Company since March 1998. Mr. Shaw
is currently serving a three-year term expiring at
the 2002 Annual Meeting of Shareholders.
[PHOTO]
11
Lawrence M. Small Mr. Small is the Secretary of the Smithsonian
Age: 59 Institution, the world's largest combined museum
and research complex, a position he assumed in
January, 2000. Prior to becoming the 11th
Secretary, he served as President and Chief
Operating Officer of Fannie Mae, the nation's
largest housing finance company, since 1991. Before
joining Fannie Mae, Mr. Small had served as Vice
Chairman and Chairman of the Executive Committee of
the Boards of Directors of Citicorp and Citibank,
N.A., since January 1990. He had been associated
with Citibank since 1964. He is also a director of
The Chubb Corporation, New York City's Spanish
Repertory Theatre, the John F. Kennedy Center for
the Performing Arts, the National Gallery of Art,
the Woodrow Wilson International Center for
Scholars and Mt. Sinai-NYU Medical Center and
Health System. Mr. Small served as director of Old
Marriott from 1995 to March 1998, and he has served
as a director of the Company since March 1998. Mr.
Small is currently serving a three-year term
expiring at the 2003 Annual Meeting of
Shareholders.
[PHOTO]
The Board of Directors met four times in 2000. No director attended fewer
than 75% of the total number of meetings of the Board and Committees on which
such director served, other than Dr. Cheng.
Committees of the Board of Directors
The Board of Directors has four standing committees: Audit; Compensation
Policy; Nominating and Corporate Governance; and Executive.
Audit Committee
. The members of the Committee are not employees of the Company and are
independent as defined under New York Stock Exchange Rules. The Audit
Committee met three times in 2000.
. There is unrestricted access between the Audit Committee and the
independent auditors and internal auditors.
. The Audit Committee has considered whether the independent auditor's
provision of information technology services and other non-audit
services to the Company is compatible with auditor independence.
. The Audit Committee report is set forth in Appendix A hereto.
. Audit Fees, Financial Information Systems Design and Implementation Fees
and All Other Fees paid to the Company's outside auditors are set forth
in Appendix B hereto.
. The full text of the Audit Committee charter is set forth in Appendix C
hereto.
Functions:
. Meets with the Company's independent auditors, management
representatives and internal auditors.
. Reviews the results of internal and external audits, the accounting
principles applied in financial reporting and the financial and
operational controls.
12
. Approves the scope of audits and other services to be performed by the
independent and internal auditors.
. Recommends to the Board the appointment of independent auditors
considering whether any circumstance, including the performance of any
professional services, would impair their independence.
Members: Lawrence M. Small (Chair), Gilbert M. Grosvenor, W. Mitt Romney,
and Roger W. Sant.
Compensation Policy Committee
. The members of the Committee are not employees of the Company. The
Compensation Policy Committee met five times in 2000.
Functions:
. Recommends to the Board policies and procedures relating to senior
officers' compensation and various employee benefit plans.
. Approves senior officer salary adjustments, bonus payments, and stock
awards.
Members: Floretta Dukes McKenzie (Chair), Roger W. Sant, W. Mitt Romney,
and Lawrence M. Small. Harry J. Pearce became a member of the
Committee in February 2000.
Nominating and Corporate Governance Committee
. The members of the Committee are not employees of the Company. The
Nominating and Corporate Governance Committee met once in 2000.
Functions:
. Makes recommendations to the Board regarding corporate governance
matters and considers nominees for election as directors.
. Advises the Board on a range of matters affecting the Board and its
committees, including the making of recommendations with respect to
qualifications of director candidates, compensation of directors,
selection of committee chairs, committee assignments, and related
matters affecting the functioning of the Board.
Members: Gilbert M. Grosvenor (Chair), Floretta Dukes McKenzie and Harry
J. Pearce.
Executive Committee
. The Executive Committee did not meet in 2000.
Function:
. Exercises the powers of the Board when the Board is not in session,
subject to specific restrictions as to powers retained by the full
Board. Powers retained by the full Board include those relating to
amendments to the certificate of incorporation and bylaws, mergers,
consolidations, sales or exchanges involving substantially all of the
Company's assets, declarations of dividends, and issuances of stock.
Members: J. W. Marriott, Jr. (Chair) and Roger W. Sant.
13
Directors' Compensation
Directors are compensated partially in cash and partially in Marriott common
stock to align their interests with those of shareholders. Company officers are
not paid for their service as directors.
Annual Retainer and Attendance Fees. For 2000, each non-employee director
received a retainer fee of $30,000, together with an attendance fee of
$1,250 per Board, Committee or shareholder meeting.
Annual Stock Awards. Each non-employee director also receives an annual
director stock award under the Marriott International, Inc. 1998
Comprehensive Stock and Cash Incentive Plan. The award is for a number of
shares having an aggregate market value as of the date of grant of
approximately the amount of the annual directors' retainer fee. This award
is granted immediately prior to the annual meeting of shareholders. In 2000
each award was for 938 shares.
Deferral of Payment. Any director may elect to defer payment of all or any
portion of his or her directors' fees pursuant to the Company's Executive
Deferred Compensation Plan and/or the 1998 Comprehensive Stock and Cash
Incentive Plan. Gilbert M. Grosvenor, Floretta Dukes McKenzie, Harry J.
Pearce, W. Mitt Romney, Roger W. Sant, and Lawrence M. Small are currently
participating in one or both of these plans.
Other. Directors are also reimbursed for travel expenses and other out-of-
pocket costs incurred when attending meetings.
Compensation Committee Interlocks and Insider Participation
During 2000, the Compensation Policy Committee's members were Floretta Dukes
McKenzie (Chair), Roger W. Sant, W. Mitt Romney and Lawrence M. Small. Harry J.
Pearce became a member of the Company's Compensation Policy Committee in
February 2000.
J. W. Marriott, Jr. serves on the Executive Compensation Committee of the
Board of Directors of General Motors Corporation. Harry J. Pearce, a director
of the Company, is an executive officer and director of General Motors
Corporation.
14
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows the compensation paid by the
Company in 2000, 1999, and 1998 (after the Spinoff of the Company on March 27,
1998), and by Old Marriott in 1998 (up to the Spinoff), to the Chief Executive
Officer and the other four most highly compensated executive officers (other
than the Chief Executive Officer) of the Company as of December 29, 2000.
Restricted Stock All Other
Fiscal Salary Bonus Stock Options Compensation
Name Year (1)($) ($) (2)(3)($) (#) (4)(5)($)
---- ------ --------- --------- ---------- ------- ------------
J.W. Marriott, Jr. .... 2000 1,000,000 1,166,600 233,310 0 202,825
Chairman and Chief 1999 992,500 981,384 196,271 300,000 150,405
Executive Officer 1998 950,000 1,001,300 200,246 192,000 148,048
William J. Shaw........ 2000 735,000 702,954 140,583 0 58,748
President and Chief 1999 700,000 537,950 107,602 125,000 58,752
Operating Officer 1998 670,000 572,850 1,462,092 132,000 56,623
James M. Sullivan...... 2000 470,000 366,835 864,766 0 36,232
Executive Vice
President 1999 444,000 315,240 63,051 75,000 35,500
Lodging Development 1998 425,000 325,125 770,498 66,000 34,375
Joseph Ryan............ 2000 470,000 357,435 71,494 0 35,617
Executive Vice
President 1999 444,000 301,920 928,352 75,000 35,500
and General Counsel 1998 425,000 325,125 65,023 66,000 34,148
Arne M. Sorenson....... 2000 450,000 346,725 69,338 0 30,965
Executive Vice
President 1999 375,000 223,125 44,614 75,000 26,570
and Chief Financial
Officer 1998 308,282 200,114 604,418 95,000 11,104
(1) Salary amounts include both base salary earned and paid in cash during
the fiscal year, and the amount of base salary deferred at the election
of the executive officer under certain employee benefit plans.
(2) Includes restricted stock, deferred bonus stock and deferred stock
contracts, as follows:
Restricted Stock. Restricted stock awards are subject to general
restrictions, such as continued employment and non-competition, and in
some cases, additional performance restrictions such as attainment of
financial objectives. Holders of restricted stock receive dividends and
exercise voting rights on their restricted shares.
Deferred Bonus Stock. The amount of a deferred bonus stock award
generally equals 20 percent of each individual's annual cash bonus award,
based on the stock price on the first trading day for the next fiscal
year. Holders of deferred bonus awards do not receive dividends or
exercise voting rights on their deferred bonus stock until it is
distributed to them. The recipient can designate an award as current,
which is distributed in 10 annual installments beginning one year after
the award is granted, or deferred, which is distributed in a lump sum or
in up to 10 installments following termination of employment. Deferred
bonus stock contingently vests in ten equal annual installments beginning
one year after the award is made.
Deferred Stock Contracts. Deferred stock contracts are subject to general
restrictions, such as continued employment and non-competition. Holders
of deferred stock contracts do not
15
receive dividends or exercise voting rights on their deferred awards
until they are distributed to them. The stock typically vests in equal
annual installments beginning one year after the award is granted. The
recipient typically receives awards in 10 annual installments following
termination of employment.
(3) The total number of restricted shares held by, and the number of deferred
bonus shares or deferred shares (vested and unvested) awarded to, each
Named Executive as of the end of the 2000 fiscal year, and the aggregate
value of these shares, is as follows. The value is based on a per share
price for Company stock of $42.7188, reflecting the average of the high
and low trading price on the New York Stock Exchange on December 29,
2000:
Shares
-------------------------------------
Deferred Restricted Deferred Aggregate Value
Named Executive Bonus Stock Stock Contract Stock at 12/29/00 ($)
--------------- ----------- ---------- -------------- ---------------
J.W. Marriott, Jr..... 31,629 0 0 1,351,153
William J. Shaw....... 30,088 32,808 55,042 5,038,170
James M. Sullivan..... 25,283 21,606 47,018 4,011,594
Joseph Ryan........... 12,715 55,225 22,018 3,842,898
Arne M. Sorenson...... 5,461 20,403 22,018 2,045,462
(4) This column represents Company matching contributions made under the
Profit Sharing Plan and the Marriott International, Inc. Executive
Deferred Compensation Plan (the "Deferred Plan") for fiscal 2000. For J.
W. Marriott, Jr., it also includes the amount described in footnote (5)
below.
(5) In 1996, Mr. J. W. Marriott, Jr. waived his vested right to receive post-
retirement distributions of cash under the Deferred Plan and Old Marriott
Common Stock under the Old Marriott 1993 Comprehensive Stock Incentive
Plan (the "1993 Plan"). The payments and stock distributions waived were
awarded to Mr. Marriott in 1995 and prior years and were disclosed as
required in earlier proxy statements of Old Marriott or of Marriott
Corporation. In connection with this waiver, Old Marriott agreed to
purchase life insurance policies for the benefit of a trust established
by Mr. Marriott. This agreement to purchase life insurance policies has
been assumed by the Company. The cost of the life insurance policies to
the Company will not exceed the expected after-tax cost to Old Marriott
if it had made the payments and stock distributions that were waived by
Mr. Marriott. For 2000, the taxable economic benefit to Mr. Marriott as a
result of these life insurance policies was $48,231. Mr. Marriott also
received $38,000 in value of personal financial services and $25,067 in
value of personal use of the Company jet.
16
Stock Options
The Company did not make a regular offering of options to purchase Common
Stock in fiscal 2000. To better allow the Compensation Policy Committee of the
Board of Directors the ability to review and recommend a total compensation
package for senior executives of the Company, the granting of annual option
awards has been moved from November of each year to the following February.
The following table shows information concerning the number of options
exercised in Fiscal 2000 and the value of all outstanding options.
Aggregated Stock Option/SAR Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
Number of Value of Unexercised
Shares Underlying In-the-Money
Shares Unexercised Options at Stock Options
Acquired Fiscal Year End (2) at Fiscal Year End (3)
on Value ------------------------- -------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name Company(1) (#) ($) (#) (#) ($) ($)
---- ---------- -------- ---------- ----------- ------------- ----------- -------------
J.W. Marriott, Jr. ..... MI 0 0 2,013,486 850,766 60,098,945 12,923,169
HMC 0 0 372,110 0 3,933,822 0
---------- ---------- ----------
Total 0 64,032,767 12,923,169
William J. Shaw......... MI 231,171 8,720,316 1,014,782 514,763 28,526,080 8,128,457
HMC 167,518 1,777,952 205,041 0 2,135,358 0
---------- ---------- ----------
Total 10,498,268 30,661,439 8,128,457
James M. Sullivan....... MI 0 0 354,478 276,389 9,404,964 4,336,779
Joseph Ryan............. MI 0 0 205,866 276,389 3,738,755 5,675,270
Arne M. Sorenson........ MI 0 0 81,928 132,328 1,210,429 1,631,840
--------
(1) "MI" represents options to purchase Old Marriott Common Stock. "HMC"
represents options to purchase shares of beneficial interest in Host
Marriott Corporation.
(2) The number and terms of these options reflect several adjustments made as
a result of the spinoff of Old Marriott from Marriott Corporation in
October 1993, the spinoff of Host Marriott Services Corporation from Host
Marriott Corporation in December 1995, the spinoff of the Company from
Old Marriott in March 1998, and the conversion of Host Marriott
Corporation into a real estate investment trust (and a related spinoff
transaction) in December 1998, each in accordance with the applicable
employee benefit plans covering those options. These adjustments
preserved, but did not increase or decrease, the economic value of the
options.
(3) The value of the unexercised stock options is based on a per share price
for Company stock of $42.7188; and a per share price for Host Marriott
Corporation common stock of $12.8438. These prices reflect the average of
the high and low trading prices on the New York Stock Exchange on
December 29, 2000.
17
REPORT ON EXECUTIVE COMPENSATION BY
THE COMPENSATION POLICY COMMITTEE
The Compensation Policy Committee (the "Committee") is responsible for
establishing basic principles related to the compensation programs of the
Company and for providing oversight for compensation programs for senior
executive officers. The principles include building a strong relationship
between shareholder return and executive compensation, providing incentives to
achieve both short and long-term goals, and providing an overall level of
remuneration which is competitive and reflective of performance. The Committee
met five times during 2000. The Chief Executive Officer and other senior
executive officers are not present at the meetings unless requested by the
Committee.
Compensation Philosophy and Programs
The Committee's objective is to establish a total compensation program for
the Company that appropriately balances compensation costs with salaries and
incentives sufficient to retain and motivate key executives. Senior human
resources management of the Company presents proposals and recommendations on
senior executive officer compensation to the Committee for their review and
evaluation. To establish compensation levels, the Committee uses data provided
by the Company that is obtained from independent consultants. The data reflects
compensation practices with companies of approximately Marriott's size (the
comparison group) who participate in a variety of compensation surveys. The
Committee believes that targeting compensation between median and the 75th
percentile of other large companies appropriately reflects the conditions of
the labor market for Company executives. Companies in the comparison group may
be included in the S&P Hotel/Motel Index used in the performance chart included
in this Proxy Statement; however, the comparison group is not made up
exclusively of companies used in that Index. As the Company is comprised of
both lodging and service lines of businesses and also recruits senior
executives from outside the hospitality industry, the Committee believes that
the broad-based comparison group is a more appropriate basis for establishing
comparable pay programs.
Base Salary
The Company has an executive compensation salary structure approved by the
Committee, which includes salary ranges established around a salary grade
midpoint. Each position's salary grade range and target bonus opportunity is
established based on targeted levels of total cash compensation for similar
positions in the survey data. Actual base salaries are set within the
prescribed salary range, based on a subjective assessment of factors including
tenure, experience, and individual performance. This assessment is not subject
to weightings or formulas. Individual annual salary increases reflect the
position within the salary range, the merit increase guidelines established by
the Company, and individual performance over the prior year. The Committee
establishes merit increase guidelines based on survey information of annual
salary increase budgets for the comparison group, along with an assessment of
the Company's labor costs for management employees.
Annual Cash Incentives
The Company has established the 1998 Comprehensive Stock and Cash Incentive
Plan, which is focused on financial objectives. In addition, the Company
maintains the Executive Officer Individual Performance Plan, which is focused
on human resource and other business requirements, to help motivate the
attainment of annual objectives. Under each plan, goals and specific objectives
are
18
established for a minimum level, target level, and a maximum level of
performance. Senior human resources management of the Company provided the
Committee with individual performance objectives for the Chief Executive
Officer and each of the other named executives for the Committee's review and
input. For each objective, actual performance is measured against these levels
in order to determine the actual payment. No payment is made if performance
fails to meet the minimum level for a particular objective.
The 2000 incentive plans for the Chief Executive Officer and other senior
executive officers included objectives related to Company financial
performance, individual performance, customer satisfaction, and lodging growth
objectives.
Stock Incentives
The Committee believes that stock ownership by senior executive management
is essential for aligning management's interest with that of shareholders. To
emphasize this principle, in February 1999, the Company established stock
ownership guidelines for the Company's senior management. The guidelines
require the top 70 executives in the Company to own a multiple of their
individual salary grade midpoint in Company stock. Executives have five years
in which to meet this goal.
The Company offers several stock-based incentive programs under the
Company's 1998 Comprehensive Stock and Cash Incentive Plan. Through deferred
stock incentive awards, approximately 4,500 managers, including the Chief
Executive Officer and other senior executive officers, receive an award of
shares equal in value to 20% of their annual cash bonus. The award is
distributed ratably over a ten-year period or at retirement if so elected by
certain levels of management, and is contingent upon continued employment.
In addition, the Company also grants stock options. Stock options are the
primary long-term incentive of the Company. The number of shares subject to
options granted to each executive officer is related to a guideline number
established for each eligible salary grade or level based on the survey data
described above. The Committee establishes a competitive range of share awards
per eligible position, and individual awards are determined based on a
subjective assessment of individual performance, contribution and future
potential.
Under the terms of the Company's 1998 Comprehensive Stock and Cash Incentive
Plan, awards of restricted stock and deferred stock contracts are also made to
key management employees. These awards tend to be relatively infrequent and are
used to recognize special performance of key executives or as an employment
inducement. The Company considers a number of factors when determining stock
grants such as individual performance, the size of competitive long-term
awards, key contributions, and previous share grants.
2000 Compensation of the Chief Executive Officer and Reported Executive
Officers
The Committee reviewed the 2000 salaries for J.W. Marriott, Jr., and all
other executive officers in November 1999. Mr. Marriott received a very modest
increase in base pay on January 1, 2000 which resulted in his annual pay rate
increasing to $1,000,000. This salary is within the median range for the
comparison group. With the exception of Mr. Sorenson, all other three named
executive officers received base salary increases of 4.5% on January 1, 2000.
Mr. Sorenson received an 18% base salary increase to better approximate the
median of the comparison group.
19
Under the 1998 Comprehensive Stock and Cash Incentive Plan, Mr. Marriott's
maximum annual incentive opportunity as a percentage of base salary was 36%
based on attaining a corporate cash flow objective and 36% related to earnings
per share. Under the Executive Officer Individual Performance Plan, his maximum
opportunity was 24% related to individual objectives, 12% on growth objectives,
and 12% related to customer satisfaction. In 2000, the Company achieved 105.5%
of cash flow objectives and 99.5% earnings per share objectives. Mr. Marriott
did achieve the maximum level of performance for corporate cash flow, but did
not achieve the maximum level of performance for earnings per share objectives.
Mr. Marriott accomplished the majority of his individual objectives and
customer satisfaction objectives, and exceeded growth objectives. The aggregate
target level of bonus award for Mr. Marriott was 80% and the maximum level of
bonus award was equal to 120% of eligible fiscal year salary. The total award
payment of $1,166,600 corresponded to 116.66% of salary. Mr. Marriott's annual
cash incentive payment was at the median for the comparison group. From a total
cash compensation perspective (base plus bonus), his annual compensation is at
the median for the comparison group. In addition, Mr. Marriott received 5,626
shares of Deferred Bonus Stock that was equal in value to 20% of his bonus.
The other named senior executive officers are also participants in the 1998
Comprehensive Stock and Cash Incentive Plan. Measures utilized include Company
and, in some cases, business-group cash flow, customer satisfaction, lodging
rooms growth objectives and individual objectives. The aggregate target
payments for other named executives were set at 50% to 60% of salary and the
maximum aggregate payments from 80% to 100% of salary. Actual total award
payments for 2000 ranged from 76.05% to 95.64% of salary.
Based on outstanding contributions during the year, and to continue to offer
a competitive total compensation program, Mr. Sullivan received a deferred
stock award in 2000 of 25,000 shares.
To assist in reviewing and evaluating key executives' total compensation
packages, the Committee decided to change the grant date of the annual stock
option awards from November 2000 to February 2001. The change in date allows
the Committee to review all components of compensation for key executives at
one time. As a result of the change in date, stock options were not granted to
Mr. Marriott and the other named executive officers in 2000.
Impact of Internal Revenue Code Section 162(m)
Under the Omnibus Budget Reconciliation Act of 1993, provisions were added
to the Internal Revenue Code under Section 162(m) that limit the tax deduction
for compensation expense in excess of one million dollars paid to each of
certain executive officers. However, performance-based compensation can be
excluded from the limit so long as it meets certain requirements. The Committee
believes the 1998 Comprehensive Stock and Cash Incentive Plan satisfies the
requirements for exemption under the Internal Revenue Code Section 162(m).
Payments made under this Plan qualify as performance-based compensation and
constitute the majority of aggregate annual incentive payment for Mr. Marriott
and all other named executive officers.
The Executive Officer Individual Performance Plan does not meet the
requirement necessary for exemption as performance-based compensation; however,
the Committee believes that incentives for performance relative to certain
Company objectives, such as personnel planning, customer satisfaction and other
non-financial business requirements are relevant and appropriate. For 2000, the
annual salary plus the bonus paid to named executive officers other than Mr.
Marriott were in each case less than one million dollars after reduction by
amounts deferred under the Executive Deferred
20
Compensation Plan. The annual salary plus the bonus paid to Mr. Marriott
exceeded one million dollars. The Committee reserves the right to pay non-
deductible compensation if it considers that to be in the best interest of the
shareholders and the Company. Due to the Company's focus on performance-based
compensation plans and continued deferral of compensation by certain executive
officers, the Committee expects that the vast majority of compensation paid to
the group will be tax deductible.
Summary
The Compensation Policy Committee believes that the compensation programs of
the Company are well structured to encourage attainment of objectives and
foster a shareholder perspective in management. The Committee feels that the
awards made in 2000 were competitive and appropriate and serve shareholders'
long-term interest.
Members of the Compensation Policy Committee
Floretta Dukes McKenzie, Chair
Harry J. Pearce
Roger W. Sant
W. Mitt Romney
Lawrence M. Small
21
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the performance of the Company's Class A common
stock from the Spinoff of the Company on March 27, 1998 to the end of fiscal
2000, and prior to the Spinoff, the performance of Old Marriott's common stock
since December 29, 1995, with the performance of the Standard & Poor's
Corporation Composite 500 Index and the Standard and Poor's Corporation
Lodging-Hotels Composite Index. The graph assumes an initial investment of $100
on December 29, 1995, and reinvestment of dividends. In addition, the Sodexho
Marriott Services, Inc. shares received in connection with the Spinoff are
assumed to be sold on March 27, 1998, and immediately reinvested in the
Company's Class A common stock.
The Company believes that this shareholder return information has only
limited relevance to an understanding of its or Old Marriott's compensation
policies during the indicated periods and does not reflect all matters
appropriately considered by it or by Old Marriott in developing their
compensation strategies.
[GRAPH]
COMPARISON OF SHAREHOLDER RETURNS AMONG MARRIOTT INTERNATIONAL,
THE S&P 500 INDEX AND THE S&P LODGING - HOTELS INDEX
Marriott S&P Lodging-Hotels S&P 500
International, Inc. Index Index
12/29/95 $100.0 $100.0 $100.0
1/3/97 $144.7 $119.1 $123.0
1/2/98 $180.4 $164.4 $160.4
1/1/99 $168.5 $135.1 $210.6
12/31/99 $184.5 $135.0 $255.0
12/29/00 $248.2 $111.7 $234.1
22
CERTAIN TRANSACTIONS
JWM Family Enterprises, L.P. ("Family Enterprises") is a Delaware limited
partnership majority owned by J.W. Marriott, Jr., the Chairman and Chief
Executive Officer of the Company, and members of his immediate family. Family
Enterprises indirectly holds varying percentages of ownership interests in a
Courtyard hotel in Long Beach, California, a Residence Inn in San Antonio,
Texas, a Fairfield Inn in Anaheim, California, a SpringHill Suites hotel in
Herndon, Virginia, a Courtyard hotel in Novato, California, and a Courtyard
hotel and a TownePlace Suites hotel in Milpitas, California. Subsidiaries of
the Company operate each of these properties pursuant to management agreements
with Family Enterprises. In fiscal 2000, the Company received management fees
of approximately $4.5 million, plus reimbursement of certain expenses, from its
operation of these hotels. The Company is negotiating to sell a Courtyard hotel
under construction in San Francisco, California to an entity partially owned by
Family Enterprises for a purchase price of approximately $81 million. The
purchase price will be paid in cash upon purchase. The sale is subject to
approval by the Board of Directors of the Company. A subsidiary of the Company
will operate the hotel pursuant to a management agreement.
McIntosh Mill Ltd. ("McIntosh Mill") is a Utah limited partnership in which
Richard E. Marriott, a director of the Company, has a 40 percent limited
partnership interest. McIntosh Mill sold certain parcels of land in Park City,
Utah to Marriott Ownership Resorts, Inc. doing business as Marriott Vacation
Club International ("MORI"), a subsidiary of the Company, on which MORI has
built a mixed-use development, including commercial condominium units and a
timeshare resort. McIntosh Mill purchased the commercial condominium units from
MORI for a purchase price of approximately $3.95 million, which is the pro rata
share of the total project development and construction costs allocable to the
commercial condominium units, less (i) the value of the land allocated to the
residential condominium units retained by MORI for its timeshare resort, and
(ii) an agreed-upon development fee earned by McIntosh Mill. MORI secured
payment of the purchase price with purchase money mortgages on the commercial
condominium units. The purchase price was paid in full in August, 2000.
Dr. Henry Cheng Kar-Shun, a director of the Company, together with members
of the Cheng family, directly or indirectly owns or leases hotel properties
that are operated by subsidiaries of the Company. In fiscal 2000, the Company
recognized sales of $557 million from its operation of these properties. Dr.
Cheng serves as Managing Director of New World Development, which is 35.99
percent owned by Dr. Cheng and members of the Cheng family, its affiliates or
affiliates of Dr. Cheng. New World Development has indemnified Renaissance
Hotel Group N.V. ("RHG"), a subsidiary of the Company, RHG's subsidiaries, and
the Company for certain lease and other obligations in connection with the
formation of RHG as a hotel management company in 1995, when Dr. Cheng and his
family members and affiliates owned a majority of RHG's stock. Under a 1999
agreement with certain affiliates of Dr. Cheng, RHG agreed to provide a limited
operating profit guarantee for fiscal years 1999, 2000 and 2001. The Company
has paid approximately $2.3 million under the operating profit guarantee with
respect to fiscal year 1999. The Company does not believe that a guarantee
payment is required to be made for fiscal year 2000, and the Company may be
entitled to recovery of a small portion of the 1999 payment. The balance of any
guarantee payments may be recouped to the extent that operating profit targets
are exceeded in 2001, 2002 or 2003.
23
Transactions with Host Marriott Corporation and Crestline Capital Corporation
On October 8, 1993, Old Marriott was spun off as a separate public company
from its former parent company, Marriott Corporation (which changed its name to
Host Marriott Corporation) ("Host Marriott"). Host Marriott retained the
ownership of lodging properties and certain other assets. Old Marriott
continued the businesses of lodging management, senior living services,
distribution services and certain other businesses.
In December 1998, Host Marriott reorganized its business operations to
qualify as a real estate investment trust ("REIT"). In conjunction with its
conversion to a REIT, Host Marriott spun off, in a taxable transaction, a new
company called Crestline Capital Corporation ("Crestline"); acquired a
portfolio of luxury hotels for $1.5 billion; and completed partnership roll-ups
representing new hotel property acquisitions approximating $650 million. As
part of the Crestline spinoff, Host Marriott transferred to subsidiaries of
Crestline all of the senior living communities previously owned by Host
Marriott, and Host Marriott leased or subleased to these Crestline subsidiaries
substantially all of Host Marriott's lodging properties, including the
properties acquired in the acquisition and roll-up transactions described
above. Host Marriott also assigned to subsidiaries of Crestline the lodging and
senior living community management and franchise agreements with the Company.
In the case of the lodging agreements, Host Marriott remains obligated under
such agreements in the event the lessee fails to perform its obligations
thereunder. Effective as of January 1, 2001, a Host Marriott taxable subsidiary
acquired the lessee entities for the hotels in the United States and took an
assignment of the lessee entities' interests in the leases for the hotels in
Canada. In December 2000, the Company acquired, through an unconsolidated joint
venture (the Courtyard Joint Venture) with an affiliate of Host Marriott, 120
Courtyard by Marriott hotels.
The Company believes that the transactions described above have not
materially changed its business or legal rights as they previously existed with
Host Marriott, although there can be no assurance that the new structure will
not adversely affect the Company in the future.
At February 28, 2001, J.W. Marriott, Jr. and Richard E. Marriott and their
respective immediate family members beneficially owned approximately 6.6
percent and 7.8 percent, respectively, of the common stock of Host Marriott.
Richard E. Marriott is the Chairman of the Board of Host Marriott, and J.W.
Marriott, Jr. is a director of Host Marriott.
At December 31, 2000, J.W. Marriott, Jr. and Richard E. Marriott and their
respective immediate family members beneficially owned approximately 6 percent
and 5.7 percent, respectively, of the common stock of Crestline. John W.
Marriott III, the son of J.W. Marriott, Jr., is a director of Crestline.
Pursuant to agreements between the Company and Host Marriott, and the
Company and Crestline, as the case may be, in 2000 the Company:
. operated lodging properties leased by Crestline from Host Marriott,
which are in turn owned or leased by Host Marriott;
. operated senior living communities owned by Crestline;
. guaranteed Host Marriott's performance in connection with certain loans
or other obligations; and
. provided Host Marriott with various administrative and consulting
services and a sublease of office space at the Marriott headquarters
building.
24
Lodging. The Company recognized sales of $2,746 million and operating profit
(before corporate expenses and interest) of $235 million in 2000 from its
operation of lodging properties owned or leased by Host Marriott and, until
December 31, 2000, leased to Crestline. During 2000, Host Marriott also served
as the general partner of several unconsolidated partnerships that own lodging
properties. The Company recognized sales of $622 million and operating profit
(before corporate expenses and interest) of $72 million in 2000 from its
operation of these lodging properties. The Company also leases land to certain
of these partnerships and recognized land rent income of $26 million in 2000.
Prior to the formation of the Courtyard Joint Venture, Host Marriott was a
general partner in the unconsolidated partnerships that owned the 120 Courtyard
by Marriott hotels. Included above in amounts recognized from lodging
properties owned by unconsolidated partnerships are sales of $345 million,
operating profit (before corporate expenses and interest) of $53 million, and
land rent income of $19 million in 2000.
Senior Living Services. During 2000, Marriott Senior Living Services, Inc.,
a subsidiary of the Company, managed senior living communities owned by
Crestline. The Company recognized sales of $185 million and operating profit
(before corporate expenses and interest) of $3 million from its operation of
these communities in 2000.
The Company believes that its lodging and senior living community operating
agreements with Host Marriott and Crestline reflect market terms and conditions
existing at the time the agreements were entered into, and are substantially
similar to operating agreements between the Company and other third parties for
facilities of a similar type.
Financing. The Company has provided financing to Host Marriott for a portion
of the cost of acquiring properties to be operated or franchised by the Company
and may continue to provide financing to Host Marriott or Crestline in the
future. In 2000, the Company recognized $1 million in interest and fee income
from loans to Host Marriott. At December 29, 2000, the outstanding principal
balance of loans to Host Marriott was $9 million.
Guarantees. The Company has guaranteed Host Marriott's performance to
certain lenders and other third parties. These guarantees were limited to $12
million at December 29, 2000. The Company has not been required to make any
payments under these guarantees.
Administrative Services. The Company also provides certain administrative
and consulting services to Host Marriott, and subleases space at its
headquarters building to Host Marriott. In 2000, the Company was paid
approximately $3.6 million for these items, including reimbursements. The
Company provides similar services to Crestline. In 2000 the Company was paid
approximately $317,000, including reimbursements, for these services.
The Company continues to have the right to purchase up to 20 percent of Host
Marriott's outstanding common stock upon the occurrence of certain events
generally involving a change of control of Host Marriott. This right expires in
2017, and Host Marriott has granted an exception to the ownership limitations
in its charter to permit full exercise of this right, subject to certain
conditions related to ownership limitations applicable to REITs generally.
On February 23, 2000, the Company entered into an agreement which was
subsequently embodied in a definitive agreement executed on March 9, 2000 and
amended on September 23, 2000 to resolve pending litigation involving certain
limited partnerships formed in the mid- to late 1980s by Marriott Corporation.
The Company, Host Marriott, and certain of their subsidiaries and affiliates
25
were defendants in these proceedings. Under the agreement, the Company
acquired, through an unconsolidated joint venture with affiliates of Host
Marriott, substantially all of the limited partners' interests in two limited
partnerships that own a total of 120 Courtyard by Marriott hotels, Courtyard by
Marriott Limited Partnership ("CBM I") and Courtyard by Marriott II Limited
Partnership ("CBM II"). The joint venture was financed with approximately $200
million in mezzanine debt loaned to the joint venture by the Company and with
equity contributed in equal shares by the Company and Host Marriott. The
Company's total investment in the joint venture, including the mezzanine debt,
is approximately $300 million. A subsidiary of the Company manages these 120
hotels under long-term agreements. The Company and Host Marriott each paid
approximately $31 million to the limited partners in several other limited
partnerships in exchange for dismissal of the complaints and full releases.
Two lawsuits are the subject of the settlement. In Whitey Ford, et al. v.
Host Marriott Corporation, et al., in the 285th Judicial District Court of
Bexar County, Texas, the plaintiff limited partners alleged breach of fiduciary
duty, breach of contract, fraud, negligent misrepresentation, tortious
interference, violation of the Texas Free Enterprise and Antitrust Act of 1983
and conspiracy in connection with the formation, operation and management of
CBM II and its hotels, with additional claims relating to the 1993 split of
Marriott Corporation and to the 1995 refinancing of CBM II's indebtedness. In
Robert M. Haas, Sr. and Irwin Randolph Joint Tenants, et al. v. Marriott
International, Inc., et al., in the 57th Judicial District Court of Bexar
County, Texas, the plaintiff limited partners alleged that the defendants
conspired to sell hotels to certain partnerships for inflated prices and that
they charged the partnerships excessive management fees to operate the
partnerships' hotels. The plaintiffs further alleged that the defendants
committed fraud, breached fiduciary duties and violated the provisions of
various contracts.
ITEM 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Acting upon the recommendation of the Audit Committee, the Board of
Directors has appointed Arthur Andersen LLP as the Company's independent
auditors for fiscal 2001. Arthur Andersen LLP, a firm of independent public
accountants, has served as the Company's independent auditors since the Spinoff
in March 1998. Arthur Andersen LLP also served as Old Marriott's independent
auditors from October 1993 (when Old Marriott was spun off as a public company)
to March 1998. Arthur Andersen LLP will examine and report to shareholders on
the consolidated financial statements of the Company and its subsidiaries.
Representatives of Arthur Andersen LLP will be present at the annual
meeting, will be given an opportunity to make a statement, and are expected to
be available to respond to questions.
The Board of Directors recommends a vote FOR ratification of Arthur Andersen
LLP as the Company's independent auditors for fiscal 2001.
26
ITEM 3--SHAREHOLDER PROPOSAL TO ADOPT CUMULATIVE VOTING FOR ELECTION OF
DIRECTORS
A shareholder (Ms. Evelyn Y. Davis, Editor, Highlights and Lowlights,
Watergate Office Building, 2600 Virginia Avenue, N.W., Suite 215, Washington,
D.C. 20037), who owns 400 shares of Class A common stock, has notified the
Company of her intention to propose the following resolution at the Annual
Meeting:
"RESOLVED: That the shareholders of Marriott International, assembled in
Annual Meeting in person and by proxy, hereby request the Board of
Directors to take the necessary steps to provide for cumulative voting in
the election of directors, which means each stockholder shall be entitled
to as many votes as shall equal the number of shares he or she owns
multiplied by the number of directors to be elected, and he or she may cast
all of such votes for a single candidate, or any two or more of them as he
or she may see fit."
In support of the resolution, Ms. Davis has submitted the following
statement:
"Many states have mandatory cumulative voting, so do National Banks. In
addition, many corporations have adopted cumulative voting. Last year the
owners of shares representing approximately 16% of shares voting, voted FOR
this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
The Board, and the Nominating and Corporate Governance Committee, have
considered this proposal. The Board recommends that shareholders vote against
it for the following reasons:
Each director of the Company currently is elected by the holders of a
majority of the voting power of the Company's shares. This permits the
directors to administer the affairs of the Company for the benefit of all
shareholders. The Board believes that cumulative voting is undesirable because
it is directed toward the election of one or more directors by a special group
of shareholders. The shareholder or special group electing a director by
cumulative voting may seek to have that director represent the shareholder's or
group's special interest, rather than the interests of the shareholders as a
whole. This partisanship among directors and voting on behalf of special
interests could interfere with the effectiveness of the Board, and could be
contrary to the interests of the Company and its shareholders as a whole.
The vast majority of states, including Delaware, where the Company is
incorporated, do not require cumulative voting. The Company's present method of
electing directors is employed by over 89% of companies in the Standard and
Poor's 500 Index, and by most companies listed on the New York Stock Exchange.
The Board believes that this method is appropriate to ensure that directors
will represent all shareholders, and not just a particular group.
The Board recommends a vote AGAINST this proposal.
27
OTHER MATTERS
The Company's management knows of no other matters which may be presented
for consideration at the 2001 annual meeting. However, if any other matters
properly come before the annual meeting, it is the intention of the persons
named in the proxy to vote such proxy in accordance with their judgment on such
matters.
Any shareholder who desires a copy of the Company's 2000 Annual Report on
Form 10-K may obtain one, without charge, by addressing a request to the
Secretary, Marriott International, Inc., Dept. 52/862, Marriott Drive,
Washington, D.C. 20058. The Company's copying costs will be charged if copies
of exhibits to the 10-K are requested.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dorothy M. Ingalls
Dorothy M. Ingalls
Secretary
28
APPENDIX A
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of our
audited financial statements to generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the Company's audited financial
statements for the three fiscal years ended December 29, 2000. The Audit
Committee has discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). In addition, the Audit Committee has received from the
independent auditors the written disclosures required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and
discussed with them their independence from the Company and its management.
Finally, the Audit Committee has considered whether the independent auditors
provision of non-audit services to the Company is compatible with the auditor's
independence.
Relying on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the Company's audited financial statements for the three fiscal years
ended December 29, 2000 be included in the Company's Annual Report on SEC Form
10-K for the year ended December 29, 2000, for filing with the Securities and
Exchange Commission.
Members of the Audit Committee
Lawrence M. Small, Chair
Gilbert M. Grosvenor
W. Mitt Romney
Roger W. Sant
A-1
APPENDIX B
INDEPENDENT AUDITOR
FEE DISCLOSURE
Fiscal Year
Ended
December
Professional Services Provided 29, 2000
------------------------------ -----------
Consolidated Audit Fees............................................ $ 1,049,800
All Other Fees..................................................... 4,883,900
-----------
Total Recurring Fees.............................................. $ 5,933,700
Financial Information Systems Design and Implementation Fees/1/ ... $25,397,600
-----------
TOTAL............................................................. $31,331,300
===========
/1/Represents fees paid to Accenture (formerly Andersen Consulting) for
Financial Information Systems Design and Implementation. Arthur Andersen LLP
divested Accenture in August 2000. Consequently, the fees relate to services
provided from January 2000 to August 2000. Disclosure of services provided
by Accenture in future periods is not required.
B-1
APPENDIX C
AUDIT COMMITTEE CHARTER
I. Composition and Terms of Office
A. The Audit Committee (the "Committee") shall be appointed by the Board of
Directors and shall be composed of at least three Directors, all of whom
have no relationship to the Company that may interfere with the exercise
of their independence from management and the Company ("Independent").
In addition to the definition of Independent provided here, additional
restrictions apply to every Committee member as outlined in the
Corporate Governance Listing Standards of the New York Stock Exchange
and currently filed with the Securities and Exchange Commission.
B. Each member of the Committee shall be financially literate as
interpreted by the Board of Directors, or must become financially
literate within a reasonable period of time after his or her appointment
to the Committee. At least one member of the Committee must have
accounting or related financial management expertise, as interpreted by
the Board of Directors.
C. The Chairman of the Committee shall be appointed by the Board of
Directors. Members of the Committee shall serve until the next Annual
Meeting of the Board of Directors or until their successors are
appointed.
II. Meetings
The Committee shall hold at least three regular meetings each year and such
additional meetings as may be deemed necessary by the Committee Chairman.
Minutes of each Committee meeting shall be submitted to the Board of
Directors, and the Chairman of the Committee will report verbally to the
full Board of Directors on matters discussed or any actions taken at the
most recent Committee meeting.
To provide access to the Committee for the internal auditors, independent
accountants and key financial management, the Committee shall request, as
deemed appropriate, attendance at its regular meetings or otherwise, of
financial management, the head of Internal Audit ("Chief Audit Executive")
and such other members of the Company's management as circumstances
require. At least annually, the Committee shall meet separately with
management, the Chief Audit Executive, and the independent accountants in
separate executive sessions to discuss any matters that the Committee or
these groups believe should be discussed privately.
III. Duties and Responsibilities
A. Risk Assessment and Control Environment
The Committee shall:
1. Periodically inquire of management, the independent accountants, and
the Chief Audit Executive about significant risks or exposures and
assess the steps management has taken to minimize such risk to the
Company.
2. Consider and review with the independent accountants and Chief Audit
Executive:
. The adequacy of the Company's internal controls including
information systems controls and security.
. Related findings and recommendations of the independent
accountants and Internal Audit together with management's
responses.
C-1
3. Review audit plans with the Chief Audit Executive and independent
accountants and evaluate adequacy of proposed audit scope.
4. Review appointment and dismissal of Chief Audit Executive.
5. Periodically review progress of the annual internal audit plan and
key findings.
6. Review with appropriate management, in-house counsel and the Chief
Audit Executive, programs to ensure compliance with the Company's
Ethical Conduct Policy (CP-1) and Business Conduct Guide.
B. Financial Reporting
The Committee shall:
1. Review the Company's Quarterly Report on Form 10-Q with financial
management and the independent accountants prior to release of
information to the public. The Committee may delegate this review
responsibility to its Chairman.
2. Review the Company's annual financial statements and, as
appropriate, any other reports or other financial information
submitted to any governmental body, or the public, including any
certification, report, opinion, or review rendered by the
independent accountants.
3. Following completion of the annual audit, review with the
independent accountants (and management, as appropriate) the
following:
. Their judgments of the quality and appropriateness of accounting
principles and financial disclosure practices of the Company
(including how the public's and shareholders' views of the Company
may be affected by its choice of accounting principles and its
financial disclosure practices).
. Any disagreements with management over the application of
accounting principles.
. Accounting principles applied, especially significant estimates
made by management or changes in accounting methods.
. Significant related party transactions or other significant
conflicts of interest.
. Significant audit adjustments.
. Any difficulties encountered during the audit, including any
restrictions on the scope of work or access to required
information.
. Any other matters related to the conduct of the audit to be
communicated to the Committee under Generally Accepted Auditing
Standards.
4. Meet regularly with in-house counsel to discuss legal matters that
may have a material impact on the financial statements. Meet with
outside counsel as appropriate.
5. Prepare the Audit Committee Report for annual inclusion in the
Company's proxy statement, as required by the Securities and
Exchange Commission. Submit the draft Report to the Board of
Directors for approval.
6. Prepare the Written Affirmation, as required by the Corporate
Governance Listing Standards of the New York Stock Exchange,
regarding the Committee members' independence and qualifications and
the adequacy of the Audit Committee charter. Submit the draft letter
to the Board of Directors for approval.
C-2
C. Relationship with Independent Accountants
The Committee shall:
1. Review the independent accountants' letter regarding independence
(required by Independence Standards Board Standard No. 1, as it may
be modified or supplemented). Discuss with the independent
accountants their independence. Consider management's plans to
engage the independent accountants to perform management advisory
services, types of services to be rendered, estimated fees and
actual fees charged.
2. Annually confirm management's recommendation of the Company's
independent accountants. Recommend appointment of independent
accountants annually to the Board of Directors for submission to
shareholders for approval. Ascertain that the independent
accountant's annual arrangement letter, with respect to the audit of
the Company's consolidated financial statements, is addressed to the
Board of Directors.
D. Other Responsibilities
1. Institute investigations of suspected improprieties on any material
matter selected by the Committee, using special counsel or outside
experts when necessary.
2. Review with the Chief Audit Executive and appropriate management the
effectiveness of controls relating to officer expenses and
perquisites.
3. At least annually, review and assess the adequacy of the Audit
Committee Charter. Submit proposed revisions to the Board of
Directors for approval. This should occur in conjunction with the
Committee's preparation of the written affirmation to the New York
Stock Exchange, as described in Section III. B. 6. above.
C-3
2001 ANNUAL MEETING INFORMATION
Time and Location. The 2001 Annual Meeting will begin at 10:30 a.m. at the
J.W. Marriott Hotel. Coffee, tea, and juice will be provided to shareholders
attending the meeting.
Parking. Due to anticipated needs of other hotel guests on May 4, minimal
parking is expected to be available to shareholders in the parking garage
adjacent to the hotel. Several public lots are located within three blocks of
the hotel.
Public Transportation. As parking is limited in the general area, it is
recommended that shareholders attending the annual meeting consider using
public transportation. Two Metro subway stations, Federal Triangle and Metro
Center, are located less than three blocks from the hotel, and the area is
served by Metro buses.
Lodging. A "Shareholder Annual Meeting" rate will be offered at two local
Marriott hotels for Thursday, May 3, 2001, the night before the meeting. To
receive these rates, call the hotel directly and ask for the shareholder annual
meeting rate for May 3, 2001. Please note that a limited number of rooms are
offered at this rate. Applicable taxes and gratuities are extra and advance
reservations are required. This discount may not be used in conjunction with
other discounts, coupons, or group rates.
J.W. Marriott Hotel--$175
1331 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
202/393-2000
Near Federal Triangle Metro Station
Washington Courtyard--$125
1900 Connecticut Avenue, N.W.
Washington, D.C. 20009
202/332-9300
Near Dupont Circle Metro Station
MARRIOTT INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
P on May 4, 2001, 10:30 a.m.
R The undersigned appoints J.W. Marriott, Jr. and Richard E. Marriott as Proxies.
Each shall have the power to appoint a substitute. They are authorized to
O represent and vote, as designated on the reverse side, all shares of Marriott
International, Inc. Class A common stock held of record by the undersigned on
X March 13, 2001 at the Annual Meeting of Shareholders to be held on May 4, 2001,
or any adjournment or postponement thereof. The Board of Directors recommends
Y votes FOR Proposals 1 and 2 and AGAINST Proposal 3.
(change of address/comments)
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
-----------
SEE REVERSE
SIDE
-----------
------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
INTERNET ACCESS TO SHAREHOLDER ACCOUNTS
Mariott International, Inc. and First Chicago Trust remind you that you can
access your account information via the Internet. Visit
http://gateway.equiserve.com. You will need your account number and social
security number to access your account and a password which you can receive by
calling First Chicago Trust at the toll-free number listed below.
DEDICATED TOLL FREE CUSTOMER SERVICE NUMBER
Marriott International, Inc. shareholders should call the toll-free number
indicated below for customer assistance.
1-800-311-4816
X Please mark your
votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder(s). If no instruction is indicated, such proxy will
be voted "FOR" Proposals 1 and 2 and "AGAINST" Proposal 3, and at the
discretion of the Proxies on any other matter that may properly occur.
------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1 and 2.
------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 01. Richard E. Marriott 2. Ratify appointment of Arthur
Director Nominees: 02. Gilbert M. Grosvenor Andersen LLP as independent
03. Harry J. Pearce auditors.
For, except vote withheld from the following nominee(s):
_____________________________________________
------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 3.
----------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Shareholder proposal to adopt
cumulative voting for the election
of directors.
----------------------------------------------------------------
MARK HERE FOR ADDRESS
CHANGE AND MARK ON
REVERSE SIDE
SIGNATURE(S) _______________________________________ DATE___________________
Sign exactly as name appears hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, give full title. If a corporation, sign full corporate name by
President, or other authorized officer. If a partnership, sign in partnership
name by authorized trustee or partner.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Please carefully detach here and return this proxy in the enclosed envelope.
Dear Shareholder:
Marriott International, Inc. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the Internet or by telephone. This eliminates the need to
return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the telephone: Using a touch-tone telephone, call 1-877-PRX-VOTE
(1-877-779-8683)
2. To vote over the Internet: Log onto the Internet and go to the web site
http://www.eproxyvote.com/mar
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
Your vote is important. Thank you for voting.
2