UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No.     )

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Preliminary Proxy Statement

 

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Definitive Proxy Statement

 

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Definitive Additional Materials

 

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Soliciting Material Pursuant to §240.14a-12

EXTENDED STAY AMERICA, INC.

ESH HOSPITALITY, INC.

 

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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EXPLANATORY NOTE

Both Extended Stay America, Inc. and ESH Hospitality, Inc. have securities that have been registered under the Securities Act of 1933, as amended, which are publicly traded and listed on the NASDAQ Global Select Market as paired shares. Each paired share consists of one share of common stock of Extended Stay America, Inc. that is attached to and trades as a single unit with one share of Class B common stock of ESH Hospitality, Inc. Accordingly, the Proxy Statements of Extended Stay America, Inc., and its controlled subsidiary, ESH Hospitality, Inc., are each included in this filing on Schedule 14A. Each registrant hereto is filing on its own behalf all of the information contained in this filing that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

notice of

annual meeting

 

EXTENDED STAY AMERICA, INC.

11525 N. Community House Road, Suite 100

Charlotte, North Carolina 28277

(980) 345-1600

www.aboutstay.com

Notice Of Annual Meeting Of Shareholders

To Be Held On May 28, 2020

Extended Stay America, Inc will hold its 2020 Annual Meeting of Shareholders (the “Annual Meeting”) on Thursday, May 28, 2020 at 8:00 a.m. (Eastern Daylight Time). Due to public health concerns and to assist in safeguarding the health and well-being of our shareholders and employees during the COVID-19 outbreak, the Annual Meeting will be a ‘virtual’ meeting, held as a live webcast via the Internet. By attending the Annual Meeting virtually, shareholders will be afforded the same rights and opportunities to participate that they would have at an in-person meeting. Shareholders will be able to attend the Annual Meeting, listen, vote, and submit questions by visiting www.virtualshareholdermeeting.com/stay2020 and signing in with a 16-digit control number included in these proxy materials. We expect to resume in person shareholder meetings in the future.

The Annual Meeting will be convened for the following purposes:

 

>

To elect seven directors to hold office until the 2021 annual meeting of shareholders or until their successors are duly elected and qualified;

 

>

To approve, on an advisory basis, the compensation paid to our named executive officers;

 

>

To approve, on an advisory basis, the frequency of future advisory votes on our named executive officer compensation;

 

>

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

 

>

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

Shareholders of record at the close of business on April 8, 2020 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

This Notice and the enclosed Proxy Statement and Proxy Card are first being made available to shareholders on or about April 23, 2020.

By Order of the Board of Directors,

 

 

Christopher N. Dekle

General Counsel and Corporate Secretary

Charlotte, North Carolina

April 23, 2020

 

		2020 PROXY STATEMENT   |   i

proxy

summary

 

We are furnishing this Proxy Statement to you as part of a solicitation by the Board of Directors (the “Board”) of Extended Stay America, Inc., a Delaware corporation, of proxies to be voted at our 2020 Annual Meeting of Shareholders and at any reconvened meeting after an adjournment or postponement of the meeting (the “Annual Meeting”). Unless the context otherwise requires, all references in this Proxy Statement to the “Corporation,” “Extended Stay America,” “Extended Stay,” “we,” “us,” and “our” refer to Extended Stay America, Inc. and its subsidiaries, excluding ESH Hospitality, Inc. (“ESH REIT”). All references in this Proxy Statement to the “Company” refer to the Corporation, ESH REIT and their subsidiaries considered as a single enterprise. Each share of Corporation common stock, par value $0.01 per share, is attached to and trades as a single unit with a share of Class B common stock of ESH REIT, par value $0.01 per share, (each, a “Paired Share”).

Our telephone number is (980) 345-1600, and our mailing address is 11525 N. Community House Road, Suite 100, Charlotte, North Carolina 28277. Our website is located at www.esa.com. The inclusion of our website address here and elsewhere in this Proxy Statement does not include or incorporate by reference the information on our website into this Proxy Statement. The information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.

 

 

IMPORTANT INFORMATION REGARDING THE AVAILABILITY OF PROXY MATERIALS

As permitted by the rules of the Securities and Exchange Commission (“SEC”), we have elected to send you this full set of proxy materials, including a proxy card, and additionally to notify you of the availability of these proxy materials on the Internet. The Notice of Meeting, Proxy Statement, Proxy Card and 2019 Annual Report, which includes our combined annual report on Form 10-K for the year ended December 31, 2019, are available free of charge on the investor relations section of our website (www.aboutstay.com) or at www.proxyvote.com.

YOUR VOTE IS VERY IMPORTANT. PLEASE CAREFULLY READ THE ATTACHED PROXY STATEMENT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, EXECUTE, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES. YOU MAY ALSO VOTE ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. IF YOU VOTE BY INTERNET OR TELEPHONE, YOU DO NOT NEED TO RETURN A WRITTEN PROXY CARD BY MAIL. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING.

PLEASE NOTE THAT THE ANNUAL MEETING WILL BE A ‘VIRTUAL’ MEETING, HELD AS A LIVE WEBCAST VIA THE INTERNET. DETAILS ON HOW TO ATTEND AND VOTE AT THE VIRTUAL MEETING MAY BE FOUND IN THE SECTION OF THIS PROXY TITLED ‘FREQUENTLY ASKED QUESTIONS.’ A SHAREHOLDER THAT JOINS THE VIRTUAL MEETING BY SIGNING INTO, AND COMPLYING WITH THE REQUIREMENTS OF, THE LIVE WEBCAST, WILL BE ATTENDING THE ANNUAL MEETING ‘IN PERSON.’

 

ii   |    2020 PROXY STATEMENT

		proxy summary

 

ANNUAL MEETING OF SHAREHOLDERS

MAY 28, 2020, 8:00 A.M. (EASTERN DAYLIGHT TIME)

Due to the COVID-19 outbreak, this year’s meeting will be held virtually via live webcast at www.virtualshareholdermeeting.com/stay2020.

PURPOSES:

 

To elect seven directors to hold office until the 2021 annual meeting of shareholders or until their successors are duly elected and qualified

To approve, on an advisory basis, the compensation paid to our named executive officers

To decide, on an advisory basis, the frequency of future advisory votes on our named executive officer compensation

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

To transact any other business as may properly come before the Annual Meeting or any adjournments or postponements thereof

 

Proposal		How may I vote?		What does the Board recommend?
1. The election of the seven director nominees identified in this Proxy Statement each for a one-year term or until his or her successor is duly elected and qualified.		You may:   > (i) vote FOR the election of all nominees named herein;   > (ii) withhold authority to vote for all such nominees; or   > (iii) vote FOR the election of all such nominees other than any nominees with respect to whom the vote is specifically withheld by indicating in the space provided on the proxy card.		The Board recommends that you vote FOR all seven of the director nominees.
2. An advisory vote on the Corporation’s executive compensation.		You may vote FOR or AGAINST the approval, on an advisory basis, of the Corporation’s executive compensation, or you may indicate that you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote FOR the approval, on an advisory basis, of the Corporation’s executive compensation.
3. An advisory vote on the frequency of future advisory votes on our named executive officer compensation.		You may vote in favor of the Corporation seeking an advisory vote on executive compensation EVERY YEAR, EVERY TWO YEARS, or EVERY THREE YEARS, or you may indicate you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote EVERY YEAR on the frequency of an advisory vote on executive compensation.
4. The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2020.		You may vote FOR or AGAINST the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2020, or you may indicate that you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2020.

 

		2020 PROXY STATEMENT   |   iii

		2019 year in review

 

 

iv   |    2020 PROXY STATEMENT

		2019 year in review

 

		BUSINESS HIGHLIGHTS   In 2019, we made strong progress on the development of our franchise system, the growth of our construction pipeline and returned a significant amount of capital to shareholders. Operationally, our Comparable system-wide RevPar declined 0.9%. Net income per Extended Stay America, Inc. diluted common share was $0.37, Adjusted FFO per Diluted Paired Share was $1.81, and Adjusted Paired share Income per Diluted Paired Share was $0.95. We increased our dividend to an annualized $0.92 per Paired Share.		Together with share repurchases, these dividends allowed us to return approximately $300 million to Paired Share holders in 2019, while still investing over $260 million in capital expenditures.
		Adjusted EBITDA, Adjusted FFO per Diluted Paired Share, and Adjusted Paired Share Income per Diluted Paired Share (collectively, the “Non-GAAP Financial Measures”) are non-GAAP measures. We believe that these measures provide useful information regarding results of operations and useful information with respect to management’s ability to evaluate ongoing performance compared to other lodging companies, hotel owners, and other capital-intensive companies, including those which include a REIT as part of their legal entity structure. These measures are not recognized terms under U.S. GAAP. These measures, as calculated by the Company, may not be comparable to the same measures calculated by other companies. These measures should not be considered as alternative measures of, or superior to, operating profit, net income, net income per share or any other measure of the Company, the Corporation, or ESH REIT calculated in accordance with GAAP. The Company’s presentation of the Non-GAAP Financial Measures does not replace the presentation of the Company’s consolidated financial statements and other disclosures prepared in accordance with GAAP. For reconciliations of these measures to the most comparable GAAP measures, see “reconciliation of non-GAAP measures.”

 

		2020 PROXY STATEMENT   |   v

2019 year in review

 

 

vi   |    2020 PROXY STATEMENT

		2019 year in review

 

 

		2020 PROXY STATEMENT   |   vii

table of contents

 

notice of annual meeting

i

proxy summary

ii

2019 year in review

iv

Business Highlights

v

Governance Highlights

vi

Compensation Highlights

vi

Environmental and Social Highlights

vi

Shareholder Outreach and Engagement Highlights

vii

table of contents

viii

proposal 1: election of directors

1

NOMINEES

3

CORPORATE GOVERNANCE AND BOARD MATTERS

9

Corporate Governance

9

Stock Ownership Guidelines

9

Prohibition on Speculative Securities Transactions

10

Code of Business Conduct and Ethics

10

Board of Directors and Director Independence

10

Board Leadership Structure

11

Board Oversight of Risk Management

11

Director Selection Process

12

Proxy Access Director Nominations

13

Meetings of the Board and Committees

13

Executive Sessions of Non-Management Directors

14

Communications with the Board

14

Committees of the Board

14

Audit Committee

15

Compensation Committee

15

Nominating and Corporate Governance Committee

16

Compensation Committee Interlocks and Insider Participation

16

Director Compensation

17

Actions in 2020

18

 

viii   |   2020 PROXY STATEMENT

		table of contents

 

proposal 2: say-on-pay													19
		EXECUTIVE OFFICERS											20
		EXECUTIVE COMPENSATION											22
				Compensation Discussion and Analysis (“CD&A”)									22
						Executive Summary							23
								2019 Say-On-Pay and Shareholder Outreach					23
								2019 CEO Compensation and CEO Transition Information					23
								Compensation Practices & Policies					26
						Executive Compensation Program Guidelines							26
								Philosophy					26
								Elements of Compensation					27
						Our Decision Making Process							27
								The Role of the Compensation Committee					27
								The Role of Management					27
								The Role of the Independent Consultant					28
								The Role of Peer Groups					28
						2019 Executive Compensation Program in Detail							29
								Base Salary					29
								Annual Cash Incentive Awards					31
								Transition-Related Bonuses					32
								Equity Incentive Awards					33
								Relative Total Shareholder Return Grants					34
								Achievement of Vesting for Prior Year Awards					34
						Other Practices, Policies and Guidelines							35
								Stock Ownership Guidelines					35
								Prohibition on Speculative Transactions in Company Securities					35
								Clawback Policy					36
								Benefit Programs					36
								Perquisites					36
								Termination Arrangements					36
								Reimbursement by ESH REIT					36
								Actions in 2020					37

 

		2020 PROXY STATEMENT   |   ix

table of contents

 

proposal 2: say-on-pay													(continued	)
				Impact of Tax Consideration on Compensation									37
				Report of the Compensation Committee of the Board									38
				Summary Compensation Table									39
				Grants of Plan-Based Awards									41
				Outstanding Equity Awards at Fiscal Year-End									42
				Stock Vested or Settled									44
				Deferred Compensation Plan									44
				Potential Payments Upon Termination or Change in Control									45
						Executive Severance Plan							45
						Equity Awards							45
proposal 3: frequency of say-on-pay													49
proposal 4: ratification of auditor appointment													50
		INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES AND SERVICES											51
		POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT RELATED SERVICES OF INDEPENDENT AUDITORS											51
		REPORT OF THE AUDIT COMMITTEE OF THE BOARD											52
reference materials													54
		STOCK OWNERSHIP INFORMATION											54
				Security Ownership of Certain Beneficial Owners and Management									54
				Reporting Compliance									56
		CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS											56
				Related Party Transaction Policy									56
				Related Party Transactions									57
				Tax and Consulting									57
		CEO PAY RATIO											57
frequently asked questions													58
other matters													65
reconciliation of non-GAAP measures													66

 

x   |    2020 PROXY STATEMENT

proposal 1:

election of directors

 

1		Proposal No. 1 The election of the seven director nominees identified in this Proxy Statement each for a one-year term or until his or her successor is duly elected and qualified.   Recommendation The Board unanimously recommends that you vote “FOR” the election of all seven nominees listed on the proxy card.

Our Board has nominated seven people for election as directors at the Annual Meeting. Each nominee is currently a director of the Corporation. If elected, each nominee will hold office until the next annual meeting of shareholders, or until his or her successor has been duly elected and qualified, subject to a director’s earlier death, resignation or removal. Each nominee has consented to be named in this Proxy Statement and has agreed to serve if elected. If a nominee is unable to serve or for good cause will not serve if elected, the persons named as proxies may vote for a substitute nominee recommended by the Board and, unless you indicate otherwise on the proxy card, your shares will be voted in favor of the Board’s remaining nominees.

We believe each nominee meets the qualifications that have been established for service on our Board. As demonstrated in the following biographies, we believe that the nominees have professional experience in areas that are highly relevant to our strategy and operations, and bring skills and other attributes that make them outstanding candidates to serve on our Board.

 

		2020 PROXY STATEMENT   |   1

The following table summarizes information about our nominees as of April 8, 2020. Detailed biographies of each nominee follow.

 

Name

Age

Director   Since

Audit   Committee

Compensation   Committee

Nominating   and   Corporate   Governance   Committee

Independent?

Bruce N. Haase President and Chief Executive Officer

59

2019

Douglas G. Geoga Board Chair

64

2013

✓

Kapila K. Anand Director

66

2016

Chair

✓

Ellen Keszler Director

57

2018

Member*

Member

✓

Jodie W. McLean Director

51

2017

Member*

Member

✓

Thomas F. O’Toole Director

61

2017

Member

Chair

✓

Richard F. Wallman Director

69

2013

Chair*

Member

✓

 

*Audit

Committee financial expert

Mr. Haase, Mr. Geoga, and Ms. Anand also sit on the Board of Directors of ESH REIT. Under our Corporate Governance Guidelines (as defined below), service on our Board and the Board of ESH REIT constitute a single directorship for purposes of overboarding calculations.

 

2   |    2020 PROXY STATEMENT

NOMINEES

Our Board has affirmatively determined that each of our directors other than Mr. Haase is independent under the rules of the SEC and the NASDAQ Global Select Market (“NASDAQ”). Detailed information regarding each nominee as of April 8, 2020 is set forth below:

 

		Bruce N. Haase President and CEO   Other directorships: HomeWell Senior Care, Inc. (Chairman of the Board and Majority Shareholder)   Skills and expertise: Extended stay lodging; finance; lodging industry; franchising; branding; marketing; operations; executive management   Mr. Haase has served as Chief Executive Officer, President and director of the Corporation since November 2019, Chief Executive Officer and

President of ESH REIT since November 2019 and as director of ESH REIT since April 2018. From 2014 to 2016, Mr. Haase was the Chief Executive Officer of WoodSpring Hotels, LLC, a leading economy extended stay lodging brand. Mr. Haase led the design, launch and franchising of the WoodSpring Suites brand, including the conversion of properties from the company’s Value Place brand. Mr. Haase previously served in a series of executive positions with Choice Hotels International, Inc. including Executive Vice President, Global Brands, Marketing & Operations (from 2008 to 2012), Senior Vice President, Domestic Brand Operations & International Division (from 2007 to 2008), Senior Vice President, International Division (from 2000 to 2007), and Vice President, Finance & Treasurer (in 2000). Prior to joining Choice, Mr. Haase held a series of positions with The Ryland Group, Inc., Caterair International Corporation, Marriott Corporation, and Goldman, Sachs, & Company.

Mr. Haase brings valuable extended stay lodging, operations, strategic planning, franchise and brand development experience to our Board. As the only executive of the Corporation to serve on the Board, Mr. Haase also contributes a level of understanding of the Corporation not easily attainable by an outside director.

 

		2020 PROXY STATEMENT   |   3

		Douglas G. Geoga President and CEO, Salt Creek Hospitality, LLC Independent Board Chair Audit Committee Financial Expert   Past directorships: Carefree Communities LLC (Advisory Board Member); Kemper Corporation (Audit Committee and Investment Committee)   Skills and expertise: Lodging; operations; real estate development; finance; marketing; branding; corporate governance

Mr. Geoga has served as Chair of the Board of the Corporation since July 2013 and as Chair of the Board of Directors of ESH REIT since November 2013. Mr. Geoga served as a non-voting member and the Non-Executive Chair of our predecessor entities, ESH Hospitality Holdings LLC (“Holdings”) and ESH Strategies Holdings LLC (“Strategies Holdings”), from October 2010 to November 2013. Mr. Geoga is President and Chief Executive Officer of Salt Creek Hospitality, LLC, a privately-held firm engaged in making investments in the hospitality industry and providing related advisory services. Mr. Geoga also serves as a consultant to Atlantica Investment Holdings Limited, which through affiliated companies is the second largest manager of hotels in Brazil. Since 2002, Mr. Geoga has served, and from November 2002 to December 2009, Mr. Geoga’s primary occupation was serving, as principal of Geoga Group, LLC, an investment and advisory consulting firm focused primarily on the hospitality industry. Until July 2006, Mr. Geoga’s primary occupation was serving as the President of Global Hyatt Corporation and as the President of Hyatt Corporation and the President of AIC Holding Co., the parent corporation of Hyatt International Corporation, then both privately-held subsidiaries of Global Hyatt Corporation which collectively operated the Hyatt chain of hotels throughout the world. In addition, from 2000 through 2005, Mr. Geoga served as President of Hospitality Investment Fund, LLC, a privately-held firm which was engaged in making investments in lodging and hospitality companies and projects.

Mr. Geoga’s history as President of Hyatt Corporation, a global leader in its industry, as well as his extensive experience in private business investment, brings to the Board the perspective of both an operating executive and one who is sophisticated in corporate investments and finance.

 

4   |    2020 PROXY STATEMENT

		Kapila K. Anand Retired Partner, KPMG Independent Director Audit Committee Financial Expert   Other directorships: Omega Healthcare Investors, Inc. (Audit Committee Chair), Elanco Animal Health Inc. (Audit Committee Chair, Finance Committee)   Non-profit boards: Rush University Medical Center, US Fund for UNICEF; Women Corporate Directors Education and Development Foundation (Lead Director)

Past directorships: KPMG LLP—Americas; KPMG LLP—U.S.; Franciscan Ministries; KPMG Foundation (Chair); Chicago Network (Chair)

Skills and expertise: Lodging; real estate; REITs; accounting; finance, risk management; corporate governance; internal controls over financial reporting

Ms. Anand has served as a director of the Corporation since July 2016 and as a director of ESH REIT since May 2017. Ms. Anand served as an audit partner and later an advisory partner at KPMG LLP from 1989 until her retirement in March 2016. Ms. Anand joined KPMG LLP in 1979 and served in a variety of roles in addition to her role as a partner, including the National Partner-in-Charge, Public Policy Business Initiatives (from 2008 to 2013) and segment leader for the Travel, Leisure, and Hospitality industry and member of the Global Real Estate Steering Committee (each from 2013 to 2016).

Ms. Anand’s extensive experience serving a diverse group of real estate, gaming, private equity and hospitality clients on numerous audit and advisory projects, including strategic planning, construction and development risk assessments, enterprise risk management, internal controls and corporate governance, brings to the Board a significant understanding of the financial, lodging, real estate and corporate governance issues and risks that affect the Corporation.

 

		2020 PROXY STATEMENT   |   5

		Ellen Keszler President and CEO, Clear Sky Associates Independent Director Audit Committee Financial Expert   Other directorships: Sojern, Inc., Travel and Transport, Inc.   Past directorships: PROS Holdings, Inc. (Audit Committee, Nominating and Corporate Governance Committee); North Texas Public Broadcasting (Finance Committee Chair); North Texas Public Broadcasting (Finance Committee Chair)

Skills and expertise: Distribution; technology; revenue management; travel and tourism; finance

Ms. Keszler has served as a director of the Corporation since February 2018. Ms. Keszler has served as the President and Chief Executive Officer of Clear Sky Associates, a management and strategy consulting firm focused on the technology and travel industries, since 2008. Previously, Ms. Keszler served as President of Travelocity Business from 2003 to 2007. From 2000 to 2003, Ms. Keszler served as Senior Vice President—North American Division of Sabre Travel Network. From 1987 to 2000, Ms. Keszler held various finance roles at Sabre Holdings, American Airlines and JCPenney. These functions included financial planning, strategic analysis, treasury, mergers and acquisitions, and financial operations. Additionally, she serves as an advisor to numerous travel technology startup companies.

Ms. Keszler’s extensive experience in technology, revenue management, customer engagement, and finance brings to the Board a significant understanding of issues and risks that affect the Corporation.

 

 

 

		Jodie W. McLean CEO and Director, EDENS Independent Director Audit Committee Financial Expert   Other directorships: International Council of Shopping Centers (Trustee); Wofford College Urban Land Institute (Trustee); Cushman & Wakefield plc; Federal Reserve Bank of Richmond   Skills and expertise: Real estate development; retail; consumer trends

Ms. McLean has served as a director of the Corporation since June 2017. Ms. McLean has served as the Chief Executive Officer of EDENS, a private commercial real estate company that develops, owns, and operates retail community shopping centers in primary markets across the country, since 2015. She joined EDENS in 1990 and has held various positions including Chief Investment Officer from 1997 to 2015 and also President from 2002 to 2015.

Ms. McLean’s extensive experience in consumer retail trends, customer engagement, real estate and investments brings to the Board a significant understanding of issues and risks that affect the Corporation.

 

6   |    2020 PROXY STATEMENT

		Thomas F. O’Toole Executive Director of the Program for Data Analytics and Clinical Professor of Marketing, Kellogg School of Management at Northwestern University Independent Director   Other directorships: Alliant Energy Corporation; LSC Communications, LLC   Past directorships: Pegasus Solutions, LLC

Skills and expertise: Lodging business; travel industry; revenue strategy, marketing; distribution; customer data analytics; customer loyalty; branding; information systems

Mr. O’Toole has served as a director of the Corporation since May 2017. Since September 2018 he has held the positions of Executive Director of the Program for Data Analytics and Clinical Professor of Marketing at the Kellogg School of Management of Northwestern University. He held the position of Senior Fellow and Clinical Professor of Marketing at Kellogg from November 2016 to September 2018. He has also served as a Senior Advisor to McKinsey & Company since January 2017.

Mr. O’Toole served as Chief Marketing Officer and Senior Vice President of United Airlines from January 2015 to December 2016, and President of MileagePlus Holdings, LLC from April 2012 to December 2016, of United Continental Airlines, Inc., a global air carrier. Mr. O’Toole joined United Airlines in 2010, serving as Senior Vice President, Marketing and Loyalty from 2012 to 2015, Chief Operating Officer of Mileage Plus Holdings, LLC from 2010 to 2012 and Chief Marketing Officer in 2010. At United Airlines, he was responsible for brand development, marketing, ancillary revenue, ecommerce, digital channels, loyalty, co-brand credit cards, customer data analytics and related functions. Prior to that, he served as an advisor with Diamond Management & Technology Consultants, a management and technology consulting firm, from 2009 to 2010. Mr. O’Toole served in various positions of increasing responsibility at Hyatt Hotels Corporation from 1995 to 2008, including as Chief Marketing Officer and Chief Information Officer from 2006 to 2008.

Mr. O’Toole’s extensive travel industry, hospitality and marketing experience in C-level positions brings to the Board a broad and deep understanding of the commercial, operational and strategic imperatives of running a large scale corporation in the travel industry and hospitality category.

 

		2020 PROXY STATEMENT   |   7

		Richard F. Wallman CFO, Honeywell International Inc. (Ret.) Independent Director Audit Committee Financial Expert   Other directorships: Roper Industries, Inc.; Charles River Laboratories International, Inc.; SmileDirectClub, Inc. (Audit and Compensation Committees); Wright Medical Group N.V. (Audit Committee)*   Past directorships: Boart Longyear Limited (Audit Committee Chair); Convergys Corporation

Skills and expertise: Corporate finance and accounting; corporate governance; internal controls over financial reporting

Mr. Wallman has served as a director of the Corporation since July 2013 and as a director of ESH REIT from November 2013 to May 2016. He previously served as a non-voting member of the board of managers of Holdings and Strategies Holdings from May 2012 to November 2013. Mr. Wallman served as the Chief Financial Officer and Senior Vice President of Honeywell International Inc., a provider of diversified industrial technology and manufacturing products, and its predecessor AlliedSignal, from March 1995 until his retirement in July 2003. Mr. Wallman has also served in senior financial positions with IBM and Chrysler Corporation.

Mr. Wallman’s extensive financial background brings to the Board a significant understanding of the financial issues and risks that affect the Corporation. Mr. Wallman also serves on the boards of other diverse publicly held companies, which gives him a multi-industry perspective and exposure to developments and issues that impact the management and operations of a large scale corporation.

*Mr. Wallman has notified us that he intends to step down from the Wright Medical Group board upon completion of its sale, which is expected to occur in 2020.

 

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CORPORATE GOVERNANCE AND BOARD MATTERS

Corporate Governance

We believe that good corporate governance helps to ensure that the Corporation is managed for the long-term benefit of our shareholders. We regularly review and consider our corporate governance policies and practices, the SEC’s corporate governance rules and regulations, and the corporate governance listing standards of NASDAQ, the stock exchange on which our Paired Shares are traded.

The Board directs and oversees the management of the business and affairs of the Corporation in a manner consistent with the best interests of the Corporation and its shareholders. In this oversight role, the Board serves as the ultimate decision-making body of the Corporation, except for those matters reserved to or shared with the Corporation’s shareholders.

We have adopted the Extended Stay America, Inc. Corporate Governance Guidelines (as amended from time to time, the “Corporate Governance Guidelines”), which provide a framework for the governance of the Corporation as a whole and describe the principles and practices that the Board follows in carrying out its responsibilities. The Corporate Governance Guidelines address, among other things:

 

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the composition, structure and policies of the Board and its committees;

 

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director qualification standards;

 

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expectations and responsibilities of directors;

 

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management succession planning;

 

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the evaluation of Board performance;

 

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our director resignation policy; and

 

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principles of Board compensation.

The Corporate Governance Guidelines further provide that the Board, acting through the Nominating and Corporate Governance Committee (as described below), conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively. In addition, the Corporate Governance Guidelines provide that each committee conduct a self-evaluation and compare its performance to the requirements of its charter.

The Corporate Governance Guidelines are posted on the investor relations section of our website at www.aboutstay.com. The Corporate Governance Guidelines are reviewed by the Nominating and Corporate Governance Committee at least annually to ensure that they effectively promote the best interests of both the Corporation and the Corporation’s shareholders and that they comply with all applicable laws, regulations and NASDAQ requirements.

Stock Ownership Guidelines

To further align the interests of our independent directors and our shareholders, the Board has adopted stock ownership guidelines under which independent directors, after an initial phase-in period, will generally be required to maintain vested equity holdings with a value at least equal to three times annual cash compensation.

 

		2020 PROXY STATEMENT   |   9

Prohibition on Speculative Securities Transactions

Our Securities Trading and Disclosure Policy prohibits directors and executive officers from engaging in the following with respect to the Corporation’s securities:

 

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short sales;

 

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transactions in put options, call options or other derivative securities related to the Corporation’s securities, on an exchange or in any other organized market;

 

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hedging or monetization transactions related to the Corporation’s securities, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds; and

 

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holding the Corporation’s securities in a margin account or otherwise pledging the Corporation’s securities as collateral for a loan.

Code of Business Conduct and Ethics

We have adopted the Extended Stay America, Inc. Code of Business Conduct and Ethics (the “Code of Business Conduct and Ethics”) that applies to all of our directors, officers and employees, including our principal executive officer (our President and CEO), principal financial officer (our CFO), principal accounting officer (our CFO) and persons performing similar functions. A copy of the Code of Business Conduct and Ethics is posted on the investor relations section of our website at www.aboutstay.com. If we amend or waive provisions of the Code of Business Conduct and Ethics with respect to such officers, we intend to disclose the amendment or waiver on our website.

Board of Directors and Director Independence

The Board consists of seven directors, all of whom have been nominated for re-election at the Annual Meeting. Our Second Amended and Restated Bylaws provide that directors are elected at the annual meeting of shareholders and each director is elected to serve until his or her successor is duly elected or until his or her earlier death, resignation or removal.

The Corporate Governance Guidelines define an “independent” director in accordance with the NASDAQ corporate governance rules for listed companies and require the Board to review and make an affirmative determination as to the independence of each director at least annually. The NASDAQ independence definition includes a series of objective tests, such as that the director is not an employee of the Corporation and has not engaged in various types of business dealings with the Corporation or certain other related party transactions with the Corporation. Because it is not possible to anticipate or explicitly provide for all potential conflicts of interest that may affect independence, the Board is also responsible for determining affirmatively, as to each independent director, that no material relationships exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the Board broadly considers all relevant facts and circumstances, including information provided by the directors and the Corporation with regard to each director’s business and personal activities as they may relate to the Corporation and the Corporation’s management. The Board may delegate independence determinations to the Nominating and Corporate Governance Committee to the extent permitted by NASDAQ.

 

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Our Board has affirmatively determined that each of our directors other than Mr. Haase is independent under the guidelines for director independence set forth in the Corporate Governance Guidelines and under all applicable rules of the SEC and NASDAQ.

Board Leadership Structure

We do not have a policy as to whether the role of the Board Chair and the Chief Executive Officer should be separate or combined. The Board may select its Chair and Chief Executive Officer in any way it considers to be in the best interests of the Corporation. At this time, in particular given the transition in our CEO position in 2019, we believe it is beneficial to separate the Chair and Chief Executive Officer in order to enhance the Chair’s oversight capability. Mr. Haase serves as our Chief Executive Officer and Mr. Geoga serves as Board Chair. The Board believes this leadership structure, which separates the Chair and Chief Executive Officer roles, is appropriate corporate governance for us at this time. In particular, the Board believes that this leadership structure clarifies the individual roles and responsibilities of Mr. Haase and Mr. Geoga and enhances accountability. The Board recognizes that there is no single, generally accepted approach to providing Board leadership and that the Board’s leadership structure may vary in the future as circumstances warrant. If the Board determines that it is in the best interests of our shareholders to combine the positions of Chair and Chief Executive Officer, the independent directors will designate a Lead Independent Director.

Board Oversight of Risk Management

The Board oversees, and provides direction with respect to, management’s day-to-day risk management activities and processes. While the full Board is responsible for risk oversight, the Board uses its committees, as appropriate, to monitor and address the risks that are within the scope of a particular committee’s expertise or charter. The Board and applicable committees periodically receive management reports on our business operations, financial results and strategic plans.

The Board delegates appropriate aspects of its oversight responsibility to the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The Audit Committee assists the Board in fulfilling its risk oversight responsibilities by periodically reviewing, among other things, our financial statements, our internal audit, accounting and financial functions and reporting processes, including our systems of internal controls for financial reporting, our compliance with legal and regulatory requirements, our enterprise risk management framework, and our cybersecurity risk framework. In particular, the Audit Committee periodically reviews and discusses with management the internal audit function and the independent auditor, as applicable, our major financial risk exposure and the guidelines and policies that management has established with respect to risk assessment and risk management. The Compensation Committee assists the Board with oversight of risks associated with our compensation policies and practices. The Nominating and Corporate Governance Committee assists the Board with oversight of risks associated with our governance. In each case, the Board or the applicable committee oversees the steps that management has taken to monitor and control such exposures. As part of the Committees’ reviews, our directors ask questions, offer insights and challenge management to continually improve its risk assessment and management. The Board has full access to management, as well as the ability to engage advisors in order to assist in its risk oversight role.

 

		2020 PROXY STATEMENT   |   11

The Chief Executive Officer’s membership on and collaboration with the Board allows him to gauge whether management is providing adequate information for the Board to understand the interrelationships of our various business and financial risks. He is available to the Board to address any questions regarding executive management’s ability to identify and mitigate risks and weigh them against potential rewards.

Director Selection Process

The Nominating and Corporate Governance Committee is responsible for identifying individuals believed to be qualified to become directors and selecting, or recommending to the Board for its selection, the director nominees for the next annual meeting of shareholders or to fill vacancies or newly created directorships that may occur between such meetings, including reviewing and making recommendations to the Board whether members of the Board should stand for re-election. The Board then nominates candidates each year for election or re-election by shareholders or appoints new Board members to fill vacancies. In identifying prospective director candidates, the Nominating and Corporate Governance Committee may seek referrals from other members of the Board, management and third-party sources. The Nominating and Corporate Governance Committee may, but is not required to, retain a search firm in order to assist it in identifying candidates to serve as directors of the Board. The Nominating and Corporate Governance Committee retained Spencer Stuart to assist with the transition of our CEO and President in 2019 and to assist with certain candidate searches into 2020. The Nominating and Corporate Governance Committee screens all potential candidates in the same manner regardless of the source of the recommendation.

The Nominating and Corporate Governance Committee does not maintain a fixed set of qualifications for director nominees other than the minimum individual qualifications described below. In considering candidates for the Board, the Nominating and Corporate Governance Committee considers all factors it deems appropriate, which may include (a) ensuring that the Board, as a whole, is appropriately diverse and consists of individuals with various and relevant career experience, relevant technical skills, relevant business or government acumen, industry knowledge and experience, financial expertise (including expertise that could qualify a director as an “audit committee financial expert” as that term is defined by SEC rules), and (b) minimum individual qualifications, including strength of character, mature judgment, familiarity with the Corporation’s business and industry, independence of thought and an ability to work collegially. The Nominating and Corporate Governance Committee also may consider the current size, composition and combined expertise of the Board and the extent to which a candidate would fill a present need on the Board. In particular, the Nominating and Corporate Governance Committee may consider the requirements that the members of the Board as a group maintain the requisite qualifications under the applicable NASDAQ listing standards for independence for the Board as a whole and for appointing individuals to the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Although the Nominating and Corporate Governance Committee considers diversity of background and experiences, neither the Corporate Governance Guidelines nor the Nominating and Corporate Governance Committee Charter include a formal diversity policy.

The Board monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Corporation’s business and structure.

 

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The Nominating and Corporate Governance Committee will consider candidates suggested by shareholders and will evaluate such candidates on a basis substantially similar to that which it uses to evaluate other nominees. Any shareholder who wishes to recommend a director candidate for consideration by the Nominating and Corporate Governance Committee may do so by submitting a recommendation in writing to the Chair of the Nominating and Corporate Governance Committee. See “Communications with the Board” below for how to communicate with the Chair of the Nominating and Corporate Governance Committee. Recommendations should include any information the shareholder believes would be helpful to the Nominating and Corporate Governance Committee in evaluating the candidate and must include information that would be required to be disclosed in a proxy statement soliciting proxies for the election of such candidate, including such candidate’s written consent to being named in the proxy statement as a nominee and to serving as director if elected. If the Nominating and Corporate Governance Committee determines to nominate a shareholder-recommended candidate and recommends his or her election, then his or her name will be included on the proxy card for our next annual meeting in accordance with the procedures set forth in our Second Amended and Restated Bylaws. Shareholders may also directly nominate directors for election at the Corporation’s annual shareholders meeting by following the provisions set forth in our Second Amended and Restated Bylaws, whose qualifications the Nominating and Corporate Governance Committee will consider. See “Frequently Asked Questions—What is the deadline under our Second Amended and Restated Bylaws for shareholders to nominate persons for election to the Board or to propose other matters to be considered at our 2021 annual meeting of shareholders?” for additional information.

Proxy Access Director Nominations

In addition to advance notice procedures, our Second Amended and Restated Bylaws also include provisions permitting, subject to certain specified terms and conditions, shareholders who have maintained continuous qualifying ownership of at least 3% of outstanding common stock for at least three years to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office who will be included in our annual meeting proxy statement. Eligible shareholders who wish to nominate a proxy access candidate must follow the procedures described in our Second Amended and Restated Bylaws. Proxy access candidates and the shareholder nominators meeting the qualifications and requirements set forth in our Second Amended and Restated Bylaws will be included in the Corporation’s proxy statement and ballot. To be timely, an eligible shareholder’s proxy access notice must be mailed to our General Counsel and Corporate Secretary at 11525 N. Community House Road, Suite 100, Charlotte, North Carolina 28277, no earlier than 150 days and no later than 120 days before the one-year anniversary of the date that we commenced mailing of our definitive proxy statement (as stated in such proxy statement) for the immediately preceding annual meeting, except as otherwise provided in our Second Amended and Restated Bylaws.

Meetings of the Board and Committees

During 2019, the Board held four regular meetings and four telephonic special meetings, in addition to taking various actions by unanimous written consent. During 2019, each incumbent director attended at least 75% of the total meetings of the Board held during the period in which he or she was a director and the total number of meetings held by all of the committees of the Board on which he or she served during the period of his or her service on the committee. Directors are expected to attend all Board meetings and all meetings of the committee or committees of the Board of which they are a member. Attendance by

 

		2020 PROXY STATEMENT   |   13

telephone or videoconference is deemed attendance at a meeting. Additionally, all director nominees are encouraged to attend the annual shareholders meeting. All of the directors who were then serving on the Board attended the 2019 annual shareholders meeting.

Pursuant to our Corporate Governance Guidelines, our Board currently plans to hold at least four meetings each year, with additional meetings to occur (or action to be taken by unanimous written consent) at the discretion of the Board.

Executive Sessions of Non-Management Directors

Pursuant to our Corporate Governance Guidelines, in order to ensure free and open discussion and communication among the non-management directors of the Board, the non-management directors meet in executive session at most Board meetings with no members of management present. Mr. Geoga serves as the Chair of executive sessions. Independent directors meet in an executive session that excludes management and affiliated directors, if any, at least once per year.

Communications with the Board

Any interested parties wishing to communicate with, or otherwise make his or her concerns known directly to the Board or Chair of any of the Audit, Compensation and Nominating and Corporate Governance Committees, or to the independent directors, may do so by addressing such communications or concerns to the General Counsel and Corporate Secretary of the Corporation, 11525 N. Community House Road, Suite 100, Charlotte, North Carolina 28277. The General Counsel and Corporate Secretary or Chair will forward such communications to the appropriate party as soon as practicable. Such communications may be done confidentially or anonymously.

Committees of the Board

The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee is composed solely of independent directors. Each committee operates under its own written charter approved by the Board, copies of which are available on the investor relations section of our website at www.aboutstay.com.

The following table shows the current membership of each committee of our Board and the number of meetings held by each committee during 2019:

 

Director		Audit Committee		Compensation Committee		Nominating and Corporate Governance Committee
Kapila K. Anand				Chair
Ellen Keszler		Member				Member
Jodie W. McLean		Member		Member
Thomas F. O’Toole				Member		Chair
Richard F. Wallman		Chair				Member
Number of 2019 Meetings†		8		4		4

 

†	During 2019, each committee also took actions by unanimous written consent.

 

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Audit Committee

The Audit Committee currently consists of Ms. Keszler, Ms. McLean, and Mr. Wallman. Mr. Wallman is the Chair of the Audit Committee. The Board has determined that each Audit Committee member qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and as “independent” as defined in Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the NASDAQ listing standards.

The principal duties and responsibilities of the Audit Committee are set forth in its written charter, and include, among other things, to oversee and monitor:

 

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the integrity and adequacy of our auditing, accounting and financial reporting processes and internal control systems;

 

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the quality and integrity of our financial statements;

 

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the independence, qualifications and performance of our independent auditor;

 

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the performance of our internal audit function;

 

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our enterprise risk management framework and our policies and procedures for risk management; and

 

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our compliance with legal, ethical and regulatory matters.

The Audit Committee also reviews and approves certain related party transactions, as described under “Certain Relationships and Related Party Transactions—Related Party Transaction Policy.” Additional information about the responsibilities of the Audit Committee and its activities during 2019 are also described in the Audit Committee Report contained in this Proxy Statement.

Compensation Committee

The Compensation Committee currently consists of Ms. Anand, Ms. McLean, and Mr. O’Toole. Ms. Anand is the Chair of the Compensation Committee. The Board has determined that each Compensation Committee member is “independent” as defined by the NASDAQ listing standards.

The principal duties and responsibilities of the Compensation Committee are set forth in its written charter, and include, among other things:

 

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to establish and review our overall compensation philosophy;

 

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to review, make recommendations to the Board, or approve where applicable, the compensation of our executives, including our Chief Executive Officer, including an evaluation of the level of compensation, use of equity-based compensation, setting of performance goals and objectives used to determine incentive compensation, and the executive’s performance in light of those established goals and objectives;

 

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to review and approve executive compensation programs and other benefits paid to our executives and to administer our equity-based compensation, incentive and benefit plans for all plan participants;

 

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to periodically review and make recommendations to the Board, or approve where applicable, any substantive changes to the director and executive incentive, compensation and benefit plans of the Corporation;

 

		2020 PROXY STATEMENT   |   15

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to review and make recommendations to the Board with respect to certain shareholder proposals regarding executive compensation;

 

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to oversee the preparation of compensation disclosures required in accordance with the rules of the SEC; and

 

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to provide regular reports to the Board and take such other actions as are necessary and consistent with governing law and the Corporation’s organizational documents.

The Compensation Committee has the authority to and does engage the services of independent advisors, experts and others to assist it from time to time. In accordance with this authority, the Compensation Committee has engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant, as described under “Executive Compensation—Compensation Discussion and Analysis—Our Decision Making Process.”

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee currently consists of Ms. Keszler, Mr. O’Toole, and Mr. Wallman. Mr. O’Toole is the Chair of the Nominating and Corporate Governance Committee. The Board has determined that each Nominating and Corporate Governance Committee member is “independent” as defined by the NASDAQ listing standards.

The principal duties and responsibilities of the Nominating and Corporate Governance Committee are set forth in its written charter, and include, among other things:

 

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to establish criteria for Board and committee membership and recommend to the Board proposed nominees for election to the Board and for membership on committees of the Board;

 

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to make recommendations regarding candidates submitted by our shareholders;

 

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to review the adequacy of the certificate of incorporation and bylaws and recommend to the board certain proposed amendments for consideration by the shareholders;

 

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to periodically review the Corporate Governance Guidelines and the charter, composition and performance of each committee of the Board;

 

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to make recommendations to the Board regarding Board governance matters and practices; and

 

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to oversee the evaluation of the Board and management.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee has at any time been one of our executive officers or employees. During 2019, none of our executive officers served as a member of the board of directors or compensation committee of an entity that has an executive officer serving as a member of the Compensation Committee, and none of our executive officers served as a member of the compensation committee of an entity that has an executive officer serving as a director on the Board.

 

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Director Compensation

At the Board’s regular meeting in May 2019, the Compensation Committee affirmed the existing director compensation program that provides the following:

Except as provided below, each independent director receives an annual cash retainer of $90,000 and an annual equity retainer with a value at grant of $100,000. Equity retainers are granted in restricted stock units that vest one year from the day of the grant.

The Chairs of the Board and of each Committee receive an additional cash retainer in the following amounts:

 

Chair		Additional cash retainer
Board			$        25,000
Audit Committee			$        15,000
Compensation Committee			$        10,000
Nominating and Corporate Governance Committee			$          7,500

The Board Chair does not receive any additional cash retainer to the extent he or she serves as a Committee Chair.

Mr. Haase, Mr. Geoga and Ms. Anand also serve on the Board of Directors of ESH REIT. Although the Boards of Directors of the Corporation and ESH REIT represent different interests, there is substantial overlap in the materials upon which the members of each Board of Directors rely in preparing for meetings and otherwise serving as directors. Recognizing that the incremental work required to serve on the second board is less than twice the effort of serving on a single board, Mr. Geoga and Ms. Anand each receive a total annual cash retainer of $120,000 and an annual equity retainer with a value at grant of $150,000 for their service on both Boards, the cost of which is split evenly between the Corporation and ESH REIT. The compensation paid to Ms. Anand and Mr. Geoga for serving as Committee or Board Chairs is not affected. Mr. Haase does not receive compensation for serving on the Board of Directors of the Corporation and ESH REIT.

The Compensation Committee previously adopted an amendment to the director compensation program permitting each director to receive the value of his or her cash retainers in Paired Shares.

 

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The table below sets forth the portion of the compensation paid to the members of the Board that is attributable to services performed during the fiscal year ended December 31, 2019.

 

Director		Fees earned   or paid in cash				Stock   Awards(1)				All Other   Compensation(2)				Total
Douglas G. Geoga		$	—			$	73,177	(3)		$	85,000			$	158,177
Kapila K. Anand		$	70,000			$	73,177	(4)		$	—			$	143,177
Ellen Keszler		$	90,000			$	97,564	(5)		$	—			$	187,564
Jodie W. McLean		$	—			$	97,564	(6)		$	90,000			$	187,564
Thomas F. O’Toole		$	—			$	97,564	(7)		$	97,500			$	195,064
Richard F. Wallman		$	78,750			$	97,564	(8)		$	26,250			$	202,564
Jonathan S. Halkyard(9)		$	—			$	—			$	—			$	—
Bruce N. Haase(10)		$	—			$	—			$	—			$	—

 

(1)

The amounts included in the “Stock Awards” column represent the grant date fair value of the restricted stock units granted, computed in accordance with FASB ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 15—Equity-Based Compensation to the audited consolidated financial statements of Extended Stay America, Inc. included in the combined annual report on Form 10-K for the fiscal year ended December 31, 2019 of the Corporation and ESH REIT.

 

(2)	The amounts included in the “All Other Compensation” column represent the fair value of shares issued in lieu of cash at the election of each Board member.

 

(3)	On May 30, 2019, Mr. Geoga was granted 4,225 restricted stock units. These restricted stock units are scheduled to vest on May 30, 2020. Vested restricted stock units will be settled in Paired Shares on September 15th next following the applicable vesting date.

 

(4)	On May 30, 2019, Ms. Anand was granted 4,225 restricted stock units. These restricted stock units are scheduled to vest on May 30, 2020. Vested restricted stock units will be settled in Paired Shares on September 15th next following the applicable vesting date.

 

(5)	On May 30, 2019, Ms. Keszler was granted 5,633 restricted stock units. These restricted stock units are scheduled to vest on May 30, 2020. Vested restricted stock units will be settled in Paired Shares on September 15th next following the applicable vesting date.

 

(6)	On May 30, 2019, Ms. McLean was granted 5,633 restricted stock units. These restricted stock units are scheduled to vest on May 30, 2020. Vested restricted stock units will be settled in Paired Shares on September 15th next following the applicable vesting date.

 

(7)	On May 30, 2019, Mr. O’Toole was granted 5,633 restricted stock units. These restricted stock units are scheduled to vest on May 30, 2020. Vested restricted stock units will be settled in Paired Shares on September 15th next following the applicable vesting date.

 

(8)	On May 30, 2019, Mr. Wallman was granted 5,633 restricted stock units. These restricted stock units are scheduled to vest on May 30, 2020. Vested restricted stock units will be settled in Paired Shares on September 15th next following the applicable vesting date.

 

(9)	Mr. Halkyard did not receive any compensation for services rendered during 2019 as a director of the Corporation. Mr. Halkyard’s compensation for services rendered as President and Chief Executive Officer of the Company is reported in the Summary Compensation Table.

 

(10)

Mr. Haase did not receive any compensation for services rendered during 2019 as a director of the Corporation. Mr. Haase’s compensation for services rendered as President and Chief Executive Officer of the Company is reported in the Summary Compensation Table, and compensation he received for services as a director of ESH REIT, prior to his appointment as the Company’s President and Chief Executive Officer, is reflected in ESH REIT’s Proxy Statement, which is appended to this Proxy Statement.

Actions in 2020

As a result of the COVID-19 pandemic and its related impact on the Company’s business operations, on April 3, 2020, the members of the Board of Directors of the Corporation agreed to a twenty percent (20%) reduction of their cash-based fees for the second quarter of 2020.

 

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proposal 2:

say-on-pay

 

2		Proposal No. 2 An advisory vote on the Corporation’s executive compensation.   Recommendation The Board unanimously recommends that you vote “FOR” Proposal No. 2 to approve, on an advisory basis, the compensation paid to our NEOs as disclosed pursuant to the SEC’s compensation disclosure rules.

Section 14A of the Exchange Act requires the Corporation to request shareholder approval, on an advisory basis, of the compensation paid to our named executive officers (“NEOs”) as disclosed pursuant to the SEC’s compensation disclosure rules. This proposal is commonly known as a “say-on-pay” proposal.

As part of the Compensation Committee’s efforts to ensure that the interests of our NEOs are aligned with those of our shareholders, the Compensation Committee considers the results of the Corporation’s prior shareholder advisory votes on executive compensation. Our most recent say-on-pay vote was held in 2019 and yielded an approval by 96.68% of the votes cast. The Committee considers these results to reflect substantial shareholder support of the Corporation’s executive compensation program, and has continued to consider shareholder feedback when reviewing, designing and implementing our executive compensation program.

The Compensation Discussion and Analysis (“CD&A”) beginning on page 22 of this Proxy Statement sets forth detailed information about our executive compensation program.

Our executive compensation program is designed to (i) attract, engage and retain a high quality workforce that helps achieve immediate and longer term success and (ii) motivate and inspire associate behavior that fosters a high performing culture and is focused on delivering business objectives. We believe that our executive compensation program accomplishes these objectives while remaining strongly aligned with the long-term interests of our shareholders.

As an advisory vote, this proposal is not binding upon the Corporation. However, our Compensation Committee will continue to use shareholder feedback, both as expressed by your say-on-pay vote and as provided directly to us, as an important consideration in making future NEO compensation decisions.

The Board therefore recommends that shareholders vote in favor of the following resolution:

RESOLVED, that the shareholders of the Corporation approve, on an advisory basis, the compensation of the Corporation’s named executive officers for fiscal 2019, as disclosed within this Proxy Statement pursuant to the compensation disclosure rules of the Exchange Act (Item 402 of Regulation S-K), which disclosure includes the Compensation Discussion and Analysis, summary executive compensation tables and related narrative information contained in this Proxy Statement.

 

		2020 PROXY STATEMENT   |   19

EXECUTIVE OFFICERS

The following table sets forth, as of April 8, 2020, the name and age of our executive officers and the positions and offices they currently hold:

 

Name		Age		Position
Bruce N. Haase		59		President and Chief Executive Officer
Brian T. Nicholson		50		Chief Financial Officer
Kevin A. Henry		52		Executive Vice President and Chief Human Resources Officer
Christopher N. Dekle		48		General Counsel and Corporate Secretary
Howard J. Weissman		51		Corporate Controller and Chief Accounting Officer
Randolph H. Fox		59		Executive Vice President, Property Operations
Kelly Poling		43		Executive Vice President, Chief Commercial Officer
Michael L. Kuenne		44		Senior Vice President, Chief Customer Experience Officer
Nancy K. Templeton		54		Senior Vice President, Chief Information Officer

Set forth below are descriptions of the backgrounds of each of our executive officers who are not directors, as of April 8, 2020:

Brian T. Nicholson has served as the Chief Financial Officer of the Corporation and ESH REIT since May 2018. Mr. Nicholson previously served as Chief Financial Officer of The Fresh Market, Inc. from September 2016 to May 2018, where he also served as Interim Chief Executive Officer from June 2017 to September 2017. From September 2015 to July 2016, Mr. Nicholson was the Executive Vice President and Chief Financial Officer of Driven Brands, Inc. From June 2012 to September 2015, Mr. Nicholson was the Vice President of Financial Planning & Analysis for the Corporation. He previously served in finance, strategy, and consulting roles for The Fresh Market, Inc. and ScottMadden, Inc.

Kevin A. Henry has served as Executive Vice President and Chief Human Resources Officer of the Corporation since August 2014. From December 2010 to August 2014, Mr. Henry served as Senior Vice President and Chief Human Resources Officer of Snyder’s-Lance, Inc., a national snack food company. From January 2010 to December 2010, he served as Chief Human Resources Officer of Lance, Inc. Prior to that, Mr. Henry served in a variety of positions at Coca-Cola Bottling Co. Consolidated, a beverage manufacturer and distributor, including as Chief Human Resources Officer from 2007 to 2010 and Senior Vice President of Human Resources from 2001 to 2007.

Christopher N. Dekle has served as General Counsel and Corporate Secretary of the Corporation and ESH REIT since June 2018. Mr. Dekle has previously served as Deputy General Counsel, Vice President and Assistant Secretary from October 2013 to June 2018. He previously served as General Counsel and Vice President from April 2010 to October 2013, as Assistant General Counsel from January 2007 to April 2010, and Corporate Counsel from July 2005 to December 2007 at HVM LLC. From 2003 to 2005, he was General Counsel for Employers Life Insurance Corporation. From 1997 to 2003, Mr. Dekle was in private practice.

 

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Howard J. Weissman has served as Chief Accounting Officer of the Corporation and ESH REIT and Corporate Controller of ESH REIT since May 2015 and Corporate Controller of the Corporation since November 2013. He previously served as Corporate Controller at HVM LLC from December 2011 to November 2013. From May 2009 to December 2011, Mr. Weissman worked at Campus Crest Communities, Inc., serving as Senior Vice President and Corporate Controller. From July 2007 through May 2009, Mr. Weissman was Controller and Chief Accounting Officer of EOP Operating Limited Partnership, LP, the private company successor to Equity Office Properties Trust, a commercial office real estate company owned by The Blackstone Group. From May 2003 through May 2007, Mr. Weissman served in a variety of positions with CarrAmerica Realty Corporation, a commercial office real estate company, including as Assistant Controller, Vice President of Shared Services and Controller.

Randolph H. Fox has served as Executive Vice President, Property Operations of the Corporation since November 2019. He has more than 35 years of hotel business experience, including most recently as Chief Operating Officer of InTown Suites and Uptown Suites, an extended stay brand. He served as Executive Vice President of Operations for WoodSpring Hotels from 2012 to 2016. He earlier spent more than 12 years at Red Roof Inn, including as Senior Vice President of Operations from 2007 to 2012 and Regional Vice President of Operations from 1999 to 2007.

Kelly Poling has served as Executive Vice President, Chief Commercial Officer of the Corporation since January 2020. Ms. Poling was most recently Chief Executive Officer of Premier Worldwide Marketing, the exclusive worldwide representative for Karisma Hotels & Resorts, and previously served as Executive Vice President, Marketing and Consumer Revenue from 2017 to 2019. From 2014 to 2017, Ms. Poling served as Executive Vice President and Chief Marketing Officer for WoodSpring Hotels, and earlier in her career, spent seven years at Choice Hotels International, leading the corporate strategy, marketing and e-commerce teams.

Michael L. Kuenne has served as Senior Vice President – Chief Customer Experience Officer of the Corporation since February 2020. He oversees teams responsible for Quality Assurance, Guest Relations, & Brand Reputation, Brand Standards, Brand Programs, Training and Enterprise Procurement. Previously, Mr. Kuenne held multiple leadership positions in the Corporation’s Technology, Operations and Human Capital organizations. Prior to joining the Corporation, Mr. Kuenne held a leadership role in the Technology practice for The North Highland Company; a consultancy focused on Strategic Planning, Change Management and Operations efficiency. He also held multiple management positions with Wells Real Estate Funds, later listed as Piedmont Office Real Estate Trust, a diversified Class ‘A’ office REIT.

Nancy K. Templeton has served as Senior Vice President, Chief Information Officer of the Corporation since February 2020. Previously, Ms. Templeton held progressive leadership roles in the Corporation’s IT organization. Prior to joining the Corporation, Ms. Templeton spent 25 years at Belk, Inc., including in the role of Director of Merchandising Systems.

 

		2020 PROXY STATEMENT   |   21

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This CD&A explains our executive compensation program for our NEOs listed below. The CD&A also describes the process followed by the Compensation Committee for making pay decisions, as well as its rationale for specific decisions related to 2019 compensation.

 

2019 CD&A At-A-Glance
This year’s CD&A again reviews the objectives and elements of the Corporation’s executive compensation program and discusses the 2019 compensation earned by our NEOs. During 2019, we:
Successfully executed on the transition of our CEO				Seamlessly transitioned Mr. Haase into the role of President and CEO effective November 22, 2019
Continued shareholder-friendly policies				Continued to include double-trigger change-in-control vesting and clawback provisions in all 2019 equity grants
Maintained improved incentive plan structure				Continued to avoid performance measures that were duplicated in our incentive plans and maintained the weighting of relative Total Shareholder Return (rTSR) in our long-term plan

2019 saw important achievements for the Company and our shareholders, with the Company returning approximately $300 million to our shareholders through dividends and share repurchases and growth in our franchise and development program. More information about these actions, our 2019 business achievements, and the resulting compensation actions taken by the Compensation Committee are summarized in the following narrative.

 

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In 2019, our NEOs were:

 

Name		Title
Bruce N. Haase(1)		President and Chief Executive Officer
Kevin A. Henry		Executive Vice President and Chief Human Resources Officer
Brian T. Nicholson		Chief Financial Officer
James G. Alderman Jr.(2)		Former Chief Asset Merchant
Ames B. Flynn(3)		Former Executive Vice President, Shared Services
Jonathan S. Halkyard(4)		Former President and Chief Executive Officer

 

(1)	On November 21, 2019, the Board of Directors approved the appointment of Mr. Haase as President and Chief Executive Officer, effective November 22, 2019.

 

(2)	Mr. Alderman resigned from his position as Chief Asset Merchant on March 2, 2020, effective as of March 13, 2020.

 

(3)	Mr. Flynn’s employment with the Company ended on February 28, 2020.

 

(4)	Mr. Halkyard resigned from his position as President and Chief Executive Officer, effective November 21, 2019.

Executive Summary

2019 Say-On-Pay and Shareholder Outreach

Each year, we carefully consider the results of our shareholder say-on-pay vote from the preceding year. We also take into account the feedback we receive from our major shareholders. At our 2019 Annual Meeting of Shareholders, more than 96% of shares cast voted in favor of the advisory vote on executive compensation. We also view a continuing, constructive dialogue with our shareholders as crucially important to ensuring that we remain aligned with their interests. To this end, we speak to almost all of our top 25 shareholders at least annually, which represent approximately 60% of our outstanding shares. During 2019, our investor relations outreach extended to over 300 investor meetings and calls, which covered a broad range of topics including Company strategy and performance, governance and executive compensation. Overall, and consistent with our say-on-pay results, our shareholders are supportive of our executive compensation program and its direction. We will continue to keep an open dialogue with our shareholders to help ensure that we have a regular pulse on investor perspectives.

2019 CEO Compensation and CEO Transition Information

Mr. Halkyard entered into a separation letter agreement with the Corporation, pursuant to which Mr. Halkyard resigned as President and Chief Executive Officer and as a director of the Corporation, effective as of November 21, 2019. Pursuant to the separation letter agreement, Mr. Halkyard provided assistance and advisory services to the new President and Chief Executive Officer of the Corporation as an employee of the Corporation from November 22, 2019 through February 25, 2020. Mr. Halkyard’s equity-based awards continued to vest in accordance with their terms through February 25, 2020, on which date Mr. Halkyard’s employment with the Corporation ended. Mr. Halkyard was eligible to vest through the end of December 31, 2019 in respect of his performance-based restricted stock units granted in 2017, and his performance-based restricted stock units granted in 2018 and 2019 were forfeited on November 21, 2019.

 

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