Patrick Pacious

About Patrick Pacious

Patrick S. Pacious (age 59) is President & Chief Executive Officer of Choice Hotels International (CHH) and a director since 2017. He previously served as President & COO (May 2016–Sept 2017), COO (Jan 2014–May 2016), EVP Global Strategy & Operations (Feb 2011–Dec 2013), and earlier strategy/IT roles after joining Choice in 2005; prior roles include Senior Manager at BearingPoint (2002–2005) and Arthur Andersen Business Consulting (1996–2002) . Under his leadership, 2024 performance included a one-year cumulative TSR of 26.2% (three-year TSR −6.6%) versus peers, >$435M returned via dividends and buybacks, >3M shares repurchased (~6% of shares), global rooms +3.3% YoY, domestic RevPAR +4.5% in Q4’23 vs prior quarter, pipeline with 98% of rooms in more revenue-intense brands, and 69M rewards members .

Past Roles

External Roles

Fixed Compensation

Key perquisites and policies:

• Stay at Choice reimbursements for personal hotel stays up to $40,000 annually with tax gross-up; executive physical reimbursements; $1,000,000 individual life insurance coverage; aircraft personal use up to 45 flight hours per year with no tax gross-up .
• Non-qualified deferred compensation available; earnings on grandfathered amounts for Pacious reported in SCT as preferential .

Performance Compensation

2024 long-term incentive target and delivery:

• Base salary: $1,250,000; target grant value: $3,000,000; actual 2024 annual equity grant at fair value: $3,000,144 (PVRSUs + options) .
• CEO pay is 84% at risk/performance-based; target and maximum ranges disclosed; no single-trigger vesting; no option repricing; no dividends on PVRSUs unless they vest .

Equity Ownership & Alignment

Outstanding Equity Awards (as of 12/31/2024; CHH close $141.98):

Ownership guideline compliance: Pacious exceeds 5x salary requirement (46x); Committee may restrict sales or alter compensation if executives fall below requirements; exemption needed before sales that reduce below guideline .

Employment Terms

• Agreement: Amended and restated Non-Competition, Non-Solicitation and Severance Benefit Agreement effective Sept 12, 2017; amended May 24, 2022; Aircraft Usage Agreement May 24, 2022 (up to 45 flight hours/year; no tax gross-up) .
• Good Reason definition includes material diminution of role/comp, relocation >35 miles, title/reporting change, failure to nominate to Board, material adverse bonus program change, successor non-assumption, Company-initiated non-renewal, material breach; requires release; arbitration provided .
• Severance (without cause/for good reason): Lump sum 200% of base salary + 200% of target bonus; continued base salary for two years; continued vesting for two years in post-2011 equity; health benefits until age 65; outplacement; 2-year non-compete/non-solicit .
• Change of Control (double trigger within 12 months): Lump sum 250% of base salary + 250% of bonus (prior-year actual or target if none); immediate vesting of all equity; PVRSUs deemed vested at target under 2017 LTIP .
• Potential Payments (as of 12/31/2024, CHH $141.98):
  • Termination without cause/for good reason: Total $22,162,016; includes cash severance $7,500,000; stock options $1,258,591; restricted stock $7,259,721; PVRSUs $6,013,847; benefits/outplacement .
  • Termination following change of control: Total $47,432,128; includes cash severance $9,375,000; stock options $1,602,201; restricted stock $24,199,071; PVRSUs $12,255,856 .
  • Disability: Total $35,271,529; disability income $1,423,500; equity values as disclosed .
  • Death: Total $34,848,029; life insurance $1,000,000; equity values as disclosed .

Clawback and LTIP provisions:

• Executive compensation recovery policy consistent with NYSE/Dodd-Frank; mandatory recoupment of incentive comp upon material restatements .
• 2025 LTIP includes double-trigger acceleration after change in control; prohibits option/SAR repricing; sets non-employee director caps; governs awards and adjustments .

Board Governance and Director Service

• Director since 2017; non-independent (as CEO) . Committees: none .
• Board separates Chairman (Stewart W. Bainum, Jr.) and CEO roles; lead independent director Gordon A. Smith chairs executive sessions; four independent director executive sessions held in 2024 .
• Board meetings in 2024: four; all directors attended ≥75% .
• Dual-role implications: Board asserts meaningful division between management and Board via separate Chair and LID structures; Bainum family beneficially controls ~42% of shares, increasing governance scrutiny; CEO participates in HRCC processes to recommend other executives’ pay, but his own pay set by independent committee and Board .

Director compensation treatment:

• As an employee director, Pacious received no separate director fees in 2024 (non-employee director fee table excludes CEO) .

Say-on-Pay & Compensation Committee Practices

• 2024 say-on-pay support: 99% in favor; outreach to holders of >90% outstanding shares; meetings with holders of >54% .
• HRCC: Independent; retained Meridian Compensation Partners; no consultant conflicts; considers market data (system-wide gross room revenue, franchising, technology focus); no benchmarking formula; four meetings in 2024; CEO assists with agenda/materials and recommends pay for other NEOs, excluding himself .
• Governance practices: No excise tax gross-ups; no single-trigger vesting; no option repricing; robust stock ownership and holding requirements; hedging prohibited for associates; pledging prohibited for associates; clawback policy in place .

Compensation Structure Analysis

• Cash vs equity mix: 2024 CEO total comp $7.79M with stock awards $2.25M and options $0.75M, non-equity incentive $3.35M; majority at-risk/performance-based (84%) .
• Shift to PVRSUs: Long-term incentives predominantly PVRSUs tied to EPS and rTSR with a modest TSR modifier, reducing reliance on options relative to historic cycles (options persist but balanced) .
• Ownership alignment: 46x salary ownership vs 5x requirement; hedging prohibited; pledging not permitted for executives; no director pledges outstanding .
• Award governance: LTIP codifies double-trigger, prohibits repricing, embeds clawback and Section 409A compliance .

Risk Indicators & Red Flags

• Tax gross-ups: Stay at Choice perquisite includes tax gross-up on reimbursements; aircraft personal use has no gross-up .
• Related party concentration: Bainum family entities collectively vote ~42.3% of shares; governance mitigants include LID and executive sessions .
• Hedging/pledging: Strict prohibitions for associates; limited exceptions for Bainum family directors only for indirectly held shares; currently no director pledges .
• Compensation risk assessment: Committee deems comp policies unlikely to create material adverse risk; balance of annual/long-term incentives and guardrails (ownership, hedging, pledging, clawback) .

Equity Award Vesting Schedule Details (select grants)

Director Compensation (Board context)

• 2024 non-employee director cash fees include committee and leadership retainers; stock awards ~$152,596 per director; ownership requirement five times annual cash retainer ($412,500), achieved or within ramp period among directors .
• Cap under 2025 LTIP: Non-employee director total annual compensation ≤$750,000; non-employee Chairman ≤$1,500,000 .

Investment Implications

• Alignment: Strong executive equity ownership (46x salary) and majority at-risk comp, with EPS and rTSR-linked PVRSUs and robust clawback/anti-hedging policies, support long-term alignment and reduce misalignment risk .
• Overhang/dilution: Equity overhang 5.7% at year-end 2024; proposed 2025 LTIP adds ~2.2% potential dilution; burn rate is modest (0.62% in 2024), suggesting prudent share use but monitor future grant pacing .
• Retention/vesting pressure: Significant unvested RS (170,440 shares) and multiple PVRSU tranches and options create periodic vesting supply; insider selling pressure could rise at vest, though ownership guidelines may slow sales .
• Change-of-control economics: Double-trigger severance and full equity acceleration result in sizable payouts (up to ~$47.4M in a CoC termination), a standard but material consideration for M&A scenarios .
• Governance: CEO is a director but not Chair; independent HRCC with external consultant and strong say-on-pay (99%) lowers pay risk; Bainum family control requires continued reliance on LID/executive sessions for independence .