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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Filed by a Party other than the Registrant o

Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

Royal Caribbean Cruises Ltd.

(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):

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No fee required.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.

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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:
        
 
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PROXY SUMMARY

Our 2021 Annual Meeting of Shareholders is an important event and we look forward to welcoming you. It provides management and the Board of Directors with an opportunity to receive collective feedback from our shareholders on how we are performing. We place significant value on your opinion and we have strived to highlight in this summary key information for your consideration. It is important, however, that you read the entire proxy statement carefully before voting.

Annual Meeting of Shareholders

When:
 
June 2, 2021
9:00 AM EDT

Location:
 
JW Marriott Marquis Miami
255 Biscayne Blvd. Way
Miami, Florida 33131

Record Date:
 
April 8, 2021

Voting:
 
Shareholders as of the record date are
entitled to vote.

Admission to Annual Meeting:
 
We encourage our shareholders to attend the
meeting. Proof of share ownership will be
required for admission. See "General
Information" for details.
  Meeting Agenda
 

·

Elect directors

·

Approve executive compensation

·

Ratify PricewaterhouseCoopers LLP as our independent auditor

·

Approve an increase in shares reserved for purchase under the 1994 Employee Stock Purchase Plan

·

Vote on the shareholder proposal regarding political contributions disclosure

·

Other business that may properly come before the meeting

Voting Matters and Vote Recommendation

        Page for
More
Information
      Board Vote Recommendation
Election of twelve directors     21     FOR
Vote on executive compensation       66       FOR
Vote on an amendment to our 1994 Employee Stock Purchase Plan to increase the number of shares reserved for issuance     67     FOR
Ratification of PricewaterhouseCoopers LLP as our independent auditor       70       FOR
Shareholder proposal regarding political contributions disclosure     72     AGAINST

Board Nominees

                    Director                   Committee
Memberships
Name         Age         Since       Principal Occupation       Independent       AC       TCC       NGC       SEH    
John F. Brock     72     2014     Former Chairman & CEO, Coca-Cola European Partners     Yes         M     M      
Richard D. Fain         73         1981       Chairman & CEO, Royal Caribbean       No                                    
Stephen R. Howe, Jr.     59     2018     Former U.S. Chairman & Managing Partner, Ernst & Young     Yes     M         C      
William L. Kimsey         78         2003       Former CEO, Ernst & Young Global       Yes       C               M            
Amy McPherson     59     2020     Former President & Managing Director, Europe, Marriott     Yes         M          
Maritza G. Montiel         69         2015       Former Deputy CEO & Vice Chairman, Deloitte       Yes       M                            
Ann S. Moore     70     2012     Former Chairman & CEO, Time     Yes         M          
Eyal M. Ofer         70         1995       Chairman, Ofer Global and Zodiac Group       Yes                       M       M    
William K. Reilly     81     1998     Founding Partner, Aqua International Partners     Yes                 C  
Vagn O. Sørensen         61         2011       Former President & CEO, Austrian Airlines Group       Yes       M       C                    
Donald Thompson     58     2015     Former President & CEO, McDonald's     Yes         M         M  
Arne Alexander Wilhelmsen         55         2003       Chairman, AWILHELMSEN AS       Yes                       M       M    

AC   Audit Committee   C   Chair
NGC   Nominating and Corporate Governance Committee   M   Member
SEH   Safety, Environment and Health Committee   TCC   Talent and Compensation Committee

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Governance Highlights

We are committed to maintaining strong governance practices and believe that our shareholders are best served by an independent, diverse, well-functioning Board with an appropriate balance between continuity and fresh perspective. Below, we highlight our key corporate governance practices and policies:

Board of Directors    
Current Size of Board   12 directors
Current Director Independence   92% of our directors are independent (11 out of 12). Our Corporate Governance Principles require two-thirds of our directors to be independent
Lead Independent Director ("Lead Director")   William L. Kimsey
Standing Board Committees   Audit Committee, Nominating and Corporate Governance Committee, Safety, Environment and Health Committee and Talent and Compensation Committee
Board Committee Independence   All members of our Audit Committee, Nominating and Corporate Governance Committee, Safety, Environment and Health Committee and Talent and Compensation Committee are independent
Director Attendance   All directors attended at least 75% of Board and applicable Board committee meetings
Executive Sessions   Our independent directors regularly meet in executive session without management present, during which the Lead Director presides
Board Evaluation Process   On an annual basis, the Nominating and Corporate Governance Committee oversees an evaluation of Board and Board committee performance
Board Refreshment   2 of 11 non-management directors joined the Board within the last 5 years
CEO Succession Planning   The Nominating and Corporate Governance Committee and the full Board, in consultation with the CEO, oversee CEO succession planning
Financial Expertise   4 "audit committee financial experts" on our Audit Committee
Diversity   The 12 members of our Board represent a range of backgrounds and diversity: four (33%) of our directors are gender/ethnically diverse; three (25%) of our directors are women; and two (17%) of our directors are racially/ethnically diverse

 

 

 
Rights of Shareholders    
Annual Election of Directors   Yes
Voting for Directors   Majority of votes cast
Right to Call Special Meetings   Shareholders with at least 50% of the outstanding shares can call Special Meetings
Advisory Say-on-Pay Vote   Annual
Poison Pill   No
Compensation Accountability    
Equity Ownership Guidelines  

CEO — 8x salary

Other named executive officers ("NEOs") — 5x salary

Board of Directors — 3x annual cash retainer

Hedging of Company Securities   Prohibited for all employees and members of the Board of Directors
Clawback Provisions   Equity and annual incentive plans permit recoupment in case of a restatement for material non-compliance with financial reporting requirements

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Executive Compensation Program

        2020 was a challenging year for our business, our industry, and society as a whole, and the COVID-19 pandemic was particularly impactful to our business. The Company had performed well during the previous years and 2020 began on a strong, upward trend. Our compensation programs for 2020 were mostly established against this backdrop before the profound impact of the pandemic was apparent. However, during 2020 our business was quickly upended by the shutdowns caused by the COVID-19 pandemic. The Talent and Compensation Committee's initial decisions this year were intended to incentivize the kind of behavior that produced the pre-pandemic results. Once the impact of the pandemic became apparent, the Committee shifted its focus to motivate our executives and recognize their efforts and leadership in dealing with the pandemic. At the same time, the Committee wanted to take into account the profound impact that the pandemic has had on the financial performance of the Company, our shareholders and our employees.

        Due to the highly unique circumstances of this period, the members of the Talent and Compensation Committee have included a special letter to shareholders outlining their approach to compensation during 2020 and beyond beginning on page 32.

        For a detailed discussion of our executive compensation program, please see the "Compensation Discussion and Analysis" beginning on page 35.

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TABLE OF CONTENTS

PROXY SUMMARY

  1

TABLE OF CONTENTS

  4

IMPORTANT INFORMATION REGARDING THE AVAILABILITY OF PROXY MATERIALS

  7

GENERAL INFORMATION

  7

WHO MAY VOTE

  7

REQUIREMENTS TO ATTEND THE ANNUAL MEETING

  8

HOW TO VOTE

  8

HOW PROXIES WORK

  8

MATTERS TO BE PRESENTED

  9

VOTES NECESSARY TO APPROVE PROPOSALS

  9

REVOKING A PROXY

  9

CORPORATE GOVERNANCE

  10

CORPORATE GOVERNANCE PRINCIPLES

  10

BOARD OF DIRECTORS AND COMMITTEES

  10

DIVERSITY OF THE BOARD OF DIRECTORS

  10

BOARD LEADERSHIP STRUCTURE

  13

TALENT DEVELOPMENT AND SUCCESSION PLANNING

  13

RISK OVERSIGHT AND BOARD ROLE

  14

DIRECTOR INDEPENDENCE

  14

SELECTION OF DIRECTOR CANDIDATES

  16

FAMILY RELATIONSHIPS

  16

CODE OF ETHICS

  16

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

  16

CONTACTING MEMBERS OF THE BOARD

  17

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  18

PRINCIPAL SHAREHOLDERS

  18

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

  18

EQUITY COMPENSATION PLAN INFORMATION

  20

PROPOSAL 1 — ELECTION OF DIRECTORS

  21

GENERAL

  21

DIRECTOR NOMINEES

  21

BOARD RECOMMENDATION

  27

DIRECTOR COMPENSATION FOR 2020

  28

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

  30

RELATED PERSON TRANSACTION POLICY AND PROCEDURES

  30

RELATED PERSON TRANSACTIONS

  30

DELINQUENT SECTION 16(a) REPORTS

  31

LETTER FROM THE TALENT AND COMPENSATION COMMITTEE

  32

COMPENSATION DISCUSSION AND ANALYSIS

  35

REPORT OF THE TALENT AND COMPENSATION COMMITTEE

  57

EXECUTIVE COMPENSATION TABLES

  58

COMPENSATION RISK

  65

CEO PAY RATIO

  65

PROPOSAL 2 — ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

  66

BOARD RECOMMENDATION

  66

PROPOSAL 3 — APPROVAL OF AMENDMENT TO OUR 1994 EMPLOYEE STOCK PURCHASE PLAN

  67

BOARD RECOMMENDATION

  69

PROPOSAL 4 — RATIFICATION OF PRINCIPAL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  70

BOARD RECOMMENDATION

  70

REPORT OF THE AUDIT COMMITTEE

  71

PROPOSAL 5 — SHAREHOLDER PROPOSAL REGARDING POLITICAL CONTRIBUTIONS DISCLOSURE

  72

SUPPORTING STATEMENT

  72

BOARD OF DIRECTORS' RESPONSE

  73

BOARD RECOMMENDATION

  73

PROPOSALS OF SHAREHOLDERS FOR NEXT YEAR

  74

SOLICITATION OF PROXIES

  74

IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS

  74

ANNUAL REPORT ON FORM 10-K

  75

ANNEX A TO PROXY STATEMENT

  A-1

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ROYAL CARIBBEAN CRUISES LTD.
1050 Caribbean Way
Miami, Florida 33132

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS



To our Shareholders:

        Notice is hereby given that the 2021 Annual Meeting of Shareholders ("Annual Meeting") of Royal Caribbean Cruises Ltd. will be held at 9:00 A.M., EDT, on Wednesday, June 2, 2021 at the JW Marriott Marquis Miami, 255 Biscayne Boulevard Way, Miami, Florida 33131 for the following purposes:

    1.
    To elect twelve directors to our Board of Directors, each for a one-year term expiring in 2022;

    2.
    To hold a vote on an advisory basis to approve the compensation of our named executive officers;

    3.
    To approve an amendment to our 1994 Employee Stock Purchase Plan to increase the number of authorized shares reserved for purchase thereunder;

    4.
    To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

    5.
    To vote on the shareholder proposal regarding political contributions disclosure; and

    7.
    To transact such other business as may properly come before the meeting and any adjournment thereof.

        The Board of Directors has fixed the close of business on April 8, 2021 as the record date for the determination of shareholders entitled to notice of and to vote at the meeting or any adjournment thereof.

        We will furnish our proxy materials over the Internet as permitted by the rules of the U.S. Securities and Exchange Commission. As a result, we are sending a Notice of Internet Availability of Proxy Materials rather than a full paper set of the proxy materials, unless you previously requested to receive printed copies. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials on the Internet, as well as instructions on how shareholders may obtain a paper copy of the proxy materials. This process will reduce the costs associated with printing and distributing our proxy materials.

        To make it easier for you to vote in advance of the Annual Meeting, Internet voting is available. The instructions on the Notice of Internet Availability of Proxy Materials or your proxy card describe how to use these convenient services.

        All shareholders are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend, you are urged to vote as soon as possible by Internet or mail so that your shares may be voted in accordance with your wishes. Granting a proxy does not affect your right to revoke it later or vote your shares in the event you should attend the Annual Meeting.

        In the interests of mitigating risks related to the ongoing COVID-19 pandemic and to prioritize the well-being of all attendees, including our employees, shareholders and other stakeholders, the following will be implemented at the Annual Meeting:

    Social distancing measures will be put in place and closely monitored;

    Hand sanitizer will be provided upon entry to, and throughout, the venue;

    No food or refreshments will be provided; and

    Attendees will be required to comply with health and safety measures implemented at the venue, including wearing a face covering, as well as having their temperature taken upon entry.

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        Attendees will be required to comply with any additional federal, state and/or local government guidance in force on the day of the Annual Meeting. You should not attend the Annual Meeting if you are suffering from any COVID-19 symptoms or you have come into close contact with someone who has tested positive for COVID-19 within the 14 days preceding the date of the Annual Meeting. You may be asked to complete a Health Declaration Form upon arrival.

April 22, 2021   /s/ Bradley H. Stein
General Counsel and Secretary

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ROYAL CARIBBEAN CRUISES LTD.
1050 Caribbean Way
Miami, Florida 33132

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 2021

        This proxy statement is being furnished to you in connection with the solicitation of proxies by our Board of Directors (the "Board") to be used at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the JW Marriott Marquis Miami, 255 Biscayne Boulevard Way, Miami, Florida 33131 on Wednesday, June 2, 2021 at 9:00 A.M. EDT, and any adjournments or postponements thereof. References in this proxy statement to "we," "us," "our," the "Company," "Royal Caribbean" and "Royal Caribbean Group" refer to Royal Caribbean Cruises Ltd. The complete mailing address, including zip code, of our principal executive offices is 1050 Caribbean Way, Miami, Florida 33132 and our telephone number is (305) 539-6000.


IMPORTANT INFORMATION REGARDING THE AVAILABILITY OF PROXY MATERIALS

        Under the rules adopted by the U.S. Securities and Exchange Commission ("SEC"), we are furnishing proxy materials to our shareholders primarily over the Internet. We believe that this process expedites shareholders' receipt of these materials, lowers the costs of our Annual Meeting and helps to conserve natural resources. On or about April 22, 2021, we mailed to each of our shareholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials, including this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2020, on the Internet and how to access a proxy card to vote on the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of the proxy materials. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one. If you received paper copies of our proxy materials, you may also view these materials at www.proxyvote.com.


GENERAL INFORMATION

Who May Vote

        Each share of our common stock outstanding as of the close of business on April 8, 2021 (the "Record Date") is entitled to one vote at the Annual Meeting. At the close of business on the Record Date, 254,570,213 shares of our common stock were outstanding and entitled to vote. You may vote all of the shares owned by you as of the close of business on the Record Date. These shares include shares that are (1) held of record directly in your name (in which case, you are a "Record Holder" with respect to such shares) and (2) held for you as the beneficial owner through a broker, bank or other nominee (in which case, you are a "Beneficial Holder" with respect to such shares). There are some distinctions between being a Record Holder and a Beneficial Holder as described herein.

Shares held of record

        If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered the Record Holder with respect to those shares, and the proxy materials were sent directly to you by Royal Caribbean. As the Record Holder, you have the right to grant your voting proxy directly to us or to vote in person at the Annual Meeting. If you requested to receive printed proxy materials, we have enclosed or sent a proxy card for you to use. You may also vote on the Internet as described in the Notice of Internet Availability of Proxy Materials and below under the heading "How to Vote."

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Shares owned beneficially

        If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the Beneficial Holder of shares held in street name, and the proxy materials were forwarded to you by your broker or other nominee who is considered, with respect to those shares, the shareholder of record. As the Beneficial Holder, you have the right to direct your broker or other nominee on how to vote the shares in your account, and you are also invited to attend the Annual Meeting.

Requirements to Attend the Annual Meeting

        You are invited to attend the Annual Meeting if you are a Record Holder or Beneficial Holder as of the Record Date. If you are a Record Holder, you must bring proof of identification, such as a valid driver's license, for admission to the Annual Meeting. If you are a Beneficial Holder, you will need to provide proof of ownership by bringing either your proxy card provided to you by your broker or a copy of your brokerage statement showing your share ownership as of the Record Date.

How to Vote

Voting in Person

        Shares held in your name as the Record Holder may be voted in person at the Annual Meeting. Shares for which you are the Beneficial Holder may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker or other nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also vote by proxy in advance of the meeting so that your vote will be counted if you later decide not to attend the meeting.

Voting Without Attending the Annual Meeting

        Regardless of how you hold your shares, you may vote your shares without attending the Annual Meeting. You may vote by granting a proxy or, for shares held as a Beneficial Holder, by submitting voting instructions to your broker or other nominee. You may also vote using the Internet or by mail as outlined in the Notice of Internet Availability of Proxy Materials or on your proxy card. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the information your bank, broker or other holder of record provided to you for more information on these options. Votes cast by Internet have the same effect as votes cast by submitting a written proxy card.

How Proxies Work

        All properly executed proxies will be voted in accordance with the instructions contained thereon and, if no choice is specified, the proxies will be voted:

    FOR the election of the twelve nominees for director named below (Proposal No. 1);

    FOR the approval of the compensation of our named executive officers (Proposal No. 2);

    FOR the amendment to the 1994 Employees Stock Purchase Plan (Proposal No. 3);

    FOR the ratification of the selection of PricewaterhouseCoopers LLP (Proposal No. 4); and

    AGAINST the shareholder proposal regarding political contributions disclosure (Proposal No. 5).

        Under New York Stock Exchange ("NYSE") rules, if you are a Beneficial Holder and do not provide specific voting instructions in a timely fashion to your broker or other nominee that holds your shares, such broker or nominee will not be authorized to vote your shares on any matters other than Proposal No. 4 regarding the ratification of the auditors. Therefore, failure to provide your broker or other nominee with specific voting instructions in a timely fashion will result in "broker non-votes" with respect to Proposals No. 1, 2, 3, and 5.

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Matters to be Presented

        We are not aware of any matters to be presented for a vote at the Annual Meeting other than those described in this proxy statement. If any matters not described in this proxy statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is postponed or adjourned, the proxies will vote your shares on the new meeting date in accordance with your previous instructions, unless you have revoked your proxy.

Votes Necessary to Approve Proposals

        We will hold the Annual Meeting if we have a quorum, which requires the presence, in person or represented by proxy, of holders of a majority of the outstanding shares of common stock as of the Record Date. If you vote via the Internet or sign and return your proxy card, your shares will be counted to determine whether we have a quorum, even if you abstain or fail to vote on any of the proposals listed on the proxy card. If the persons present or represented by proxy at the Annual Meeting constitute the holders of less than a majority of the outstanding shares of common stock as of the Record Date, we will not have a quorum and the Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum.

        The affirmative vote of a majority of the votes cast is required to approve each proposal.

        Although abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present, they will not have any effect on the outcome of any proposal.

        Prior to the Annual Meeting, we will select one or more inspectors of election for the meeting. Such inspectors shall determine the number of shares of common stock represented at the Annual Meeting, the existence of a quorum and the validity and effect of proxies. They shall also receive, count and tabulate ballots and votes and determine the results thereof.

Revoking a Proxy

        Any proxy may be revoked by a shareholder at any time prior to the final vote at the Annual Meeting by voting again on a later date via the Internet (only your latest Internet proxy submitted prior to the Annual Meeting will be counted), by signing and submitting a later-dated proxy or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your prior proxy be revoked by delivering to our Corporate Secretary at 1050 Caribbean Way, Miami, Florida 33132 a written notice of revocation prior to the Annual Meeting.

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CORPORATE GOVERNANCE

        We are committed to maintaining strong governance practices as we evolve as a company and regularly assess our practices to determine effectiveness and whether additional enhancements should be made.

Corporate Governance Principles

        We have adopted corporate governance principles which, along with our Board committee charters, provide the framework for the governance of the Company. The corporate governance principles address such matters as director qualifications, director independence, director compensation, Board committees and committee evaluations. Copies of these principles and our Board committee charters are posted in the corporate governance section on our website at www.rclinvestor.com.

Board of Directors and Committees

Meetings

        The Board held nineteen meetings during 2020. In 2020, each of our directors attended at least 75% of an aggregate of all meetings of the Board and of any committees on which he or she served during the period the director was on the Board or committee. Our independent directors regularly meet in executive session without management directors present. The Lead Director presides at such meetings.

        We do not have a formal policy regarding Board member attendance at the annual shareholders meeting. Last year's 2020 annual shareholders meeting was held early on during the COVID-19 pandemic and, so as to limit the number of persons present at the meeting for safety and health reasons, none of our Board members attended our 2020 annual shareholders meeting.

Board Committees

        The Board has established four standing committees: the Audit Committee, the Nominating and Corporate Governance Committee, the Safety, Environment and Health Committee, and the Talent and Compensation Committee. Each of the standing committees is composed solely of independent directors. Each standing committee has adopted a written charter, meets periodically throughout the year, reports its actions and recommendations to the Board, receives reports from senior management, annually evaluates its performance and has the authority to retain outside advisors in its discretion. The primary responsibilities of each committee are summarized in the charts below and set forth in more detail in each committee's written charter, which can be found in the corporate governance section on our website at www.rclinvestor.com. In addition to these committees, the Board, from time to time, authorizes additional Board committees to assist the Board in executing its responsibilities.

Diversity of the Board of Directors

        The Board is currently composed of twelve directors with diverse skills and professional backgrounds, which provide our Board with an effective mix of experiences and perspectives.

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Audit Committee
Members:
William L. Kimsey (Chair)
Stephen R. Howe, Jr.
Maritza G. Montiel
Vagn O. Sørensen
  Responsibilities:

Oversight of

o

the integrity of our financial statements

o

the qualifications and independence of our principal independent auditor

o

the performance of our internal audit function and principal independent auditor

o

our compliance with the legal and regulatory requirements in connection with the foregoing

Review of and discussions with management and the principal independent auditor regarding the annual audited and quarterly financial statements of the Company and related disclosures

Discuss with management the guidelines and policies by which management assesses and manages the Company's exposure to risk, including a discussion of the Company's major enterprise risk exposures and the steps management has taken to monitor and mitigate such exposures

Preparation of Report of the Audit Committee (page 71)


 

 

 
Meetings Held During 2020: 18   Independence and Financial Expertise:

The Board has determined that each member of the Audit Committee is independent within the meaning of the NYSE and SEC standards of independence for directors and audit committee members

The Board has concluded that Mr. Howe, Mr. Kimsey, Ms. Montiel and Mr. Sørensen each qualifies as an "audit committee financial expert" within the meaning of SEC rules

The Board has concluded that Ms. Montiel's simultaneous service on four public company audit committees would not impair her ability to service on the Audit Committee

Nominating and Corporate Governance Committee
Members:
Stephen R. Howe, Jr. (Chair)
John F. Brock
William L. Kimsey
Eyal M. Ofer
Arne Alexander Wilhelmsen
  Responsibilities:

Identification of individuals qualified to become Board members

Recommendation to the Board of director nominees

Recommendation to the Board of corporate governance principles

Recommendation to the Board of Board committee nominees

Recommendation to the Board of Board committee structure, operations and Board reporting

Oversee evaluation of Board and management performance

Oversee CEO Succession Planning


 

 

 
Meetings Held During 2020: 5   Independence:

The Board has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the NYSE standards of independence for directors

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Safety, Environment and Health Committee
Members:
William K. Reilly (Chair)
Eyal M. Ofer
Donald Thompson
Arne Alexander Wilhelmsen
  Responsibilities:

Oversight of our management concerning the implementation and monitoring of our safety (including security), environmental and health programs and policies

Monitor overall safety, environment and health compliance and performance

Review and monitor our overall strategies, policies and programs that impact the safety, environment and health of our guests, crew, the communities where we operate and the ports where our ships call

Monitor our overall development of strategies, policies and practices in the areas of energy consumption, greenhouse gas, and other criteria pollutant emissions, waste disposal and water use

Meetings Held During 2020: 5

 

Review of our programs and policies relative to environmental sustainability and our environmental sustainability reporting

Talent and Compensation Committee
Members:
Vagn O. Sørensen (Chair)
John F. Brock
Amy McPherson
Ann S. Moore
Donald Thompson
  Responsibilities:

Overall responsibility for approving and evaluating the executive compensation plans, policies and programs of the Company

Annual determination of CEO compensation levels, taking into account corporate goals and CEO performance against these goals

Annual determination of senior executive compensation levels

Periodic review and recommendations for director compensation

Periodic review of talent development programs and succession planning

Preparation of Report of the Talent and Compensation Committee (page 57)


 

 

 
Meetings Held During 2020: 6   Independence:

The Board has determined that each member of the Talent and Compensation Committee is independent within the meaning of the NYSE and SEC standards of independence for directors and compensation committee members

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Board Leadership Structure

        The Board believes that one of its key responsibilities is to evaluate and implement an optimal leadership structure to facilitate appropriate oversight by an engaged Board of Directors. The Board regularly considers these matters and has concluded that the current leadership structure is appropriate to the Company's current circumstances.

        The current leadership structure of the Board consists of:

Name
Title
Richard Fain Chairman and Chief Executive Officer
William Kimsey Lead Director, Chairman of Audit Committee
Vagn O. Sørensen Chairman of Talent and Compensation Committee
Stephen R. Howe, Jr. Chairman of Nominating and Corporate Governance Committee
William Reilly Chairman of Safety, Environment and Health Committee

        Mr. Kimsey is our Lead Director. As Lead Director, Mr. Kimsey is responsible for presiding at and calling meetings of non-management directors, serving as a liaison between the Chairman and the non-management directors, advising the Chairman on and approving Board meeting agendas and schedules as well as information sent to the Board and, if requested by major shareholders, being available as appropriate for consultation and direct communication. The Lead Director serves at the pleasure of the non-management directors and may be replaced at any time by a majority of the non-management directors.

        The Board also regularly reviews the management structure within the Company and has concluded that combining the roles of Chairman and Chief Executive Officer is the most appropriate for our current circumstances. Mr. Fain has served as both Chairman and Chief Executive Officer for over 30 years. His experience and knowledge of our company and his position in our industry are unparalleled. He has effectively led the Company in both roles during the Company's evolution, including through a number of challenging industry and macroeconomic environments. Over the years, he has developed strong working relationships and trust with other members of the Board. Further, the Board believes that the significant leadership roles undertaken by Mr. Kimsey as well as the various independent directors who chair the other Board committees strike an appropriate balance between effective Board leadership and independent oversight of management.

        While currently appropriate, the Board notes that this conclusion is specific to today's circumstances. As these specific circumstances change, the Board intends to review the leadership structure, including the issue of combining the Chairman and Chief Executive Officer roles, and to make any changes that are appropriate at that time.

Talent Development and Succession Planning

        Our Talent and Compensation Committee is responsible for overseeing our talent development programs for our senior executives, including initiatives and practices to further enhance their skills and experience in order to ensure the continuity of capable management. As part of this responsibility, the Talent and Compensation Committee, in consultation with the Chairman & CEO, annually reviews and reports to the Board on management succession planning. The Nominating and Corporate Governance Committee and the full Board, in consultation with the CEO, oversee CEO succession planning. This overview includes an assessment of the qualifications for the Chief Executive Officer job, an evaluation of potential successors to the position, consideration of the appropriate process going forward and a review of our emergency management succession plan.

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Risk Oversight and Board Role

        We have a formal enterprise risk management program. Pursuant to this program, management annually performs a Company-wide enterprise risk assessment under the supervision of the Audit & Advisory Services department. This assessment is updated at least once during the course of the year. The assessment identifies those risks inherent in our business plans and strategies with the greatest potential to impact the achievement of our business objectives. This assessment is used to provide us with a risk-based approach to managing our business. Management reviews and discusses the risk assessment report and updates thereto with the Audit Committee and the Board. In addition, committees of the Board consider and review with management at regularly scheduled committee meetings ongoing financial, strategic, operational, legal and compliance risks inherent in the business activities applicable to each committee's area of responsibility, which are overseen by the Audit Committee. The committee chairs inform the Board of the outcome of these reviews through reports to the Board at the regularly scheduled Board meetings.

        Cyberattacks have continued to intensify in their sophistication and ability to harness information both from the public domain and by means of data exfiltration across public and private institutions. Management is intent on protecting the Company from such attacks and on evolving its program based on the evolving threat landscape. Using a risk-based prioritization approach, management is focused on securing its critical assets, updating its cybersecurity detection and prevention capabilities to the new threats, and maturing its compliance processes to protect its operations and its guests. The Company has taken the following foundational steps to address these risks:

    The establishment of a global cybersecurity operation center that monitors for cyber threats on a 24-hours a day, year-round basis;

    The investment in new surveillance technologies and services to improve the Company's cyber defense capabilities;

    The implementation of enterprise-wide cybersecurity training, anti-phishing and awareness programs for its employees;

    The conducting of periodic audits and targeted risk assessments of its IT security capabilities to proactively identify and strengthen its cyber defense operations; and

    The purchase of a cybersecurity insurance policy to provide financial protections.

        The Company's Chief Information Officer and Chief Information Security Officer meet with the Audit Committee on a quarterly basis to review the Company's cybersecurity and data programs and risks, and the Chair of the Audit Committee informs the Board of the outcome of these committee reviews through updates presented to the Board at the regularly scheduled Board meetings. In the past three years, the Company has not experienced any material information security breaches, and the expenses incurred by the Company as a result of any security breaches has been immaterial.

Director Independence

        Under our corporate governance principles, two-thirds of our directors are required to be independent within the meaning of the NYSE standards of independence for directors. Our corporate governance principles contain guidelines established by the Board to assist it in determining director independence in accordance with these NYSE standards. The Board believes that directors who do not meet the NYSE independence standards also make valuable contributions to the Board and to the Company by reason of their experience and wisdom, and the Board expects that some minority of its Board will not meet the NYSE independence standards.

        To be considered independent under the NYSE independence standards, the Board must determine that a director does not have any direct or indirect material relationship with the Company or any of its subsidiaries

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(collectively, the "Royal Caribbean Group"). The Board has established the following guidelines to assist it in determining director independence in accordance with those standards:

    A director will not be independent if:

    o
    the director is, or has been within the preceding three years, an employee of the Royal Caribbean Group, or an immediate family member is, or has been within the preceding three years, an executive officer of the Royal Caribbean Group, other than in each instance as interim Chairman, interim CEO or other interim executive officer;

    o
    the director or an immediate family member has received during any twelve-month period within the preceding three years more than $120,000 in direct compensation from the Royal Caribbean Group other than (A) director and committee fees, (B) pension and other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), (C) compensation for former services as an interim Chairman, interim CEO or other interim executive officer or (D) compensation to an immediate family member for service as a non-executive employee of the Royal Caribbean Group;

    o
    the director is a current partner or employee of Royal Caribbean's internal or external auditor (in either case, the "Auditor") or has an immediate family member who is either (A) a current partner of the Auditor or (B) a current employee who personally works on Royal Caribbean's audit;

    o
    the director or an immediate family member was within the last three years a partner or employee of the Auditor and personally worked on Royal Caribbean's audit within that time;

    o
    the director or an immediate family member is, or has been within the preceding three years, employed as an executive officer of another company where any of Royal Caribbean's current executive officers at the same time serves or served on the compensation committee of that other company; or

    o
    the director is an employee of another company that does business with the Royal Caribbean Group, or the director has an immediate family member that is an executive officer of another company that does business with the Royal Caribbean Group and, in either case, the annual payments to, or payments from, the Royal Caribbean Group within any of the three most recently completed fiscal years exceed $1,000,000 or two percent of the annual consolidated gross revenues of the other company (whichever is greater).

    The following commercial relationships will not be considered to be material relationships that would impair a director's independence:

    o
    if a director is an employee of another company that does business with the Royal Caribbean Group and the annual payments to, or payments from, the Royal Caribbean Group are less than $1,000,000 or two percent of the annual consolidated revenues of the company he or she serves as an employee (whichever is greater);

    o
    if a director is an employee of another company which is indebted to the Royal Caribbean Group, or to which the Royal Caribbean Group is indebted, and the total amount of indebtedness to the other is less than two percent or $1,000,000 (whichever is greater) of the total consolidated assets of the company he or she serves as an employee; and

    o
    if an immediate family member of a director is an executive officer of another company that does business with the Royal Caribbean Group, and the annual payments to, or payments from, the Royal Caribbean Group, are less than $1,000,000 or two percent of the annual consolidated revenues of the company the immediate family member serves as an executive officer (whichever is greater).

        Each director must regularly disclose to the Board whether his or her relationships satisfy these independence tests. Based on these disclosures and other information available to it, the Board has determined that each of the directors is independent with the exception of Mr. Fain, who is not considered independent as a result of his position

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as Chairman & CEO of the Company. In addition, the Board had previously determined that former director Thomas J. Pritzker, whose term on the Board expired on May 28, 2020, qualified as independent.

Selection of Director Candidates

        In identifying and evaluating candidates for nomination to the Board, the Nominating and Corporate Governance Committee considers the personal and professional ethics, integrity and values of the candidate, his or her willingness and ability to evaluate, challenge and stimulate, and his or her ability to represent the long-term interests of the shareholders. The Nominating and Corporate Governance Committee also considers the candidate's experience in business and other areas that may be relevant to the activities of the Company, his or her leadership ability, the applicable independence requirements, the current composition of the Board and the appropriate balance between the value of continuity of service by existing members of the Board with that of obtaining a new perspective.

        The Board recognizes the value and importance of diversity and considers diversity when evaluating prospective nominees as part of our director nomination process. As diversity can encompass many attributes, our corporate governance principles provide that diversity includes matters of race, gender and ethnicity and require that the Board endeavor to seek out qualified and diverse director candidates, including at least one woman and one underrepresented minority, to include in the initial pool from which nominees are chosen.

        The Nominating and Corporate Governance Committee has been committed to refreshing the Board by adding new directors. Two new members have been added to the Board within the past five years. Such refreshment brings different experiences to the Board and expands the Board's diversity in terms of gender, race and ethnicity.

        The Nominating and Corporate Governance Committee regularly engages third party search firms to identify or assist in identifying potential director nominees. The Nominating and Corporate Governance Committee seeks to identify director candidates from a variety of sources, including search firms, personal connections, shareholder recommendations and recommendations by others. The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders that are submitted as described in our amended and restated by-laws. During the last year, we employed an outside firm to assist us with our search process for new directors. In 2020, this third-party search firm identified and recommended Ms. McPherson for appointment to our Board.

Family Relationships

        There are no family relationships among our executive officers and directors or director nominees.

Code of Ethics

        The Board has adopted a Code of Business Conduct and Ethics that applies to all our employees, including our executive officers, and our directors. A copy of the Code of Business Conduct and Ethics is posted in the corporate governance section of our website at www.rclinvestor.com and is available in print, without charge, to shareholders upon written request to our Corporate Secretary at Royal Caribbean Cruises Ltd., 1050 Caribbean Way, Miami, Florida 33132. Any amendments to the code or any waivers from any provisions of the code granted to executive officers or directors that require disclosure under the applicable SEC or NYSE rules will be posted on our website at www.rclinvestor.com.

Compensation Committee Interlocks and Insider Participation

        During 2020, none of the members of the Talent and Compensation Committee (a) was an officer or employee of the Company or any of its subsidiaries, (b) was a former officer of the Company or any of its subsidiaries or (c) had any related party relationships requiring disclosure under Item 404 of SEC Regulation S-K. During 2020, no executive officer of the Company served as a member of the board of directors or on the compensation committee

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of any other company, one of whose executive officers or directors serve or served as a member of the Board or the Talent and Compensation Committee of the Company.

Contacting Members of the Board

        The Board welcomes questions and comments. Interested parties who wish to communicate with non-management members of the Board can address their communications to the attention of our Corporate Secretary at our principal address at 1050 Caribbean Way, Miami, Florida 33132 or via email to bstein@rccl.com. The Corporate Secretary maintains a record of all such communications and promptly forwards to the Lead Director those communications that the Corporate Secretary believes require immediate attention. The Corporate Secretary periodically provides a summary of all such communications to the Lead Director and he, in turn, notifies the Board or the chairs of the relevant committees of the Board of those matters that he believes are appropriate for further action or discussion.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

        This table sets forth information as of April 1, 2021 about persons we know to beneficially own(1) more than five percent of our common stock.

Name of Beneficial Owner
  Shares of
Common
Stock (#)
  Percentage of
Ownership(2)
 

AWILHELMSEN AS

  23,206,512 (3) 9.11 %

Capital Research Global Investors

    21,822,396 (4)   8.56 %

The Vanguard Group

  19,568,503 (5) 7.69 %

Capital International Investors

    13,996,210 (6)   5.50 %

BlackRock, Inc.

  11,634,300 (7) 4.57 %

Osiris Holdings Inc.

    11,496,865 (8)   4.52 %

(1)
A person is deemed to be the beneficial owner of securities to which such person has the right to acquire within 60 days from April 1, 2021, including upon the exercise of options, warrants and other convertible securities.

(2)
Applicable percentage ownership is based on 254,614,450 shares of common stock outstanding as of April 1, 2021.

(3)
AWILHELMSEN AS is a Norwegian corporation, the indirect beneficial owners of which are members of the Wilhelmsen family of Norway. The shares reported in the table include 5,035,259 shares owned by AWECO Invest AS, an affiliate of AWILHELMSEN AS. AWILHELMSEN AS has the power to vote and dispose of the shares owned by AWECO Invest AS pursuant to an agreement between AWILHELMSEN AS and AWECO Invest AS. The address of AWILHELMSEN AS is Beddingen 8, Aker Brygge, Vika N-0118 Oslo, Norway. The foregoing information is based on a Schedule 13G/A and Form 4 filed by AWILHELMSEN AS with the SEC on February 6, 2015 and December 11, 2020, respectively.

(4)
Represents shares beneficially owned by Capital Research Global Investors, 333 Hope Street, 55th Floor, Los Angeles, California 90071. The foregoing information is based on Schedule 13F filed by Capital Research Global Investors with the SEC on February 12, 2021.

(5)
Represents shares beneficially owned by The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355. The foregoing information is based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2021.

(6)
Represents shares beneficially owned by Capital International Investors, 333 Hope Street, 55th Floor, Los Angeles, California 90071. The foregoing information is based on Schedule 13G filed by Capital International Investors with the SEC on February 16, 2021.

(7)
Represents shares beneficially owned by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. The foregoing information is based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 5, 2021.

(8)
Osiris Holdings Inc. ("Osiris") is a Liberian corporation, the indirect beneficial owner of which is a trust primarily for the benefit of certain members of the Ofer family. The shares reported in the table include 9,656,380 shares owned by Osiris and 1,840,485 shares owned by a subsidiary of Osiris. The address of Osiris is c/o Global Holdings Management Group S.A.M., 3 ruelle Saint Jean, 98000 Monaco. The foregoing information is based solely on a Schedule 13G/A filed by Osiris with the SEC on February 10, 2021.

Security Ownership of Directors and Executive Officers

        This table sets forth information as of April 1, 2021 about the number of shares of common stock beneficially owned(1) by (i) our directors; (ii) the named executive officers listed in the "Compensation Discussion and Analysis" below; and (iii) our directors and executive officers as a group.

        The number of shares beneficially owned by each named person or entity is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose.

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        No shares of common stock held by our directors or named executive officers have been pledged.

Name of Beneficial Owner
  Shares of
Common
Stock (#)
  Percentage of
Ownership(2)
 

Michael W. Bayley

  34,580   *  

John F. Brock

    16,662     *  

Richard D. Fain

  787,501 (3) *  

Stephen R. Howe, Jr.

    3,759     *  

William L. Kimsey

  22,718   *  

Harri U. Kulovaara

    36,457     *  

Jason T. Liberty

  37,074   *  

Lisa Lutoff-Perlo

    40,601     *  

Amy McPherson

  34   *  

Maritza G. Montiel

    5,296     *  

Ann S. Moore

  18,465   *  

Eyal M. Ofer

    32,387 (4)   *  

William K. Reilly

  21,275   *  

Vagn O. Sørensen

    25,184     *  

Donald Thompson

  29,023   *  

Arne Alexander Wilhelmsen

    23,218,663 (5)   9.12 %

All directors and executive officers as a group (20 persons)

  24,401,008   9.56 %

*
Denotes beneficial ownership of less than 1% of the outstanding shares of common stock

(1)
A person is deemed to be the beneficial owner of securities to which such person has the right to acquire within 60 days from April 1, 2021, including upon the exercise of options, warrants and other convertible securities.

(2)
Applicable percentage ownership is based on 254,614,450 shares of common stock outstanding as of April 1, 2021.

(3)
Includes 235,106 shares owned by various trusts primarily for the benefit of certain members of the Fain family. Mr. Fain disclaims beneficial ownership of some or all of these shares. Does not include shares owned by other trusts for the benefit of members of the Fain family in which Mr. Fain does not have any beneficial or pecuniary interest or shares directly or indirectly owned by Mr. Fain's adult children.

(4)
Does not include 11,496,865 shares beneficially owned by Osiris.

(5)
Includes 23,206,512 shares beneficially owned by AWILHELMSEN AS. Mr. Wilhelmsen disclaims beneficial ownership of these shares.

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EQUITY COMPENSATION PLAN INFORMATION

        The following table summarizes our equity plan information as of December 31, 2020.

Plan Category
Column A:
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in Column A)

Equity compensation plans approved
by security holders


1,289,327 (1) $ 46.1800 (2) 2,879,148 (3)

Equity compensation plans not approved by security holders


Total

1,289,327 $ 46.1800 2,879,148

(1)
Includes outstanding stock options, unvested or unsettled restricted stock units and unvested performance share units under our 2008 Equity Incentive Plan.

(2)
Represents the weighted average exercise price of stock options outstanding without regard to equity awards that have no exercise price (including restricted stock units and performance shares).

(3)
Includes shares available for issuance under our 2008 Equity Incentive Plan plus the total number of shares remaining available, as well as the number of shares subject to purchase during any current purchase period, under the 1994 Employee Stock Purchase Plan. This table does not reflect the number of additional shares that would be available under the 1994 Employee Stock Purchase Plan if shareholders approve Proposal 3.

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PROPOSAL 1 — ELECTION OF DIRECTORS

General

        The Board currently consists of twelve directors. On the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated each of our current directors for re-election. Once elected, a director holds office until the next annual shareholders meeting and until a respective successor is duly elected and qualified or until his or her earlier resignation or removal.

        If any of the nominees is unexpectedly unavailable for election, shares represented by validly delivered proxies will be voted for the election of a substitute nominee designated by our Board or our Board may determine to reduce the size of our Board. Each person nominated for election has agreed to serve if elected.

Director Nominees

        Set forth below is biographical information for the nominees, as well as the key attributes, experience and skills that the Board believes each nominee brings to the Board.

John F. Brock
Director since February 2014
Age: 72
Board Committees: Nominating and Corporate Governance Committee; Talent and Compensation Committee
Other Public Company Boards: None

        Mr. Brock retired as Chief Executive Officer of Coca-Cola European Partners in December 2016, having served in that role since the formation of that company in May 2016. Prior to that, Mr. Brock served as Chairman and Chief Executive Officer of Coca-Cola Enterprises Inc. since April 2008 and as Chief Executive Officer since April 2006. From February 2003 until December 2005, Mr. Brock was Chief Executive Officer of InBev, S.A., a global brewer, and from March 1999 until December 2002, he was Chief Operating Officer of Cadbury Schweppes plc, an international beverage and confectionery company. From April 2007 to December 2007, Mr. Brock served as a director of Dow Jones & Company, Inc., a publisher and provider of global business and financial news. From 2004 to 2006, he served as a director of the Campbell Soup Company, a global manufacturer and marketer of branded convenience food products. From 2003 to 2005, he served as a director of Interbrew/Inbrew, a beer brewing company. He also served as a director of Reed Elsevier, a publisher, from 1997 to 2003. Mr. Brock is a Trustee of the Georgia Tech Foundation, Chairman of Horizons Atlanta, a philanthropic organization that enhances education for underserved children, and a member of the Smithsonian National Board. Mr. Brock also is a member of the Advisory Board of BIP Capital, a venture capital firm.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Brock brings senior leadership and strategic and global expertise from his most recent position as Chairman and Chief Executive Officer of one of the world's largest independent Coca-Cola bottlers. Prior to his retirement, Mr. Brock demonstrated effective and efficient leadership of a complex, publicly traded company competing in the highly competitive international beverage industry.

Richard D. Fain, Chairman
Director since 1981
Age: 73
Board Committees: None
Other Public Company Boards: None

        Mr. Fain has served as a director since 1981 and as our Chairman and Chief Executive Officer since 1988. Mr. Fain is a recognized industry leader, having participated in shipping for over 40 years and having held a number of prominent industry positions, such as Chairman of the Cruise Lines International Association (CLIA), the

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largest cruise industry trade association. He currently serves on the University of Miami Board of Trustees and the Uhealth Board of Directors. He is former chairman of the University of Miami Board of Trustees, the Miami Business Forum, the Greater Miami Convention and Visitors Bureau, and the United Way of Miami-Dade.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Fain's breadth of experiences, tenure and leadership provide incomparable insights into the history, operations, and strategic vision of the Company as well as the evolution and direction of the cruise industry as a whole. As our Chairman & CEO for over 33 years, Mr. Fain has grown the Company from a one-brand Caribbean-centric operation with berthing capacity of approximately 5,000 to the second largest cruise company in the world with a portfolio of global and regional brands that operate around the globe with berthing capacity of approximately 140,000.

Stephen R. Howe, Jr.
Director since December 2018
Age: 59
Board Committees: Audit Committee; Nominating and Corporate Governance Committee (Chairman)
Other Public Company Boards: None

        Mr. Howe served as U.S. Chairman and Managing Partner and Americas Area Managing Partner of Ernst & Young ("EY") and was a member of EY's Global Executive Board from 2006 until his retirement in 2018. In these roles, Mr. Howe directed strategy and operations for EY's businesses of over 75,000 people, delivering professional services across all industry sectors. While leading EY, Mr. Howe also gained extensive board governance and regulatory experience and was executive sponsor for the firm's focus on diversity and inclusiveness. He was with EY for over 35 years. Mr. Howe is also a member of the Board of Trustees of Carnegie Hall, the Board of the Peterson Institute for International Economics and the Board of Trustees (Chairman) of the Liberty Science Center. Mr. Howe was previously a member of the boards of Colgate University, the Center for Audit Quality and the Financial Accounting Foundation.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Howe brings to the Board considerable financial and leadership experience through his service as U.S. Chairman and Managing Partner and Americas Managing Partner of EY. He provides the board with meaningful insight gained from his strategic and operational experience and from his past service as the executive sponsor of EY's focus on diversity and inclusiveness.

William L. Kimsey, Lead Director
Director since 2003
Age: 78
Board Committees: Audit Committee (Chairman); Nominating and Corporate Governance Committee
Other Public Company Boards: None

        Mr. Kimsey was employed for 32 years through September 2002 with the independent public accounting firm Ernst & Young L.L.P. From 1998 through 2002, Mr. Kimsey served as the Chief Executive Officer of Ernst & Young Global and Global Executive Board member of Ernst & Young and from 1993 through 1998 as the Firm Deputy Chairman and Chief Operating Officer. From 2003 until 2018, Mr. Kimsey served on the board, the compensation committee, and the audit committee (serving as chair from 2011-2018) of Accenture Plc. From 2004 until 2008, he served on the board of NAVTEQ Corporation and was the chairman of its audit committee. From 2003 through 2014, Mr. Kimsey also served on the board and the audit committee of Western Digital Corporation. Mr. Kimsey is a certified public accountant and a member of the American Institute of Certified Public Accountants.

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Specific Qualifications, Attributes, Skills and Experience:

        As former Chief Executive Officer of one of the largest public accounting firms in the world, Mr. Kimsey brings substantial accounting and finance knowledge and expertise to the Board as well as experience serving on and chairing the audit committees of a number of other large, well-regarded public corporations.

Amy McPherson
Director since December 2020
Age: 59
Board Committees: Talent and Compensation Committee
Other Public Company Boards: PVH Corporation (New York Stock Exchange)

        Ms. McPherson served in various positions at Marriott International, Inc. for over 30 years. Most recently, from 2009 through 2019, she served as President & Managing Director, Europe. Under her leadership, Marriott launched five new brands in Europe and completed the successful integration of Starwood Hotels in Europe. Since 2017, Ms. McPherson has served as a non-executive member of the board of directors of PVH Corporation and is a member of its Audit and Nominating & Governance Committees.

Specific Qualifications, Attributes, Skills and Experience:

        Ms. McPherson brings to the board considerable experience in overseeing business operations and development in Europe, having overseen multiple brands of hotels for Marriott. She has overseen acquisitions and strategic partnerships and implemented and executed strategies on both a regional and global basis. In addition, Ms. McPherson has experience managing Marriott's global and field sales, marketing, loyalty program, revenue management, e-commerce, worldwide reservation sales and customer care, and sales channel strategy and analysis.

Maritza G. Montiel
Director since December 2015
Age: 69
Board Committees: Audit Committee
Other Public Company Boards: AptarGroup, Inc. (New York Stock Exchange); Comcast Corporation (Nasdaq Global Select Market); McCormick & Company (New York Stock Exchange)

        Ms. Montiel served as Deputy Chief Executive Officer and Vice Chairman of Deloitte LLP from 2011 through her retirement in May 2014. Prior to these positions, she held numerous senior management roles at Deloitte, including Managing Partner (Leadership Development and Succession, Deloitte University) from 2009 to 2011, and Regional Managing Partner from 2001 to 2009. During Ms. Montiel's tenure at Deloitte, she was the Advisory Partner for many public company registrants in which Deloitte was the principal auditor. Ms. Montiel is a board member of AptarGroup, Inc. where she chairs the audit committee, a board member of Comcast Corporation, where she is a member of the audit committee, and a board member of McCormick & Company, where she chairs the audit committee.

        The Board has concluded that Ms. Montiel's simultaneous service on four public company audit committees would not impair her ability to serve on the Audit Committee.

Specific Qualifications, Attributes, Skills and Experience:

        Leveraging her more than 35 years of advising companies (including providing attestation services for public companies) across a wide cross-section of industries, Ms. Montiel brings to the Board significant financial and advisory experience. The Board also benefits from her deep and broad working knowledge of the strategic and governance challenges faced by today's large organizations and her experience overseeing risk and compliance in her role as Deputy CEO of Deloitte.

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Ann S. Moore
Director since May 2012
Age: 70
Board Committees: Talent and Compensation Committee
Other Public Company Boards: None

        Ms. Moore served as Chairman and Chief Executive Officer of Time Inc. from July 2002 to September 2010 and served as Chairman through December 2010. Prior to that, Ms. Moore was Executive Vice President of Time Inc., where she had executive responsibilities for a portfolio of magazines including Time, People, InStyle, Teen People, People en Español and Real Simple. Ms. Moore joined Time Inc. in 1978 in Corporate Finance. Since then, she held consumer marketing positions at Sports Illustrated, Fortune, Money and Discover, moving to general management of Sports Illustrated in 1983 and to publisher of People in 1991. From 1993 to May 2014, Ms. Moore served on the Board of Directors of Avon Products Inc. She was also a director of the Wallace Foundation from 2004 through June 2016.

Specific Qualifications, Attributes, Skills and Experience:

        Ms. Moore's extensive experience in consumer-driven publishing and media brings to the Board recognized management and entrepreneurial capabilities. As the leader of one of the largest magazine companies in the United States, Ms. Moore successfully expanded the footprint of many of the company's flagship brands and oversaw her company's transition to digital platforms.

Eyal M. Ofer
Director since 1995
Age: 70
Board Committees: Safety, Environment and Health Committee; Nominating and Corporate Governance Committee
Other Public Company Boards: None

        Mr. Ofer has served as a director of the Company since May 1995. Mr. Ofer is a global maritime shipping and real estate business leader and philanthropist. As the Chairman of a multi-generational family group, Ofer Global, he leads a private portfolio of international businesses principally focused on shipping, real estate, energy, technology, banking and investments. Its interests span Europe, North America, the Near East, Australasia and South East Asia. Mr. Ofer heads Ofer Global's various divisions, including: Zodiac Group, an international shipping enterprise operating a diversified fleet of over 160 vessels worldwide; Global Holdings Group, a real estate holding group specializing in large scale iconic office buildings, hotels and luxury residential developments, as well as other investment and development assets; and O.G. Tech Ventures, a single LP Venture Capital fund with a focus on Round A tech investments. Mr. Ofer also chairs the Eyal & Marilyn Ofer Family Foundation, a philanthropic foundation established for the charitable giving of his family in support of education and the arts.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Ofer brings to the Board over 30 years of significant leadership in the international maritime industry, including over 20 years of service on our Board of Directors. Mr. Ofer also provides considerable expertise in both real estate and finance matters, having played a leading role throughout his career in both expanding and diversifying his family's shipping enterprise into sectors including real estate, cruise lines, hotels and banking.

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William K. Reilly
Director since 1998
Age: 81
Board Committees: Safety, Environment and Health Committee (Chairman)
Other Public Company Boards: Enviva Partners LP (New York Stock Exchange)

        Mr. Reilly is the Founding Partner of Aqua International Partners L.P., a private equity fund established in 1997 and dedicated to investing in companies engaged in water. From 1989 to 1993, Mr. Reilly served as the Administrator of the U.S. Environmental Protection Agency. He has also previously served as the first Payne Visiting Professor at Stanford University, President of the World Wildlife Fund and President of The Conservation Foundation. He is Chairman Emeritus of the World Wildlife Fund and Chairman of the Advisory Committee to the Nicholas Institute for Environmental Policy Solutions at Duke University. He serves as a director of Enviva Partners LP, a publicly traded master limited partnership that aggregates wood fiber and processes it into a transportable form. From 1993 until April 2012, Mr. Reilly also served on the Board of Directors of E.I. duPont de Nemours and Company and from 1997 until May 2013, he served on the Board of Directors of ConocoPhillips. In May 2010, President Obama named Mr. Reilly to serve as co-chair of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, which released its report on January 11, 2011. In December 2012, the President named Mr. Reilly to the Council for Global Development. In 2017, Mr. Reilly became a director of the Center for Strategic and International Studies, a non-profit research and communication organization in Washington, DC. In 2018, Mr. Reilly became a director of the Union of Concerned Scientists, a non-profit research and communications organization based in Cambridge, MA.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Reilly brings to the Board his wealth of environmental, safety and regulatory expertise gained through significant leadership roles within a number of distinguished environmental organizations, including the U.S. Environmental Protection Agency and the World Wildlife Fund, and on important environmental projects, including serving as co-chair of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

Vagn O. Sørensen
Director since 2011
Age: 61
Board Committees: Audit Committee; Talent and Compensation Committee (Chairman)
Other Public Company Boards: Air Canada (Toronto Stock Exchange); FLSmidth A/S (Copenhagen Stock Exchange); CNH Industrial (New York Stock Exchange and Milan Stock Exchange)

        Mr. Sørensen brings to the Board over 20 years of experience in the aviation industry, having served as the President and CEO of Austrian Airlines Group from 2001 through 2006. Prior to that, he served in a variety of roles with Scandinavian Airlines Systems, including as Executive Vice President and Deputy CEO. He currently serves as a board member and chairman for a number of corporations throughout Europe and Canada, including Air Canada, FLSmidth A/S, Parques Reunidos SA, CNH Industrial and Scandlines. Mr. Sørensen also previously served on the board of Scandic Hotels AB and DFDS.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Sørensen's breadth of experience in the aviation industry and the insurance industry brings useful insight to the Board, especially with respect to matters impacting the travel industry and risk management. He also provides significant experience within the shipping industry gained through his prior service as Deputy Chairman of DFDS A/S, one of the largest short-seas operators in Europe. Through his service on a number of other boards in Europe and Canada, Mr. Sørensen also provides the Board with diverse perspectives.

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Donald Thompson
Director since May 2015
Age: 58
Board Committees: Safety, Environment and Health Committee; Talent and Compensation Committee
Other Public Company Boards: Northern Trust Corporation (Nasdaq Global Select Market); Beyond Meat,  Inc. (Nasdaq Global Select Market)

        Prior to his current role as Founder and Chief Executive Officer of Cleveland Avenue, LLC, a venture capital firm, Mr. Thompson served as President and Chief Executive Officer of McDonald's Corporation from 2012 until March 2015. Previously, Mr. Thompson served as President and Chief Operating Officer of McDonald's Corporation from 2010 to 2012 and President of McDonald's USA from 2006 to 2010. Prior to joining McDonald's, Mr. Thompson served six years as an Electrical Engineer for the Northrop Corporation, where he specialized in power supply design and manufacturing for high technology radar systems. Mr. Thompson also served as director of McDonald's Corporation from 2011 to March 2015 and as a director of Exelon Corporation from 2007 to 2013. Since March 2015, Mr. Thompson has served as a director of Northern Trust Corporation. He also serves on the boards of Beyond Meat and Footprint International HoldCo Inc., as an Advisory Board member of Docusign, Inc. and on numerous civic and philanthropic boards. He is a member of the Executive Leadership Council, the Commercial and Economic Clubs of Chicago, Business Council, World Business Chicago and the Arthur M. Brazier Foundation. He serves as a Trustee on the boards of the Cleveland Avenue Foundation for Education, Northwestern Memorial Hospital and Purdue University.

Specific Qualifications, Attributes, Skills and Experience:

        Mr. Thompson brings to the Board significant strategic leadership and collaboration skills as well as valuable global business perspective. His 25-year career at McDonald's, the world's leading global foodservice retailer, culminated in leading the company from 2012 through 2015. In his role as President & CEO of McDonald's, Mr. Thompson directed strategy and operations for over 30,000 restaurants in over 100 countries, working closely with thousands of independent owner/operators, corporate staff and restaurant employees around the world.

Arne Alexander Wilhelmsen
Director since 2003
Age: 55
Board Committees: Safety, Environment and Health Committee, Nominating and Corporate Governance Committee
Other Public Company Boards: None

        Mr. Wilhelmsen is Chairman of the board of directors of AWILHELMSEN AS, the holding company for the AWILHELMSEN group of companies, after having served as the Chairman of the board of directors of AWILHELMSEN Management AS from 2008 through June 2013. Mr. Wilhelmsen was elected Chairman of the Board of AWECO AS in 2011 and Chairman of the Board of AWILHELMSEN HOLDING AS in June 2016 and Aweco Cruise Holding AS in June 2017. He has held a variety of positions within the AWILHELMSEN group of companies since 1995. In addition, Mr. Wilhelmsen serves as Chairman of the board of his wholly owned company Pan Sirius AS. From 1996 through 1997, Mr. Wilhelmsen was engaged as a marketing analyst for the Company and from 2001 through 2009 served as a member of the board of directors of Royal Caribbean Cruise Line AS, a wholly owned subsidiary of the Company that was responsible for the sales and marketing activities of the Company in Europe.

Specific Qualifications, Attributes, Skills and Experience:

        As the leader of an investment company with varied interests across a number of business segments, including shipping, cruise, real estate and retail, Mr. Wilhelmsen brings a diverse knowledge base and strategic insight to the

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Board. As the representative of the Company's largest shareholder and one of the Company's original founders, Mr. Wilhelmsen also provides a valuable historical perspective to the Board.

Board Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR NAMED ABOVE.

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Director Compensation for 2020

        Directors who are also Company employees do not receive any compensation for their services as directors.

        As disclosed by the Company in 2019, Willis Towers Watson performed a detailed analysis of our Board compensation practices and recommended that we increase the annual cash retainer payable for Board service to $100,000 for a full year of service. However, in light of the COVID-19 pandemic, our directors unanimously consented to forego all cash retainers and fees payable for Board and committee service for the six-month period between April 1, 2020 and September 30. 2020. As a result, each non-employee director (other than Ms. McPherson) received a cash retainer of $50,000 for their services in 2020. Ms. McPherson joined the Board in December 2020 and received a pro-rated portion of the cash retainer. In addition, our Lead Director received a further annual cash retainer of $37,500 for 2020 (which total amount does not include the portion of the cash retainer waived for the six-month period between April 1, 2020 and September 30, 2020).

        We also pay annual cash retainers for chairing and service on various Board committees. The amount of these retainers in 2020 for a full year of service was as follows:

Committee Role
  Audit
Committee
  Talent &
Compensation
Committee
  Nominating &
Corporate
Governance
Committee
  Safety,
Environment &
Health
Committee
 

Chairman

  $ 17,000 * $ 12,500 * $ 10,000 * $ 10,000 *

Member

  $ 10,000 * $ 6,000 * $ 5,000 * $ 5,000 *

*
Amount does not include the portion of the cash retainer waived for the six-month period between April 1, 2020 and September 30, 2020, in each case, by the chairman or the committee member, as applicable

        Directors do not earn fees for each meeting attended; however, they are reimbursed for their travel expenses and, occasionally, for those of an accompanying guest.

        In 2020, each non-employee director (other than Ms. McPherson, who joined the Board in December 2020) received restricted stock units with a fair market value of $194,410 as of the grant date. These restricted stock units vested in full immediately upon grant and settled one year following the date of grant. Our stock ownership guidelines require directors to accumulate ownership of at least $300,000 of our common stock (which is 3 times their annual cash retainer for Board service), including the value of restricted stock and restricted stock units, within three years of becoming a director. If the value of their stock holdings falls below this amount, directors cannot sell shares of our common stock until the value once again exceeds the required amount. In addition, non-employee directors may not be granted awards with a dollar value in excess of $500,000 in any one calendar year.

        In order to increase their knowledge and understanding of our business, we encourage our non-management Board members and their families to experience our cruises. As a result, we have adopted a Non-Management Director Cruise Policy. Under this policy, with certain limited exceptions, a Board member is entitled to up to two complimentary staterooms on two cruises per year for the Board member and any immediate family accompanying the Board member on the cruise. Additional guests traveling with a Board member will receive a 15% discount off the lowest available fare for up to five staterooms. The Chairman & CEO may grant exceptions to this policy in his discretion but did not do so in 2020.

        As discussed above, in light of the COVID-19 pandemic and the negative financial and operational impacts resulting therefrom, the Board unanimously consented to forego all cash retainers and fees payable for Board and committee service, effective from April 1, 2020 through September 30, 2020. The table below summarizes the compensation of each person serving as a non-employee director in 2020.

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2020 Director Compensation Table

Name
  Fees Earned
or Paid in
Cash
  Stock Awards(1),(2)   All Other
Compensation(3)
  Total  

John F. Brock

  $ 61,000   $ 194,410     $ 255,410  

Stephen R. Howe, Jr.

  $ 66,126   $ 194,410       $ 260,536  

William L. Kimsey

  $ 109,500   $ 194,410     $ 303,910  

Amy McPherson

  $ 2,717   $ 0       $ 2,717  

Maritza G. Montiel

  $ 60,000   $ 194,410   $ 15,563   $ 269,973  

Ann S. Moore

  $ 56,000   $ 194,410       $ 250,410  

Eyal M. Ofer

  $ 60,000   $ 194,410     $ 254,410  

Thomas J. Pritzker(4)

  $ 30,000   $ 194,410       $ 224,410  

William K. Reilly

  $ 60,000   $ 194,410     $ 254,410  

Vagn O. Sørensen

  $ 72,500   $ 194,410   $ 10,098   $ 277,008  

Donald Thompson

  $ 61,000   $ 194,410     $ 255,410  

Arne Alexander Wilhelmsen

  $ 60,000   $ 194,410       $ 254,410  

(1)
The column titled "Stock Awards" reports the fair value of restricted stock unit awards at their grant date in 2020 calculated in accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718. For the assumptions used in valuing these awards for purposes of computing this expense, please see Note 13 of the consolidated financial statements in the Company's Annual Report for the year ended December 31, 2020.

(2)
As of December 31, 2020, each non-employee director listed in the table (other than Ms. McPherson) held 1,815 vested restricted stock units.

(3)
These amounts relate to discounts on Company cruises provided to directors. The aggregate value of other compensation that would be reportable in this column made available to non-employee directors other than Mr. Sørensen and Ms. Montiel is less than $10,000 per person.

(4)
Mr. Pritzker served on the Board until May 28, 2020.

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Related Person Transaction Policy and Procedures

        We have a written Related Person Transaction Policy that requires review of all relationships and transactions in which the Company is a participant and a "related person" which includes any director, executive officer or greater than 5% beneficial owner of the Company or any immediate family member of the foregoing has a direct or indirect material interest. Under this policy, each director, director nominee and executive officer is required to promptly notify the Corporate Secretary of any such transaction. The Corporate Secretary then presents such transactions to the Audit Committee, which is responsible for reviewing and determining whether to approve or ratify the transactions. The following types of transactions are deemed not to create or involve a material interest on the part of the related person and do not require approval or ratification under the policy, unless the Audit Committee determines that the facts and circumstances of the transaction warrant its review:

    transactions involving the purchase or sale of products or services in the ordinary course of business, not exceeding $120,000;

    transactions in which the related person's interest derives solely from his or her service as a director of another corporation or organization that is a party to the transaction;

    transactions in which the related person's interest derives solely from his or her ownership of less than 10% of the equity interest in another person (other than a general partnership interest) which is a party to the transaction;

    transactions in which the related person's interest derives solely from his or her ownership of a class of equity shares of the Company and all holders of that class of equity securities received the same benefit on a pro rata basis;

    compensation arrangements of any executive officer, other than an individual who is an immediate family member of a related person; and

    non-executive director compensation arrangements.

        In reviewing transactions submitted to them, the Audit Committee reviews and considers all relevant facts and circumstances to determine whether the transaction is in, or not inconsistent with, the best interests of the Company and its shareholders, including, without limitation:

    the commercial reasonableness of the terms;

    the benefit and perceived benefit, or lack thereof, to the Company;

    opportunity costs of alternative transactions;

    the character of the related person's interest; and

    the actual or apparent conflict of interest of the related person.

        If after the review described above, the Audit Committee determines not to approve or ratify the transaction, it will be cancelled or unwound as the Audit Committee considers appropriate and practicable.

Related Person Transactions

        Mr. Thomas J. Pritzker, one of our former directors who did not stand for re-election on May 28, 2020, is Executive Chairman of the Hyatt Hotels Corporation ("Hyatt"). During the year ended December 31, 2020, we paid Hyatt approximately $306,428 for hotel stays of our guests and employees traveling on business and for use of Hyatt's facilities for business purposes. The amount represents less than 0.015% of Hyatt's revenues for 2020 and approximately 0.78% of our transportation and lodging expense for the same period. As in prior years, there are no specific arrangements or understandings between us and Hyatt in this regard. Hyatt is a major hotel chain and it

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would be imprudent for us to exclude them. The Audit Committee reviewed and approved or ratified the foregoing transactions with Hyatt Hotels Corporation in accordance with our Related Person Transaction Policy.

        On March 23, 2020 (the "Funding Date"), we entered into a $2.2 billion senior secured term loan agreement (the "Senior Secured Loan Agreement") with Morgan Stanley Senior Funding, Inc., as the administrative agent and collateral agent and other lenders party thereto. Given the uncertainties around the COVID-19 pandemic at this early stage, we found it challenging to obtain bank funding for the full amount and coming as it did shortly after we ceased global business operations, this loan was crucial to our business. We reached out to two of our directors, Arne Alexander Wilhelmsen and Eyal Ofer, to request their support for this loan following which AWILHELMSEN AS and a trust primarily for the benefit of certain members of the family of Eyal Ofer, each purchased, on an arm's length basis, a participation interest in the senior secured term loan equal to $100 million. We repaid the loan balance under the Senior Secured Term Loan Agreement in its entirety with a portion of the proceeds of the $3.32 billion in senior secured notes we issued in May 2020, and as a result as of April 1, 2021, there was no principal outstanding under the Senior Secured Loan Agreement. The Audit Committee reviewed and approved or ratified the foregoing transactions in accordance with our Related Person Transaction Policy.

Delinquent Section 16(a) Reports

        Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires that our executive officers and directors, and persons who own more than 10% of our common stock, file reports of ownership and changes of ownership with the SEC. Such directors, executive officers and 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

        SEC regulations require us to identify in this proxy statement anyone who filed a required report late during the most recent fiscal year. We believe that during our fiscal year ended December 31, 2020, all Section 16(a) filing requirements were satisfied on a timely basis, except for (i) one Form 4 made on behalf of Richard D. Fain reporting (A) a charitable contribution in October 2020 to a charitable foundation associated with the Fain family and (B) one gift to a trust for the benefit of certain members of the Fain family (filed with the SEC on March 26, 2021) and (ii) one Form 4 made on behalf of Maritza G. Montiel reporting a purchase of stock on the open market in June 2019 (filed with the SEC on March 24, 2021 and as amended on March 29, 2021).

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EXECUTIVE
COMPENSATION


Letter from the Talent and
Compensation Committee


GRAPHIC
Vagn O. Sørensen, Chairman
      

Dear Fellow Shareholders,

        The year 2020 truly defined the term "Black Swan Event." It presented an unusual and highly challenging environment in which to operate, especially for companies like Royal Caribbean, which found themselves in the center of the COVID-19 storm. It also presented unusual challenges to our compensation program. Our Talent and Compensation Committee has worked diligently to navigate this unique environment, and we thought it would be helpful, before we provide the standard information, to lay out the philosophy we tried to follow and the logic behind the decisions taken.

        Our fundamental compensation philosophy remains unchanged – we strive to construct compensation arrangements for our executives that align their interests with those of our shareholders. To do this, we focus on making sure that executive compensation includes a high proportion of performance-based pay metrics, including equity-based compensation.

        The Compensation Committee's decisions for this year, as described in the Compensation Discussion and Analysis that follows, were designed coming off an exceptional 2019 and during the early part of 2020 when the impact of the pandemic was not yet apparent. Our goal at that time was to motivate our management to continue that strong financial performance and momentum. Based on their performance and comparisons to other comparable companies, the committee granted significant increases to these executives at the start of the year. Consistent with the Committee's objective of having executive compensation link to shareholder value, the majority of their compensation was in the form of equity-based compensation.

        However, as the impact of the pandemic became clear, our focus shifted to motivating the Company's management to address the challenges of the pandemic, while also taking into account the profound impact it has had on the financial performance of the Company. As you will see in the following analysis, the Talent and Compensation Committee considered these factors in determining compensation and took action to meaningfully incentivize, motivate and retain our executives with pay programs designed to drive shareholder return. The difficult operating environment and the fast-changing circumstances on the ground made balancing such competing objectives particularly challenging.

        During this crisis, management has taken aggressive steps to protect the health and safety of its guests and crew; worked effectively to develop protocols and procedures and control costs; established the highly regarded Healthy Sail Panel; and has protected and bolstered its liquidity. Management also focused heavily on accomplishing these goals with minimal dilution to shareholders. We believe that these proactive actions by management have led to the Royal Caribbean Group preserving shareholder value particularly well during this extraordinary period, as well as being seen as a leader in our industry. Our compensation actions this year sought to take all this into consideration.

   

1050 Caribbean Way, Miami, Florida 33132-2096 | 305 539 6000 | royalcaribbeangroup.com

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Our Commitment to Pay for Performance

Royal Caribbean Group's financial performance in fiscal year 2020 did not meet our expectations for shareholder value creation. However, the management team delivered a strong performance against the revised goals we established once the impact of pandemic became clear. Ultimately, we felt that due consideration needed to be made for the overall impact of the virus and as a result, key compensation actions were implemented that included the following actions:

In February 2020, based on a strong 2019 and in anticipation of a stronger 2020, we increased the base salaries and annual equity grant values for each of our NEOs to better align their pay with the market and incentivize positive performance. In addition, the target annual incentive percentage was increased for Mr. Bayley, Mr. Liberty, and Mr. Kulovaara. These changes took place prior to our understanding of the pandemic and its impact, which ultimately included the suspension of our cruising operations.



Board members waived their cash retainers for a period of six months.



Mr. Fain elected to forego his base salary from April 1, 2020 until September 30, 2020. In addition, each of Mr. Bayley, Mr. Liberty, and Ms. Lutoff-Perlo elected to reduce their base salaries by 25% from April 1, 2020 until September 30, 2020.



Our 2018 performance-based restricted stock awards were intended to incentivize performance over the three-year period 2018, 2019 and 2020 and were on track for awards substantially in excess of target value after the second year (2019). However, in light of the impact of the pandemic on the financial results of the third year (2020), the award targets became unattainable. Using the Committee's discretionary authority as provided in the plan, we determined a payout for these awards based on the projected payout trajectory at the end of 2019. We then reduced that payout in consideration of the poor 2020 financial performance.



Similarly, our 2019 performance-based restricted stock awards are intended to incentivize performance over the three-year period 2019, 2020 and 2021 and were on track for payout in excess of target value based on 2019 financial performance. While we have made no changes to date to the original metrics, the Committee expects to use its discretionary authority to establish a payout based on the payout trajectory at the end of 2019 with appropriate negative adjustments.



Early in the year, in accordance with the Executive Short-Term Bonus Plan ("Executive Bonus Plan") requirements, the Talent and Compensation Committee determined that it would not be appropriate to set goals related solely to financial results and key performance indicators ("KPI's") as we have historically utilized. The 2020 annual incentive targets were established after the cessation of our cruises and were aligned with the needs of the business in the pandemic — keeping our guests and crew safe, our business solvent and our company healthy in order to withstand the impacts of the COVID-19 pandemic and facilitate our return to service. These targets were not changed after being established. The Talent and Compensation Committee evaluated the Company's performance against these established targets and determined that it qualified for a 150% rating. However, in light of the Company's financial performance for the fiscal year 2020, the Talent and Compensation Committee decided that a reduced rating of 95% was more appropriate. Mr. Fain voluntarily elected to forego his bonus entirely. As a result, the total bonuses paid for the NEO's amounted to 62.9% of the target bonus (31.5% of the maximum bonus).



Cash compensation for each of our NEOs related to 2020 was lower than that received in 2019. Inclusive of base salary, annual incentive and discretionary bonus payments, our cash paid to the Chairman & CEO was 88% less in 2020 than in 2019, was 11% less in 2020 compared to 2019 for the other NEOs, and 39% less in 2020 compared to 2019 when considering all NEOs.



None of our NEOs received a base salary increase for fiscal year 2021 or received an adjustment to their bonus targets for 2021.

   

1050 Caribbean Way, Miami, Florida 33132-2096 | 305 539 6000 | royalcaribbeangroup.com

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Our 2020 performance-based restrictive stock awards, which vest in 2023, were based on 2022 EPS and ROIC financial metrics established pre-COVID-19. We adjusted these EPS and ROIC metrics – and added a new leverage metric – to align more directly with the 2022 results and outcomes necessary to prepare us for a healthy return to service and financial recovery. As modified these metrics also enable us to maintain the retentive and incentive value of these awards.



We have granted long-term equity retention awards to our senior executives designed to incentivize them to continue leading efforts in our Company and the industry to achieve the kind of goals mentioned above. Mr. Fain declined to participate in these retention grants.



While the focus of this compensation report is on our most senior executives, the Committee also spent considerable effort on compensation at lower levels in the Company with the same focus on ensuring that the motivational and retentive elements predominate.

        The Committee is committed to assessing our executive compensation programs on a regular basis. We strongly believe that, in the near term, the above actions are necessary to drive performance, retention and motivation of our leadership team – all of which are essential to a successful recovery. As we monitor the execution of the business plan, the committee will regularly re-evaluate its compensation approach and adjust as merited.

        We are convinced that these compensation plans will allow Royal Caribbean Group to retain and motivate the very best leadership to drive our financial recovery for both the Company and its shareholders and is the foundation for our support of the board's recommendation to vote "YES" on say-on-pay (Proposal No. 2).

Sincerely,

The Talent and Compensation Committee

GRAPHIC GRAPHIC GRAPHIC
Vagn Sørensen John Brock Ann Moore

 

GRAPHIC GRAPHIC
Amy McPherson Donald Thompson

   

1050 Caribbean Way, Miami, Florida 33132-2096 | 305 539 6000 | royalcaribbeangroup.com

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Compensation Discussion and Analysis

        The 2020 COVID-19 pandemic was particularly impactful to our business. On March 13, 2020, we voluntarily suspended our global cruise operations and our focus shifted to protecting the safety of our guests and crew, proactively preserving our liquidity, protecting the Company's brands and our travel partners and defining and preparing for our return to service (as described in more detail below).

Safety Of Our Crew

        When the COVID-19 pandemic hit, we worked tirelessly to safely repatriate our guests and crew members to their homes. We repatriated approximately 50,000 crew members from more than 100 countries around the world, with widely different safety protocols and travel restrictions. Our teams worked around the clock with a multitude of governing bodies to repatriate our crew as soon as possible. We worked diligently with the governments of the restricted countries to reunite the last few of our crew with their family. It was a very complex task with shifting regulations and restrictions across multiple countries.

Preserving Our Liquidity

        The Company took a very methodical approach to protecting our liquidity with a focus on reducing cash outflows and minimizing dilution. Since the suspension of its global cruise operations, the Company has taken aggressive actions to enhance its liquidity, preserve cash, obtain additional financing, and significantly reduce capital expenditures and operating expenses. During fiscal year 2020, the Company raised approximately $9.3 billion of new capital through a combination of bond issuances, common stock public offerings and other debt instruments.

Protecting Our Brand and Travel Partners

        We've taken actions to provide guests with flexibility and peace of mind as they look forward to resuming their travel. To this end, we have implemented the "Cruise with Confidence" program, where guests have the flexibility to cancel their cruises up to 48 hours prior to sailing and receive a full credit on the cruise fare for a future cruise. We enhanced this program with our "Lift and Shift" program, which gives our guests even more comfort for the time ahead. These programs have been very well received as they benefit both our guests and our liquidity profile. During this difficult period, we have also maintained a vibrant public outreach program through videos, social media, personal appearances, etc. in order to maintain interest in and bookings for the post-pandemic period.

Defining And Preparing For our Return to Service

        As we look ahead to the return to sailing in a majority of the world, we know we must face what will ultimately be a changed landscape for the cruising industry. In cooperation with Norwegian Cruise Line, we have assembled an expert panel called the Healthy Sail Panel to help us meet two specific goals: one, to reduce the risk of COVID in our guest home communities; and two, to ensure that we can properly handle a COVID incident on board effectively and without inconveniencing all the other guests or the local community. After a thorough review, the panel made 74 specific recommendations toward accomplishing these two goals. After their publication, the entire cruise industry agreed to abide by these recommendations, and we believe that the recommendations can serve as a foundation for a gradual and methodical healthy return to service. We believe that the creation of the Healthy Sail Panel has been an important contributor to the science and has been very valuable in protecting and enhancing the company's response to the pandemic and its reputation for doing so.

2020 Say-on-Pay Results

        At our 2020 annual meeting, shareholders approved our 2019 NEO compensation with over 98% of the votes cast in favor of our practices. Given the high level of support, the Talent and Compensation Committee did not make any significant changes to its approach to executive compensation specifically as a result of this "say-on-pay" vote. The Talent and Compensation Committee considers the outcome of our annual say-on-pay

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votes when making future compensation decisions for NEOs. The next "say-on-pay" vote will occur at our 2021 annual meeting.

        We discuss our compensation plans, policies and objectives in detail below.

Named Executive Officers

        Our NEOs for the fiscal year ended December 31, 2020 are consistent with fiscal year 2019 and are set forth below.

Name
 
Title
Richard D. Fain   Chairman & Chief Executive Officer
Jason T. Liberty   Executive Vice President, Chief Financial Officer
Michael W. Bayley   President and Chief Executive Officer, Royal Caribbean International
Lisa Lutoff-Perlo   President and Chief Executive Officer, Celebrity Cruises
Harri U. Kulovaara   Executive Vice President, Maritime

Fiscal 2020 Impact on Compensation

        In fiscal year 2020, our NEOs showed exceptional agility in managing the Company in the face of the COVID-19 pandemic, including the four areas described in the preceding section. Notwithstanding these significant accomplishments for our shareholders, the impact of the pandemic on our businesses led to a meaningful reduction in NEO compensation in a number of ways:

    Mr. Fain elected to forego his base salary from April 1, 2020 through September 30, 2020. In addition, each of Mr. Liberty, Mr. Bayley and Ms. Lutoff-Perlo elected to reduce their base salaries by 25% from April 1, 2020 until September 30, 2020.

    Cash compensation for each of our NEOs related to 2020 was lower than that received in 2019. Inclusive of base salary, annual incentive and discretionary bonus plans, our cash paid to the CEO was 88% less in 2020 than in 2019, was 11% less in 2020 compared to 2019 for the other NEOs, and 39% less in 2020 compared to 2019 when considering all NEOs.

    Performance Share Awards granted in 2018 and scheduled to vest in 2021, based on 2020 performance, resulted in 100% of the original target number of shares being earned, which adjusted for the decrease in share price, equates to 66% of the original target value of the awards and which is significantly lower than the vesting level at which these awards were tracking prior to the start of the pandemic.

    Performance Share Awards granted in 2020, and scheduled to vest in 2023, have established goals based upon return on invested capital ("ROIC") and earnings per share ("EPS"). Based on the impact on our business from the COVID-19 pandemic, the goals have been modified and will now include ROIC, EPS and a leverage metric (measuring our debt to EBITDA ratio).

    Based on the impact from the COVID-19 pandemic on our business and consistent with the overall organization, in 2021 there will be no merit adjustments to base salaries for our NEOs, nor will there be any adjustment in annual incentive targets.

Elements of the 2020 Executive Compensation Program

Base Salary

        Base salaries comprise, on average, less than 20% of the total target compensation for our NEOs (8% for our Chairman & CEO and 17% for our other NEOs). However, base salaries are an important and customary element of

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pay for attracting and retaining executives. The Talent and Compensation Committee seeks to pay each NEO a level of fixed compensation that competitively reflects their scope of responsibility.

        The primary considerations used in adjusting base salary levels include each NEO's:

    market positioning;

    scope of responsibilities;

    expertise and experience;

    tenure with the organization; and

    performance and potential to further our business objectives.

        The Talent and Compensation Committee generally reviews salaries in the early part of each year and, if appropriate, adjusts them to reflect changes in such considerations and to respond to market conditions and competitive pressures. The table below reflects the extent of increases in 2020 to the base salaries for our NEOs, made to better align their pay with the market and to recognize positive performance and Company results in the prior years. These changes in base salary were made in February 2020, prior to the time most of the impact of the pandemic, including the suspension of our cruising operations, was known. As mentioned previously, there will be no merit adjustments for 2021.

 
  Base Salary    
  Base Salary    
 
 
  Percent
Change
  Percent
Change
 
Name
  2019   2020   2021  

Richard D. Fain

  $ 1,300,000   $ 1,300,000   0.0 % $ 1,300,000   0.0 %

Jason T. Liberty

  $ 875,000   $ 950,000     8.6 % $ 950,000     0.0 %

Michael W. Bayley

  $ 950,000   $ 1,000,000   5.3 % $ 1,000,000   0.0 %

Lisa Lutoff-Perlo

  $ 780,000   $ 820,000     5.1 % $ 820,000     0.0 %

Harri U. Kulovaara

  $ 770,000   $ 810,000   5.2 % $ 810,000   0.0 %

Performance Based Annual Incentive

        Our Chairman & CEO receives approximately 70% of his target annual cash compensation in performance-based pay pursuant to our Executive Short-Term Bonus Plan (the "Executive Bonus Plan,") and performance-based pay accounts for more than half of target annual cash compensation for each of our other NEOs. The Executive Bonus Plan is designed to reward our executives for the achievement of the Company's annual financial and/or strategic goals and, to recognize individual contributions.

        For 2020, the Talent and Compensation Committee established the following framework for the Executive Bonus Plan, which is generally consistent with prior years:

Target Annual Incentives:

        The annual target performance-based incentive for each NEO is expressed as a percentage of base salary. In establishing the target percentage, the Talent and Compensation Committee considers the role and level of each executive and competitiveness with our Market Comparison Group.

        At its February 2020 meeting, the Talent and Compensation Committee increased the target annual incentive for Mr. Liberty, Mr. Bayley and Mr. Kulovaara to make the target cash compensation more competitive with the market and to incentivize positive performance. The following table shows the 2019 and 2020 bonus targets of each NEO. These changes in bonus targets were made in February 2020, prior to the time most of the impact of the

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COVID-19 pandemic was known, including the suspension of our cruising operations. As mentioned previously, there will be no changes to the bonus targets for 2021.

Name
  2019 Bonus Target
(% of base salary)
  2020 Bonus Target
(% of base salary)
  2021 Bonus Target
(% of base salary)
 

Richard D. Fain

  225 % 225 % 225 %

Jason T. Liberty

    140 %   145 %   145 %

Michael W. Bayley

  135 % 140 % 140 %

Lisa Lutoff-Perlo

    130 %   130 %   130 %

Harri U. Kulovaara

  80 % 100 % 100 %

Metrics and Weighting:

        In prior years, financial results were the predominant measure of both Corporate and Brand performance, comprising 70% of the annual bonus opportunity. KPI's measuring Net Revenue Yield, Net Cruise Costs excluding Fuel, Guest Satisfaction, Employee Engagement and Safety, Security, Health and Environmental Stewardship represented the remaining 30% of the bonus opportunity. At the February 2020 meeting, the Talent and Compensation Committee determined that targets could not be determined for these criteria due to the uncertainty caused by the spread of COVID-19 and subsequent travel restrictions. As a result, the Talent and Compensation Committee deferred the establishment of criteria for the annual incentive plan and subsequently convened in April, May, and June of 2020.

        In June 2020, the Talent and Compensation Committee established the nine criteria below as the Company's corporate goals for fiscal year 2020 under the Executive Bonus Plan. The nine criteria are related to the Company's response to the COVID-19 pandemic and how it would protect its guests, employees and ships as the COVID-19

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pandemic unfolded. These nine criteria replaced the financial performance criteria and the KPIs used in prior years and are as follows:

    Criteria

  Description

    Leadership during the pandemic       Represents the degree to which management has led our COVID-19 pandemic efforts, compared to other cruise, hospitality, and local companies.    
    Contribution to liquidity targets       Represents the degree to which the business was able to respond to liquidity targets and ensure necessary capital during a prolonged period with suspended cruise operations.    
    Safe operation of vessels — relocation of ships, layup scenarios, return to service       Represents our efforts to operate our ships in the most cost effective and safe manner during a time of lay-up and return to service.    
    Service suspension — CDC coordination, government relations       Represents coordination with the CDC and various governments and governmental agencies related to the suspension of cruising, the return of passengers and crew, and the provisioning of our ships during our layup period.    
    Repatriation and planned return of crew       Represents the actions taken to ensure our crew members were repatriated in a timely, safe, and efficient manner.    
    Global shoreside office closures and reentry       Represents the actions taken during the closure of our offices, the actions to prepare our offices for reopening, including the establishment of testing, safety, cleaning, and quarantine protocols.    
    Employee headcount actions and restructuring       Represents the actions taken to reduce payroll spend and restructure the business to ensure best use of our human capital.    
    Healthy Return to Service plan and execution       Represents the actions taken to work with the CDC, governmental agencies, and destinations on protocols for the safe and healthy return to sailing.    
    Health and safety of the crew members       Represents the actions taken to ensure our crew members have a clean and safe environment in which to work and live, are tested on a regular basis to ensure they are COVID free and implement protocols in the event they should become ill.    

        For fiscal year 2020, it was determined that the annual incentive plan components for our Chairman & CEO would be weighted 80% on the nine criteria described above, and 20% on an Individual component. For the other NEOs, the weightings were 50% on the nine criteria and 50% on the Individual component. The change in the normal allocation from one-third of weighting on the Individual Component for the NEOs below the Chairman & CEO reflects the unique nature of the responsibilities each assumed during the year in support of the nine criteria as further detailed below.

2020 Nine Criteria Performance Review

        Leadership During the Pandemic:    Our Company led the cruise industry through the COVID-19 pandemic by optimizing our experienced personnel and planning during the most transformative period in our history. We were at the forefront of developing initiatives that positively impacted our industry: We helped lead the creation of the Healthy Sail Panel, a group of esteemed medical experts that developed and delivered 74 recommendations to support the industry's, and our, healthy return to sail; we collaborated with global marine and health organizations providing expertise and counsel on strategies to resume cruise operations; we supported our travel advisors and helped them rebuild their businesses; we led the resumption of cruising operations in Singapore with Quantum of

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the Seas; and, we reinvented the safety drill incorporating new technology, higher levels of safety, and an improved guest experience with Muster 2.0.

        We were able to accomplish all of this and more by prioritizing the engagement, health, and well-being of our employees throughout fiscal year 2020. Our frequent shoreside pulse surveys demonstrated an overall increase in engagement — 87% in April to 93% in September, which level of engagement carried on through December. In July 2020, we surveyed our shipboard population. The results from that survey showed that nine out of ten crew members positively rated our handling of their repatriation. Additionally, we implemented robust mental health and crew wellness initiatives for both active and at-home crew members.

        Healthy Return to Service Plan and Execution:    Our contributions to the Healthy Sail Panel and the 74 recommendations we delivered directly impacted our own "Pathway Plan-Healthy Sail Plan." We researched, developed, and are implementing more than 122 protocols and 294 policies that are now part of our safety management system. We established a mobilization plan to disembark crew and guests utilizing "Infection Prevention Control" best practices. We installed a contact tracing program using new technologies. In conjunction with the University of Nebraska Medical Center, we conducted our first ever bioaerosol test onboard Oasis of the Seas' HVAC systems, advancing our technical and medical team's plan to combat airborne pathogens. Finally, we selected and procured equipment from the best-in-market and reliability diagnostics company, Cepheid, for testing and identifying SARS-CoV-2. All these actions are helping advance our Healthy Sail Plan.

        Contribution to Liquidity:    Throughout fiscal year 2020, we've taken several approaches to bolster liquidity:

    Approximately $3.0 Billion capital expenditure deferral or reduction in 2020 to align priorities and reduce spend.  With respect to our newbuild order book, we negotiated with both shipyards and with our export credit facility lenders to defer (i) installment payments due throughout the course of the loan and (ii) final payments due upon delivery of each vessel. We reduced or deferred ship modernization, private destinations, and Digital/ AI / IT in Newbuild CapEx, while maintaining and optimizing necessary investments to protect our assets, including dry docks, ship maintenance, information technology, cybersecurity and regulatory spend. We settled committed spend at reduced rates and favorable payment terms.

    $3.4 Billion cruise operating expenditure reduction while the fleet is out of service.  We reduced sales and marketing and general and administrative expenses, and reduced running expenses, including repatriation of approximately 50,000 crew and the renegotiation of existing contracts.

    $9.3 Billion capital market transactions with the least dilution to shareholders vs. our peers. We successfully accessed capital across multiple markets, some for the first time in decades and created innovative structures to reduce the cost of liquidity. We leveraged bank and export credit relationships to achieve covenant relief, approximately $1 billion in additional liquidity from a debt holiday with our export credit lenders, and an early crisis bridge loan. Our methodical approach to capital raising helped reduce interest burden, while our implementation of a flexible structure supports our return to financial health while mitigating dilution.

        Repatriation and Planned Return of Crew:    Since March 2020, we repatriated approximately 50,000 crew in a highly caring and efficient manner. For crew who were not permitted back in their countries or for crew who were not comfortable returning home, we provided a safe and secure environment to live onboard our ships until such time as they were able to safely return home. We continue to work closely and communicate with our crew as we prepare to return to service.

        Global Shoreside Office Closures and Reentry:    We continue to evaluate our office closure and reentry procedures on a case-by-case basis. At the onset of the COVID-19 pandemic, we successfully moved our entire shoreside workforce to a remote environment and quickly provided them with the support and tools needed to operate in a virtual environment. Last year from June to July, we opened our US headquarters with 400 employees returning. We established a playbook and were able to test protocols and training with 1,200 employees. We also facilitated PCR testing for employees and family members, administering more than 1,200 tests over the summer.

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        Internationally, we have opened six offices in Hong Kong, China, Finland, Germany, France & New Zealand. All other locations are in a remote working status and remain closed in the UK, Norway, Ecuador, Mexico, Brazil and Ecuador. We continue to evaluate the status of the COVID-19 pandemic in these countries and will re-open these offices when we determine it is safe to do so.

        Employee Headcount Actions and Restructuring:    Within six weeks of closing the US headquarters located in Miami, we took action to reduce shoreside headcount and favorably impact savings with approximately 23% of our U.S. shoreside employees being impacted and, except for the minimum safe manning shipboard crew required to operate the ships during the suspension of operations, our shipboard crew were notified that their contracts would end early and they would be notified about new assignments when operations resume in the future. Additionally, we suspended business travel and instituted a hiring freeze.

        Service Suspension — CDC Coordination, Government Relations:    Fluctuating lockdowns and travel restrictions around the world, combined with the prolonged CDC Conditional Sail Order and stipulations, continue to present challenges. We have regular, fruitful discussions with the CDC and other health regulators globally and have submitted to the CDC all requested and required documentation to date.

        As we await the resumption of sailing in the U.S., we continue to work collaboratively with top-tier destination authorities, in partnership with the Healthy Sail Panel, to ensure they understand our commitment to safety for their communities as well as our guests and crew.

        Safe operation of vessels — relocation of ships, layup scenarios, return to service:    We've taken several steps for reductions in vessels, port expenses, and marine operations capital expenditures, including reducing our vessel operating expenses and marine operation capital expenditures, as well as conducting several remote audits in lieu of in person audits.

        Health and Safety of the Crew Members:    The health and safety of our crew remain top priorities. We've enhanced our medical facilities on board and across our fleet with non-infectious and infectious disease zones to effectively manage cases onboard in the long-term. In addition to our new disembarkation plan, proactive protocols, and our crew wellbeing initiatives, we've launched an Innovative Leadership Program to equip leaders with tools to help manage the emotional and physical wellbeing of our crew and lead a positive crew experience.

2020 Annual Incentive Plan Determination

        The Talent and Compensation Committee objectively assessed the nine criteria set forth above. As part of their review, they considered, among other things, our management of cash and expenditures, our leadership in establishing the Healthy Sail Panel, with epidemiological and policy experts, health authorities and various governments around the globe to ensure a healthy and safe return to cruising for guests, crew and the communities visited, the safe operation of our ships related to the return of guests and repatriation of crew, the on-going safety for those manning our ships during layup and return to service, and our new safety and containment protocols related to the COVID-19 pandemic. Based on their evaluation of the actions taken by the Company, and other specific successes outlined previously in this discussion, the Talent and Compensation Committee approved the payout of the bonus component related to the nine criteria at 95%.

Individual Performance Measurement:

        The individual performance component of our Executive Bonus Plan awards is intended to reward managerial decision-making, behavioral interaction, and overall contribution. All NEOs have an individual performance component. In determining the funding level of this component, the Talent and Compensation Committee considered the recommendation of Mr. Fain, for each of the NEOs reporting to him, achievement of his or her individual goals and overall contribution to our successful growth, how each one directed their area of responsibility to meet the challenges created by the COVID-19 pandemic and our return to service, and the results of specific projects they were responsible for during the year.

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        With respect to Mr. Fain, the Talent and Compensation Committee recognized the following key performance highlights:

    Acted swiftly to achieve a positive liquidity position when the cruise industry was disproportionately impacted by shutdowns related to the COVID-19 pandemic;

    Led the creation of the Healthy Sail Panel, a group of the best minds and leaders in public health, biosecurity, epidemiology, hospitality, and maritime operations;

    Led the Company's overall response to the pandemic including taking a public leadership role within the industry and with the CDC and others;

    Enhanced the Company's focus on Inclusion and Diversity by signing the CEO Action Pledge and committed to continued dialogue with employees though transparent discussions, mentorship and sponsorship programs, external diverse partnerships, development, and improved recruiting practices; and

    Facilitated the Company's recognition as 2020 Forbes Best Employers for Diversity, Human Rights Campaign Foundation — 2020 Corporate Equality Index (CEI) LGBTQ Workplace Equality Honoree, 2021 Glassdoor Best Places to Work — US Companies.

        With respect to Mr. Bayley, the Talent and Compensation Committee recognized the following key performance highlights:

    Upheld and strengthened the Royal Caribbean International brand through leadership and continued communication with guests despite unprecedented circumstances prompted by the COVID-19 pandemic;

    Demonstrated leadership through the repatriation of approximately 50,000 crew members and provided a safe and secure environment for crew members unable to return to home due to various restrictions or who were uncomfortable returning;

    Led the care for crew members, onboard and at home, through the introduction of the Hardship Fund and Employee Assistance Programs; increased and improved methods for communication to crew members;

    Served as a board member of the Cruise Line Industry Association ("CLIA") Europe and Executive Committee member for CLIA US;

    Developed and co-chaired America's Cruise Tourism Task Force, a committee comprised of six appointed leaders from FCCA destination partners in the Caribbean, Mexico, and South/Central America alongside leaders from the six major cruise lines in North America; and

    Continued leadership of diversity and inclusion within the Royal Caribbean International organization.

        With respect to Mr. Liberty, the Talent and Compensation Committee recognized the following key performance highlights:

    Improved management of capital and achieved capital expenditure deferrals and reductions to align priorities and reduce spend across the Company;

    Reduced operational expenditures to achieve a lower monthly burn rate;

    Accessed capital across multiple markets and reduced the cost of liquidity with the least dilution to shareholders compared to peers;

    Established internal cash management measures to control cash spend and manage working capital, renegotiated vendor commitments and announced divestitures of non-core assets including Azamara, Pullmantur, and two Royal Caribbean branded ships;

    In July 2020, led the acquisition of the Company's remaining interest Silversea Cruises, making Silversea a wholly-owned brand;

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    Led our information technology organization, which facilitated a successful transition to a virtual work environment for global shoreside employees; and

    Continued to lead our diversity and inclusion efforts.

        With respect to Ms. Lutoff-Perlo, the Talent and Compensation Committee recognized the following key performance highlights:

    Upheld and strengthened the Celebrity brand through leadership and continued communication with guests despite unprecedented circumstances prompted by the COVID-19 pandemic;

    Demonstrated leadership through the repatriation of approximately 50,000 crew members and provided a safe and secure environment for crew members unable return home due to home country restrictions or who were uncomfortable returning;

    Led the care for crew members, onboard and at home, through the introduction of the Hardship Fund and Employee Assistance Programs;

    Continued to innovate despite being out of service with the launch of "Always Included", Celebrity's new model which includes unlimited drinks, Wi-Fi, and gratuities; and

    Continued to lead our diversity and inclusion efforts within the Celebrity organization, including the history- making all female bridge on International Woman's Day in March 2020.

        With respect to Mr. Kulovaara, the Talent and Compensation Committee recognized the following key performance highlights:

    Led the ship design efforts to make ships more resilient to biological outbreaks;

    Facilitated the Medical Facility Enhancement Program in order to prepare our vessels for a healthy return to service;

    Worked with shipyards, governments and financial institutions to boost liquidity by deferring installment payments;

    Led the cross functional effort to optimize the spending, ship design, and specifications of our vessels;

    Renegotiated terms and timelines for deployment with shipyards to ensure the Company maintained a competitive position;

    Worked to drive the transformation towards a carbon neutral future of our vessels;

    Continued to lead diversity and inclusion efforts within the New Build organization; and

    Facilitated the delivery of three new builds: Silver Origin, Silver Moon and Celebrity Apex.

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Actual 2020 Performance-Based Annual Incentive Payout

        Based on the nine criteria established by the Committee and Individual Performance, the following table shows the 2020 performance-based annual incentive payout as a percentage of target for each award component. In total, the NEOs received bonuses equal to:

 
  2020 Actual Funding
Levels by Component
(as a % of target)
   
 
 
  Total Funding
Level (as a % of
Target)
 
Name
  Corporate   Individual  

Richard D. Fain

  N/A (1) N/A (1) N/A (1)

Jason T. Liberty

    95 %   110 %   102.5 %

Michael W. Bayley

  95 % 110 % 102.5 %

Lisa Lutoff-Perlo

    95 %   110 %   102.5 %

Harri U. Kulovaara

  95 % 110 % 102.5 %

(1)
Mr. Fain elected to forego his bonus.

        The following table shows each NEO's target and actual bonus awards for 2020. The 2020 actual awards for our NEOs reflect the Company's performance against the nine criteria and individual performance in support of our operations and key initiatives.

 
   
  Actual 2020 Annual Incentive Plan Payout by Component    
   
 
 
  2020 Target Payout   Actual Total
2020 Payout
  Actual Total
2019 Payout
 
Name
  Corporate   Individual  

Richard D. Fain

  $ 2,925,000   N/A (1) N/A (1) 0   $ 4,006,080  

Jason T. Liberty

  $ 1,377,500   $ 654,313   $ 757,625   $ 1,411,938   $ 1,731,001  

Michael W. Bayley

  $ 1,400,000   $ 665,000   $ 770,000   $ 1,435,000   $ 1,803,361  

Lisa Lutoff-Perlo

  $ 1,066,000   $ 506,350   $ 586,300   $ 1,092,650   $ 1,098,259  

Harri U. Kulovaara

  $ 810,000   $ 384,750   $ 445,500   $ 1,130,250 (2) $ 1,320,446  

(1)
Mr. Fain elected to forego his bonus.

(2)
During fiscal year 2020, the Company took delivery of three ships. Mr. Kulovaara is entitled to a discretionary bonus of $150,000 per ship, but this year it was reduced to $300,000 in the aggregate, which is included in the $1,130,250 amount listed above.

        Awards under our Executive Bonus Plan, including awards to our NEOs, may be subject to clawback if the Company is required to restate its financial results for the bonus plan year and it is determined that the applicable executive's fraud, negligence or intentional misconduct was a significant contributing factor to the restatement.

2020 Total Cash Compensation

        The cash compensation for our NEOs, made up of base salary, annual incentives, and in the case of Mr. Kulovaara, a discretionary bonus based on completed ship deliveries, were all lower in 2020 as compared to 2019, as detailed below. Mr. Fain received 88% less in cash compensation in 2020 than he received in 2019. The other NEOs collectively earned 11% less in cash compensation in 2020 than they did in 2019. In total, our NEOs collectively earned 39% less cash in 2020 than they did in 2019.

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Cash Compensation

Name and Principal Position
  Year   Salary(1)   Bonus(2)   Non-Equity
Incentive Plan
Compensation(2)
  Declined
Non-Equity
Incentive Plan
Compensation
  Total
Cash
Payments
 

Richard D. Fain

  2020   $ 645,000     $ 3,042,000 (3) ($ 3,042,000 ) $ 645,000  

Chairman &

  2019   $ 1,276,923     $ 4,006,080     $ 5,283,003  

Chief Executive Officer

  2018   $ 1,100,000     $ 3,500,200     $ 4,600,200  

Jason T. Liberty

   
2020
 
$

818,798
       
$

1,411,938
       
$

2,230,736
 

EVP, Chief Financial Officer

    2019   $ 866,346         $ 1,731,001         $ 2,597,348  

    2018   $ 788,462         $ 1,685,523         $ 2,473,985  

Michael W. Bayley

 

2020

 

$

866,346

 



 

$

1,435,000

 



 

$

2,301,346

 

President and CEO,

  2019   $ 941,923     $ 1,803,361     $ 2,745,284  

RCI

  2018   $ 870,769     $ 1,577,143     $ 2,447,912  

Lisa Lutoff-Perlo

   
2020
 
$

710,558
       
$

1,092,650
       
$

1,803,208
 

President and CEO,

    2019   $ 770,769         $ 1,098,259         $ 1,869,028  

Celebrity Cruises

    2018   $ 688,462         $ 1,228,458         $ 1,916,920  

Harri U. Kulovaara

 

2020

 

$

803,846

 

$

300,000

 

$

830,250

 



 

$

1,934,096

 

EVP, Maritime

  2019   $ 761,923   $ 450,000   $ 870,446     $ 2,082,369  

  2018   $ 692,308   $ 450,000   $ 764,728     $ 1,907,036  

(1)
Amounts reflect base salary paid during the applicable calendar year in accordance with our bi-weekly payroll cycle. Although there are generally 26 pay periods in each calendar year, depending on the start and end dates of each cycle, there could be a higher (27) number of pay periods (or portions thereof) in any given year.

(2)
We report annual Executive Short-Term Bonus Plan awards in the column titled "Non-Equity Incentive Plan Compensation". For Mr. Kulovaara, the amount reported in the "Bonus" column reflects his bonus awarded in recognition of his efforts in connection with our newbuild program. During fiscal year 2020, the Company took delivery of three ships. Mr. Kulovaara is entitled to a discretionary bonus of $150,000 per ship, but this year it was reduced to $300,000 in the aggregate.

(3)
Mr. Fain elected to voluntarily forego the entire amount of his fiscal year 2020 bonus under the Executive Bonus Plan.

Long-Term Incentive Awards

        Our long-term incentive award program is the most significant element of our overall compensation program and comprises on average approximately 66% of target total compensation for our NEOs (73% for our Chairman & CEO and an average of 61% for our other NEOs). We structure our long-term program to align with shareholder interests, reward the achievement of long-term goals and promote stability and corporate loyalty among the executives. We use a combination of performance shares and time-based restricted stock units ("RSUs") in our long-term incentive program to balance performance and retention objectives effectively and efficiently.

        At the first regularly scheduled meeting of each year (which generally occurs in February), the Talent and Compensation Committee determines the target equity award value to be delivered to each NEO. At the time of the February 2020 meeting, COVID-19 was not widespread and had little impact on our business at that point. Having just completed a very strong 2019, the decisions made by the Talent and Compensation Committee described below were in recognition of such year and were made without knowledge of the full extent to which our business would be negatively impacted in the days to come.

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        In determining the appropriate long-term incentive award value, the Talent and Compensation Committee considered:

    the compensation paid to comparable executives in the Market Comparison Group;

    a review of each of the elements of total direct compensation; and

    the NEO's contribution to the overall results of the Company.

        Ensuring that NEO compensation continues to motivate senior leadership to act consistently with long-term shareholder interests and fostering the retention of our senior leadership remain two key priorities of our executive compensation program; this is true for our ongoing programs and also true in the difficult years that will frame this pandemic. Coming off of another strong performance year, and recognizing each of Mr. Fain's, Mr. Liberty's, Mr. Bayley's, Ms. Lutoff-Perlo's and Mr. Kulovaara's total target compensation positioning as compared to market compensation, the Talent and Compensation Committee felt it appropriate to take steps in fiscal year 2020 to better position these leaders toward the market in terms of target pay opportunity. Accordingly, to achieve the desired level of market competitiveness and reflect performance, the Talent and Compensation Committee approved the following increases in the target award values for each of our NEOs in fiscal year 2020.

 
  Long-Term Incentive Awards  
Name
  2019 Grant
Values
  2020 Grant
Values
  %
Change
 

Richard D. Fain

  $ 8,750,000   $ 11,250,000   28.6 %

Jason T. Liberty

  $ 2,800,000   $ 3,500,000     25.0 %

Michael W. Bayley

  $ 4,100,000   $ 5,000,000   22.0 %

Lisa Lutoff-Perlo

  $ 2,300,000   $ 2,750,000     19.6 %

Harri U. Kulovaara

  $ 1,150,000   $ 1,500,000   30.4 %

        As in prior years and consistent with competitive market practice, in fiscal year 2020, our long-term incentive awards for our NEOs consisted of a mix of performance share awards ("PSAs") and RSUs. Mr. Fain's award is allocated 75% in the form of PSAs and 25% in RSUs. For other NEOs, 60% of the awards are given in the form of PSAs and 40% in the form of RSUs.

RSU Vesting Schedule

        To promote retention (and except as provided in connection with our "Vesting Into Retirement Policy" to the extent applicable), the RSUs vest in equal annual installments over a four-year period commencing on the first anniversary date of the grant. As the RSU awards are inherently tied to the performance of our common stock, we consider a vesting schedule based on continued service appropriate to provide both retention and performance incentives. Our "Vesting Into Retirement Policy" is described further on page 53.

Performance Share Plan Mechanics

        As outlined above, at least 60% of each NEO's target equity award for fiscal year 2020 consisted of PSAs. For this portion of the award, the NEO receives an award on the grant date expressed as a target number of PSAs. The actual number of shares ultimately delivered to the executive in settlement of the award ranges from 0% to 200% of target based on our performance results with regards to the predetermined metric or metrics across the measurement period. To receive the shares in settlement of this award, the executive must, with certain exceptions (including as provided in connection with our "Vesting Into Retirement Policy" to the extent applicable), remain employed through the settlement date of the award, which is three years after the grant date.

        As awarded, payouts for performance share grants made in 2020 and vesting in 2023 were based on 2022 Adjusted EPS and 2022 ROIC. These metrics were equally weighted so that 50% of the total payout will be based

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on Adjusted EPS and 50% of the total payout will be based on ROIC. Subsequent to the granting of these awards, the metrics were modified, and now include leverage. The weighting of the metrics is now 40% for the EPS metric, 40% for the ROIC metric and 20% for the leverage metric.

Payout under 2018 Performance-Based Equity Awards

        In March 2021, the Talent and Compensation Committee determined the payout for the PSAs issued to the NEOs in early 2018. The original target payouts for such grants were based on 2020 Adjusted EPS and 2020 ROIC, which were established at the time of grant. Our long-term performance equity program depends on our ability to set achievable targets and allows for discretion when events occur outside the control of the Company's management. Consistent with prior years and our equity plan documents, the Talent and Compensation Committee generally excludes the impact of any event or occurrence which the Talent and Compensation Committee determines should appropriately be excluded, usually because such event or occurrence is outside of management's control. This includes without limitations (a) restructurings, discontinued operations, extraordinary items and other unusual or non-recurring changes (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company's management or (c) a change in applicable accounting standards. The Talent and Compensation Committee has historically utilized this discretion at the end of each year to determine appropriate adjustments to the payout level of the PSAs for events such as hurricanes which have impacted a large number of sailings, a broad area, and the ports we visit.

        The COVID-19 pandemic is, by definition, an event beyond the control of Company's management and has had an incomprehensible impact on our operations and the retentive value of the compensation packages for our officers. As such and in line with our equity plan documents, the Talent and Compensation Committee took into consideration the achievement of results prior to the COVID-19 pandemic and the shareholder value created prior to the cessation of cruise operations, the desire to align our pay programs with goals that can be impacted by the business leaders, the uncertainty on a return to service date, and the goals set forth for the performance-basis of the fiscal year 2020 performance period under the Executive Bonus Plan in utilizing their discretion regarding the payout of the 2018 grant. Based on the widespread impact of the COVID-19 pandemic on our business, the Talent and Compensation Committee decided to exclude the impact of fiscal year 2020 on the attainment of the 2018 PSA goals. The Talent and Compensation Committee considered, among other things, that had we utilized financials for the year before the COVID-19 pandemic, the payout would have been 148% of the original share value. Our 2018 PSAs were intended to incentivize performance over several years and were on track for awards substantially in excess of target value. Given the impact of the COVID-19 pandemic on our business, the Talent and Compensation Committee utilized downward discretion in its determination to payout the 2018 PSAs at 100% of the original targeted number of shares.

2021 Executive Compensation Program

        With the impact of the COVID-19 pandemic on our business, including the disruption of service and the subsequent reduction in headcount of more than 1,200 employees (representing approximately 15% of our shoreside workforce), we are not, as an organization, providing merit increases in 2021 for any employees, including our NEOs. Further, we have not changed the target bonus potential for our shoreside employees as part of our annual cycle in 2021 for any employees, including our NEOs.

        Our 2021 compensation program is generally consistent with our 2020 program in its design. Recognizing that:

    recent compensation review from Willis Towers Watson shows that our position against the market has improved in terms of base salary, variable pay targets and actual payouts over the last several years;

    competition for talent continues to increase;

    each of the NEOs have played and continues to play a critical role in our success; and

    we expect greater than market median performance.

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        During the annual review of NEO compensation in February and March 2021, the Talent and Compensation Committee made no changes to the Target Cash Compensation, inclusive of Base Salary and the Annual Incentive Plan, for any of our NEOs for 2021.

 
  Base Salary  
Name
  2020   2021  

Richard D. Fain

  $ 1,300,000   $ 1,300,000  

Jason T. Liberty

  $ 950,000   $ 950,000  

Michael W. Bayley

  $ 1,000,000   $ 1,000,000  

Lisa Lutoff-Perlo

  $ 820,000   $ 820,000  

Harri U. Kulovaara

  $ 810,000   $ 810,000  

 

Name
  2020 Bonus Target
(% of base salary)
  2021 Bonus Target
(% of base salary)
 

Richard D. Fain

  225 % 225 %

Jason T. Liberty

    145 %   145 %

Michael W. Bayley

  140 % 140 %

Lisa Lutoff-Perlo

    130 %   130 %

Harri U. Kulovaara

  100 % 100 %

        We are currently working with governments and governmental agencies around the world to return to service and provide our guests with meaningful destinations and experiences. The 2021 Performance Based Annual Incentive metrics will be determined in May 2021, when we hope to have better insight into our ability to return to service in key markets, such as the United States and Europe. We anticipate that the 2021 Performance Based Annual Incentive goals will be related to our healthy return to service and/or financial goals as can be reasonably estimated at that time. In 2022, we anticipate returning to the use of financial results and KPI's as our annual incentive metrics. Historically, financial results were the predominant measure of both Corporate and Brand performance, comprising 70% of the annual bonus opportunity. KPI's measuring Net Revenue Yield, Net Cruise Costs excluding Fuel, Guest Satisfaction, Employee Engagement and Safety, Security, Health and Environmental Stewardship represented the remaining 30% of the bonus opportunity.

        Our Talent and Compensation Committee felt it appropriate to take steps to ensure that the long-term incentives within our program continue to provide motivation and retentive value to our NEOs. The Talent and Compensation Committee took several actions related to Long Term Incentive Plans. In making these decisions, the Talent and Compensation Committee considered the volatile and uncertain macroeconomic environment created by the ongoing COVID-19 pandemic, and the loss of retentive value of existing long-term incentive compensation.

        The Long-Term Incentive Awards were developed in consultation with the Talent and Compensation Committee's independent compensation consultant to address near term uncertainty while keeping the executives' long-term incentive compensation aligned with creating shareholder value. The awards were approved in recognition of an inability to earn any PSAs based on established goals for the PSAs previously issued in fiscal years 2019 and 2020, the executives' extraordinary efforts to protect employee and guest safety and to increase liquidity and align costs during the pandemic, as well as to incent executives continued focus on driving

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improvement in key financial metrics over the longer-term. The actions by the Talent and Compensation Committee related to the Long-Term Incentive Plans for our NEOs took place in two areas:

    1.
    Modification of our 2020 Performance Share Grants. The goals established for our PSAs granted in fiscal year 2020 were based upon 2022 ROIC and 2022 EPS targets. These goals were established in February 2020, before the cessation of cruising, and based upon a markedly different outlook than the reality that came about in March 2020 with the cessation of cruising. In March 2021, a year after the cessation of cruising, our passenger counts are a small fraction of those seen prior to the cessation of cruising. In order to maintain the focus of the organization on the long-term viability of the organization and shareholder value, the Talent and Compensation Committee modified the metrics to include our new EPS, ROIC, and Leverage targets for 2022. These shares will vest on February 20, 2023 and settle subject to performance certification by the Talent and Compensation Committee.

    2.
    Increase in Annual Long-Term Incentives – In March 2021, special equity awards were made to each of Mr. Liberty, Mr. Bayley and Ms. Lutoff-Perlo. Each of these awards is (A) comprised (i) 50% in the form of RSUs and (ii) 50% in the form of PSAs and (B) vest 50% two years from the grant date and 50% three years from the grant date. The PSA targets match those established for the 2022 and 2023 fiscal years based on EPS, ROIC and leverage metrics. We made these equity grants to ensure that the overall NEO compensation packages continue to be competitive against our peer group and ensure retentive levels of outstanding equity. These actions were made to motivate these executives and recognize them for their efforts and leadership throughout the pandemic, as well as provide greater stability to our recovery efforts through awards that align well with shareholder interests. Furthermore, the Talent and Compensation Committee wanted to provide ample motivation for these executives to ensure that their continued focus was on returning to service as quickly as practicable. Shares awarded in connection with these increased grants are not included in our "Vesting Into Retirement Policy" described on page 53.

Executive Compensation Philosophy

        As detailed below, our fundamental compensation philosophy and practices have not changed. As a result of the 98% support that the Company received for NEO compensation at the 2019 Annual Shareholder meeting, the Talent and Compensation Committee entered 2020 determining that no immediate changes in our compensation philosophy were required. The approach we take and the reasoning for the approach has not changed. We adhere to a pay-for-performance philosophy. In line with this philosophy, we have designed our compensation programs to support three main goals:

    align the interests of our executives with the interests of our shareholders;

    recruit, retain, and motivate an elite management team; and

    reward positive contributions to both short-term and long-term corporate performance.

        We provide compensation to our executives consisting of three principal elements: base salary, performance-based annual incentive bonus and equity awards. The objectives and key features of each pay element are described below.

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GRAPHIC

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        Our commitment to performance-based compensation is illustrated by the following pie charts, which show the mix of each compensation component at target levels for our Chairman & CEO and for our other NEOs for 2020.

Royal Caribbean Cruises LTD.
2020 Target Compensation – Chairman & CEO
92% Variable Compensation

GRAPHIC

Royal Caribbean Cruises LTD.
2020 Target Compensation – Other Named Executies
83% Variable Compensation

GRAPHIC

        The percentages in the foregoing chart for the other NEOs represent a weighted average of each element of compensation for such officers.

        We place significant focus on the design of our executive compensation programs as we believe their effectiveness is crucial to our success as a company. We assess our programs regularly and strive to continuously make improvements as well as incorporate shareholder feedback. Our 2020 executive compensation program was generally consistent with the prior year's program.

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        In furtherance of our compensation program objectives, we maintain a high level of corporate governance standards within our executive compensation programs as follows:

    What We Do

  What We Do Not Do

   

Establish a mix of compensation components, including fixed and variable pay and short- and long-term incentives, that encourages focus on both the short- and long-term interests of the Company and its shareholders;

Set challenging short- and long-term performance objectives;

Hold our executives to meaningful stock ownership guidelines to further align executives' motivations with those of shareholders;

Provide severance benefits in the event of a change-of-control only if there is an accompanying termination;

Design our programs so as not to encourage unnecessary and excessive risk taking;

Include "clawback" provisions for our cash and equity incentive awards;

Hold an annual "say-on-pay" advisory vote; and

Utilize an independent compensation consultant to advise the Talent and Compensation Committee.

     

No repricing of underwater stock options;

No cash buyouts of underwater stock options;

No tax-gross up provisions on any change-of-control severance benefits;

No excessive perquisites or other executive-only benefits; and

No hedging of the Company's stock by corporate officers, employees, or directors.

   

Equity Grant Practices

        Timing of Equity Awards:    The Talent and Compensation Committee generally grants annual equity awards to NEOs and other members of management at the first regularly scheduled Talent and Compensation Committee meeting of the calendar year, usually held in February. Equity awards may be granted outside of the annual grant cycle in connection with events such as hiring, promotion or extraordinary performance or as part of a special retention effort.

        Calculation of Equity Awards:    To determine the number of RSUs or PSAs awarded, the total grant value is multiplied by the RSU or PSA target allocation, as applicable, and then divided by the fair market value of our common stock as of the grant date. Our equity plan defines fair market value of a share of our common stock as the average of the high and low sale prices of our common stock on the NYSE on the grant date.

        Share Limits:    The maximum number of shares underlying awards that may be granted to an employee in any calendar year is 500,000 shares.

        Clawback Policy:    For awards of PSAs, the Company has adopted a "clawback" policy applicable to the award recipients, including the NEOs. If, for the two year period following the end of the three-year performance period of each award, the Company is required to restate its financial results for the award performance period in a manner that would have adversely affected the number of PSAs subject to the award, the Talent and Compensation Committee may (regardless of any fault on the part of the participant) adjust the number of PSAs subject to the award to reflect the number of PSAs that would have been payable under the restated financial statements, as

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determined by the Talent and Compensation Committee. For example, for the grants made in February 2018, the compensation recoupment period would extend to December 31, 2022.

        Vesting Into Retirement Policy:    Starting with grants made in 2014, certain of our executives may be eligible for accelerated or continued vesting of applicable long-term equity awards under our "Vesting Into Retirement" policy. In recognition that different motivations and considerations prevail for officers approaching retirement, awards granted to senior executives who are at least 62 years of age and who have been employed by the Company for at least 15 years are generally not subject to forfeiture upon termination of employment after the later of the first anniversary of the grant date and the first anniversary of the date that the officer meets both the age and service criteria. In order to maintain an alignment of interest with our shareholders, these awards continue to be subject to restrictions on transfer that will lift over a four-year period for the RSUs and over a three-year period for PSAs (mirroring the typical vesting schedule for these awards).

Market Comparison Group

        In the normal course of events for our executives' compensation, the process of making compensation decisions begins with establishing a Market Comparison Group. Our Market Comparison Group is the foundation of our annual compensation review — which begins in September and runs through February — and is used to help guide the Talent and Compensation Committee's decisions regarding competitive pay levels and design architecture.

        Although we strive for consistency, the list of companies that comprise our Market Comparison Group are developed by our independent compensation consultant and reviewed and approved annually by the Talent and Compensation Committee using the following criteria:

    Availability of public information — company is publicly-traded and compensation data is available in public filings

    Relevant industry group — company included in at least one of ten leisure and tourism industry groups

    Equivalent revenue — company is within approximately 0.5 to 2 times our revenue

    Similar business strategy — company falls under hospitality, hotels and motels, leisure time, leisure products or resort industry categories

    Global Footprint — company has significant operations outside of the United States

    Historical precedent — company included in the prior year's Market Comparison Group

        The below Market Comparison Group, which was approved by our Talent and Compensation Committee in September 2019, was used to inform 2020 compensation decisions.

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Market Comparison Group Selection Criteria

GRAPHIC

Elements of the 2020 Executive Compensation Program

Stock Ownership Guidelines

        We recognize the importance of aligning our management's interests with those of our shareholders. As a result, the Board, at the recommendation of the Talent and Compensation Committee, has established stock ownership guidelines for all of our officers. Under these guidelines, the NEOs are expected to accumulate over an applicable compliance period Company stock having a fair market value equal to the multiples of their base salaries as shown in the table below.

Name
  Stock Ownership
Guideline (as a
multiple of base
salary)

Richard D. Fain

  8 times

Jason T. Liberty

  5 times

Michael W. Bayley

  5 times

Lisa Lutoff-Perlo

  5 times

Harri U. Kulovaara

  5 times

        For purposes of determining compliance with the guidelines, officers are permitted to include derivative forms of Company equity, such as unvested and vested stock options, unvested restricted stock units and unvested performance shares following completion of the performance period. Officers who have not reached their target equity ownership during the applicable compliance period are required to retain at least 50% of the net after-tax shares received upon the vesting and exercise of equity incentive awards until their target equity ownership is

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reached. Once an officer's target equity ownership is achieved, if such officer's equity ownership thereafter falls below the target equity ownership, such officer will not be permitted to sell any Company stock until he or she again becomes fully compliant with his or her target equity ownership under these guidelines. In 2020, the Talent and Compensation Committee added an additional requirement that the Target Amount shall include at least 20% of the Target Amount being held in the form of common stock that is fully vested and otherwise owned without risk of forfeiture to the Company. As a result of this change, the NEOs have been given a transition period of two years to reach the target holdings specified in the Guidelines, although our Chairman and CEO already owns outright more than 100% of his required target amount.

        We have a policy that prohibits the members of our Board and our officers and employees from engaging in hedging transactions with respect to our securities, including through the use of instruments such as prepaid variable forwards, equity swaps, collars and exchange funds, and from short selling our securities.

Other Elements of Compensation

        In an effort to offer our employees a competitive remuneration package, we provide them with certain retirement, medical and welfare benefits, including a qualified non-contributory profit-sharing retirement plan. The NEOs are eligible to participate and/or receive such benefits on a basis commensurate with that of other employees.

        Since January 1, 2009, as a result of Section 457A of the U.S. Internal Revenue Code, in lieu of contributions to the Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan (the "SERP"), each NEO receives, on an annual basis, a lump-sum cash payment of the benefits that would have been accrued under the SERP for services in a given year but for a change in tax laws. Amounts earned in 2020 in lieu of the SERP benefit are disclosed in the Summary Compensation Table — All Other Compensation column, as further detailed in the "2020 All Other Compensation Table."

        We also offer the NEOs certain perquisites which include: Company paid automobile leases, discounts on Company cruises, annual executive physicals and travel expenses for guests accompanying executives on business travel. Our executives who have been on international assignment are also eligible to receive tax equalization and preparation assistance. Our NEOs also receive life insurance coverage equal to five times their annual base salary.

Severance

        We have entered into Employment Agreements with each of the NEOs. These agreements provide for severance benefits in connection with various termination of employment scenarios, which are discussed in this proxy statement under the heading "Employment Agreements."

        We currently do not specifically provide for enhanced severance benefits if termination should follow a change-of-control of the Company. However, the Talent and Compensation Committee may, in its discretion, accelerate the vesting of long-term incentive awards in connection with a change-of-control, and the vesting of long-term incentive awards will occur automatically in the event of a qualifying termination within 18 months following a change-of-control.

Governance and Process

        Our executive compensation program is overseen by the Talent and Compensation Committee. Talent and Compensation Committee members are appointed by our Board and meet the independence and other requirements of the NYSE and other applicable laws and regulations. Talent and Compensation Committee members are selected based on a variety of factors, including their knowledge and experience in compensation matters.

        As provided for in its charter, the Talent and Compensation Committee has sole discretion to retain a compensation consultant and is directly responsible for the appointment, compensation and oversight for such consultant's work. The Talent and Compensation Committee has retained Willis Towers Watson as its independent

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compensation consultant and has asked Willis Towers Watson to regularly provide independent advice on the following:

    the composition of our Market Comparison Group;

    our compensation plan risk;

    current trends in executive and director compensation design; and

    the overall levels of compensation and types and blend of various compensation elements.

        Willis Towers Watson has direct access to the Talent and Compensation Committee's members and advises them regarding matters for which the Talent and Compensation Committee is responsible. Within this framework, Willis Towers Watson has been instructed to work collaboratively with management, including our Chairman & CEO and our Chief Human Resources Officer to gain an understanding of our business and compensation programs to help Willis Towers Watson advise the Talent and Compensation Committee. In addition, Willis Towers Watson also regularly confers with our senior management and human resources department to collect, analyze and present data requested by the Talent and Compensation Committee. The total annual expense for the executive and director compensation advising services provided to us by Willis Towers Watson during 2020 was approximately $224,700. In 2020, we also purchased industry surveys from Willis Towers Watson for approximately $58,538.

        During 2020, our management separately engaged Willis Towers Watson to provide insurance brokerage services. Aggregate fees billed during 2020 for these services were approximately $115,000. The personnel who performed these services for us operated separately and independently of the Willis Towers Watson personnel who performed executive and director compensation-related services for the Talent and Compensation Committee. While the decision to engage Willis Towers Watson for such other services was made by management, the Talent and Compensation Committee assessed whether the services provided by Willis Towers Watson raised any conflicts of interest pursuant to applicable SEC and NYSE rules and concluded that no such conflicts of interest existed that would prevent Willis Towers Watson from independently advising the Talent and Compensation Committee. We do anticipate that, given the wide scope of services provided by Willis Towers Watson, we may continue to use them to provide insurance services outside of executive compensation from time to time. Willis Towers Watson has advised the Talent and Compensation Committee of a number of policies in place to ensure that their executive compensation advice is not influenced by this other work, including that:

    individuals who are not part of the executive compensation consulting team (other than designated quality reviewers) are precluded from involvement in the development of recommendations regarding the compensation of our executives and directors;

    executive compensation consultants who advise us on director and executive compensation may not serve in broader relationship-management roles for us; and

    the compensation paid to Willis Towers Watson executive compensation consultants is not tied to the fees paid, or to the expansion of fees paid, by us.

        For each NEO other than the Chairman & CEO, the Talent and Compensation Committee consults with and receives the recommendation of the Chairman & CEO, but the Talent and Compensation Committee is ultimately responsible for determining whether to accept such recommendations. For the compensation related to the Chairman & CEO, the Talent and Compensation Committee meets in an executive session and considers the opinion of Willis Towers Watson as well as other criteria identified in this Compensation Discussion & Analysis.

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Report of the Talent and Compensation Committee

        The Talent and Compensation Committee of the Board of Royal Caribbean Cruises Ltd. has reviewed and discussed with management the Compensation Discussion & Analysis and, based on such review and discussion, has recommended to the Board that the Compensation Discussion & Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for 2020.

        THE TALENT AND COMPENSATION COMMITTEE

Vagn O. Sørensen, Chairman
John F. Brock
Ann S. Moore
Amy McPherson
Donald Thompson

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Executive Compensation Tables

Summary Compensation Table

        The following table sets forth information regarding the compensation to our NEOs for the year ended December 31, 2020.


2020 Summary Compensation Table

Name and Principal Position
  Year   Salary(1)(2)   Bonus(6)   On-Cycle
Stock
Awards(3)
  One-Time
Stock
Award(3)
  Non-Equity
Incentive Plan
Compensation(4)
  Declined
Non-Equity
Incentive
Plan
Compensation
  Change in
Pension Value
and NQDC
Earnings(5)
  All Other
Compensation(7)
  Total  

    

                                         

Richard D. Fain

  2020   $ 645,000     $ 11,171,146     $ 3,042,000   ($ 3,042,000 ) $ 154,879   $ 112,478   $ 12,083,503  

Chairman &

  2019   $ 1,276,923     $ 8,699,024     $ 4,006,080     $ 189,347   $ 187,545   $ 14,358,919  

Chief Executive

  2018   $ 1,100,000  


$ 7,664,567  


$ 3,500,200    


$ 157,948   $ 12,422,715  

Officer

                                         

Jason T. Liberty

   
2020
 
$

818,798
       
$

3,228,563
       
$

1,411,938
       
$

89,503
 
$

100,429
 
$

5,649,231
 

EVP, Chief

    2019   $ 866,346         $ 2,621,510         $ 1,731,002         $ 91,472   $ 113,674   $ 5,424,004  

Financial

    2018   $ 788,462       $ 2,136,947       $ 1,685,523             $ 140,932   $ 4,751,864  

Officer

                                                             

Michael W. Bayley

 

2020

 

$

866,346

 



 

$

4,943,887

 



 

$

1,435,000

 



 

$

74,355

 

$

116,244

 

$

7,435,832
 

President and

  2019   $ 941,923     $ 4,061,696     $ 1,803,361     $ 110,190   $ 140,711   $ 7,057,881  

CEO, RCI

  2018   $ 870,769  


$ 3,086,742  


$ 1,577,143    


$ 187,432   $ 5,722,086  

Lisa Lutoff-Perlo

   
2020
 
$

710,558
       
$

2,719,084
       
$

1,092,650
       
$

130,177
 
$

96,854
 
$

4,749,323
 

President and

    2019   $ 770,769         $ 2,278,490         $ 1,098,258         $ 140,211   $ 142,114   $ 4,429,482  

CEO, Celebrity

    2018   $ 688,462       $ 1,786,762       $ 1,228,458             $ 136,520   $ 3,840,202  

Cruises

                                                             

Harri U. Kulovaara

 

2020

 

$

803,846

 

$

300,000

 

$

1,483,167

 



 

$

830,250

 



 

$

81,764

 

$

107,746

 

$

3,606,773
 

EVP, Maritime

  2019   $ 761,923   $ 450,000   $ 1,139,243     $ 870,446     $ 98,382   $ 102,335   $ 3,422,329  

  2018   $ 692,308   $ 450,000   $ 893,480   $ 934,236   $ 764,728       $ 109,262   $ 3,844,014  

(1)
Amounts reflect base salary paid during the applicable calendar year in accordance with our bi-weekly payroll cycle. Although there are generally 26 pay periods in each calendar year, depending on the start and end dates of each cycle, there could be a higher (27) or lower (25) number of pay periods (or portions thereof) in any given year.

(2)
Amounts reflect salary actually paid during the applicable calendar year. For the period beginning on April 1, 2020 and ending on September 30, 2020, (1) Mr. Fain elected to forego $655,000 of his total annual base salary in respect of fiscal year 2020 ; (2) Mr. Liberty elected to forego $125,433 of his total annual base salary in respect of fiscal year 2020; (3) Mr. Bayley elected to forego $125,962 of his total annual base salary in respect of fiscal year 2020; and (4) Ms. Lutoff-Perlo elected to forego $103,288 of her total annual base salary in respect of fiscal year 2020.

(3)
These columns report the fair value of restricted stock unit awards at their grant date in 2020, 2019 and 2018, as applicable, calculated in accordance with the provisions of FASB ASC Topic 718. These columns also include the value of the performance shares. These amounts represent the fair value of the performance shares award at the service inception date (i.e. the date the Talent and Compensation Committee authorized the award) based upon the then-probable outcome of the performance conditions (i.e. the target value of the awards). The value of the 2020 performance shares on the service inception date assuming that the highest level of performance conditions will be achieved for Messrs. Fain, Liberty, Bayley, Kulovaara and Ms. Lutoff-Perlo is $16,875,030, $3,850,901, $6,000,001, $1,800,088 and $3,299,979, respectively. For the assumptions used in valuing these awards for purposes of computing this expense, please see Note 13 of the consolidated financial statements in the Company's Annual Report for the year ended December 31, 2020.

(4)
Amounts reflect cash bonus amounts earned pursuant to the Executive Bonus Plan. Mr. Fain elected to forego the entire amount of his fiscal year 2020 bonus under the Executive Bonus Plan.

(5)
Each of the NEOs participated in the Royal Caribbean Cruises Ltd. Retirement Savings Plan as of December 31, 2020. Prior to January 1, 2009, each of the NEOs participated in the Royal Caribbean Cruises Ltd. SERP. In 2020, 2019 and 2018, certain of the NEOs continued to maintain a balance in the SERP of amounts accrued prior to January 1, 2009. The aggregate above-market earnings on these NEO's holdings in the SERP are listed under the column titled "Change in Pension Value Earnings." The above-market portion of earnings is calculated as the total earnings in the plan, less the earnings that would have been achieved under an annual growth rate equal to 120% of the applicable federal long-term rate at the end of each year.

(6)
We report annual Executive Bonus Plan awards in the column titled "Non-Equity Incentive Plan Compensation". For Mr. Kulovaara, the amount reported in the "Bonus" column reflects a discretionary bonus awarded to Mr. Kulovaara in recognition of his efforts in connection with our newbuild program. During fiscal year 2020, the Company took delivery of three ships. Mr. Kulovaara normally is entitled to a discretionary bonus of $150,000 per ship, but this year it was reduced to $300,000 in the aggregate.

(7)
Please see the following table entitled "2020 All Other Compensation" for an itemized disclosure of this element of compensation.

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2020 All Other Compensation

 
Perquisites Benefits  
Name
Auto
Lease(1)
Other
Perquisites(2)
Life
Insurance
Policies
Company Contributions
to Qualified Deferred
Compensation Plans(3)
Benefit
Payouts(4)
Total

Richard D. Fain

$ 14,928 $ 0 $ 33,050 $ 28,500 $ 36,000 $ 112,478

Jason T. Liberty

$ 15,515 $ 0 $ 2,319 $ 28,500 $ 54,095 $ 100,429

Michael W. Bayley

$ 14,400 $ 6,950 $ 7,838 $ 28,500 $ 58,556 $ 116,244

Lisa Lutoff-Perlo

$ 17,101 $ 1,448 $ 6,942 $ 28,500 $ 42,863 $ 96,854

Harri U. Kulovaara

$ 14,400 $ 0 $ 12,654 $ 28,500 $ 52,192 $ 107,746

(1)
These amounts include payments or allowance for auto lease, maintenance and repairs, registration and insurance.

(2)
Other perquisites include airline expense for spouse travel, discounts on Company cruises, personal tax consulting services and executive physicals. There are no expenses relating to airline for spouses of the NEO's; the value of discounts on Company cruises for Mr. Bayley is $144; the value of personal tax consulting services for Mr. Bayley is $6,806; and the value of executive physicals for Ms. Lutoff-Perlo is $1,448.

(3)
Represents Company contributions to the Royal Caribbean Cruises Ltd. Retirement Savings Plan.

(4)
Since January 1, 2009, in lieu of contributions to the SERP, each NEO receives, on an annual basis, a lump-sum cash payment of the benefits that would have been accrued under the SERP for services in a given year but for the adoption of Section 457A of the Internal Revenue Code effective as of January 1, 2009. The amounts included in this column represent amounts payable to the NEOs for service in 2020, all of which are taxable as ordinary income.

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Grants of Plan-Based Awards in 2020

        The following table provides information for each of the NEOs regarding the range of awards potentially available for service in 2020 under our Executive Bonus Plan and equity awards granted in 2020.


2020 Grants of Plan-Based Awards

 
   
   
   
   
   
   
   
  All Other
Stock Awards:
Number of
Shares of
Stocks or
Units
   
 
 
   
  Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
  Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
   
 
 
   
  Grant Date
Fair Value
of Stock
Awards
 
 
  Grant
Date
 
Name
  Threshold   Target   Maximum   Threshold   Target   Maximum  

    

                                     

Richard D. Fain

  2020  


$ 2,925,000   $ 8,190,000  














  2/20/20  











76,562   153,124  


$ 8,437,515 (3)

  2/20/20  

















25,521   $ 2,733,631 (4)

Jason T. Liberty

   
2020
   

 
$

1,377,500
 
$

3,443,750
   

   

   

   

   

 

    2/20/20                     19,055     38,110       $ 1,925,451 (3)

    2/20/20                             12,704   $ 1,303,113 (4)

Michael W. Bayley

 

2020

 





$

1,400,000

 

$

3,500,000

 
















  2/20/20  











27,222   54,444  


$ 3,000,001 (3)

  2/20/20  

















18,148   $ 1,943,887 (4)

Lisa Lutoff-Perlo

   
2020
   

 
$

1,066,000
 
$

2,665,000
   

   

   

   

   

 

    2/20/20                     14,972     29,944       $ 1,649,989 (3)

    2/20/20                             9,981   $ 1,069,095 (4)

Harri U. Kulovaara

 

2020

 





$

810,000

 

$

2,025,000

 
















  2/20/20  











8,167   16,334  


$ 900,044 (3)

  2/20/20  

















5,444   $ 583,123 (4)

(1)
These values represent the target and maximum payouts under the Executive Bonus Plan.

(2)
These amounts represent the target and maximum number of shares underlying the performance shares authorized by the Talent and Compensation Committee on the service inception date of February 20, 2020. The actual payout levels for the grants authorized on February 12, 2020 will be set by the Talent and Compensation Committee in early 2023 following the end of the three-year performance period. The performance shares vest in one installment on the later of the third anniversary of the service inception date and the date on which the actual payout levels are set by the Talent and Compensation Committee.

(3)
Under the applicable FASB ASC Topic 718 rules, the "grant date" for accounting purposes will not be determined until the performance period has been completed because of the discretion provided to the Talent and Compensation Committee to make adjustments to the payout levels. Therefore, the amount reported in the table represents the fair value of the award at the service inception date (i.e. the date the Talent and Compensation Committee authorized the award) based upon the then-probable outcome of the performance conditions (i.e. the target value of the awards). See Note 13 of the consolidated financial statements in the Company's Annual Report for the year ended December 31, 2020, regarding assumptions underlying the valuation of these awards.

(4)
The grant date fair values of the equity awards are calculated in accordance with FASB ASC Topic 718. See Note 13 of the consolidated financial statements in the Company's Annual Report for the year ended December 31, 2020, regarding assumptions underlying the valuation of these awards.

Employment Agreements

        We have employment agreements with each of our NEOs. These agreements are intended to enhance the retention and motivation of these key employees and include provisions protecting the Company such as

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non-competition and non-solicitation clauses. The terms of the employment agreements are summarized below and apply uniformly to all of our NEOs, except that Ms. Lutoff-Perlo's agreement is with Celebrity Cruises Inc.

        Pursuant to each employment agreement, each NEO is entitled to receive an annual base salary, which may be increased, but not decreased, at any time during the term at our sole discretion. Each NEO is also eligible to participate in and receive awards, in our discretion, pursuant to any cash incentive compensation programs and any equity or long-term incentive plans on terms available to similarly situated executives of the Company.

        Each NEO's employment can be terminated by us or by them at any time. If we terminate a NEO's employment without "cause" or if the NEO resigns for "good reason" (as both terms are defined in the applicable employment agreement), he or she is entitled to (i) two times his or her then-current base salary payable over the two-year period following termination, (ii) two times his or her "target" bonus under the annual Executive Bonus Plan for the year in which the termination of employment occurs, generally payable in accordance with our normal bonus payment practices, (iii) continued payment of health and medical benefits for a period of two years commencing on the date of termination, or until such time that he or she commences employment with a new employer, whichever occurs first, and (iv) payment of reasonable professional search fees relating to outplacement. At our sole discretion, each NEO is also eligible to receive a one-time lump-sum termination bonus to be paid two years after the date of termination in an amount not to exceed 50% of his or her base salary as of the date of termination. All of these payments are conditioned on the NEO executing a general release of claims for the benefit of the Company.

        If the NEO's employment is terminated as a result of the NEO's death or disability, the NEO, or his or her legal representative, is entitled to, within 60 days of the NEO's death or disability (i) payment in a lump sum of compensation equal to two times his or her base salary in effect at the time of termination of employment, (ii) payment of the "target" bonus he or she would have been entitled to receive in each year during the two year period commencing on the date of termination under the annual Executive Bonus Plan and (iii) any death or disability benefit, as applicable, provided in accordance with the terms of the Company's employee benefit plans then in effect. If the NEO's employment is terminated for cause, we have no obligation to provide severance payments, except for certain amounts that were earned and unpaid as of the date of termination or as required by law.

        Any outstanding equity grants held by the NEO at the time of termination will be treated in the manner provided for in each equity grant. Please see further information regarding treatment of equity grants under the heading "Payment Upon Termination of Employment."

        Each NEO has agreed not to compete with the Company or its affiliates during the term of employment and for two years following termination of employment and to refrain from (i) employing the Company's or its affiliates' employees during this period or (ii) soliciting employees, consultants, lenders, suppliers or customers from discontinuing, modifying or reducing the extent of their relationship with the Company during such period. During the term of the agreements and subsequent thereto, the NEOs have agreed not to disclose or use any confidential information.

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        The following table provides information on the holdings of stock options, RSUs and performance shares by the NEOs at December 31, 2020.


Outstanding Equity Awards at 2020 Fiscal Year-End

 
  Option Awards   Stock Awards  
Name
  Number of
Securities
Underlying
Unexercised
Options —
Exercisable
  Option
Exercise
Price
  Option
Expiration
Date
  Number of Shares
or Units of Stock
Held That Have
Not Vested
  Market Value
of Shares or
Units of
Stock Held that
Have Not Yet
Vested(1)
  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares That
Have Not
Vested
  Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares That
Have Not
Vested(1)
 

    

                             

Richard D. Fain

  37,513   $ 46.18   2/8/21          

        70,306 (2) $ 5,251,155   264,278 (7) $ 19,738,924  

Jason T. Liberty

                     
52,330

(3)

$

3,908,528
   
66,566

(8)

$

4,971,815
 

Michael W. Bayley

 


 



 



 


68,544

(4)

$

5,119,551

 


96,110

(9)

$

7,178,456
 

Lisa Lutoff-Perlo

                     
29,463

(5)

$

2,200,591
   
53,318

(10)

$

3,982,321
 

Harri U. Kulovaara

 


 



 



 


22,559

(6)

$

1,684,932

 


28,020

(11)

$

2,092,814
 

(1)
The market value of unvested and unearned stock awards is calculated as of December 31, 2020, as the aggregate number of shares underlying outstanding unvested RSUs and performance shares multiplied by the year end closing stock price of $74.69.

(2)
Includes (i) 25,521 RSUs which vested on February 20, 2021 and (ii) 44,785 performance shares which vested on March 24, 2021.

(3)
Includes (i) 1,894 RSUs which vested on February 7, 2021, (ii) 3,489 RSUs, half of which vested on February 13, 2021 and half of which are scheduled to vest on February 13, 2022, (iii) 7,113 RSUs, one-third of which vested on February 13, 2021 and the remainder of which will vest in equal installments on each of February 13, 2022 and February 13, 2023, (iv) 16,661 RSUs, 6,408 of which are scheduled to vest on September 27, 2021, and 10,253 of which are scheduled to vest on September 27, 2022, (v) 12,704 RSU's, one-fourth of which vested on February 20, 2021 and the remainder of which vest in equal installments on February 20, 2022, February 20, 2023 and February 20, 2024, (vi) 10,469 performance shares which vested on March 24, 2021.

(4)
Includes (i) 3,156 RSUs, which vested on February 7, 2021, (ii) 5,040 RSUs, one-half of which vested on February 13, 2021 and the remainder of which will vest on August 2, 2021, (iii) 10,417 RSUs, one-third of which vested on February 13, 2021 and the remainder of which is scheduled to vest in equal installments on August 2, 2021 and February 13, 2023, (iv) 16,661 RSUs, 6,408 of which are scheduled to vest on September 27, 2021 and 10,253 of which are scheduled to vest on September 27, 2022, (v) 18,148 RSU, one-fourth of which vested on February 20, 2021, and the remainder of which vests on August 2, 2021 and (vi) 15,122 performance shares, which vested on March 24, 2021.

(5)
Includes (i) 11,107 RSUs, 4,272 of which are scheduled to vest on September 27, 2021 and 6,835 of which are scheduled to vest on September 27, 2022 (iii) 9,981, which vested on February 20, 2021 and (iii) 8,375 performance shares which vested on March 24, 2021.

(6)
Includes (i) 5,553 RSUs, 2,136 of which are scheduled to vest on September 27, 2021, and 3,417 of which are scheduled to vest on September 27, 2022, (ii) 7,451 RSUs, 2,070 of which is scheduled to vest on each of September 5, 2021 and September 5, 2022 and 3,311 of which is scheduled to vest on September 5, 2023, (iii) 5,444, which vested on February 20, 2021 and (iv) 4,111 performance shares which vested on March 24, 2021.

(7)
Includes (i) 111,154 performance shares scheduled to vest on the date in 2022 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant and (ii) 153,124 performance shares scheduled to vest on the date in 2023 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant. The performance shares scheduled to vest in 2022 and 2023 included in the table represent the maximum number of performance shares authorized by the Talent and Compensation Committee in February 2019 and February 2020, respectively.

(8)
Includes (i) 14,228 performance shares scheduled to vest on the date in 2022 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant and (ii) 19,055 performance shares scheduled to vest on the date in 2023 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant. The performance shares scheduled to vest in 2022 and 2023 included in the table represent the maximum number of performance shares authorized by the Talent and Compensation Committee in February 2019 and February 2020, respectively.

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(9)
Includes (i) 41,666 performance shares scheduled to vest on the date in 2022 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant and (ii) 54,444 performance shares scheduled to vest on the date in 2023 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant. The performance shares scheduled to vest in 2022 and 2023 included in the table represent the maximum number of performance shares authorized by the Talent and Compensation Committee in February 2019 and February 2020, respectively.

(10)
Includes (i) 23,374 performance shares scheduled to vest on the date in 2022 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant and (ii) 29,944 performance shares scheduled to vest on the date in 2023 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant. The performance shares scheduled to vest in 2022 and 2023 included in the table represent the maximum number of performance shares authorized by the Talent and Compensation Committee in February 2019 and February 2020, respectively.

(11)
Includes (i) 11,686 performance shares scheduled to vest on the date in 2022 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant and (ii) 16,334 performance shares scheduled to vest on the date in 2023 when the Talent and Compensation Committee sets the actual payout level for purposes of such grant. The performance shares scheduled to vest in 2022 and 2023 included in the table represent the maximum number of performance shares authorized by the Talent and Compensation Committee in February 2019 and February 2020, respectively.

Option Exercises and Stock Vested in 2020

        The following table provides information for the NEOs on stock option exercises and RSU and performance shares that vested during 2020, including the number of shares acquired upon exercise or vesting and the value realized, before payment of any applicable withholding tax and broker commissions.


Option Exercises and Stock Vested in 2020

 
  Option Awards   Stock Awards  
Name
  Number of
Shares
Acquired on
Exercise
  Value
Realized on
Exercise
  Number of
Shares
Acquired on
Vesting
  Value
Realized on
Vesting
 

Richard D. Fain

  0   $ 0   140,060   $ 15,672,420  

Jason T. Liberty

            37,388   $ 3,876,489  

Michael W. Bayley

 





57,639   $ 6,142,980  

Lisa Lutoff-Perlo

            42,612   $ 3,779,190  

Harri U. Kulovaara

 





16,330   $ 1,696,483  

Payments Upon Termination of Employment

        The following table represents payments and benefits to which the NEOs would be entitled upon termination of their employment in accordance with their employment agreements and our equity plans and agreements. Termination of employment is assumed to occur, for purposes of this table, on December 31, 2020. The table does not include amounts a NEO would be entitled to receive without regard to the circumstances of termination, such as vested equity awards or accrued retirement benefits (if retirement eligible) and deferred compensation. Please see the "Outstanding Equity Awards at 2019 Fiscal Year End" table for more information. In most cases, the NEOs' entitlements upon termination of employment are governed by their employment agreement with the Company. These arrangements are described under the heading "Employment Agreements." In addition, the treatment of outstanding equity awards, which are unvested as of the time of termination, are treated in accordance with the agreement and plan applicable to the particular award, as described below. We do not provide any cash payments in the event of a change of control absent an employment termination nor do we increase the amount of cash severance that would be due to a NEO in the event of his termination of employment in connection with a change of control.

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2020 Payments Upon Termination of Employment

 
   
  Termination Type  
Name
  Benefit   Voluntary
Quit
  Death or
Disability
  Termination
w/o Cause or
for Good
Reason
  Involuntary
Termination
for Cause
  "Change of
Control
Termination"
  Retirement  

Richard D. Fain

  Severance Payment  


$ 2,600,000   $ 2,600,000  


$ 2,600,000  


  Settlement of Outstanding Annual Bonus Award  


$ 5,850,000   $ 5,850,000  


$ 5,850,000  


  Settlement of Outstanding Equity Awards (Restricted Stock Units and Performance Shares)  


$ 15,120,617  





$ 15,120,617  


  Medical and Dental Benefits Continuation  





$ 18,453  


$ 18,453  


  Outplacement Services  





$ 25,000  


$ 25,000  


               

  Total   $ 0   $ 23,570,617   $ 8,493,453   $ 0   $ 23,614,070   $ 0  

Jason T. Liberty

  Severance Payment       $ 1,900,000   $ 1,900,000       $ 1,900,000      

  Settlement of Outstanding Annual Bonus Award       $ 2,755,000   $ 2,755,000       $ 2,755,000      

  Settlement of Outstanding Equity Awards (Restricted Stock Units and Performance Shares)       $ 6,394,435           $ 6,394,435      

  Medical and Dental Benefits Continuation           $ 27,383       $ 27,383      

  Outplacement Services           $ 25,000       $ 25,000    
 

  Total   $ 0   $ 11,049,435   $ 4,707,383   $ 0   $ 11,101,818   $ 0  
               

Michael W. Bayley

  Severance Payment  


$ 2,000,000   $ 2,000,000  


$ 2,000,000  


  Settlement of Outstanding Annual Bonus Award  


$ 2,800,000   $ 2,800,000  


$ 2,800,000  


  Settlement of Outstanding Equity Awards (Restricted Stock Units and Performance Shares)  


$ 8,708,779  





$ 8,708,779