Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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McDermott
International, Inc.
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Charter)
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Statement, if Other Than the Registrant)
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Table of Contents
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY
STATEMENT
2017 |
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Table of Contents
In early 2017,
McDermott acquired the newly built pipelay and construction vessel Amazon to
better position the Company for ultradeepwater and subsea, umbilicals, risers
and flowlines projects. McDermott plans to upgrade the vessel to address the
ultradeepwater market with a state-of-the-art J-lay system outfitted with the
latest vessel technology.
Table of Contents
LETTER TO
STOCKHOLDERS
Gary P.
Luquette
Independent Chair
of the
Board
Our 2016 results are the
culmination of our three year journey to improve execution in our base
business while positioning McDermott for
growth. |
Dear Fellow Stockholders:
A Year of Strong
Financial and Operating Performance
We are pleased to report that 2016 was
a year of strong operational and financial performance for McDermott, despite
persistent challenges presented by the macro oil and gas market:
120% TSR $2.6B Revenues $142.3M Operating Income $4.3B Backlog
These strong results
are a testament to the leadership of McDermott and successfully executing our
operational strategy. Continued improvements in project execution, increased
focus on cost control and strengthening customer relationships all contributed
to our best results in many years, including the strongest total shareholder
return among peers for the second consecutive year.
The Culmination
of a Three Year Journey
Our 2016 results are the culmination of
our three year journey to improve execution in our base business while
positioning McDermott for growth. Although 2014 began with the business facing
financial difficulty, we took meaningful actions to develop and execute a
turnaround plan for our business. These actions resulted in considerably
improved financial results for 2015 against the backdrop of deteriorating market
conditions. In 2016, we remained highly focused on items within our control and
executed our operating strategy to drive sustainable and profitable growth with
an increased focus on stockholders, customers and all of our
stakeholders.
Continued
Alignment of Operating Strategy, Financial Goals and Executive
Compensation
Our 2016 results reflect the
achievement of our 2016 business objectives, which include driving enhanced
profitability through improved project execution, supporting future business
through increased backlog, promoting pricing discipline on new bids,
prioritizing liquidity needs through cost management and efficiently allocating
capital to profitable investments. Key 2016 over-arching initiatives, the One
McDermott Way and Taking the Lead, built upon 2015s progress and further
drove improvements in project execution and cost management, leading to
on-schedule milestone completions in all of our operating areas. Additionally,
as part of our commitment to cost containment, we completed our Additional
Overhead Reduction program, which generated $45.8M of additional cash savings in
2016.
Our 2016 executive compensation programs were thoughtfully structured to align with and
drive our operational performance and achieve financial targets. Stockholder
feedback has been and will continue to be influential in shaping our
compensation programs.
McDermott International,
Inc. 3
Table of Contents
Corporate
Governance, Board Oversight and Community
The extensive stockholder outreach
program we began in 2015 remained a key priority for our Board in 2016. Members
of our Board held discussions with holders of approximately 30% of our
outstanding common stock on an array of topics, and based on feedback received
we made adjustments to our compensation program, including returning to the use
of a relative metric in our long-term incentive plan, and also enhanced
governance processes, including placing a limit on the number of boards on which
our directors may serve. You will find additional details around these and other
changes on pages 11 and 38 of this Proxy Statement.
Ethics, compliance and sustainability
are integral to McDermotts long-term success and we are deeply committed to
ensuring all our employees, as well as those conducting business on our behalf,
adhere to principles of ethical behavior and core values which include a
personal commitment to integrity. Likewise, we realize the importance of
integrating sustainable and socially responsible practices into our business. We
are proud of our industry leading safety culture and the progress we have made
this year in reducing our environmental footprint and in supporting the
communities in which we operate.
Looking
Forward
Thanks to our Board and executive
teams success in executing our 2016 operating plan, McDermott has entered 2017
confidently, with over $3.0 billion of expected 2017 revenues booked in backlog
as of 2016 year-end, a strong pipeline of potential new projects and excitement
about our ability to continue differentiating ourselves to our global customers
for years to come.
I am pleased to invite you to attend
the 2017 Annual Meeting of Stockholders and, even if you are not able to attend,
encourage you to vote via proxy. The accompanying Proxy Statement highlights
many of our key activities and accomplishments in 2016 and contains information
on the matters to be acted on at the Annual Meeting.
On behalf of the Board, our executive
team, and the entire McDermott organization, thank you for your continued
interest and support, as we seek to leverage the momentum of 2016 and look to
the future.
Sincerely yours,
Gary P. Luquette
Independent Chair of the Board
March 24, 2017
YOUR VOTE IS
IMPORTANT.
Whether or not you plan to
attend the meeting, please take a few minutes now to vote your
shares. |
4 2017 Proxy
Statement
Table of Contents
McDERMOTT
INTERNATIONAL, INC.
757 N. Eldridge Pkwy.
Houston, Texas
77079
NOTICE OF 2017
ANNUAL MEETING OF STOCKHOLDERS
Time and Location |
10:00 a.m., local
time, on Friday, May 5, 2017 |
The Westin Houston
Hotel |
945 Gessner
Road |
Houston, Texas
77024 |
Record Date and Voting |
You are entitled to vote if you
were a stockholder of record at the close of business on March 13, 2017
(the Record Date). Each share of common stock is entitled to one vote
for each director nominee and one vote for each of the other proposals to
be voted on at the meeting. There were 243,047,477 shares of our common
stock outstanding on the Record Date. |
Items of
Business |
1. |
To
elect eight members to our Board of Directors, each for a one year
term. |
2. |
To
conduct an advisory vote to approve named executive officer
compensation. |
3. |
To
conduct an advisory vote on the frequency with which to hold advisory
votes on named executive officer compensation. |
4. |
To
ratify our Audit Committees appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the year ending
December 31, 2017. |
5. |
To transact such other business that
properly comes before the meeting or any adjournment
thereof. |
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Proxy
Voting Your vote is important. Please vote via proxy
promptly so your shares can be represented, even if you plan to attend the
Annual Meeting. You can vote by Internet, by telephone, or by requesting a
printed copy of the proxy materials and using the proxy card enclosed with
the printed materials. |
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By
internet |
By
Telephone |
By
mail |
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www.proxyvote.com |
Toll-free 1-800-690-6903 |
Follow instructions on your proxy
card |
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Notice and
Access
Instead of mailing a printed
copy of our proxy materials, including our Annual Report, to each stockholder of
record, we are providing access to these materials via the Internet. This
reduces the amount of paper necessary to produce these materials, as well as the
costs associated with mailing these materials to all stockholders. Accordingly,
on March 24, 2017, we began mailing a Notice of Internet Availability of Proxy
Materials (the Notice) to all stockholders of record as of the Record Date,
and posted our proxy materials on the Web site referenced in the Notice
(www.proxyvote.com). As more fully described in the Notice, all stockholders may
choose to access our proxy materials on the Web site referred to in the Notice
and/or may request a printed set of our proxy materials. In addition, the Notice
and Web site provide information regarding how you may request to receive proxy
materials in printed form by mail or electronically by email on an ongoing
basis.
Attending the
Annual Meeting
See page 71,
Questions and Answers About the Annual Meeting and Voting for
details.
By Order of the Board of
Directors,
Liane K.
Hinrichs
Secretary
March 24, 2017
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Stockholders to
Be Held on May 5, 2017. |
The proxy statement and annual report
are available on the Internet at www.proxyvote.com.
The following information applicable to
the Annual Meeting may be found in the proxy statement and accompanying proxy
card:
● |
The date, time and location of the
meeting; |
● |
A list of the matters intended to be acted on
and our recommendations regarding those matters; |
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Any control/identification numbers that you
need to access your proxy card; and |
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Information about attending the meeting and
voting in person. |
McDermott International,
Inc. 5
Table of Contents
ABOUT
MCDERMOTT
McDermott is a leading provider of
integrated engineering, procurement, construction and installation services for
offshore and subsea oil and gas field developments worldwide. We deliver fixed
and floating production facilities, pipelines and subsea systems, from concept
to commissioning, to customers including national oil companies and
international and independent oil companies. McDermott generally has 40 or fewer
active contracts at any given time, which typically span a duration of one to
three years, are performed in a variety of jurisdictions, and may individually
range from less than $50 million to more than $2 billion in total contract
value.
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Engineering |
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Procurement |
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Construction |
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Installation |
We design production facilities
in multiple phases through increased levels of definition to manage risks
and maximize value across all stages of project
development. |
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Certainty of supply requires early and thorough planning, a realistic
timetable, reliable expediting, a network of high quality suppliers and
subcontractors and understanding of the sourcing market. |
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Our global fabrication facilities
handle multiple, fast-track projects for conventional shallow water
structures, deepwater floating platforms and subsea
facilities. |
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Our fleet of vessels can be
mobilized safely and efficiently for installation campaigns anywhere in
the world, optimizing productivity and mitigating various risks associated
with operations offshore. |
McDermott at a Glance
New York Stock Exchange: MDR
Headquarters: Houston, Texas
Employees: Approximately 12,400 |
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Vessel Fleet: 12 construction and multi-service vessels
Customers: National, International and Independent Oil Companies |
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Financials (as of 12/31/16):
●TSR: 120%
●Revenue: $2.6B
●Operating Income: $142.3M
●Backlog: $4.3B |
Operating
Areas:
20 countries in oil and gas
producing regions worldwide
Forward-Looking Statements
McDermott cautions that the statements
in this proxy statement which are forward-looking, and provide other than
historical information, including, among other things, statements about backlog,
to the extent backlog may be viewed as an indicator of future revenues, and
about McDermotts expected 2017 revenues, future performance, bidding pipeline
and planned upgrades to the Amazon involve risks, contingencies and
uncertainties that may impact McDermotts actual results of operations.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. For a more complete
discussion of these and other risk factors, please see McDermotts annual and
quarterly filings with the Securities and Exchange Commission, including its
annual report on Form 10-K for the year ended December 31, 2016. Except to the
extent required by applicable law, McDermott undertakes no obligation to update
or revise any forward-looking statement.
6 2017 Proxy
Statement
Table of Contents
PROXY
SUMMARY
This proxy summary highlights
information contained elsewhere in this proxy statement, and is divided into
four sections:
I. |
2016 Financial Performance
Highlights and Strategy; |
II. |
Executive Compensation
Highlights; |
III. |
Board and Corporate Governance
Highlights; and |
IV. |
Items of Business for the Annual
Meeting. |
This summary does not contain all of
the information that you should consider, and you should read the entire proxy
statement carefully. As used in this proxy statement, unless the context
otherwise indicates or requires, references to McDermott, we, us, and
our mean McDermott International, Inc. and its consolidated subsidiaries. We
first sent or provided this proxy statement and the form of proxy for our 2017
Annual Meeting of Stockholders on March 24, 2017.
I. 2016 Financial Performance Highlights
and Strategy
McDermott International,
Inc. 7
Table of Contents
Total shareholder return (TSR) for
McDermott was 120% for 2016, as compared to our Proxy Peer Groups median TSR of
approximately 12%. McDermotts TSR was higher than the 2016 TSR for any of the
companies constituting our Proxy Peer Group. Our operating income also continued
to increase, with full year operating income of $142.3 million compared to 2015
operating income of $112.7 million and 2014 operating income of $16.4 million.
Order intake (including change orders) was $2.7 billion in 2016, which, while a
decrease from 2015, was considered positively in light of the lower for longer
oil and gas market that continued through 2016. Year-end 2016 backlog was
slightly up compared to year-end 2015, and provides a strong foundation for 2017
with approximately $3 billion of expected 2017 revenues already recorded in
backlog as of December 31, 2016. In evaluating the performance of David Dickson,
our President and Chief Executive Officer, the Board has considered these
performance results, as well as other financial and leadership goals detailed
further below, and believes that Mr. Dickson has succeeded in positioning
McDermott as a stronger, more durable business, particularly during a difficult
business cycle and extended challenging macro environment.
Following the appointment of David
Dickson as President and Chief Executive Officer in December 2013, and
notwithstanding a challenging macro oil and gas environment, over the past three
years McDermott has transformed as a company through stabilization of the
business, optimization via cost-reduction initiatives and growth through
strategic asset investment.
In continuation of McDermotts
transformation, our strategy in 2016 was to drive a sustainable, profitable and
growth-oriented business, with a focus on stockholders, customers and other
stakeholders. In furtherance of this strategy, our 2016 goals were
to:
● |
increase operating income via
improved project execution; |
● |
increase cash flows by prioritizing our
liquidity needs; |
● |
increase backlog and bookings to support our
future business; |
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promote pricing discipline on order intake
operating margins; and |
● |
efficiently allocate capital to profitable
investments to grow our business. |
Strong project execution, additional
cost management, improved liquidity culture and increased organizational
capabilities and competencies drove the execution of McDermotts strategy and
goals in 2016.
II. Executive Compensation
Highlights
The Compensation Committee is committed
to targeting reasonable and competitive total direct compensation for our Named
Executive Officers, or NEOs, with a significant portion of that compensation
being performance-based. Our compensation programs are designed to drive
achievement of our business strategies and provide competitive opportunities.
Accordingly, achievement of most of those opportunities depends on the
attainment of performance goals and/or stock price performance. McDermotts
compensation programs are designed to provide compensation that:
Attracts, motivates and retains
high-performing executives |
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Provides performance-based incentives to reward
achievement of short and long-term business goals and strategic objectives
while recognizing individual contributions |
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Aligns the interests of our executives with those of our stockholders |
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8
2017 Proxy
Statement
Table of Contents
The Compensation Committee has
designed and administered compensation programs aligned with this philosophy and
is committed to continued outreach to stockholders to understand and address
comments on our compensation programs.
2016 Compensation
Program |
Reflecting this philosophy, our NEO
compensation arrangements in 2016 provided for the continuing use of three
elements of target total direct compensation: annual base salary, annual
incentive provided under our Executive Incentive Compensation Plan, or EICP, and
long-term incentives, or LTI. In making compensation decisions for 2016, the
Compensation Committee considered McDermotts operating strategy and goals and
significantly improved operational and financial performance, with appreciation
of the lower for longer macro oil and gas environment and comments received
during the 2016 stockholder outreach program.
With respect to plan design, the
Compensation Committee:
● |
maintained consistency in the
2016 EICP performance metrics, with the exception of the elimination of
the MPI modifier following completion of the McDermott Profitability
Initiative, or MPI, in 2015; and |
● |
evolved the 2016 LTI performance metric to
relative Return on Average Invested Capital, or relative ROAIC, in
consideration of McDermotts transformation from turnaround and
stabilization to optimization for future growth. |
Performance metrics and performance levels used within
elements of annual and long-term compensation are designed to support our
strategic and financial goals and drive the creation of stockholder
value |
2016 Executive Incentive Compensation
Plan |
Goal |
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Performance
Metric |
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Drive profitability via improved project
execution |
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Operating Income |
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Prioritize liquidity
needs |
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Free Cash Flow |
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Support future business |
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Order Intake |
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Promote pricing discipline on new
work |
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Order Intake Operating
Margin |
2016 Long-Term Incentive Plan
Performance Units |
Efficiently allocate capital to
profitable investments |
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Relative Return on Average Invested
Capital |
McDermott International,
Inc. 9
Table of Contents
With respect to levels of compensation,
the Compensation Committee generally sought to maintain 2016 NEO compensation
consistent with 2015 levels, with the exception of Mr. Dickson, whose 2016
target LTI award was returned to 2014 levels following an increased target LTI
award in 2015, Mr. Spence, who received an increase in his 2016 target LTI award
to better approximate market range and Mr. Kennefick, who received an increase
in his 2016 target LTI award following his promotion in 2015. Accordingly, for
2016 NEO compensation, the Compensation Committee provided:
● |
No increases in annual base
salaries. |
● |
No increases in target annual incentive. |
● |
The same number of LTI units as awarded in
2015, other than for those NEOs whose target LTI awards were adjusted as
described above. Due to the decrease in the price of McDermott stock as of
the grant date for the 2016 annual LTI awards, as compared to the grant
date for the 2015 annual LTI awards, this resulted in a year over year
decrease in the grant date fair value of LTI awarded to the NEOs, with the
exception of Messrs. Spence and Kennefick, as noted
above. |
The mix of target total direct
compensation for Mr. Dickson for 2016 is shown in the chart below.
CEO TARGET 2016
COMPENSATION
10
2017 Proxy
Statement
Table of
Contents
Impact of 2016 Say on Pay Vote on
Executive Compensation and Stockholder Outreach |
2016 Say on
Pay Vote |
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Stockholder
Outreach |
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Stockholder
Feedback |
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Board
Engagement |
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Board
Response |
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In 2016, 87.6% of our
stockholders voted in favor on our executive compensation
program |
During both the Spring
and Fall of 2016, we reached out to stockholders representing
approximately 40% of our outstanding common stock and other stakeholders
to gain insight regarding their perspectives on corporate governance and
compensation matters |
We conducted meetings
with stockholders representing approximately 30% of our outstanding common
stock and also met with other stakeholders |
Meetings were led by
either our independent Compensation Committee Chair or our independent
Governance Committee Chair |
Our Board considered
the 2016 say on pay vote and the matters discussed during our 2016
stockholder and stakeholder outreach efforts, and made certain
corresponding changes in our compensation and governance programs as
indicated below |
What we heard |
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What we have done in
response |
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When effective |
Maintain consistency in executive compensation
plans |
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The financial metrics under our EICP operating income,
free cash flow, order intake and order intake operating margin have
remained consistent since 2014, with the exception of the use of the MPI
Modifier in 2015, which was not included as a metric for 2016. The
Compensation Committee approved the continuing use of these metrics for
the 2016 and 2017 EICP awards. |
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2014, 2015, 2016 and
2017 EICP Awards |
Consider returning to a relative
metric for LTI plan awards |
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The Compensation Committee
approved the use of Return on Average Invested Capital relative to a
competitor peer group as the performance metric for both the 2016 and 2017
Performance Unit awards. |
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2016 and 2017
Performance Unit
Awards |
Consider composition of Peer Group |
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The Compensation Committee added a competitive peer
group of both domestic and international peers for determining performance
under the 2016 and 2017 Performance Unit awards. |
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2016 and 2017 Performance Unit Awards |
Require double-trigger vesting of
equity awards upon a change in control |
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The 2016 long-term incentive
award grant agreements and 2016 McDermott International, Inc. Long-Term
Incentive Plan, or the 2016 LTIP, provide for double trigger vesting upon
a change in control, except where the awards are not assumed in the
transaction. |
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February 2016 and Approval of
2016 LTIP |
Maintain strong corporate governance
foundation |
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The Board adopted limits on the number of boards on
which directors may serve. Directors who serve as a CEO or senior
executive of a public company generally may serve on no more than two
public company boards and other directors may serve on no more than three
public company boards (in both instances, including the McDermott
Board). |
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November 2016 |
Maintain commitment to Board
refreshment |
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The Governance Committee
continued its commitment to Board refreshment. Consistent with our
By-Laws, Roger A. Brown will retire from our Board at the 2017 Annual
Meeting of Stockholders. |
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Ongoing |
Consider periodic usage of an independent third party
facilitator for Board and Committee evaluations |
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McDermott engaged an independent, third party
facilitator in connection with the Board of Director and Committee
evaluations conducted for 2017. |
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2017 Board Evaluations |
Provide disclosure on McDermotts
corporate social responsibility and sustainability activities |
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We have provided disclosure on
McDermotts corporate social responsibility and sustainability activities
in this proxy statement, and expect to continue to increase disclosures
around these activities in the future. |
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2017 Proxy Statement |
Continue stockholder engagement |
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The Board has prioritized stockholder engagement and
will be continuing its vigorous outreach program going forward. |
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Ongoing |
McDermott International,
Inc. 11
Table of Contents
III. Board and
Corporate Governance Highlights
We are committed to maintaining the
highest standards of corporate governance. The Board has built a strong and
effective governance framework, which has been designed to promote the long-term
interests of stockholders and support Board and management
accountability.
The Board of Directors has nominated
eight candidates, each for a one-year term.
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Age |
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Director Since |
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Independent |
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Committees |
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Other Current
Public Company Boards |
John F. Bookout,
III |
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63 |
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2006 |
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●Audit |
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●None |
Partner, Apollo Global |
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●Governance |
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Management, LLC |
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David
Dickson |
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49 |
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2013 |
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●None |
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●None |
President and Chief Executive Officer
of McDermott |
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Stephen G.
Hanks President, Chief Executive Officer
of Washington Group International, Inc. (retired) |
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66 |
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2009 |
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●Audit
●Governance
(Chair) |
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●Lincoln Electric Holdings, Inc.
●Babcock & Wilcox
Enterprises, Inc. |
Erich
Kaeser |
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61 |
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2016 |
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●Audit |
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●None |
Chief Executive Officer of Siemens
Middle East (retired) |
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●Compensation |
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Gary P.
Luquette President and Chief Executive
Officer of
Franks International N.V.
(retired)
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61 |
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2013 |
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●Compensation |
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●Franks International, N.V. |
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Non-Executive Chair of the Board
of |
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McDermott |
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William H.
Schumann, III |
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66 |
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2012 |
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●Audit (Chair) |
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●Avnet, Inc. |
Executive Vice President of
FMC
Technologies, Inc.
(retired)
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●Governance |
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●Tesoro
Corporation |
Mary L.
Shafer-Malicki Senior Vice President and
Chief Executive Officer of BP Angola (retired) |
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56 |
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2011 |
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●Compensation (Chair)
●Governance |
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●John Wood Group PLC |
David A.
Trice Chief Executive Officer of
Newfield Exploration Company
(retired) |
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69 |
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2009 |
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●Audit
●Compensation |
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●New Jersey Resources Corporation
●QEP Resources,
Inc. |
Board Independence
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Tenure Balance
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Relevant Skills and
Experience
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In accordance with our
Corporate Governance Guidelines, 8 of our 9 directors are independent,
including the Chair of the Board. |
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Our Board is appropriately
refreshed, and our directors bring a balance of experience and fresh
perspectives. |
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Our directors bring leadership
experience in fields relevant to
McDermott. |
12
2017 Proxy Statement
Table of Contents
Corporate Governance
Highlights |
McDermotts Board has implemented
policies and structures that we believe are among best practices in corporate
governance. The Corporate Governance section of this proxy statement beginning
on page 16 describes our governance framework, which includes the
following:
Current Board
and Governance Information |
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Size of Board |
9 |
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Board Orientation |
Yes |
Number of Independent
Directors |
8 |
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Succession Planning
Oversight |
Yes |
Separate Chair and CEO |
Yes |
|
Board Risk Oversight |
Yes |
Board Meetings Held in 2016 |
16 |
|
Code of Conduct for Directors, Officers
and Employees |
Yes |
Mandatory Retirement
Age |
72 |
|
Stock Ownership Guidelines
for Directors and Executive Committee, or EXCOM, Members |
Yes |
Average Age of
Directors |
63 |
|
Anti-Hedging and Pledging
Policies |
Yes |
Annual Board and Committee
Evaluations |
Yes |
|
Clawback Policy and Forfeiture
Provisions |
Yes |
Independent Directors Meet in Executive
Sessions |
Yes |
|
Stockholder Outreach Program |
Yes |
Corporate and Social
Responsibility |
We are committed to improving the
quality of life in the communities where we live and work.
Volunteering |
|
Our employees donate their time
and expertise to support charitable programs and outreach initiatives
around the world. Local operations identify those in need and develop
partnerships to support the health, safety and wellbeing of their
neighbors. Employees are generous with their time and often volunteer
after-hours or on weekends to support the greater good. |
Giving |
|
Donations are made at both the
individual and corporate level to support non-profit social service
organizations. Giving, in addition to monetary donations, can take the
form of canned goods, toys and clothing that directly benefit local food
banks, orphanages and shelters. McDermott is also a proud supporter of the
American Heart Association, National MS Society and Dubai Centre for
Special Needs. |
Leading |
|
The Batam International Charity
(BIC) is a registered non-profit managed by a committee of employees and
senior management of McDermott in Batam, Indonesia, the location of one of
McDermotts fabrication yards. BIC focuses on improving the quality of
life of those less fortunate in the Riau Island Province, with a
significant focus on orphans. The charity is fully funded by an annual
tournament that raised over $350,000 USD combined in 2015 and
2016. |
McDermott International,
Inc. 13
Table of Contents
IV. Items of Business for the Annual
Meeting
Item of
Business |
|
Board Vote
Recommendation and Rationale |
|
Page Reference |
Item 1 Election of
Directors |
|
FOR
The Board of Directors has nominated
eight candidates, each for a one-year term, and recommends that
stockholders vote for each nominee based on their specific background,
experience, qualifications, attributes and skills. |
|
16 |
Item 2 Advisory Vote to Approve
Named Executive Officer Compensation |
|
FOR
We recommend that you review our
Compensation Discussion and Analysis beginning on page 33, which explains
in greater detail the philosophy of the Compensation Committee and its
actions and decisions in 2016 regarding our compensation programs. While
the outcome of this proposal is non-binding, the Board and Compensation
Committee will consider the outcome of the vote when making future
compensation decisions. |
|
33 |
Item 3 Advisory Vote on the
Frequency of the Advisory Vote on Named Executive Officer
Compensation |
|
EVERY YEAR
The Board recommends that a
stockholder vote for the advisory vote on executive compensation to be
held every year, to allow our stockholders to evaluate our executive
compensation and communicate their approval or disapproval to us on as
prompt a basis as is practicable. |
|
66 |
Item 4 Ratification of Deloitte
& Touche as Auditors |
|
FOR
Our Board of Directors has ratified
our Audit Committees appointment of Deloitte & Touche LLP as
McDermotts independent registered public accounting firm for the year
ending December 31, 2017, and, as a matter of good governance, we are
seeking stockholder ratification of that appointment. |
|
67 |
14 2017
Proxy Statement
Table of Contents
PROXY STATEMENT FOR 2017 ANNUAL MEETING
OF STOCKHOLDERS
Table of Contents
McDermott International,
Inc. 15
Table of Contents
CORPORATE GOVERNANCE
Introduction
Our Board of Directors maintains a
strong commitment to corporate governance and has implemented policies and
procedures that we believe are among the best practices in corporate
governance.
We maintain a corporate governance
section on our Web site which contains copies of our principal governance
documents. The corporate governance section may be found at www.mcdermott.com
under INVESTORS Corporate Governance and WHO WE ARE Leadership Board
Committees. The corporate governance section contains the following
documents:
Articles of Incorporation |
Board of Directors Conflicts of Interest
Policies and |
By-Laws |
Procedures |
Corporate Governance Guidelines |
Audit Committee Charter |
Code of Ethics for CEO and Senior Financial
Officers |
Compensation Committee Charter |
|
Governance Committee
Charter |
In addition, our Code of Business
Conduct may be found on our Web site at www.mcdermott.com at WHO WE ARE
Ethics.
Item 1 Election of
Directors
Unless otherwise directed, the persons
named as proxies on the enclosed proxy card intend to vote FOR the election of
each of the nominees. If any nominee should become unavailable for election, the
shares will be voted for such substitute nominee as may be proposed by our Board
of Directors. However, we are not aware of any circumstances that would prevent
any of the nominees from serving.
|
Our Board of Directors recommends
that stockholders vote FOR each of the nominees named
below. |
Our Articles of Incorporation provide
that, at each annual meeting of stockholders, all directors shall be elected
annually for a term expiring at the next succeeding annual meeting of
stockholders or until their respective successors are duly elected and
qualified. Accordingly, on the nomination of our Board, John F. Bookout, III,
David Dickson, Stephen G. Hanks, Erich Kaeser, Gary P. Luquette, William H.
Schumann, III, Mary L. Shafer-Malicki and David A. Trice will stand for
reelection as directors at this years Annual Meeting, each for a term of one
year.
Our By-Laws provide that (1) a person
shall not be nominated for election or reelection to our Board of Directors if
such person shall have attained the age of 72 prior to the date of election or
reelection, and (2) any director who attains the age of 72 during his or her
term shall be deemed to have resigned and retired at the first Annual Meeting
following his or her attainment of the age of 72. Accordingly, a director
nominee may stand for election if he or she has not attained the age of 72 prior
to the date of election or reelection. Pursuant to these By-Law requirements,
Roger A. Brown will retire from our Board after eleven years of service,
effective at this years Annual Meeting.
In nominating individuals to become
members of the Board of Directors, the Governance Committee considers the
experience, qualifications, attributes and skills of each potential member. Each
nominee brings a strong and unique background and set of skills to the Board,
giving the Board, as a whole, competence and experience in a wide variety of
areas. The Governance Committee and the Board of Directors considered the
following information, including the specific experience, qualifications,
attributes or skills of each individual, in concluding each was an appropriate
nominee to serve as a member of our Board for the term commencing at this years
Annual Meeting (ages are as of May 5, 2017).
16 2017
Proxy Statement
Table of Contents
|
|
|
JOHN
F. BOOKOUT, III
Director Since
2006
Committee
Assignments:
●Audit Committee
●Governance Committee
|
Former Public
Company Directorships:
●Tesoro Corporation (2006-2010)
Skills and
Qualifications:
✓Energy/Oil Field Services Industry
✓Other Public Company Directorships
✓Corporate Governance
✓Executive Leadership
✓Financial & Private Equity
✓International
Operations |
Mr. Bookout, 63, currently serves as a
Partner at Apollo Global Management, LLC, (Apollo) a global investment
management firm, since June 2016. Previously, he served as a Senior Advisor at
Apollo from October 2015 to June 2016, and Managing Director of Energy and
Infrastructure at Kohlberg Kravis Roberts & Co. (KKR), a private equity
firm, from March 2008 until his retirement from KKR in June 2015. Prior to
joining KKR, he served as a director of McKinsey & Company, a global
management consulting firm that he joined in 1978. During Mr. Bookouts career
with McKinsey, he held several leadership roles, including Managing Partner and
Head of North American and European energy practices and was responsible for
McKinseys 17 global industry practices. Mr. Bookout has focused his career on
the petroleum refining, marketing, exploration and development, and the natural
gas and electric utility industries. Mr. Bookout also served as a director of
Tesoro Corporation, an independent refiner and marketer of petroleum products,
from 2006 to 2010. Mr. Bookout has a Bachelor of Arts degree in Economics from
Rice University and an M.B.A. from Stanford Graduate School of
Business.
The Board of Directors is nominating
Mr. Bookout in consideration of his broad experience in executive leadership and
as a public company director within the oil and gas exploration and development
industry and the petroleum refining and marketing industry. Mr. Bookouts
expertise in private equity and finance, together with his extensive global
energy experience, adds significant value to McDermotts strategic decision
making process.
|
|
|
DAVID
DICKSON
Director Since
2013
President and Chief Executive
Officer |
Skills and
Qualifications:
✓Offshore Oilfield Engineering/Construction Industry
✓Knowledge of and relationships with core customers
✓Corporate Governance
✓Executive Leadership
✓Financial Oversight
✓International
Operations |
Mr. Dickson, 49, has served as a member
of our Board of Directors and as President and Chief Executive Officer since
December 2013, and previously as our Executive Vice President and Chief
Operating Officer beginning in October 2013. Mr. Dickson has over 25 years of
offshore oilfield engineering and construction business experience, including 11
years of experience with Technip S.A. and its subsidiaries. From September 2008
to October 2013, he served as President of Technip U.S.A. Inc., with oversight
responsibilities for all of Technips North American operations. In addition to
being the President of Technip U.S.A. Inc., Mr. Dickson also had responsibility
for certain operations in Latin America. Mr. Dickson also supported the Technip
organization by managing key customer accounts with international oil companies
based in the United States.
The Board of Directors is nominating
Mr. Dickson in consideration of his position as our President and Chief
Executive Officer, his extensive executive leadership experience in and
significant knowledge of the offshore oilfield engineering and construction
business, and his broad understanding of the expectations of our core
customers.
McDermott International,
Inc. 17
Table of Contents
|
|
|
STEPHEN G. HANKS
Director Since 2009
Committee
Assignments:
●Governance Committee (Chair)
●Audit Committee
Current Public Company
Directorships:
●Lincoln Electric Holdings, Inc. (since 2006) Finance Committee
Chair and Compensation and Executive Development Committee
●Babcock & Wilcox Enterprises, Inc. (since July 2015)
Governance Chair, Compensation Committee and Lead Independent
Director |
Former Public
Company Directorships:
●Washington Group International, Inc. (2000-2007)
●URS Corporation (2007-2008)
●The Babcock & Wilcox Company (2010-June 2015)
Skills and
Qualifications:
✓Engineering/Construction Industry
✓Other Public Company Directorships
✓Corporate Governance
✓Executive Leadership
✓Financial Oversight
✓International
Operations |
Mr. Hanks, 66, has held various roles
over a 30-year career with Washington Group International, Inc. (and its
predecessor, Morrison Knudsen Corporation), an integrated engineering,
construction and management solutions company for businesses and governments
worldwide. From 1994 to 1995, Mr. Hanks served as Executive Vice President
Administration and Finance of Morrison Knudsen Corporation and later served as
Washington Group International, Inc.s President and Chief Executive Officer and
was a member of its board of directors from 2000 through 2007. From November
2007 until his retirement in January 2008, he was President of the Washington
Division of URS Corporation. He formerly served as Executive Vice President,
Chief Legal Officer and Secretary for Washington Group International. He has
also served as a director of Lincoln Electric Holdings, Inc., a global leader in
arc welding, robotic welding systems, plasma and oxyfuel cutting equipment and
brazing and soldering alloys, since 2006, and as a director of Babcock &
Wilcox Enterprises, Inc., a global leader in energy and environmental
technologies and services for the power and industrial markets, since July 2015.
Mr. Hanks has a Bachelor of Science degree in Accounting from Brigham Young
University, a Masters degree in Business Administration from the University of
Utah and a Juris Doctor degree from the University of Idaho.
The Board of
Directors is nominating Mr. Hanks in consideration of his extensive experience
in the international engineering and construction business and his broad
knowledge in accounting, auditing and financial reporting, and his legal
background. Having served in executive and director capacities at several public
companies, Mr. Hanks brings to the Board a valuable perspective on its oversight
responsibilities, on corporate governance issues and on outstanding customer
service across many global industrial sectors. Based on his knowledge and
experience, Mr. Hanks qualifies as an audit committee financial
expert.
|
|
|
ERICH KAESER
Director Since
2016
Committee
Assignments:
●Audit Committee
●Compensation Committee
|
Skills and
Qualifications:
✓Energy/Infrastructure Services Industry
✓Corporate Governance
✓Executive Leadership
✓Financial Oversight
✓Knowledge of Core Customers
✓International
Operations |
Prior to his retirement in December
2014, Mr. Kaeser, 61, served in key executive and advisory positions, with a
strong focus on the Middle East markets, throughout his 35 year career at
Siemens AG, a global conglomerate producing energy-efficient and resource-saving
technologies across a variety of industrial sectors. Mr. Kaeser served as
Executive Advisor to the Siemens AG Board and Regional Middle East Management
from December 2013 to December 2014, and as Chief Executive Officer, Siemens
Middle East, responsible for overseeing Siemens business operations in 16
countries, from August 2008 to November 2013. He also served as Senior Vice
President, Head of Corporate Development and Regional Strategies, Africa, Middle
East, C.I.S., Siemens AG from May 2007 to August 2008, and in several other
managerial and executive capacities within the Energy, Industry, Infrastructure
and Cities sectors since commencing his career at Siemens in 1979, including:
Senior Vice President, Head of Corporate Development and Regional Strategies,
Africa, Middle East, C.I.S., Siemens A.G., from 2007 to 2008, Managing
DirectorBranch Offices, Jordan, Syria and Lebanon, Siemens A.G., from 2006 to
2007, General ManagerPower Transmission & Distribution Systems, Lower Gulf
(UAE, Qatar, Bahrain, Oman, Yemen), Siemens LLC, from 2005 to 2006, President
Transportation Systems Turnkey Systems (worldwide), Siemens A.G., from 2004 to
2005, and Chief Executive Officer of Siemens Ltd. in Saudi Arabia, from 2000 to
2004. Since January 2015, Mr. Kaeser has served as an Executive Advisor for MKS
Consultancy FZ LLC (a member of QRC Group A.G.), an international management
consulting and executive recruitment company. Mr. Kaeser holds a Bachelor degree
in Electrical Power Engineering from the Regensburg University of Applied
Sciences in Germany.
The Board of Directors is nominating
Mr. Kaeser in consideration of the breadth of his experience in the energy and
supporting infrastructure businesses and his extensive international operations
experience, particularly in the Middle East. Mr. Kaeser brings to the Board
significant managerial and operational expertise in the international energy
industry and provides key insight into McDermotts international operations and
strategy. Based on his knowledge and experience, Mr. Kaeser qualifies as an
audit committee financial expert.
18
2017 Proxy Statement
Table of Contents
|
|
|
GARY P.
LUQUETTE
Director Since
2013
Non-Executive Chair of the
Board
Committee
Assignments:
●Compensation Committee
Current Public Company
Directorships:
●Franks International N.V. (Since 2013) Supervisory
Committee |
Skills and
Qualifications:
✓Energy/Oil Field Services Industry
✓Other Public Company Directorships
✓Corporate Governance
✓Executive Leadership
✓Knowledge of Core Customers
✓Financial Oversight
✓International
Operations |
From January 2015 until November 2016,
Mr. Luquette, 61, served as President and Chief Executive Officer of Franks
International N.V. (Franks), a global provider of engineered tubular services
to the oil and gas industry, following which he served as a special advisor to
Franks until his retirement in December 2016. He has also served as a member of
Franks Supervisory Board since November 2013, and is expected to continue such
service until Franks 2017 annual meeting of shareholders. From 2006 until
September 2013, he served as President of Chevron North America Exploration and
Production, a unit of Chevron Corporation. Mr. Luquette began his career with
Chevron in 1978 and, prior to serving as President, held several other key
exploration and production positions in Europe, California, Indonesia and
Louisiana, including Managing Director of Chevron Upstream Europe, Vice
President, Profit Center Manager, Advisor and Engineer. He has served on the
board of directors for the United Way of Greater Houston and has also been a
member of the American Petroleum Institute and was the former chair of its
Upstream Committee. Mr. Luquette has a Bachelor of Science degree in Civil
Engineering from the University of Louisiana at Lafayette.
The Board of Directors is nominating
Mr. Luquette in consideration of his extensive senior management, operational
and international experience in the global oil and gas exploration and
production industry and the oilfield services industry. Our Board benefits from
his valuable upstream customer perspective and his knowledge and understanding
of the subsea sector and our core customers.
|
|
|
WILLIAM H. SCHUMANN,
III
Director Since
2012
Committee
Assignments:
●Audit Committee (Chair)
●Governance Committee
Current Public Company
Directorships:
●Avnet, Inc. (since 2010) Non-Executive Chairman of the Board,
Audit, Compensation and Corporate Governance Committees
●Tesoro Corporation (since 2016)Governance and Audit
Committees |
Former Public Company
Directorships:
●AMCOL International Corporation (2012-2014)
●URS Corporation (March 2014-October 2014)
●UAP Holding Corp. (2005-2008)
Skills and
Qualifications:
✓Energy Industry
✓Other Public Company Directorships
✓Corporate Governance
✓Financial Oversight
✓Executive Leadership
✓Knowledge of Core Customers
✓International
Operations |
From 2005 until his retirement in
August 2012, Mr. Schumann, 66, served as Executive Vice President of FMC
Technologies, Inc. (FMC), a global provider of technology solutions for the
energy industry. During his 31 year career at FMC, and its predecessor, FMC
Corporation, he also served in the following positions: Chief Financial Officer
of FMC Technologies from 2001 until 2011; Chief Financial Officer of FMC
Corporation from 1999 until 2001; Vice President, Corporate Development from
1998 to 1999; Vice President and General Manager, Agricultural Products Group
from 1995 to 1998; Regional Director, North America Operations, Agricultural
Products Group from 1993 to 1995; Executive Director of Corporate Development
from 1991 to 1993, and other various management positions from the time he
joined FMC in 1981. He also has served as the Chairman of the Board of Avnet,
Inc., an industrial distributor of electronic components and products, since
February 2010, and as a director of Tesoro Corporation, an independent refiner
and marketer of petroleum products, since November 2016. Mr. Schumann has a
Bachelor of Science degree in Systems Engineering from the University of
California, Los Angeles, and a Master of Science degree in Management Science
from University of Southern California Marshall Graduate School of
Business.
The Board of Directors is nominating
Mr. Schumann in consideration of his valuable experience acquired from serving
in several executive leadership and board positions at public companies within
the energy industry and his broad knowledge in the areas of accounting, auditing
and financial reporting. Mr. Schumann brings to the Board managerial,
operational and financial expertise in the global energy industry. Based on his
knowledge and experience, Mr. Schumann qualifies as an audit committee
financial expert.
McDermott International,
Inc. 19
Table of Contents
|
|
|
MARY L.
SHAFER-MALICKI
Director Since
2011
Committee
Assignments:
●Compensation Committee (Chair)
●Governance Committee
Current Public Company
Directorships:
●John
Wood Group PLC (since 2012) Nomination and Remuneration Committees, and Safety & Assurance
Committee |
Skills and
Qualifications:
✓Energy/Oilfield Services Industry
✓Other Public Company Directorships
✓Corporate Governance
✓Executive Leadership
✓Knowledge of Core Customers
✓Financial Oversight
✓International
Operations |
From July 2007 until her retirement in
March 2009, Ms. Shafer-Malicki, 56, was Senior Vice President and Chief
Executive Officer of BP Angola, a subsidiary of BP p.l.c. (BP), an oil and
natural gas exploration, production, refining and marketing company. Previously,
she held several other executive leadership positions during her 25 year career
with BP p.l.c. and Amoco Corp. (which was acquired by BP in 1998), including
Chief Operating Officer of BP Angola from January 2005 to June 2007, Director
General of BP Vietnam, from 2003 to 2004, and various other international
engineering and managerial positions. In addition to working with a number of
non-profit organizations, Ms. Shafer-Malicki has also served as a director of
John Wood Group PLC, a leading independent services provider for the oil and gas
and power generation markets, since June 2012, and served as a director of
Ausenco Limited, an Australian company providing engineering design, project
management, process controls and operations solutions to a variety of
industries, from January 2011 through December 2016. Ms. Shafer-Malicki has a
Bachelor of Science degree in Chemical Engineering from Oklahoma State
University.
The Board of Directors is nominating
Ms. Shafer-Malicki in consideration of her diverse experience in the upstream
energy and supporting infrastructure businesses and her significant
international operations experience, having served in executive and director
roles for public companies in Europe, the Asia Pacific region and Africa. Ms.
Shafer-Malickis significant experience in international oil and gas allows her
to provide valuable insight into McDermotts operations, strategy, commercial,
safety, supply chain management and core customers.
|
|
|
DAVID A. TRICE
Director Since
2009
Committee
Assignments:
●Audit Committee
●Compensation Committee
Current Public Company
Directorships:
●New Jersey Resources Corporation (since 2004) Compensation, and
Nominating and Governance Committee
●QEP Resources, Inc. (since 2011) Lead Director, Compensation
Committee, Nominating and Governance Committee Chair |
Former Public Company Directorships:
●Hornbeck Offshore Services, Inc. (2002-2011)
●Newfield Exploration Company (2000-2010)
●Grant Prideco, Inc. (2003-2008)
Skills and
Qualifications:
✓Energy/Oilfield Services Industry
✓Other Public Company Directorships
✓Corporate Governance
✓Executive Leadership
✓Financial Oversight
✓International
Operations |
From February 2000 until his retirement
in May 2009, Mr. Trice, 69, was President and Chief Executive Officer of
Newfield Exploration Company, an oil and natural gas exploration and production
company, and served as chairman of its board from September 2004 to May 2010. He
previously served in several other key leadership positions at Newfield,
including Vice President and Chief Financial Officer, Chief Operating Officer
and President, and Vice President of Finance and International. Prior to his
career at Newfield, Mr. Trice served as President and Chief Executive Officer of
Huffco Group, Inc., from 1991 to May 1997. He began his career in 1973 as an
attorney. Mr. Trice has also served as a director of New Jersey Resources
Corporation, an energy company providing retail and wholesale services across
the United States and Canada, since 2004, and as a director of QEP Resources,
Inc., an energy company specialized in natural gas and oil exploration, since
2011. Mr. Trice has an Accounting and Management Services Degree from Duke
University and a Juris Doctorate from Columbia University School of
Law.
The Board of Directors is nominating
Mr. Trice in consideration of his significant experience gained from serving in
executive leadership and board positions at public companies within the oil and
gas exploration and production business. With his extensive knowledge in the
areas of accounting, auditing and financial reporting and his legal background,
Mr. Trice offers the Board valuable insight on risk oversight, financial policy,
executive compensation and corporate governance matters. Based on his knowledge
and experience, he qualifies as an audit committee financial
expert.
20 2017 Proxy
Statement
Table of Contents
Summary of Director Nominees Qualifications and
Experience |
The following table illustrates the
breadth and variety of business and other experience that each of our director
nominees brings to McDermott.
Experience/Skill |
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EXECUTIVE
LEADERSHIP Necessary for an understanding of managements role and
responsibilities and the challenges management must address so as to be
able to evaluate managements performance |
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ENERGY/OILFIELD
SERVICES An understanding of our industry is important so that the Board can
independently assess our strategy, managements progress in achieving the
strategy and appropriate oversight of our business and
operations |
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PUBLIC COMPANY
BOARD Important to an understanding of the Boards role as it relates to
that of management |
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EXPERIENCE WITH CORE
CUSTOMERS Knowledge of and experience with our core customers is
important for achieving our strategic goals and assessing project
development and opportunities for growth |
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INTERNATIONAL OPERATIONS
Important to assessing risks and
business strategy in countries in which we operate |
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FINANCIAL OVERSIGHT
RESPONSIBILITIES Important to
understand the complexities of financial reporting, internal controls and
the regulatory environment applicable to publicly traded
companies |
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CORPORATE
GOVERNANCE Necessary to understand
directors duties and the system of governance checks and balances under
which a public company operates |
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Our Governance Committee has determined
that a candidate for election to our Board of Directors must meet specific
minimum qualifications. Each candidate should:
● |
have a record of integrity and
ethics in his/her personal and professional life; |
● |
have a record of professional
accomplishment in his/her field; |
● |
be prepared to represent the best
interests of our stockholders; |
● |
not have a material personal,
financial or professional interest in any competitor of ours;
and |
● |
be prepared to participate fully
in Board activities, including active membership on at least one Board
committee and attendance at, and active participation in, meetings of the
Board and the committee(s) of which he or she is a member, and not have
other personal or professional commitments that would, in the Governance
Committees sole judgment, interfere with or limit his or her ability to
do so. |
McDermott International,
Inc. 21
Table of Contents
In 2016, the Board approved amendments
to the Corporate Governance Guidelines which place limits on the number of
boards on which McDermott directors may serve. Such limits provide that any
director who is a chief executive officer or other senior executive of a public
company should serve on no more than two public company boards, and any other
director should serve on no more than three public company boards, in both
instances including the McDermott Board. Any proposed service in excess of these
limits will be considered on a case by case basis.
In addition, the Governance Committee
also considers it desirable that candidates contribute positively to the
collaborative culture among Board members and possess professional and personal
experiences and expertise relevant to our
business and industry. The Governance Committee solicits ideas for possible
candidates from a number of sources, including independent director candidate
search firms, members of the Board and our senior level executives.
The Board recognizes the benefits of a
diversified board and believes that any search for potential director candidates
should consider diversity as to gender, race, ethnic background and personal and
professional experiences. Additionally, our Corporate Governance Guidelines
provide that any independent director search firm retained to assist the
Governance Committee in identifying director candidates shall seek to include
diverse candidates in terms of race, ethnic background and gender.
The New York Stock Exchange (NYSE)
listing standards require our Board of Directors to be comprised of at least a
majority of independent directors. In 2015, however, the Board amended our
Corporate Governance Guidelines to require that, with the exception of the Chief
Executive Officer, the Board be comprised entirely of independent directors. For
a director to be considered independent, our Board must determine that the
director does not have any direct or indirect material relationship with us. To
assist it in determining director independence, and as permitted by NYSE rules
then in effect, the Board previously established categorical standards which
conform to, or are more exacting than, the independence requirements in the NYSE
listing standards. These standards are contained in our Corporate Governance
Guidelines, which can be found on our Web site at www.mcdermott.com under
INVESTORS Corporate Governance.
Based on these independence standards,
our Board of Directors has affirmatively determined that the following directors
are independent and meet our categorical independence standards:
John F. Bookout, III |
|
Gary P. Luquette |
Roger A. Brown |
|
William H. Schumann, III |
Stephen G. Hanks |
|
Mary L. Shafer-Malicki |
Erich Kaeser |
|
David A. Trice |
In determining the independence of the
directors, our Board considered ordinary course transactions between us and
other entities with which the directors are associated, none of which were
determined to constitute a material relationship with us. Messrs. Brown,
Luquette, Kaeser, Schumann and Trice have no relationship with McDermott, except
as a director and stockholder. Messrs. Bookout and Hanks and Ms. Shafer-Malicki
are directors of entities with which we transact business in the ordinary
course. Our Board also considered contributions by us to charitable
organizations with which the directors were associated. No director is related
to any executive or significant stockholder of McDermott, nor is any director,
with the exception of Mr. Dickson, a current or former employee of
McDermott.
Any stockholder may nominate one or
more persons for election as one of our directors at the annual meeting of
stockholders if the stockholder complies with the notice, information and
consent provisions contained in our By-Laws. See Stockholders Proposals in
this proxy statement and our By-Laws, which may be found on our Web site at
www.mcdermott.com at INVESTORS Corporate Governance.
The Governance Committee will consider
candidates identified through the processes described above and will evaluate
the candidates, including incumbents, based on the same criteria. The Governance
Committee also takes into account the contributions of incumbent directors as
Board members and the benefits to us arising from their experience on the Board.
Although the Governance Committee will consider candidates identified by
stockholders, the Governance Committee has sole discretion whether to recommend
those candidates to the Board.
22 2017
Proxy Statement
Table of Contents
The Boards Role and
Responsibilities
The Boards Key Responsibilities
include:
The
Boards Role in Risk Oversight |
As part of its oversight function, the
Board is actively involved in overseeing risk management through our Enterprise
Risk Management (ERM) program, which includes periodic reporting through an
area and corporate ERM structure. In connection with the ERM program, the
Board exercises its oversight responsibility with
respect to key external, strategic, operational and financial risks and
discusses the effectiveness of current efforts to mitigate certain focus risks
as identified by senior management and the Board through anonymous risk
surveys.
Board and Committees Risk Oversight
Responsibilities |
Full Board
Although the
Board is ultimately responsible for risk oversight, the Board is assisted
in discharging its risk oversight responsibility by the Audit,
Compensation and Governance Committees. Each committee oversees management
of risks, including, but not limited to, the areas of risk summarized
below, and periodically reports to the Board on those areas of
risk: |
|
|
|
|
|
Audit Committee
Oversees management of risks
related to our financial statements and the financial reporting
process |
|
Compensation
Committee
Oversees management of risks
related to our compensation policies and practices applicable to
executives, employee benefit plans and the administration of equity
plans |
|
Governance
Committee
Oversees management of risks
related to succession planning for the Chief Executive Officer and other
members of executive management and our Ethics and Compliance Program
(excluding responsibilities assigned to the Audit
Committee) |
McDermott International,
Inc. 23
Table of Contents
At their respective November 2016
meetings, each committee undertook an assessment of those areas of risk
oversight that were delegated to it and provided a report to the Board. Also, at
its November 2016 meeting, the Board received an ERM report and performed an
assessment and review of the risks described in that report that were not
delegated to the committees.
Regarding risks relating to the design
of our compensation programs, the Compensation Committee, with assistance from
its independent compensation consultant, Pay Governance LLC, regularly reviews
and assesses our compensation policies and practices to ensure that they
are appropriate in terms of the level of
risk-taking and in line with our business strategies and the interests of our
stockholders. The Compensation Committee has designed our compensation programs
to encourage performance focused on long-term stockholder value, promote company
growth and allow for appropriate levels of risk-taking but to discourage
excessive risk-taking. Based on the findings of the risk assessment performed at
its November 2016 meeting, the Compensation Committee concluded that the risks
arising from our compensation policies and practices are aligned with
stockholders interests and not reasonably likely to have a materially adverse
impact on us.
The Board oversees and is committed to
ongoing stockholder dialogue on governance and compensation matters and places
considerable weight on stockholder feedback in making decisions impacting our
governance processes and compensation programs. In 2016, our Board engaged in a
stockholder outreach program to discuss our stockholders perspectives on our
governance and compensation policies and practices. We reached out to
stockholders representing approximately 40% of our outstanding common stock and
conducted face-to-face or telephonic meetings with holders of approximately 30%,
which were led by either our independent Compensation Committee Chair or our
independent Governance Committee Chair. This engagement process provided us with
constructive stockholder feedback on governance and compensation topics, such as
board refreshment, board evaluations, annual and long-term incentive programs
and disclosure around our executive compensation programs.
The feedback received during the course
of our outreach efforts was fully reported to and assessed by the Board and its
relevant committees. Details as to our 2016 engagement effort and actions taken
in response to stockholders compensation-related comments are provided on pages
11 and 38 of this proxy statement. Stockholders were highly supportive of our
corporate governance processes and were supportive of the Boards current tenure
mix and commitment to director refreshment. In response to stockholder input
received on annual Board and Committee performance evaluations generally, we
enhanced our process by bringing in a third party to conduct the 2016 Board,
Committee and Independent Director annual evaluations. Additionally, in response
to general comments received relating to over boarding, the Board approved
limits on the number of boards on which McDermott directors may serve. The Board
will continue to seek stockholder input to identify and proactively address
important governance and compensation issues.
Board Refreshment and Succession
Planning |
We are committed to a strong board
refreshment process. As part of our commitment to board refreshment we impose a
mandatory director retirement age of 72, require Committee Chairs to rotate
after five years of service and annually review Committee composition and
individual director skills and qualifications. Additionally, our Governance
Committee, typically with the assistance of a third party search firm,
identifies and considers new director candidates
who have expertise that would complement and enhance the current Boards skills
and experience. Our commitment to board refreshment has resulted in a Board with
a well-balanced tenure, with three directors who have served four years or less,
two directors who have served between five and six years and four directors who
have served seven years or more.
24 2017
Proxy Statement
Table of
Contents
Director
Succession Planning Process
|
Succession Planning |
|
|
Identification
of Candidates |
|
|
Meeting
with Candidates |
|
|
Decision
and Nomination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Governance Committee implements
an ongoing succession planning process, seeking out director candidates to
join our Board in light of our emerging business needs of our business and
our current Boards composition |
|
To ensure a robust search process
and access to a wide range of qualified candidates, the Governance
Committee works closely with an independent search firm to identify and
evaluate director candidates in light of our Boards structure, tenure and
qualifications |
|
Potential director candidates are
interviewed by our Chair of the Board, CEO, the Governance Committee and
other available directors |
|
The Governance Committee recommends to the full Board for nomination
those director candidates with the skills and experience that would most
benefit the current Board and best serve the interests of McDermott and
its stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting |
|
The Director Nominees stand for
election or reelection to the Board by our stockholders at the Annual
Meeting, each to serve one-year
terms. |
Board and Committee
Evaluations |
Our Board recognizes the critical role of
annual Board and committee evaluations in ensuring each are functioning
effectively. The Governance Committee annually reviews the Board and committee
evaluation process in consideration of recent best practices and input from the
directors. To that end, and in response to stockholder input received during the 2016 stockholder outreach program,
the Governance Committee enhanced the evaluation process by utilizing a third
party to help conduct the annual Board and committee performance evaluations
conducted in early 2017.
|
Annual Board and
Committee Evaluation Process |
|
|
Board
Survey
The third party facilitator worked
with the Chair of the Board, the Governance Chair and selected directors
and officers to set the scope and plan for the annual evaluations based on
business strategy, board culture and observations on Board processes. The
facilitator then conducted a written board survey to identify cultural and
overall effectiveness issues. |
|
Detailed
Interviews
The facilitator leveraged findings
from the Board survey to obtain initial views and to create with the
Governance Chair a customized interview guide. Using the interview guide,
the facilitator conducted in person interviews with directors and selected
officers. |
|
|
|
|
|
Full Board
Discussion
The facilitator compiled feedback
and developed a summary of findings and recommendations, which was
presented to the full Board for discussion and proposed
enhancements. |
|
Follow-Through
The Board will consider the results
of these evaluations in making decisions on Board agendas, structure,
responsibilities, policies and practices, as appropriate. The facilitator
will reach out to the Board later in the year to determine lasting impact
of changes and any further steps. |
|
|
|
|
|
|
McDermott International,
Inc. 25
Table of
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Sustainability and Corporate Social
Responsibility |
Sustainability and corporate social
responsibility are integral components of our business strategy. In 2015, we
established Taking the Lead, an internally driven initiative focused on
proactively developing and supporting the behaviors and attitudes that lead to a
robust quality, health, safety, environment and security (QHSES) culture and
excellence in QHSES performance. Our approach to corporate responsibility and
sustainability revolves around maintaining our best in class safety performance,
limiting our environmental footprint and supporting local community
development.
Safety
McDermott has a deeply integrated safety
culture that is part of our DNA. The safety of our employees, customers,
subcontractors and vendors is of utmost importance and we strive to be an
industry leader in safety. In 2016, we reached significant safety milestones at
our fabrication yards and on our vessels around the world, with our Middle East
area setting a new record achievement in reaching 48-million man-hours without a
lost time incident.
Environment
McDermott is focused on opportunities to
reduce our environmental impact in areas in which we operate. Our approach to
reducing our environmental impact is to consider
how we can integrate new solutions in our operations and activities to create
sustained change. In 2016, in particular, we were highly focused on eliminating
and controlling plastic waste.
Philanthropy &
Volunteerism
We realize that the success of our
business is linked to the success of the communities where we operate. McDermott
is committed to using its global reach to develop, strengthen and support the
communities in which we operate. A few of the causes in which we participated to
support our communities this year were:
● |
organizing a blood donation
event in partnership with the Indonesian Red Cross in Batam, for which we
were recognized with an award by the Riau Islands Red Cross for our
commitment and contribution through blood drive activities; |
● |
participating in the American Heart
Associations 2016 Heart Walk, raising funds to save lives from heart
disease and stroke, for which we were recognized as one of the top five
contributors in the Houston area; and |
● |
hosting a World Environment Day at
our Altamira fabrication yard to take local action against environmental
challenges, where our employees and their families gathered to plant
casuarinas, a type of tree that flourishes in the local
environment. |
Communications with the
Board |
Stockholders or other interested persons
may send written communications to the independent members of our Board,
addressed to Board of Directors (Independent Directors), c/o McDermott
International, Inc., Corporate Secretary, 757 N. Eldridge Pkwy., Houston, Texas
77079.
Board Leadership
Structure
Mr. Luquette has served as Chair of the
Board since May 6, 2014. Our Board believes that it is appropriate for McDermott
to have a Chair of the Board separate from the Chief Executive Officer, as this
structure allows Mr. Dickson, McDermotts President and Chief Executive
Officer, to maintain his focus on our strategic
direction and the management of our day-to-day operations and performance, while
Mr. Luquette is able to set the Boards agendas and lead the Board
meetings.
Executive
Sessions
Our independent directors meet in
executive session without management on a regular basis. Currently, Mr.
Luquette, our Chair of the Board of Directors, serves as the presiding director
for those executive sessions.
26
2017 Proxy Statement
Table of
Contents
Board of Directors and
its Committees
Our Board met 16 times during 2016. All
directors serving on the Board during 2016 attended 75% or more of the meetings
of the Board and of the committees on which they served during 2016.
Additionally, it is our policy that all of our
directors attend our annual meeting of stockholders, and in accordance with that
policy, all directors serving on the Board in 2016 attended our 2016 Annual
Meeting.
Our Board currently has, and appoints the
members of, standing Audit, Compensation and Governance Committees. Each
standing Board committee is comprised entirely of independent nonemployee
directors and has a written charter approved by the Board. The current charter
for each standing Board committee is posted on our Web site at www.mcdermott.com under
WHO WE ARE Leadership Board Committees. Attendance at committee meetings
is open to every director, regardless of whether
he or she is a member of the committee. Occasionally, our Board may convene
joint meetings of certain committees and the Board. Each portion of the joint
meeting is counted separately for purposes of the number of meetings of the
Board and its committees disclosed in this proxy statement. The following table
shows the current membership, the principal functions and the number of meetings
held in 2016 for each committee:
Audit
Committee
|
|
|
|
|
|
Committee Members: |
|
Principal Functions and Additional
Information |
|
|
Mr. Schumann (Chair) Mr.
Bookout Mr. Hanks Mr. Kaeser Mr. Trice
7 Meetings Held in 2016 |
|
●Monitors our
financial reporting process and internal control
system.
●Oversees the
preparation of our financial statements.
●Monitors our
compliance with legal and regulatory financial requirements, including our
compliance with the applicable reporting requirements established by the
U.S. Securities and Exchange Commission (the SEC).
●Evaluates the
independence, qualifications, performance and compensation of our
independent registered public accounting firm.
●Oversees the
performance of our internal audit function.
●Oversees certain
aspects of our Ethics and Compliance Program relating to financial
matters, books and records and accounting and as required by applicable
statutes, rules and regulations.
●Provides an open
avenue of communication among our independent registered public accounting
firm, financial and senior management, the internal audit department and
the Board.
Our Board has determined that Messrs.
Schumann, Bookout, Hanks, Kaeser and Trice each qualify as an audit
committee financial expert, within the definition established by the SEC.
For more information on the backgrounds of those directors, see their
biographical information under Election of Directors
above. |
|
|
|
|
|
|
McDermott International,
Inc. 27
Table of
Contents
Compensation Committee
|
|
|
|
|
|
Committee
Members: |
|
Principal Functions and
Additional Information |
|
|
Ms. Shafer-Malicki (Chair) Mr.
Brown Mr. Kaeser Mr. Luquette Mr. Trice
6 Meetings Held in 2016 |
|
●Oversees the design
of our officer and director compensation plans, policies and
programs.
●Evaluates employee
benefit plans.
●Approves and/or
recommends to the Board for approval such officer and director
compensation plans, policies and programs.
●Annually reviews and
approves goals and objectives relevant to CEO compensation, evaluates (in
coordination with the Governance Committee) the CEOs performance in light
of those goals and objectives and sets the CEOs compensation based on
that evaluation.
●Oversees our
disclosures relating to compensation plans, policies and programs,
including overseeing the preparation of the Compensation Discussion and
Analysis included in this proxy statement.
●Acts in its sole
discretion to retain or terminate any compensation consultant to be used
to assist the Compensation Committee in the discharge of its
responsibilities. For additional information on the role of compensation
consultants, please see Compensation Discussion and Analysis How We
Make Compensation Decisions below.
●For 2016, the
Compensation Committee authorized our Chief Executive Officer, in
consultation with his direct reports, to establish individual goals under
our Executive Incentive Compensation Plan (EICP) for our other executive
officers and key employees who participate in the EICP. All payments under
the EICP are subject to Compensation Committee
approval.
●Under our long term
incentive plans, the Compensation Committee may delegate some of its
duties to our Chief Executive Officer or other senior officers. The
Compensation Committee has delegated certain authority to our Chief
Executive Officer and Vice President, Human Resources, for the approval of
long-term incentive awards to new-hire, non-officer
employees.
●Under the McDermott
International, Inc. Director and Executive Deferred Compensation Plan,
which we refer to as the DCP, the Compensation Committee may delegate
any of its powers or responsibilities to one or more members of the
Committee or any other person or entity. |
|
|
|
|
|
|
Governance Committee
|
|
|
|
|
|
Committee
Members: |
|
Principal Functions and
Additional Information |
|
|
Mr. Hanks (Chair) Mr.
Bookout Mr. Brown Mr. Schumann Ms. Shafer-Malicki
6 Meetings Held in 2016 |
|
●Identifies
individuals qualified to become Board members and recommends to the Board
each year the director nominees for the next annual meeting of
stockholders.
●Recommends to the
Board the directors to serve on each Board committee.
●Leads the Board in
its annual review of the performance of the Board and its
committees.
●Develops, reviews
and recommends to the Board any changes to our Corporate Governance
Guidelines the Governance Committee deems appropriate.
●Oversees the annual
evaluation of our Chief Executive Officer (in conjunction with the
Compensation Committee).
●Reviews and assesses
the succession plan for the Chief Executive Officer and other members of
executive management and reviews such plan with the Board periodically,
and at least on an annual basis.
●Recommends to the
Board the compensation of nonemployee directors.
●Serves as the
primary committee overseeing our Ethics and Compliance Program, excluding
certain oversight responsibilities assigned to the Audit
Committee.
●Oversees our
director and officer insurance program. |
|
|
|
|
|
|
28
2017 Proxy Statement
Table of
Contents
Compensation Committee Interlocks and Insider Participation
|
All members of our Compensation Committee
are independent in accordance with NYSE listing standards. No member of the
Compensation Committee (1) was, during the year ended December 31, 2016, or had
previously been, an officer or employee of McDermott or any of its subsidiaries,
or (2) had any material interest in a transaction
of McDermott or a business relationship with, or any indebtedness to, McDermott.
No interlocking relationship existed during the year ended December 31, 2016
between any member of the Board of Directors or the Compensation Committee and
an executive officer of McDermott.
Related Party
Transactions
We have adopted a written Related Person
Transaction Policy applicable to any individual transaction or series of related
transactions, arrangements or relationships (including any indebtedness or
guarantee of indebtedness) in which:
● |
McDermott or any of its subsidiaries
is, was or will be a participant; |
● |
any related person (as defined in
the policy) has, had or will have a direct or indirect material interest;
and |
● |
the amount involved exceeds
$120,000. |
This policy requires directors, director
nominees and executive officers to provide written notice to the General Counsel
(GC) of any potential Related Person Transaction involving, directly or
indirectly, him or her or any of his or her
immediate family members. Additionally, each director, director nominee and
executive officer must complete an annual questionnaire designed in part to
elicit and evaluate information about potential related person transactions and
any related person relationships. All related person transactions requiring
compliance with the policy as determined by the GC must be presented to the
Governance Committee for review, approval, ratification or other action. The
Governance Committee will approve or ratify a related person transaction only if
it determines that, under all of the circumstances, the transaction is not
inconsistent with the best interests of McDermott. There were no such
transactions found to be directly or indirectly material to a related person
required by SEC rules to be disclosed in this proxy statement.
McDermott International,
Inc. 29
Table of
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Compensation of
Directors
We did not make any changes to our
nonemployee director compensation program in 2016.
Under our 2016 nonemployee director
compensation program, cash compensation for nonemployee directors consisted of
retainers (paid monthly and prorated for partial terms) and meeting fees as
follows:
|
|
($) |
Annual Board Member Retainer |
|
75,000 |
Audit Committee Chair
Retainer |
|
20,000 |
Compensation Committee Chair
Retainer |
|
20,000 |
Governance Committee Chair
Retainer |
|
10,000 |
Additional Retainer for Lead Director (if
applicable) |
|
20,000 |
Additional Retainer for
Chair of the Board |
|
150,000 |
Meeting fees for each meeting of the Board or a Committee
(of which the director is a member) attended in excess of the twelfth
Board or Committee meeting per annual director term |
|
2,500 |
The table below summarizes the
compensation earned by or paid to our nonemployee directors during the year
ended December 31, 2016.
Director
Compensation Table
Name |
|
Fees Earned or Paid in
Cash ($) |
|
Stock Awards ($)(1) |
|
Total ($) |
John F. Bookout,
III |
|
75,000 |
|
119,999 |
|
194,999 |
Roger A. Brown |
|
75,000 |
|
119,999 |
|
194,999 |
Stephen G. Hanks |
|
85,000 |
|
119,999 |
|
204,999 |
Erich Kaeser |
|
64,009 |
|
142,024 |
|
206,033 |
Gary P. Luquette |
|
225,000 |
|
119,999 |
|
344,999 |
William H. Schumann, III |
|
95,000 |
|
119,999 |
|
214,999 |
Mary L.
Shafer-Malicki |
|
95,000 |
|
119,999 |
|
214,999 |
David A. Trice |
|
75,000 |
|
119,999 |
|
194,999 |
(1) |
Under our 2016 director
compensation program, equity compensation for nonemployee directors
included a discretionary annual stock grant. On May 10, 2016, each of the
nonemployee directors then serving as a director received a grant of
26,966 shares of restricted stock valued at $119,999, which is the
aggregate grant date fair value computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification (FASB ASC)
Topic 718, using the closing market price of McDermott common stock on the
date of grant ($4.45). Additionally, Mr. Kaeser received a grant of 7,728
shares of restricted stock valued at $22,025, which represented a prorated
2015 annual grant for his partial term of service upon joining the Board
in February 2016. Under the terms of each award, the restricted stock
vested immediately on the grant date and immediately became unrestricted
shares of McDermott common stock. For a discussion of the valuation
assumptions with respect to these awards, see Note 14 to our Consolidated
Financial Statements included in our Annual Report on Form 10-K for the
year ended December 31, 2016. |
|
As of December 31, 2016,
nonemployee directors had aggregate outstanding stock option awards as
follows: Mr. Bookout stock options to purchase 5,233 shares; and Mr.
Brown stock options to purchase 1,744 shares. All of such stock options
were fully vested. |
30
2017 Proxy Statement
Table of
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Executive Officer
Profiles
The following profiles provide the
relevant experience, age and tenure with McDermott as of May 5, 2017 of our
Chief Executive Officer, Chief Financial Officer and other executive officers
currently employed by McDermott.
David Dickson, President
and Chief Executive Officer
Age: 49 | Tenure: 3 years 7
months
Mr. Dickson has served as a member of our
Board of Directors and as President and Chief Executive Officer since December
2013, prior to which he served as our Executive Vice President and Chief
Operating Officer from October 2013. Mr. Dickson has over 25 years of offshore
oilfield engineering and construction business experience, including 11 years of
experience with Technip S.A. (Technip) and its subsidiaries. From September
2008 to October 2013, he served as President of Technip U.S.A. Inc., with
oversight responsibilities for all of Technips North American operations. In
addition to being the President of Technip U.S.A. Inc., Mr. Dickson also had
responsibility for certain operations in Latin America. Mr. Dickson also
supported the Technip organization by managing key customer accounts with
international oil companies based in the United States.
Stuart Spence, Executive
Vice President and Chief Financial Officer
Age: 48 | Tenure: 2 years 9
months
Mr. Spence has served as McDermotts
Executive Vice President and Chief Financial Officer since August 2014. Mr.
Spence has approximately 20 years of combined financial and operational
management experience with companies in the oilfield products and services and
engineering and construction businesses. Immediately prior to joining McDermott,
Mr. Spence served as Vice President, Artificial Lift for Halliburton Company,
where he had overall strategic and operational responsibility for Halliburtons
artificial lift product and service line. Previously, he served as Senior
Director, Strategy and Marketing for Halliburtons Completion and Production
Division. Mr. Spence joined Halliburton following Halliburtons acquisition of
Global Oilfield Services Inc. in November 2011. He served as Executive Vice
President and Chief Financial Officer of Global Oilfield Services from 2008 to
May 2011 and as Executive Vice President, Strategy, in May 2011 in connection
with the sale to Halliburton. His prior experience also includes positions of
increasing financial and management responsibility at: Green Rock Energy, LLC;
and Vetco International Ltd. (holding company for Aibel Ltd., an oilfield
facilities maintenance and construction company, and Vetco Gray, Inc., a subsea
production and drilling equipment company).
Liane Hinrichs, Senior
Vice President, General Counsel and Corporate Secretary
Age: 59 | Tenure: 18
years
Ms. Hinrichs has been our Senior Vice
President, General Counsel and Corporate Secretary since October 2008.
Previously, she served as our: Vice President, General Counsel and Corporate
Secretary from January 2007 to September 2008; Corporate Secretary and Associate
General Counsel, Corporate Compliance and Transactions from January 2006 to
December 2006; Associate General Counsel, Corporate Compliance and Transactions,
and Deputy Corporate Secretary from June 2004 to December 2005; Assistant
General Counsel, Corporate Secretary and Transactions from October 2001 to May
2004; and Senior Counsel from May 1999 to September 2001. Prior to joining
McDermott in 1999, she was a partner in a New Orleans law firm.
Jonathan Kennefick, Senior Vice
President, Project Execution and Delivery
Age: 48 | Tenure: 25
years
Mr. Kennefick has served as
our Senior Vice President, Project Execution and Delivery, since November 2015.
Mr. Kennefick joined McDermott in 1992, and has served in various positions of
increasing responsibility, including: Vice President of Quality, Health, Safety,
Environment and Security, from March 2014 to November 2015; Vice President,
OperationsMiddle East and India, from May 2012 to March 2014; Director of
Operations, from June 2010 to May 2012; and General Manager, Marine Operations,
from March 2008 to June 2010.
Brian McLaughlin, Senior
Vice President, Commercial
Age: 46 | Tenure: 10
years
Mr. McLaughlin has served as McDermotts
Senior Vice President, Commercial, since September 2015. Previously, he served
as our VP Commercial, Offshore, from 2014 to September 2015; General Manager,
Business DevelopmentMiddle East and India, from 2010 to 2014; Senior Director,
Business DevelopmentMiddle East and India, from 2008 to 2010; and, Proposals
Manager, Middle East, from 2006 to 2008. Prior to joining McDermott, Mr.
McLaughlin held roles of increasing responsibility at Al Faris, Abu Dhabi, ALE
Middle East and Weir Pumps.
McDermott International,
Inc. 31
Table of Contents
Linh Austin, Vice
President, Middle East and Caspian
Age:
47 | Tenure: 2 years 5 months
Mr. Austin has served as our Vice
President, Middle East and Caspian since January 2016 and, previously, as our
Senior Director Operations, Middle East from January 2015 to January 2016. Mr.
Austin has over 20 years of executive and operational experience in the oil and
gas industry, including two years in the Middle East with Abu Dhabi Marine
Operating Company (ADMA-OPCO). Prior to joining McDermott, he served as: Senior
Advisor for ADMA-OPCO from August 2013 until January 2015; Commercial Project
General Manager for BP from July 2012 to August 2013; Director of Planning &
Resources Unit Leader for BP from 2009 to 2012; President and CEO of Point
Energy Group from 2007 to 2009; Global Strategy and IM Director for BP from 2004
to 2007; and Business Unit Chief of Staff, Project and Operations Management for
BP and ARCO from 1993 to 2004.
Hugh
Cuthbertson, Vice President, Asia
Age: 59 | Tenure: 39 years
Mr. Cuthbertson has served as our Vice
President, Asia since January 2015. Previously, he served as: our Vice President
& General Manager, Asia Pacific from April 2014 to January 2015; Senior
Director, Operations, McDermott Australia Pty. Ltd. (MAP) from July 2013 to
March 2014; Senior Director Business Development, MAP, from March 2012 to July
2013, and Managing Director, MAP, from May 2009 to March 2012. Mr. Cuthbertson
joined McDermott in 1978, and since that time has held positions of increasing
responsibility in business development, project management and regional
responsibility.
Andrew Leys,
Vice President, Human Resources
Age: 38 | Tenure: 9 years
Andrew Leys has served as Vice
President, Human Resources since July 2016. Prior to his current position, Mr.
Leys served as Senior Director, HR & Crewing for Marine Assets &
Operations from April 2014 to June 2016. Prior to rejoining McDermott in 2014,
he served as Director of HR Operations for Technip North America from January
2012 to April 2014. He also served as McDermotts Director of HR for Atlantic
Operations from November 2010 to January 2012 and Director of HR for Marine from
September 2006 to November 2010. Before joining McDermott in 2006, Andrew served
at Smith International, Inc. as Global Compensation Manager from July 2005 to
September 2006, and as a Compensation Analyst from May 2003 to June
2005.
Chris Krummel,
Vice President, Finance and Chief Accounting
Officer
Age: 49 | Tenure: 7
months
Chris Krummel has served as the Vice
President, Finance and Chief Accounting Officer since October 2016. Previously,
Mr. Krummel served as a consultant of American Industrial Partners, a firm
engaging in private equity investments in industrial businesses in the United
States and Canada, from November 2015 through July 2016; Chief Financial Officer
and Vice President of EnTrans International, a global manufacturer of aluminum
tank trailers, heavy lift trailers and oilfield pressure pumping equipment used
in hydraulic fracturing and other well services, from September 2014 to October
2015; Chief Accounting Officer, Vice President and Corporate Controller of
Cameron International, a worldwide provider of flow equipment products, systems
and services to oil, gas and process industries from April 2008 until April
2014; and Vice President, Finance of Cameron International from April 2014 until
August 2014. Mr. Krummel has also served as a member of the Board of Directors
of Eco-Stim Energy Solutions, an environmentally-focused well stimulation and
completion company, since January 2014.
Scott Munro,
Vice President, Americas, Europe and Africa
Age: 42 | Tenure: 3 years 3 months
Mr. Munro has served as our Vice
President, Americas, Europe and Africa, since January 2015. Previously, he
served as our Vice President and General Manager, North Seas and Africa, from
April 2014 to January 2015; and Vice President, Projects and Operations Subsea,
from the time he joined McDermott in January 2014 through March 2014. Prior to
joining McDermott, Mr. Munro was Vice President, Commercial, for Technip U.S.A.
Inc., a subsidiary of Technip, from 2010 to 2013; and Vice President Offshore
Unit, Technip France, an operating unit of Technip, from 2013 to 2014. Mr. Munro
has management experience in the oil and gas industry, having worked in the
United Kingdom, United States, Canada, Brazil and France in a variety of
operational and project management roles in organizations such as Coflexip Stena
Offshore Group S.A., Acergy, S.A., Chevron Corporation and Technip.
32 2017
Proxy Statement
Table of Contents
EXECUTIVE COMPENSATION
Item 2 Advisory
Vote to Approve Named Executive Officer Compensation
We are asking our stockholders to vote
on an advisory basis to approve the compensation of our NEOs (sometimes referred
to as say on pay) in accordance with Section 14A(a)(1) of the Securities
Exchange Act of 1934. The Board recommends a vote FOR this proposal because it
believes that our compensation policies and practices are effective in achieving
McDermotts philosophy of providing compensation that:
● |
attracts, motivates and retains
well-qualified executives; |
● |
provides performance-based
incentives to reward achievement of short and long term business goals and
strategic objectives, while recognizing individual contributions; and
|
● |
aligns the interests of our
executives with those of our stockholders. |
For the reasons discussed in the
Compensation Discussion and Analysis, accompanying compensation tables and
related narrative disclosures in this proxy statement, the Board of Directors
unanimously recommends that stockholders vote FOR the following resolution:
RESOLVED, that the compensation paid to the NEOs, as
disclosed pursuant to Item 402 of Regulation S-K,including the Compensation Discussion
and Analysis, compensation tables and accompanying narrative discussion in
McDermotts proxy statement relating to its 2017 annual meeting of stockholders,
is hereby APPROVED.
Although the resolution is non-binding, the Board of
Directors and Compensation Committee will consider the outcome of the vote when
making future compensation decisions.
|
Our Board of Directors recommends
that stockholders vote FOR the advisory vote to approve named executive
officer compensation. |
Compensation
Discussion & Analysis
The following Compensation Discussion
and Analysis, or CD&A, provides information relevant to understanding the
2016 compensation of our executive officers and former executive officers
identified in the Summary Compensation Table, whom we refer to as our NEOs, with
the exception of Mr. Stephen L. Allen, our former Senior Vice President, Human
Resources, who we refer to as our Retired NEO. NEOs, as used in the CD&A,
includes only the Named Executive Officers who remained employed in their same
position with McDermott through the date of this proxy statement. For 2016, our
NEOs and their respective titles were as follows:
● |
David Dickson, our President and
Chief Executive Officer; |
● |
Stuart A. Spence, our Executive
Vice President and Chief Financial Officer; |
● |
Linh Austin, our Vice President,
Middle East and Caspian; |
● |
Liane K. Hinrichs, our Senior
Vice President, General Counsel and Corporate Secretary;
and |
● |
Jonathan Kennefick, our Senior
Vice President, Project Execution and Delivery.
|
The following discussion also contains
statements regarding future individual and company performance targets and
goals. These targets and goals are disclosed in the limited context of our
compensation programs and should not be understood to be statements of
managements expectations or estimates of results or other guidance. We caution
investors not to apply these statements in other contexts.
McDermott International,
Inc. 33
Table of Contents
CD&A
Executive Summary
Our Business, the
Macro Environment and our 2016 Operating
Strategy |
McDermott is a leading provider of
integrated engineering, procurement, construction and installation services for
offshore and subsea oil and gas field developments worldwide. We deliver fixed
and floating production facilities, pipelines and subsea systems, from concept
to commissioning, to customers including national oil companies and
international and independent oil companies. McDermott generally has 40 or fewer
active contracts at any given time, which typically span a duration of one to
three years, are performed in a variety of jurisdictions, and may individually
range from less than $50 million to more than $2 billion in total contract
value. We execute our contracts through a variety of methods, with fixed-price
contracts being the most prevalent. These contracts are often performed in
difficult conditions, and the cost and gross profit we realize on these
contracts could vary materially from the estimated amounts due to supplier,
contractor and subcontractor performance, changes in job conditions,
unanticipated weather conditions, variations in labor and equipment
productivity, increases in the cost of raw materials over the term of the
contract or our own performance.
The demand for our engineering,
procurement, construction and installation services and our ability to book new
work is dependent upon the capital expenditures of oil and gas companies for the
construction of development projects. The depressed oil and natural gas market
in recent years has resulted in significant reductions in capital expenditure
budgets of oil and gas producing companies, which have led to the continued
reprioritization and deferral of work as project economics have been
reevaluated. A direct result of this has been the delay of certain project
awards from those customers and increased competition to McDermott, as
competitors compete to secure a more limited number of available projects.
Notwithstanding the challenging macro environment, in 2016 McDermott continued
its focus on customer relationships and building backlog in markets where
capital is available for investment.
Following the appointment of David
Dickson as Chief Executive Officer in December 2013, over the past three years
McDermott has transformed as a company through a turnaround, stabilization of
the business, optimization via cost-reduction initiatives and growth through
strategic asset investment.
In continuation of McDermotts
transformation, in 2016 our operating strategy was to drive a sustainable,
profitable and growth-oriented business, with a focus on stockholders, customers
and other stakeholders. In furtherance of this strategy, our 2016 goals were to:
● |
increase operating income via
improved project execution; |
● |
increase cash flow by
prioritizing our liquidity needs; |
● |
increase backlog and bookings to
support our future business; |
● |
promote pricing discipline on
order intake operating margins; and |
● |
efficiently allocate capital to
profitable investments to grow our
business. |
Strong project execution, additional
cost management, improved liquidity culture and increased organizational
capabilities and competencies drove the execution of McDermotts strategy and
goals in 2016.
34 2017
Proxy Statement
Table of Contents
2016 Performance
Highlights |
|
|
|
Total shareholder return (TSR) for
McDermott was 120% for 2016, as compared to our Proxy Peer Groups median TSR of
approximately 12%. McDermotts TSR was higher than the 2016 TSR for any of the
companies constituting our Proxy Peer Group. Our operating income also continued
to increase, with full year operating income of $142.3 million compared to 2015
operating income of $112.7 million and 2014 operating income of $16.4 million.
Order intake (including change orders) was $2.7 billion in 2016, which, while a
decrease from 2015, was considered positively in light of the lower for longer
oil and gas market that continued through 2016. Year-end 2016 backlog was
slightly up compared to year-end 2015, and provides a strong foundation for 2017
with approximately $3 billion of expected 2017 revenues already recorded in
backlog as of December 31, 2016. In evaluating the performance of David Dickson,
our President and Chief Executive Officer, the Board has considered these
performance results, as well as other financial and leadership goals detailed
further below, and believes that Mr. Dickson has succeeded in positioning
McDermott as a stronger, more durable business, particularly during a difficult
business cycle and extended challenging macro
environment.
McDermott International,
Inc. 35
Table of Contents
Compensation
Philosophy and 2016 Compensation Program Design and
Levels |
The Compensation Committee is committed
to targeting reasonable and competitive total direct compensation for our NEOs,
with a significant portion of that compensation being performance-based. Our
compensation programs are designed to align with and drive achievement of our
business strategies and provide competitive opportunities. Accordingly,
achievement of most of those opportunities depends on the attainment of
performance goals and/or stock price performance. McDermotts compensation
programs are designed to provide compensation that:
Attracts, motivates and retains
high-performing executives |
|
|
|
Provides performance-based incentives to reward
achievement of short and long-term business goals and strategic objectives
while recognizing individual contributions |
|
|
|
Aligns the interests of our executives with those of our stockholders |
|
|
|
|
|
|
|
|
The
Compensation Committee has designed and administered compensation programs
aligned with this philosophy and is committed to continued outreach to
stockholders to understand and address comments on our compensation
programs.
Reflecting this philosophy, our NEO
compensation arrangements in 2016 provided for the continuing use of three
elements of target total direct compensation: annual base salary, annual
incentive provided under our Executive Incentive Compensation Plan, or EICP, and
long-term incentives, or LTI. In making compensation decisions for 2016, the
Compensation Committee considered McDermotts operating strategy and goals and
significantly improved operational and financial performance, with appreciation
of the lower for longer macro oil and gas environment and comments received
during the 2016 stockholder outreach program.
With respect to plan design, the
Compensation Committee:
● |
maintained consistency in the
2016 EICP performance metrics, with the exception of the elimination of
the MPI modifier following completion of the McDermott Profitability
Initiative, or MPI, in 2015; and |
● |
evolved the 2016 LTI performance metric to
relative Return on Average Invested Capital, or relative ROAIC, in
consideration of McDermotts transformation from turnaround and
stabilization to optimization for future growth. |
Performance metrics and performance levels used within
elements of annual and long-term compensation are designed to support our
strategic and financial goals and drive the creation of stockholder
value |
2016 Executive Incentive Compensation
Plan |
Goal |
|
Performance
Metric |
|
|
|
Drive profitability via improved project
execution |
|
Operating Income |
|
|
|
Prioritize liquidity
needs |
|
Free Cash Flow |
|
|
|
Support future business |
|
Order Intake |
|
|
|
Promote pricing discipline on new
work |
|
Order Intake Operating
Margin |
2016 Long-Term Incentive Plan
Performance Units |
Efficiently allocate capital to
profitable investments |
|
Relative Return on Average Invested
Capital |
36 2017 Proxy Statement
Table of Contents
With respect to levels of compensation,
the Compensation Committee generally sought to maintain 2016 NEO compensation
consistent with 2015 levels, with the exception of Mr. Dickson, whose 2016
target LTI award was returned to 2014 levels following an increased target LTI
award in 2015, Mr. Spence, who received an increase in his 2016 target LTI award
to better approximate market range and Mr. Kennefick, who received an increase
in his 2016 target LTI award following his promotion in 2015. Accordingly, for
2016 NEO compensation, the Compensation Committee provided:
● |
No increases in annual base
salaries. |
● |
No increases in target annual
incentive. |
● |
The same number of LTI units as
awarded in 2015, other than for those NEOs whose target LTI awards were
adjusted as described above. Due to the decrease in the price of McDermott
stock as of the grant date for the 2016 annual LTI awards, as compared to
the grant date for the 2015 annual LTI awards, this resulted in a year
over year decrease in the grant date fair value of LTI awarded to the
NEOs, with the exception of Messrs. Spence and Kennefick, as noted
above. |
The mix of target total direct
compensation for Mr. Dickson for 2016 is shown in the chart below.
CEO TARGET 2016
COMPENSATION
Impact of 2016 Say on Pay Vote on Executive Compensation and
Stockholder Outreach |
2016 Say on
Pay Vote |
|
Stockholder
Outreach |
|
Stockholder
Feedback |
|
Board
Engagement |
|
Board
Response |
|
|
|
|
|
In 2016, 87.6% of our
stockholders voted in favor of our executive compensation
program |
During both the Spring
and Fall of 2016, we reached out to stockholders representing
approximately 40% of our outstanding common stock and other stakeholders
to gain insight regarding their perspectives on corporate governance and
compensation matters |
We conducted meetings
with stockholders representing approximately 30% of our outstanding common
stock and also met with other stakeholders |
Meetings were led by
either our independent Compensation Committee Chair or our independent
Governance Committee Chair |
Our Board considered
the 2016 say on pay vote and the matters discussed during our 2016
stockholder and stakeholder outreach efforts, and made certain
corresponding changes in our compensation and governance programs as
indicated below |
McDermott International,
Inc. 37
Table of Contents
What we
heard |
|
What we
have done in response |
|
When
effective |
Maintain
consistency in executive compensation plans |
|
The
financial metrics under our EICP operating income, free cash flow, order
intake and order intake operating margin have remained consistent since
2014, with the exception of the use of the MPI Modifier in 2015, which was
not included as a metric for 2016. The Compensation Committee approved the
continuing use of these metrics for the 2016 and 2017 EICP
awards. |
|
2014, 2015,
2016 and 2017 EICP Awards |
Consider returning to a relative metric for LTI plan
awards |
|
The Compensation Committee approved the use of Return on Average
Invested Capital relative to a competitor peer group as the performance
metric for both the 2016 and 2017 Performance Unit awards. |
|
2016 and 2017 Performance Unit Awards |
Consider
composition of Peer Group |
|
The Compensation Committee added a competitive peer group of both domestic and international peers for determining performance under the 2016 and 2017 Performance Unit awards. |
|
2016 and
2017 Performance Unit Awards |
Require double-trigger vesting of equity awards upon a change in
control |
|
The 2016 long-term incentive award grant agreements and 2016
McDermott International, Inc. Long-Term Incentive Plan provide for double
trigger vesting upon a change in control, except where the awards are not
assumed in the transaction. |
|
February 2016 and Approval of 2016 LTIP |
Maintain
strong corporate governance foundation |
|
The Board
adopted limits on the number of boards on which directors may serve.
Directors who serve as a CEO or senior executive of a public company
generally may serve on no more than two public company boards and other
directors may serve on no more than three public company boards (in both
instances, including the McDermott Board). |
|
November
2016 |
Maintain commitment to Board refreshment |
|
The Governance Committee continued its commitment to Board
refreshment. Consistent with our By-Laws, Roger A. Brown will retire from
our Board at the 2017 Annual Meeting of Stockholders. |
|
Ongoing |
Consider
periodic usage of an independent third party facilitator for Board and
Committee evaluations |
|
McDermott
engaged an independent, third party facilitator in connection with the
Board of Director and Committee evaluations conducted for 2017. |
|
2017 Board
Evaluations |
Provide disclosure on McDermotts corporate social responsibility
and sustainability activities |
|
We have provided disclosure on McDermotts corporate social
responsibility and sustainability activities in this proxy statement, and
expect to continue to increase disclosures around these activities in the
future. |
|
2017 Proxy Statement |
Continue stockholder
engagement |
|
The Board has prioritized stockholder
engagement and will be continuing its vigorous outreach program going
forward |
|
Ongoing |
The Compensation Committee will
continue to consider the outcome of our say on pay votes when making future
compensation decisions for the NEOs. The Compensation Committee expects to
continue to hold the advisory vote to approve NEO compensation every
year.
38 2017
Proxy Statement
Table of Contents
Executive Compensation
Policies and Practices |
Below we highlight certain of our
executive compensation and governance policies and practices, including both
those which we utilize to drive performance and those which we prohibit because
we do not believe they would serve our stockholders long-term
interests:
Policy or
Practice |
|
MDR
Policy |
|
|
Pay for Performance |
|
|
|
A significant portion of target
total direct compensation is tied to performance, including 100% of annual
incentive compensation and 50% of the NEOs target value long-term
incentive compensation. |
Meaningful Stock Ownership
Guidelines |
|
|
|
We have stock ownership
guidelines for our NEOs that generally require the retention of a dollar
value of qualifying McDermott securities of 5x base salary for our CEO, 3x
base salary for the other NEOs and 5x annual retainer for
directors. |
Double Trigger Change
in Control Agreements & Equity Agreements |
|
|
|
Our change in control agreements
and, beginning in 2016, our equity agreements provide benefits only upon
an involuntary termination or constructive termination of the executive
officer within one year following a change in control. |
Independent Compensation Consultant |
|
|
|
The Compensation Committee
retains an independent compensation consultant to advise on executive
compensation program and practices. |
Annual Compensation Risk
Assessment |
|
|
|
Our compensation consultant
assists the Compensation Committee in conducting an annual risk assessment
of our compensation programs. |
Annual Advisory Vote on NEO
Compensation |
|
|
|
We value our stockholders input
on our executive compensation programs, and our Board of Directors seeks
an annual advisory vote from stockholders to approve NEO
compensation. |
Modest Directed Perquisite
Program |
|
|
|
In 2016, the Compensation
Committee eliminated the perquisite allowance and instead provided
reimbursement to members of McDermotts EXCOM for financial planning and
required executive physicals, in a combined amount not to exceed
$20,000. |
Annual Review of Share
Utilization |
|
|
|
We evaluate share utilization
levels annually by reviewing overhang levels (the dilutive impact of
equity compensation on our stockholders) and annual run rates (the
aggregate stock awarded as a percentage of total outstanding
shares). |
Clawback Policy |
|
|
|
We have a clawback policy that
allows McDermott to recover, under certain circumstances, compensation
paid to executive officers. |
Derivatives
Trading, Hedging or Pledging of McDermott Stock |
|
|
|
Members of the Board of Directors
and employees are prohibited from engaging in derivatives trading, hedging
or pledging of our common stock. |
Excise Tax
Gross-Ups |
|
|
|
We do not provide excise tax
gross-ups in our change in control agreements. |
Repricing of Underwater Stock
Options |
|
|
|
Our equity incentive plans do not
permit repricing or exchange of underwater stock options without
stockholder approval. |
Employment
Contracts |
|
|
|
None of our current NEOs has an
employment contract with McDermott relating to ongoing
employment. |
McDermott
International, Inc. 39
Table of Contents
2016 Compensation Program
The Compensation Committee is committed
to targeting reasonable and competitive total direct compensation for our NEOs,
with a significant portion of that compensation being performance-based. Our
compensation programs are designed to address business needs and
provide competitive opportunities, but
achievement of most of those opportunities depends on the attainment of
performance goals and/or stock price performance. McDermotts compensation
programs are designed to provide compensation that:
Attracts, motivates
and
retains high-performing executives |
|
|
|
Provides
performance-based incentives to reward achievement of short and long-term
business goals and strategic objectives while recognizing individual
contributions |
|
|
|
Aligns the
interests of our executives with those of our
stockholders |
|
|
|
|
|
|
|
|
What We Pay and Why: Elements of Total Direct
Compensation |
Target Total
Direct Compensation
The Compensation Committee seeks to provide reasonable and competitive
compensation. As a result, it targets the elements of total direct compensation,
or TDC, for our NEOs generally within approximately 15% of the median
compensation of our market for comparable positions. Throughout this CD&A,
we refer to compensation that is within approximately 15% of market median as
market range compensation.
The Compensation Committee may set TDC
or individual elements of TDC above or below the market range to account for a
NEOs performance, experience, tenure in the role, internal pay equity and other
factors or situations that are not typically captured by looking at standard
market data and practices and which the Compensation Committee deems relevant to
the appropriateness or competitiveness of a NEOs compensation.
When making decisions regarding
individual compensation elements, the Compensation Committee also considers the
effect on the NEOs target TDC and target total cash-based compensation (annual
base salary and annual incentives at target level), as applicable. The
Compensation Committees goal is to establish target compensation for each
element that, when combined, create a target TDC award for each NEO that is
reasonable and competitive and supports our compensation philosophy and
objectives.
Elements of
Total Direct Compensation
Total direct compensation is comprised
of three elements: annual base salary, annual incentive, and long-term
incentives.
Annual Base
Salary
We pay base salaries to provide a fixed
level of compensation that helps attract and retain executives. Base salary
levels recognize an executive officers experience, skill and performance, with
the goal of being market competitive based on the officers role and
responsibilities within the organization. Adjustments may be made based on
individual performance, inflation, pay relative to market and internal pay
equity considerations. No NEO received an increase in annual base salary in
2016.
Annual
Incentive
The Compensation Committee administers
our annual incentive compensation program under our Executive Incentive
Compensation Plan, or EICP. The EICP is a cash incentive plan designed to
motivate and reward our NEOs and other key employees for their contributions to
strategic business goals and other factors that we believe drive our earnings
and promote creation of stockholder value. In 2016, EICP bonus pool funding was
100% based on our financial performance, with each participants actual bonus
award determined by achievement of the participants individual performance
goals.
Financial
Performance Goals. For 2016 EICP awards, the Compensation Committee approved
financial metric performance goals based on consolidated operating income,
consolidated free cash flow (defined as consolidated cash from operations less
consolidated capital expenditures), order intake (including change orders) and
operating margins on order intake, weighted as set forth below. McDermott
established the 2016 financial performance goals with consideration of
managements internal forecast of 2016 financial results, with the exception of
the operating income goals, which were established at an increase over the
forecast 2016 results.
40 2017
Proxy Statement
Table of Contents
Weight |
|
Financial
Metric Performance Goal |
|
Reason Metric
Selected |
|
Performance Level |
|
Business Result
Goal ($/%) |
|
Funding Multiple |
25% |
|
Operating Income |
|
Reflects
execution performance
|
|
Threshold Target Maximum |
|
100M 137M 170M |
|
0.5x 1.0x 2.0x |
25% |
|
Free Cash Flow |
|
Prioritizes liquidity needs |
|
Threshold Target Maximum |
|
(180)M (143)M (110)M |
|
0.5x 1.0x 2.0x |
30% |
|
Order Intake |
|
Forward-looking
leading indicator to drive future performance |
|
Threshold Target Maximum |
|
3,140M 4,192M 5,240M |
|
0.5x 1.0x 2.0x |
20% |
|
Order Intake Operating Margin* |
|
Promotes pricing discipline on order
intake |
|
Threshold Target Maximum |
|
6% 8% 10% |
|
0.5x 1.0x 2.0x |
* |
Due to the nature of our
business, forward-looking Order Intake Operating Margin Threshold, Target
and Maximum business goals are competitively sensitive and unable to be
disclosed, although at this time we are able to disclose such goals after
the end of the applicable performance
period. |
McDermotts actual performance against
the stated goals determines the funding for each financial performance goal,
with the weighted sum of each funding multiple determining the financial metric
result.
2016 Financial
Performance Results Under the EICP. McDermotts actual 2016 financial performance results against the stated
performance goals under the EICP were as follows:
Financial Metric
Performance Goal |
|
Actual
Result ($/%) |
|
Funding Multiple |
|
Weight |
|
Weighted Funding
Multiple |
Operating Income |
|
203.1M* |
|
2.000x |
|
25% |
|
0.500x |
Free Cash Flow |
|
(49.9)M |
|
2.000x |
|
25% |
|
0.500x |
Order Intake |
|
2,726.4M |
|
0.000x |
|
30% |
|
0.000x |
Order Intake Operating Margin** |
|
5.20% |
|
0.000x |
|
20% |
|
0.000x |
Total EICP Bonus Pool Funding Multiple |
|
|
|
|
|
|
|
1.000x |
* |
Actual result for Operating
Income computed in accordance with generally accepted accounting
principles in the U.S. was $142.3 million. In consideration of McDermotts
2016 performance, however, the Compensation Committee approved adjustments
to GAAP Operating Income for items that our management does not consider
to be representative of our normal operations. See the Appendix for a
reconciliation of the Non-GAAP to GAAP financial measure. |
** |
Due to the nature of our
business, forward-looking Order Intake Operating Margin goals are
competitively sensitive and unable to be disclosed, although at this time
we are able to disclose those goals and actual results after the end of
the applicable performance period. |
Accordingly, each NEO was eligible to
earn 1.0x of his or her target EICP award, subject to modification by the
Compensation Committee, based on his or her achievement of individual
performance goals.
Individual
Performance Goals. Following the determination of the EICP bonus pool funding multiple, an
individual participants award was determined based on the achievement of the participants individual performance goals. In
no event could any NEOs annual bonus exceed two times his or her target EICP
award opportunity. The Compensation Committee had the discretion to reduce the
amount of payout to any participant, even if performance goals were
achieved.
McDermott
International, Inc. 41
Table of Contents
Long-Term
Incentives
The Compensation Committee believes
that the interests of our stockholders are best served when a significant
percentage of executive compensation is comprised of equity that appreciates in
value contingent on increases in the value of our common stock and other
performance measures that reflect improvements in McDermotts business
fundamentals. Therefore, LTI compensation represents the single largest element
of our NEOs total direct compensation. The Compensation Committee maintained
the performance-based component of LTI at 50% in 2016, after increasing to 50%
in 2015 from 40% in 2014, and allocated LTI compensation to executive officers,
including the NEOs, as follows:
Performance
Units |
Restricted Stock
Units |
50% |
50% |
Performance
Units. Performance units are intended
to align the NEOs interests with those of our stockholders, with a focus on
long-term results. The performance units awarded in 2016 are structured to be
paid out, if at all, in shares of McDermott common stock, cash equal to the fair
market value of the shares otherwise deliverable, or any combination thereof, at
the sole discretion of the Compensation
Committee, at the end of a three-year performance period, to the extent the
applicable performance goals are met. Relative return on average invested
capital, or ROAIC, was used as the performance metric for the performance units
granted in 2016, as the Compensation Committee believed that this metric tied
specifically to our strategy of appropriately investing capital to grow the
business. The number of performance units earned is determined based on both (1)
our average ROAIC, and (2) our relative ROAIC improvement as compared to a
competitor peer group comprised of both domestic and international peers, in
each case over the three-year performance period. Based on this performance, up
to 200% of a participants target award may be earned, with earned awards
between the amounts shown calculated by linear interpolation. We compute
McDermotts ROAIC improvement by subtracting McDermotts 2015 ROAIC from the
three-year performance period average ROAIC. Similar calculations are done for
each member of the competitor peer group, following which the median competitor
peer group ROAIC improvement is calculated. The amount by which McDermotts
ROAIC improvement exceeds the competitor peer group median ROAIC improvement
determines whether the threshold, target or maximum earned award is
achieved.
|
|
MDR 3-Year Average
ROAIC |
|
<
6% |
|
≥ 6% and <
10% |
|
≥
10% |
Performance
Level |
|
Amount by which MDR
ROAIC Improvement Exceeds Competitor Peer Group Median ROAIC
Improvement |
|
Earned
Award |
|
Earned
Award |
|
Earned
Award |
Maximum |
|
³ 6% |
|
50% |
|
200% |
|
200% |
Target |
|
2% |
|
50% |
|
100% |
|
100% |
Threshold |
|
0% |
|
50% |
|
50% |
|
50% |
|
|
< 0% |
|
0% |
|
0% |
|
50% |
Restricted Stock Units.
Restricted stock units, or RSUs, are intended to promote
the retention of employees, including the NEOs. The RSUs granted in 2016
generally vest in one-third increments on the first, second and third
anniversaries of the grant date. The RSUs may be paid out in shares of McDermott common
stock, cash equal to the fair market value of the shares otherwise deliverable,
or any combination thereof, at the sole discretion of the Compensation
Committee.
For 2016 NEO compensation, the
Compensation Committee provided:
● |
No increases in annual base
salaries. |
● |
No increases in annual target
bonus awards. As a result of McDermotts 2016 financial performance, each
NEO was eligible to earn 1.0x of his or her target EICP award, subject to
adjustment by the Compensation Committee based on his or her achievement
of individual performance goals. |
● |
The same number of units to
participants in our LTI program as awarded in 2015, other than for those
NEOs whose target LTI awards were adjusted in 2016. Due to the decrease in the price of McDermott stock as
of the grant date for the 2016 annual LTI awards, as compared to the grant
date for the 2015 annual LTI awards, this resulted in a year over year
decrease in the grant date fair value of LTI awarded to the NEOs, with the
exception of Messrs. Spence and Kennefick, who each received an increase
to the target value of their LTI award for 2016. See Sizing Long-Term
Incentive Compensation and Timing of Equity Grants below for further
explanation of how the size of the 2016 LTI awards was
determined. |
42 2017 Proxy Statement
Table of Contents
The compensation of each NEO is
discussed in more detail on the following pages.
|
|
|
|
|
|
McDermott Tenure:
3 years 6 months |
|
DAVID DICKSON President and Chief Executive Officer |
|
|
|
|
|
|
|
2016 Target
Total Direct Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
Element |
2015
Target Compensation ($) |
|
2016
Target Compensation ($) |
|
2016 Percentage of Target TDC |
|
|
|
Annual Base
Salary |
850,000 |
|
850,000 |
|
15% |
|
|
|
Annual
Incentive (% of Salary) |
100% |
|
100% |
|
15% |
|
|
|
Long-Term
Incentive |
5,000,000 |
|
4,000,000 |
|
70% |
|
|
|
Target
TDC |
6,700,000 |
|
5,700,000 |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive In February 2016, the
Compensation Committee approved the following individual performance goals as a
component of Mr. Dicksons 2016 EICP award:
● |
Financial
Deliver financial performance in line with forecast, with a focus on
continuing to build backlog, and deliver cost savings under McDermotts
Additional Overhead Reduction initiative |
● |
Strategic
Evaluate and propose to the Board any changes to McDermotts strategy and
vision for both near-term and long-term objectives |
● |
QHSES Continue
focus on quality, health, safety, environment and security, or QHSES,
statistics, with increased focus on the cost of non-quality and further
development of McDermotts Taking the Lead initiative |
● |
Relationships
Continue development of relationships with customers, potential partners,
the investment community, governments and banks |
● |
Internal
Organization Continue
development of effectiveness and efficiency of internal organization, and
continued enhancement of processes for talent management and succession
planning |
The Governance Committees assessment
of these individual performance goals considered McDermotts continued financial
and operational performance improvements during 2016. Notably, McDermotts 2016
financial results reflected TSR of 120%, revenues of $2.6 billion, operating
income of $142.3 million and order intake (including change orders) of $2.7
billion, which resulted in year-end backlog of $4.3 billion. These results
reflect continued, significant improvements since Mr. Dickson was elected as
President and Chief Executive Officer in 2013, and were achieved despite the
difficult, lower for longer oil and gas market. Additionally, under his
oversight McDermotts QHSES performance has continued on a positive trend with
peer leading safety statistics, increased focus on the cost of non-quality and
the deployment of McDermotts Taking the Lead initiative, designed to promote
consistency in quality, safety and performance across the globe as well as
operating in an environmentally conscious and socially responsible manner.
During 2016, Mr. Dickson also continued improving relationships with customers,
potential joint venture or consortium counterparties, the investment community,
governments and banks. Finally, following significant executive management
changes in prior years, in 2016 Mr. Dickson was focused on building and
optimizing the executive management team as required for achievement of
McDermotts operating strategy, while improving talent management and succession
planning for key roles.
In consideration of the Governance
Committees assessment of Mr. Dicksons achievement of his individual
performance goals as discussed above, the Compensation Committee awarded Mr.
Dickson a final EICP award of $1,190,000.
Long-Term
Incentive Mr. Dicksons 2016 target
LTI award was decreased from his 2015 award, with his 2016 target award returned
to the amount of his 2014 target LTI award following the increase received in
2015.
McDermott International,
Inc. 43
Table of Contents
|
|
|
|
|
|
McDermott Tenure: 2 years 9
months |
|
STUART A.
SPENCE Executive Vice
President and Chief Financial Officer |
|
|
|
|
|
|
|
2016 Target
Total Direct Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
Element |
2015
Target Compensation ($) |
|
2016
Target Compensation ($) |
|
2016 Percentage of Target
TDC |
|
|
|
Annual Base
Salary |
475,000 |
|
475,000 |
|
22% |
|
|
|
Annual Incentive (% of
Salary) |
70% |
|
70% |
|
15% |
|
|
|
Long-Term
Incentive |
1,200,000 |
|
1,400,000 |
|
63% |
|
|
|
Target TDC |
2,007,500 |
|
2,207,500 |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive Based on the Compensation
Committees and Mr. Dicksons assessment of Mr. Spences achievement of his
individual performance goals, the Compensation Committee awarded Mr. Spence a
final EICP award of $478,800.
Long-Term
Incentive Mr. Spence received an
increase in his 2016 target long-term incentive in consideration of his
performance from his date of hire to the date of the 2016 LTI awards, as well as
to more approximate market range.
|
|
|
|
|
|
McDermott Tenure: 2 years 5
months |
|
LINH
AUSTIN Vice President,
Middle East and Caspian |
|
|
|
|
|
|
|
2016 Target
Total Direct Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
Element |
2015
Target Compensation ($) |
|
2016
Target Compensation ($) |
|
2016 Percentage of Target
TDC |
|
|
|
Annual Base
Salary |
300,000 |
|
325,000 |
|
37% |
|
|
|
Annual Incentive (% of
Salary) |
30% |
|
50% |
|
18% |
|
|
|
Long-Term
Incentive |
250,000 |
|
400,000 |
|
45% |
|
|
|
Target TDC |
640,000 |
|
887,500 |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive Based on the Compensation
Committees and Mr. Dicksons assessment of Mr. Austins achievement of his
individual performance goals, the Compensation Committee awarded Mr. Austin a
final EICP award of $214,500.
Long-Term
Incentive Mr. Austin received an
increase in his 2016 target long-term incentive as a result of his promotion to
Vice President, Middle East and Caspian effective January 1, 2016.
44 2017 Proxy Statement
Table of Contents
|
|
|
|
|
|
McDermott Tenure:
18 years |
|
LIANE K. HINRICHS Senior Vice President, General Counsel and Corporate
Secretary |
|
|
|
|
|
|
|
2016 Target
Total Direct Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
Element |
2015
Target Compensation ($) |
|
2016
Target Compensation ($) |
|
2016 Percentage of Target TDC |
|
|
|
Annual Base
Salary |
477,750 |
|
477,750 |
|
26% |
|
|
|
Annual
Incentive (% of Salary) |
70% |
|
70% |
|
19% |
|
|
|
Long-Term
Incentive |
1,000,000 |
|
1,000,000 |
|
55% |
|
|
|
Target
TDC |
1,812,175 |
|
1,812,175 |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive Based on the Compensation
Committees and Mr. Dicksons assessment of Ms. Hinrichs achievement of her
individual performance goals, the Compensation Committee awarded Ms. Hinrichs a
final EICP award of $401,310.
|
|
|
|
|
|
McDermott Tenure:
25 years |
|
JONATHAN
KENNEFICK Senior Vice
President, Project Execution and Delivery |
|
|
|
|
|
|
|
2016 Target
Total Direct Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
Element |
2015
Target Compensation(1) ($) |
|
2016
Target Compensation ($) |
|
2016 Percentage of Target TDC |
|
|
|
Annual Base
Salary |
375,000 |
|
375,000 |
|
39% |
|
|
|
Annual
Incentive (% of Salary) |
50% |
|
50% |
|
19% |
|
|
|
Long-Term
Incentive |
300,000 |
|
400,000 |
|
42% |
|
|
|
Target
TDC |
862,500 |
|
962,500 |
|
100% |
|
|
|
|
(1) 2015 target compensation reflects increases to
annual base salary and annual incentive received in November 2015 in
connection with Mr. Kenneficks promotion to Senior Vice President,
Project Execution and Delivery. |
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentive Based on the Compensation
Committees and Mr. Dicksons assessment of Mr. Kenneficks achievement of his
individual performance goals the Compensation Committee awarded Mr. Kennefick a
final EICP award of $213,750.
Long-Term
Incentive Mr. Kennefick received an
increase in his 2016 target long-term incentive as a result of his promotion to
Senior Vice President, Project Execution and Delivery in November 2015 and
internal pay equity considerations.
McDermott
International, Inc. 45
Table of
Contents
Steve
Allen
Mr. Allen served as McDermotts Senior
Vice President, Human Resources, until his retirement in July 2016. Mr. Allens
2016 target direct compensation was comprised of an annual base salary of
$400,000, annual incentive target award of 70% of annual base salary earned in
2016, and long-term incentive awards with a target value of $600,000, all of
which remained unchanged from 2015.
In connection with Mr. Allens
retirement, we entered into a separation agreement with Mr. Allen providing for
various compensation-related benefits in exchange for, among other things, his
agreement to comply with several restrictive covenants. Under that separation
agreement, Mr. Allen received: (1) a lump-sum cash payment equal to six months
of his base salary; (2) an amount of 2016 bonus under the EICP based on actual
performance results for 2016, prorated for the length of his 2016 service; (3)
payment of an amount to fund three months of continuing health insurance
coverage under the Consolidated Omnibus Reconciliation Act; and (4) accrued but
unutilized vacation pay.
Additionally, Mr. Allen received the
following relating to his outstanding equity awards under the McDermott
International, Inc. 2009 Long-Term Incentive Plan (the 2009 LTIP) and the 2014
LTIP: (1) each then outstanding portion of his March 6, 2014 RSU award and March
5, 2015 RSU award, and 50% of the currently outstanding portion of his February
26, 2016 RSU award, which would, absent his retirement, have remained
outstanding and continued to vest through March 15, 2017 would, subject to
certain conditions, vest and be settled on the date such award would otherwise
be settled in accordance with the terms of the 2009 LTIP of 2014 LTIP, as
applicable, and the applicable grant agreement;
(2) each then outstanding portion of his May 12, 2014 RSU award which would,
absent his retirement, have remained outstanding and continued to vest through
May 15, 2017 would, subject to certain conditions, vest and be settled on the
date such award would otherwise be settled in accordance with the terms of the
2014 LTIP and the applicable grant agreement; (3) each then outstanding portion
of his May 12, 2014 award of performance shares which would, absent his
retirement, have remained outstanding and continue to vest through May 15, 2017
would, subject to certain conditions, vest and be settled in accordance with the
terms of the 2014 LTIP and applicable grant agreement, with the number of
performance shares that would otherwise vest and settle prorated based on the
number of days beginning on January 1, 2014 and ending on July 1, 2016 relative
to the total number of days in the performance period; and (4) each then
outstanding portion of his March 5, 2015 award of performance shares which
would, absent his retirement, have remained outstanding and continued to vest
through March 15, 2018 would, subject to certain conditions, vest and be settled
on the date such award would otherwise be settled in accordance with the terms
of the 2014 LTIP and applicable grant agreement, with the number of performance
shares that would otherwise vest and settle prorated based on the number of days
beginning on January 1, 2015 and ending on July 1, 2016 related to the total
number of days in the performance period. All other outstanding equity and
performance-based awards previously granted to Mr. Allen were forfeited at the
time of his retirement. Mr. Allens benefits under our Director and Executive
Deferred Compensation Plan became fully vested as of the date of his retirement,
and those benefits are to be paid in accordance with the terms of that
plan.
2016 Other Compensation
Elements |
Perquisites
In 2016, our Compensation Committee
revised its approach with respect to perquisites, and provided for financial
planning services and an executive physical to be reimbursed to the participant
or paid directly to the participants provider of choice, in a combined amount
not to exceed $20,000, rather than providing an allowance to be used for a
company-required physical and any other purpose determined by the participant,
as in recent years. No other perquisites were available to the participants in
the perquisite program, with the exception of any company-required spousal
travel for (1) the Chief Executive Officer, and (2) the remaining participants,
as approved by the Chief Executive Officer. There were no reimbursements to any
perquisite program participants for company-required spousal travel in
2016.
Additionally, and consistent with our
past practice, we may provide a gross-up for any imputed income related to such
company-required spousal travel, but only when the presence of the spouse is
related to the underlying business purpose of the trip. There was no
company-required spousal travel in 2016, and no
imputed income or gross-ups were provided for any such company-required spousal
travel in 2016. We also may provide our NEOs with a tax gross-up on any
relocation-related expense reimbursements that may be subject to tax.
Expatriate
Benefits
McDermott provides benefits to our
expatriate employees, which benefits are designed to relocate and support
employees who are sent on an assignment outside of their home country.
Expatriate benefits generally include an expatriate premium equal to 10% of the
employees base salary, a hardship premium in certain countries, a housing
allowance (or company provided housing in certain locations), transportation
allowance (or company provided transportation in certain locations), a cost of
living differential, where applicable, a vacation allowance based on the cost of
an economy plane ticket to the employees home location, company paid education
for approved dependents in locations where public education is not an option and
a tax equalization program. Following Mr. Kenneficks relocation to Houston in
November 2015,
46 2017 Proxy
Statement
Table
of Contents
McDermott continued to pay the cost of
education for his dependents through June 2016, and also provided a tax gross-up
on that cost.
Under McDermotts tax equalization
program, we ensure that expatriate employees are subject to substantially the
same income tax liability as they would have paid had they lived and worked in
the United States. Each expatriate employee is responsible for a hypothetical US
income tax liability based on an estimate of the expatriates anticipated US
income tax liability on their base compensation. Under the program, McDermott is
responsible for any home country tax and assignment country taxes (if
applicable) in excess of that amount based on the expatriates full
compensation, including any foreign allowances. Mr. Austin participated in
expatriate benefits during 2016, as Mr. Austin is a United States citizen based
in Dubai.
Defined
Contribution Plans
We provide retirement benefits for most
of our U.S. based employees, including our U.S. based NEOs, through sponsorship
of the McDermott Thrift Plan, a qualified defined contribution 401(k) plan,
which we refer to as our Thrift Plan. We provide retirement benefits for our
non-U.S. expatriate employees through sponsorship of a global defined
contribution plan, which we refer to as the McDermott Global Defined
Contribution Plan.
Retirement and
Excess Plans
We do not provide defined benefit
pension plans to any of our NEOs, with the exception of Ms. Hinrichs and Mr.
Kennefick, who were participants in our now closed and frozen retirement and
excess plans. Ms. Hinrichs and Mr. Kennefick were eligible for participation
under the McDermott (U.S.) Retirement Plan (the U.S. Retirement Plan) before
it was closed to new participants in 2006. Benefit accruals under the U.S.
Retirement Plan were frozen altogether in 2010. Ms. Hinrichs is also a
participant in our unfunded, nonqualified excess retirement plan (the U.S.
Excess Plan), under which benefits have been frozen since 2010. This plan
covers a small group of highly compensated employees whose ultimate benefits
under the U.S. Retirement Plan are reduced by Internal Revenue Code limits on
the amount of benefits which may be provided under qualified plans and the
amount of compensation which may be taken into account in computing benefits
under qualified plans.
See the Pension Benefits table under
Executive Compensation Tables below for more information regarding the U.S.
Retirement Plan, the U.S. Excess Plan and the J. Ray McDermott, S.A. Third
Country National Employees Pension Plan, or the TCN Plan, which provides
retirement benefits for certain of our current and former foreign
employees.
Deferred
Compensation Plan
The McDermott International, Inc.
Director and Executive Deferred Compensation Plan, or the DCP, is a defined
contribution supplemental executive retirement plan established by our Board and
the Compensation Committee to help maintain the competitiveness of our
post-employment compensation as compared to our market. The DCP is an unfunded,
nonqualified plan that provides each participant in the plan with benefits based
on the participants notional account balance at the time of retirement or
termination. Under the DCP, on an annual basis, the Compensation Committee has
the discretion to credit a specified participants notional account with an
amount equal to a percentage of the participants prior-year base salary and
annual bonus paid in the prior year. We refer to such credit as a Company
Contribution. In 2016, Messrs. Dickson, Spence, Kennefick, Allen and Ms.
Hinrichs were participants in the DCP and their respective accounts in the DCP
received a Company Contribution in an amount equal to 5% of the sum of their
respective base salaries paid in 2015 and 2014 bonus paid in 2015. Mr. Austin
was not a participant in the DCP in 2016.
The Compensation Committee has
designated deemed mutual fund investments to serve as indices for the purpose of
determining notional investment gains and losses to each participants account
for any Company Contribution or participant-elected deferrals. Each participant
allocates any Company Contributions and deferrals among the various deemed
investments. DCP benefits are based on the participants vested notional account
balance at the time of retirement or termination. Please see the Nonqualified
Deferred Compensation table and accompanying narrative below for more
information about the DCP and Company Contributions to DCP accounts.
Employment
Agreements
Except for change in control agreements
described below, we do not currently have any employment agreements with any of
our NEOs relating to ongoing employment. Mr. Austin has an employment agreement
related to his status as an expatriate employee, which sets forth the expatriate
benefits as discussed above under Expatriate Benefits. This employment
agreement does not provide for any specified term of employment, and the terms
of the agreement are generally consistent with those of employment agreements
entered into with various other McDermott expatriate employees.
Change in
Control Agreements
We believe change in control agreements
for executive officers are common within our industry, and our Board and the
Compensation Committee believe that providing these agreements to our NEOs
protects stockholders interests by helping to assure management continuity and
focus through and beyond a change in control. Accordingly, the Compensation
Committee has offered change in control agreements to key senior executives
since 2005. Our change in control agreements contain what is commonly referred
to as a double trigger,
McDermott International,
Inc. 47
Table of
Contents
that is, they provide benefits only
upon an involuntary termination or constructive termination of the executive
officer within one year following a change in control. The change in control
agreements for our NEOs generally provide a cash severance payment of a multiple
of the sum of the NEOs annual base salary and target EICP, as set forth below,
and a pro-rated bonus payment under the EICP.
NEO |
Multiple of Base Salary
+ Target EICP |
Mr. Dickson |
2.5x |
Mr. Spence |
2.0x |
Mr. Austin |
1.0x |
Ms. Hinrichs |
2.0x |
Mr.
Kennefick |
2.0x |
In addition, upon a change in control,
each such officer would become fully vested in any outstanding and unvested
equity-based awards and his or her respective account balance in the
DCP.
The change in control agreements: (1)
do not provide for excise tax gross-ups; (2) require the applicable officers
execution of a release prior to payment of certain benefits; and (3) provide for
the potential reduction in payments to an applicable officer in order to avoid
excise taxes. Additionally, the change in control agreements with Messrs. Austin
and Kennefick are scheduled to expire on March 15, 2019. See the Potential
Payments Upon Termination or Change in Control table under Compensation of
Executive Officers below and the accompanying disclosures for more information
regarding the change in control agreements with our NEOs, as well as other plans
and arrangements that have different trigger mechanisms that relate to a change
in control.
Other Compensation
Policies and Practices
Sizing Long-Term
Incentive Compensation and Timing of Equity Grants
The Compensation Committee generally
determines the size of equity-based grants as a dollar value, rather than
granting a targeted number of shares or units, with each target value generally
set within market range. To determine the number of restricted stock units and
performance shares or units granted, the target value of long-term incentive
compensation is divided by the fair market value of the applicable component of
equity.
For purposes of determining 2016
awards, the Committee sought to ensure that award recipients did not receive
larger share awards due solely to the decline in stock price during the
preceding year. Accordingly, in February 2016, the Committee approved 2016 LTI
award opportunities for the NEOs, with the number of units to be awarded based
on McDermotts stock price on March 5, 2015 (the date of 2015 LTI awards). Due
to the decrease in the price of McDermott stock as of the grant date for the
2016 annual LTI awards, as compared to the grant date for the 2015 annual LTI
awards, there was a year over year decrease in the grant date fair value of LTI
awarded to the NEOs, with the exception of Messrs. Spence and Kennefick, who
received increases to the target value of their LTI awards for 2016.
To avoid timing equity grants ahead of
the release of material nonpublic information, the Compensation Committee
generally grants equity awards effective as of the first day of the open trading
window following the meeting at which the grants are approved, which open window
period generally begins on the third NYSE trading day following the filing of
our annual report on Form 10-K or quarterly report on Form 10-Q with the
SEC.
Stock Ownership
Guidelines
To assist with the alignment of the
interests of directors, executive officers and stockholders, we believe our
directors and officers should have a significant financial stake in McDermott.
To further that goal, we have adopted stock ownership guidelines requiring
generally that our nonemployee directors and employees who are members of
McDermotts EXCOM maintain a minimum ownership interest in McDermott. The EXCOM
includes all of the NEOs. The ownership requirements are as follows:
Level |
Base Salary or
Annual Retainer Multiple |
CEO |
5x |
Members of
McDermotts |
3x |
EXCOM |
|
Nonemployee Directors |
5x |
Directors and officers have five years
from their initial election as a director/officer or a change in position which
increases the expected ownership level, whichever is later, to comply with the
guidelines. Shares of McDermott common stock, restricted shares of McDermott
common stock, restricted stock units (whether or not McDermott can settle them
in cash and whether or not vested), performance shares and units (whether or not
McDermott can settle them in cash and whether or not vested, but to the extent
not vested, at target performance level), shares of McDermott common stock held
in an employees Thrift Plan account and shares of McDermott common stock held
in any trust in which an employee has a pecuniary interest (to the extent the
employee has investment control over such shares) are all counted towards
compliance with the stock ownership guidelines. Further,
48 2017 Proxy
Statement
Table of
Contents
each director and officer subject to
the stock ownership guidelines has the ability to certify his or her ownership
at any time after reaching compliance with the required ownership level,
following which such director or officer is not required to accumulate any
additional McDermott securities, so long as he or she retains the number of
securities held on the certification date, regardless of any subsequent changes
in the market price of shares of McDermott common stock. All directors and NEOs
currently meet or exceed their ownership requirement or are within the five-year
period to achieve compliance.
Derivatives
Trading and Hedging
McDermotts Insider Trading Policy
prohibits all directors, officers and employees, including our NEOs, from
engaging in short sales or trading in puts, calls or other options on
McDermotts common stock. Additionally, directors, officers and employees are
prohibited from engaging in hedging transactions and from holding McDermott
shares in a margin account or pledging McDermott shares as collateral for a
loan.
Clawback
Policy
Our Compensation Committee has adopted
a clawback policy, which provides that, if the consolidated financial statements
of McDermott are materially restated within three years of their initial filing,
and the Compensation Committee determines, in its reasonable discretion, that
any current or former executive officer has engaged in intentional misconduct,
and such misconduct caused or partially caused the need for such restatement,
the Compensation Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or
return to McDermott all or a portion of the compensation vested, awarded or
received under any bonus award, equity award or other award during the period
subject to restatement and the 12-month period following the initial filing of
the financial statements that were restated. The forfeiture and/or return of
compensation under the policy would be limited to any portion that the executive
officer would not have received if the consolidated financial statements had
been reported properly at the time of their initial filing. The clawback policy
would not apply to restatements occurring as a result of a change in control, as
defined in the DCP, and the policy does not limit the ability of McDermott to
pursue forfeiture or reclamation of amounts under applicable law.
Forfeiture
Provisions
Additionally, consistent with our
recent practice, our grant agreements for awards made in 2016 contain a
forfeiture provision. In 2016, this provision provided that, in the event that,
while the grantee is employed by McDermott or performing services on behalf of
McDermott under any consulting agreement, the grantee is convicted of a felony
or a misdemeanor involving fraud, dishonesty or moral turpitude, or the grantee
engages in conduct that adversely affects or, in the sole judgment of the
Compensation Committee, may reasonably be expected to adversely affect, the
business reputation or economic interests of McDermott, then all rights and
benefits awarded under the respective agreements are immediately forfeited,
terminated and withdrawn.
How
We Make Compensation Decisions |
Compensation
Committee
The Compensation Committee has primary
responsibility for determining and approving, on an annual basis, the
compensation of our CEO and other executive officers. The Compensation Committee
receives information and advice from its compensation consultant as well as from
our human resources department and management to assist in compensation
determinations.
Compensation
Consultant
Pay Governance LLC, or Pay
Governance, has been engaged by our Compensation Committee to serve as its
consultant on executive compensation and benefits matters since November 2010.
Pay Governance provides advice and analysis to the Compensation Committee on the
design, structure and level of executive and director compensation, and, when
requested by the Compensation Committee, attends
meetings of the Compensation Committee and participates in executive sessions
without members of management present. Pay Governance reports directly to the
Compensation Committee, and the Compensation Committee reviews, on an annual
basis, Pay Governances performance and provides Pay Governance with direct
feedback on its performance. When requested by the Governance Committee, Pay
Governance attends meetings of the Governance Committee with respect to
nonemployee director compensation.
During 2016, Pay Governance did not
perform any services for McDermott other than as described above. In January
2017, our Compensation Committee assessed whether the work performed by Pay
Governance during 2016 raised any conflict of interest and determined that Pay
Governances work performed for the Compensation Committee raised no conflict of
interest.
McDermott International,
Inc. 49
Table of
Contents
Role of CEO and
Management
While the Compensation Committee has
the responsibility to approve and monitor all compensation for our executive
officers, management plays an important role in determining executive
compensation. Management, at the request of the Compensation Committee,
recommends financial goals that drive the business and works with Pay Governance
to analyze competitive market data and to recommend compensation levels for our
executive officers other than our CEO. Our CEO likewise assists the Compensation
Committee by providing his evaluation of the performance of our other executive
officers and recommending compensation for those officers, including adjustments
to their annual incentive compensation, based on individual
performance.
Defining Market
Range Compensation 2016 Benchmarking and Peer Groups
To identify median compensation for
each element of total direct compensation, the Compensation Committee relies on
benchmarking. This involves reviewing the compensation of our NEOs relative to
the compensation paid to similarly situated executives at companies we consider
our peers. As a result, the annual base salary, target annual incentive
compensation and target LTI compensation for each of the NEOs is benchmarked.
However, the specific performance metrics and performance levels used within
elements of annual and long-term compensation are designed for the principal
purpose of supporting our strategic and financial goals and driving the creation
of stockholder value, and, as a result, generally are not
benchmarked.
It is the Compensation Committees
practice to periodically review and consider the individual companies used for
benchmarking purposes. The Compensation Committee believes that identification
of peers using a broad industry sector code is inadequate and does not establish
similarity of operations and business models, nor identify historical
competitors for managerial talent factors the Compensation Committee considers
in the selection of companies for benchmarking purposes. Therefore, the
Compensation Committee considers the revenues and market capitalization of the
component companies. In this CD&A, we refer to the peer group as
the Proxy Peer Group. Market data from the
Proxy Peer Group was reflective of 2013 compensation, as reported in the 2014
proxy statements of the companies in the Proxy Peer Group, and was not
size-adjusted, although the Compensation Committee was aware of these
differences when making individual pay decisions. Market data utilized for 2016
compensation decisions was not refreshed from the data provided by Pay
Governance in 2015, given the Compensation Committees expectation that there
would be limited to no increases in elements of target direct compensation in
2016. The component companies of the Proxy Peer Group are as follows:
Archrock, Inc. |
KBR, Inc. |
Cameron International
Corporation |
Noble Corporation
plc |
Chicago Bridge & Iron Company
N.V. |
Oceaneering International, Inc. |
Dresser-Rand Group,
Inc. |
Oil States International,
Inc. |
FMC Technologies, Inc. |
Superior Energy Services, Inc. |
Helix Energy Solutions
Group, Inc. |
Tidewater
Inc. |
Jacobs Engineering Group, Inc. |
|
These Proxy Peer Group companies are
the same as the Proxy Peer Group utilized in 2015, except that the Proxy Peer
Group for 2016 did not include Foster Wheeler AG, which was acquired by AMEC plc
in November 2014. Archrock, Inc. changed its name
from Exterran Holdings, Inc. after its spin-off of a new publicly held company
named Exterran Corporation.
50 2017 Proxy
Statement
Table of
Contents
Pay Governance also utilized market
data based on a set of 78 companies in similar industries which participate in
Towers Watson surveys (the Survey Peer Group). The Survey Peer Group is
intended to provide a reference point for pay levels within similar industries,
and is used as a secondary reference for Messrs. Dickson and Spence and Ms.
Hinrichs, and a primary reference for Messrs. Allen, Austin and Kennefick. Aside
from screening companies on the basis of their industry classifications,
no further refinements or judgments were applied
in the identification of companies within the sample. Market data from the
Survey Peer Group represents 2014 compensation as reported to the survey and,
when possible, was size adjusted. Corporate positions were evaluated based on
average revenues of $3.3 billion, and business unit positions were evaluated
based on their respective revenue levels. The component companies of the Survey
Peer Group are as follows:
Anadarko Petroleum Corporation |
HNTB Corporation |
PolyOne Corporation |
Apache
Corporation |
Holly Frontier
Corporation |
PulteGroup,
Inc. |
A.O. Smith Corporation |
Hunt Consolidated, Inc. |
Rockwell Automation, Inc. |
Archrock, Inc. |
Husky Injection Molding
Systems Ltd. |
Rowan Companies
plc |
Ball Corporation |
ION Geophysical Corporation |
Saudi Arabian Oil Co. |
Beam, Inc. |
Irving Oil Commercial
G.P. |
Schlumberger
Limited |
Bemis Company, Inc. |
ITT Corporation |
Sealed Air Corporation |
BG US Services |
Jacobs Engineering Group,
Inc. |
ShawCor Ltd. |
BP p.l.c. |
KBR, Inc. |
Shell Oil Company |
Caterpillar Inc. |
Koch Industries,
Inc. |
Snap-On
Incorporated |
CH2M Hill |
Lehigh Hanson Materials Limited |
Sonoco Products Co. |
Chevron
Corporation |
Magellan Midstream
Partners, L.P. |
Spectra Energy
Corp |
ConocoPhillips |
Marathon Oil Corporation |
SPX Corporation |
Deere &
Company |
Marathon Petroleum
Corporation |
Statoil ASA |
Devon Energy Corporation |
Matthews International Corporation |
Terex Corporation |
Donaldson Company,
Inc. |
MDU Resources Group,
Inc. |
Tesoro
Corporation |
Eaton Corporation |
MeadWestvaco Corporation |
Textron Inc. |
EQT Corporation |
Milacron Holdings
Corp. |
3M Company |
Exxon Mobil Corporation |
Noble Energy, Inc. |
The Timken Company |
GAF Materials |
Occidental Petroleum
Corporation |
The Toro
Company |
The Goodyear Tire & Rubber
Company |
Owens Corning |
Transocean Ltd. |
Graco Inc. |
Pall Corporation |
Trinity Industries,
Inc. |
HD Supply, Inc. |
Parker Hannifin Corporation |
URS Corporation |
Hercules Offshore,
Inc. |
Parsons
Corporation |
USG
Corporation |
Herman Miller, Inc. |
Phillips 66 Company |
Valero Energy Corporation |
Hess Corporation |
Polymer Group, Inc. |
Xylem Inc. |
McDermott International,
Inc. 51
Table of
Contents
Performance Unit Peer
Group |
In consideration of comments received from the
stockholder outreach efforts undertaken during 2015 and 2016 regarding the
composition of the peer group, the Compensation Committee established the
following peer group comprised of domestic and international competitors for
purposes of the 2016 and 2017 Performance Unit awards:
Archrock, Inc. |
Saipem SpA |
Helix Energy Solutions
Group, Inc. |
Subsea7 SA |
Oceaneering International, Inc. |
TechnipFMC plc |
Superior Energy Services,
Inc. |
Swiber Holdings
Limited |
Tidewater Inc. |
SapuraKencana Petroleum
Berhad |
Compensation Committee
Report
We have reviewed and discussed the
Compensation Discussion and Analysis with McDermotts management and, based on
our review and discussions, we recommended to the Board that the Compensation
Discussion and Analysis be included in this Proxy Statement.
THE COMPENSATION COMMITTEE
Mary L.
Shafer-Malicki, Chair
Roger A. Brown
Erich Kaeser
Gary P.
Luquette
David Trice
52 2017 Proxy
Statement
Table of Contents
EXECUTIVE COMPENSATION TABLES
The following table summarizes the
prior three years compensation of our Chief Executive Officer, our Chief
Financial Officer, our three highest paid executive officers who did not serve
as our CEO and CFO during 2016 and were employed by McDermott as of December 31,
2016, and our former Senior Vice President, Human Resources, Mr. Allen (who
served until July 1, 2016). No compensation information is provided for Messrs.
Austin or Kennefick for 2014 and 2015, as they
were not previously included as named executive officers in our proxy
statement for our annual meeting of stockholders in 2015 or 2016. No
compensation information is provided for Mr. Allen for 2014 as he was not
included as a named executive officer in our proxy statement for our annual
meeting of stockholders in 2015.
Summary
Compensation Table
Name and Principal
Position |
|
Year |
|
Salary ($)(1) |
|
Bonus ($)(2) |
|
Stock Awards ($)(3) |
|
Non-Equity Incentive
Plan Compensation ($)(4) |
|
Change
in Pension Value
and Nonqualified Deferred Compensation Earnings ($)(5) |
|
All
Other Compensation ($)(6) |
|
Total ($) |
Mr.
Dickson |
|
2016 |
|
850,000 |
|
0 |
|
3,774,469 |
|
1,190,000 |
|
N/A |
|
101,691 |
|
5,916,160 |
President and Chief |
|
2015 |
|
850,000 |
|
0 |
|
4,999,998 |
|
1,445,340 |
|
N/A |
|
75,750 |
|
7,371,088 |
Executive Officer |
|
2014 |
|
850,000 |
|
0 |
|
3,999,976 |
|
552,000 |
|
N/A |
|
74,200 |
|
5,476,176 |
Mr. Spence |
|
2016 |
|
475,000 |
|
0 |
|
1,321,064 |
|
478,800 |
|
N/A |
|
60,533 |
|
2,335,397 |
Executive Vice |
|
2015 |
|
475,000 |
|
0 |
|
1,199,996 |
|
565,383 |
|
N/A |
|
55,675 |
|
2,296,054 |
President and
Chief |
|
2014 |
|
168,229 |
|
0 |
|
2,299,994 |
|
70,656 |
|
N/A |
|
7,570 |
|
2,546,449 |
Financial
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Austin |
|
2016 |
|
325,000 |
|
70,000 |
|
377,444 |
|
214,500 |
|
N/A |
|
397,750 |
|
1,383,694 |
Vice President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Hinrichs |
|
2016 |
|
477,750 |
|
0 |
|
943,608 |
|
401,310 |
|
30,704 |
|
63,982 |
|
1,917,354 |
Senior Vice |
|
2015 |
|
477,750 |
|
0 |
|
999,987 |
|
473,880 |
|
14,663 |
|
58,972 |
|
2,025,252 |
President,
General |
|
2014 |
|
477,750 |
|
50,000 |
|
999,992 |
|
167,213 |
|
104,829 |
|
73,474 |
|
1,768,429 |
Counsel and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Kennefick |
|
2016 |
|
375,000 |
|
0 |
|
377,444 |
|
213,750 |
|
10,529 |
|
43,637 |
|
1,020,360 |
Senior Vice |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project Execution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Delivery |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Allen |
|
2016 |
|
201,515 |
|
0 |
|
566,164 |
|
141,061 |
|
N/A |
|
259,627 |
|
1,168,367 |
Former Senior
Vice |
|
2015 |
|
400,000 |
|
0 |
|
599,991 |
|
436,436 |
|
N/A |
|
53,116 |
|
1,489,543 |
President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Human Resources |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The amounts reported in this
column for Messrs. Allen and Spence for 2016 and 2014, respectively,
represent partial-year service. |
(2) |
The amount reported in this
column for Mr. Austin for 2016 represents payment of the remaining portion
of a sign on bonus Mr. Austin received upon joining McDermott in 2015. Mr.
Austin received $70,000 on his date of hire in 2015 and the remaining
$70,000 in 2016, twelve months after his date of hire. The amount reported
in this column for Ms. Hinrichs for 2014 represents a discretionary bonus
award in recognition of her contributions to, and results achieved in
connection with, McDermotts refinancing transactions in the first half of
2014. |
(3) |
The amounts reported in this
column represent the aggregate grant date fair value of stock awards or
option awards, as applicable, granted to each NEO and computed in
accordance with FASB ASC Topic 718. See the Grants of Plan-Based Awards
table for more information regarding the stock awards we granted in 2016.
For a discussion of the valuation assumptions with respect to these
awards, see Note 14 to our consolidated financial statements included in
our annual report on Form 10-K for the year ended December 31,
2016. |
(4) |
The amounts reported in this
column for 2016, 2015 and 2014, respectively, are attributable to the
annual incentive awards earned in fiscal year 2016, but paid in 2017,
earned in 2015, but paid in 2016, and earned in 2014 but paid in
2015. |
McDermott International,
Inc. 53
Table of Contents
Executive Compensation
Tables |
(5) |
The amounts reported in this
column represent the changes in actuarial present values of the
accumulated benefits under defined benefit plans, determined by comparing
the prior completed fiscal year end amount to the covered fiscal year end
amount. |
(6) |
The amounts reported in this
column for 2016 are attributable to the
following: |
|
|
Deferred Compensation Plan Contribution ($)(A) |
|
Employer
Match ($)(B) |
|
Safe
Harbor Non-Elective Contribution ($)(B) |
|
Perquisite Program ($)(C) |
|
Expatriate Benefits ($)(D) |
|
Other ($)(E) |
|
Tax Payments ($)(F) |
Mr. Dickson |
|
70,100 |
|
6,625 |
|
7,950 |
|
17,016 |
|
0 |
|
0 |
|
0 |
Mr. Spence |
|
27,283 |
|
5,300 |
|
7,950 |
|
20,000 |
|
0 |
|
0 |
|
0 |
Mr. Austin |
|
N/A |
|
7,808 |
|
7,950 |
|
0 |
|
245,360 |
|
0 |
|
136,632 |
Ms. Hinrichs |
|
32,248 |
|
7,134 |
|
7,950 |
|
16,650 |
|
0 |
|
0 |
|
0 |
Mr. Kennefick |
|
18,474 |
|
7,750 |
|
7,950 |
|
0 |
|
7,513 |
|
0 |
|
1,950 |
Mr.
Allen |
|
26,417 |
|
6,000 |
|
6,045 |
|
0 |
|
0 |
|
221,165 |
|
0 |
(A) |
The amounts reported in this
column are attributable to contributions made by McDermott under the
Deferred Compensation Plan. |
(B) |
The amounts reported in these
columns are attributable to contributions made under our defined
contribution plans, which we refer to as our Thrift Plan. |
(C) |
The amounts reported in this
column are attributable to payments made pursuant to McDermotts 2016
perquisite program. For Mr. Dickson, $15,315 related to financial planning
and $1,701 related to his required physical. For Mr. Spence, $17,851
related to financial planning and $2,149 related to his required physical.
For Ms. Hinrichs, $15,000 related to financial planning and $1,650 related
to her required physical. For more information on McDermotts 2016
perquisite program, see Compensation Discussion and Analysis 2016 Other
Compensation Elements Perquisites. |
(D) |
The amounts reported in this
column for 2016 are attributable to the
following: |
|
|
Expatriate Premium ($) |
|
Commodities &
Service Allowance ($) |
|
Housing
& Utilities Allowance ($) |
|
Vacation Airfare ($) |
|
Education Allowance ($) |
|
Relocation ($) |
|
Company Provided Automobile ($) |
Mr. Austin |
|
32,500 |
|
48,772 |
|
91,806 |
|
18,148 |
|
54,134 |
|
0 |
|
0 |
Mr. Kennefick |
|
0 |
|
0 |
|
0 |
|
0 |
|
7,513 |
|
0 |
|
0 |
(E) |
The amount reported in this
column for Mr. Allen represents a cash severance payment pursuant to his
Separation Agreement ($200,000), payment for vacation earned but not taken
by Mr. Allen in 2016 ($8,975) and a payment of an amount to fund three
months of continuing health insurance coverage under the Consolidated
Omnibus Reconciliation Act ($3,696). The remaining amount ($8,494) relates
to consulting services provided to McDermott by Mr. Allen following his
retirement. |
(F) |
The amount reported for Mr.
Austin represents amounts paid to Mr. Austin in 2016 pursuant to
McDermotts tax equalization program. The amount reported for Mr.
Kennefick represents a tax gross-up provided to Mr. Kennefick in
connection with payments made to him for the education of his dependents
through June 2016. For more information on McDermotts tax equalization
program, see Compensation Discussion and Analysis 2016 Other
Compensation Elements Expatriate
Benefits. |
54 2017
Proxy Statement
Table of Contents
Executive Compensation
Tables |
Grants of
Plan-Based Awards
The following Grants of Plan-Based
Awards table provides additional information about stock awards and equity and
non-equity incentive plan awards we granted to our NEOs during the year ended
December 31, 2016.
|
|
|
|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan
Awards(1) |
|
Estimated Future Payouts Under Equity
Incentive Plan
Awards(2) |
|
All
Other Stock Awards: Number of Shares of Stock or
Units(3) |
|
Grant
Date Fair Value of Stock
and Option Awards ($)(4) |
Name / Award
Type |
|
Grant Date |
|
Committee Action Date |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
Mr. Dickson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP |
|
02/26/16 |
|
02/26/16 |
|
425,000 |
|
850,000 |
|
1,700,000 |
|
|
|
|
|
|
|
|
|
|
PUnits |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
296,736 |
|
593,471 |
|
1,186,942 |
|
|
|
1,887,238 |
RSUs |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
593,469 |
|
1,887,231 |
Mr. Spence |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP |
|
02/26/16 |
|
02/26/16 |
|
166,250 |
|
332,500 |
|
665,000 |
|
|
|
|
|
|
|
|
|
|
PUnits |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
103,858 |
|
207,715 |
|
415,430 |
|
|
|
660,534 |
RSUs |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
207,714 |
|
660,531 |
Mr. Austin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP |
|
02/26/16 |
|
02/26/16 |
|
81,250 |
|
162,500 |
|
325,000 |
|
|
|
|
|
|
|
|
|
|
PUnits |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
29,674 |
|
59,347 |
|
118,694 |
|
|
|
188,723 |
RSUs |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
59,346 |
|
188,720 |
Ms. Hinrichs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP |
|
02/26/16 |
|
02/26/16 |
|
167,213 |
|
334,425 |
|
668,850 |
|
|
|
|
|
|
|
|
|
|
PUnits |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
74,184 |
|
148,367 |
|
296,734 |
|
|
|
471,807 |
RSUs |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
148,365 |
|
471,801 |
Mr. Kennefick |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP |
|
02/26/16 |
|
02/26/16 |
|
93,750 |
|
187,500 |
|
375,000 |
|
|
|
|
|
|
|
|
|
|
PUnits |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
29,674 |
|
59,347 |
|
118,694 |
|
|
|
188,723 |
RSUs |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
59,346 |
|
188,720 |
Mr. Allen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP |
|
02/26/16 |
|
02/26/16 |
|
140,000 |
|
280,000 |
|
560,000 |
|
|
|
|
|
|
|
|
|
|
PUnits |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
44,510 |
|
89,020 |
|
178,040 |
|
|
|
283,084 |
RSUs |
|
02/26/16 |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
89,019 |
|
283,080 |
(1) |
These columns reflect the
threshold, target and maximum payout opportunities under the Executive
Incentive Compensation Plan, or EICP. |
|
On February 26, 2016, our
Compensation Committee established target EICP awards expressed as a
percentage of the NEOs 2016 annual base salary earned, as follows: Mr.
Dickson 100%, Mr. Spence 70%, Mr. Austin 50%, Ms. Hinrichs 70%,
Mr. Kennefick 50%, and Mr. Allen 70%. The target amounts shown for
Messrs. Dickson, Spence, Kennefick, and Allen and Ms. Hinrichs were
computed by multiplying their annual base salaries by their target award
percentage. For all of the NEOs, the threshold amounts are equal to 50% of
the respective target amounts and the maximum amounts are equal to 200% of
the respective target amounts. See Compensation Discussion and Analysis
What We Pay and Why: Elements of Total Direct Compensation Annual
Incentive and Compensation Discussion and Analysis 2016 NEO
Compensation for a detailed description of the EICP and discussions
regarding the determinations made with respect to the 2016 EICP
awards. |
(2) |
These columns reflect the
target, threshold and maximum payout opportunities of 2016 grants of
performance units under the 2014 LTIP. Each grant represents the right to
receive the value of one share of McDermott common stock for each vested
performance unit, paid in shares of McDermott common stock, cash equal to
the fair market value of the shares otherwise deliverable, or any
combination thereof, in the sole discretion of the Compensation Committee.
The amount of performance units that vest, if any, will be based on
McDermotts relative ROAIC improvement as compared to a competitor peer
group over a three-year measurement period (January 1, 2016 December 31,
2018). If the threshold performance goal is achieved, a number of
performance units between 50% and 200% of the target award may be earned,
depending on the three-year aggregate relative ROAIC performance. See
Compensation Discussion and Analysis What We Pay and Why: Elements of
Total Direct Compensation Long-Term Incentives and 2016 NEO
Compensation for a detailed description of the performance units awarded
in 2016. |
(3) |
This column reflects grants of
restricted stock units under the 2014 LTIP. The restricted stock units are
generally scheduled to vest in one-third increments on the first, second
and third anniversaries of the date of grant. Each restricted stock unit
represents the right to receive one share of McDermott common stock, cash
equal to the fair market value of the share otherwise deliverable, or any
combination thereof, in the sole discretion of the Compensation
Committee. |
(4) |
This column reflects the full
grant date fair values of the equity awards computed in accordance with
FASB ASC Topic 718. Grant date fair values are determined using the
closing price of our common stock on the date of grant, as reported on the
NYSE. For more information regarding the compensation expense related to
2016 awards, see Note 14 to our consolidated financial statements included
in our annual report on Form 10-K for the year ended December 31,
2016. |
McDermott International,
Inc. 55
Table of Contents
Executive Compensation
Tables |
Outstanding Equity
Awards at Fiscal Year-End
The following Outstanding Equity Awards
at Fiscal Year-End table summarizes the equity awards we have made to our NEOs
which were outstanding as of December 31, 2016.
|
|
|
|
Option
Awards(1) |
|
Stock
Awards |
Name |
|
Grant Date |
|
Number
of Securities Underlying Unexercised Options Exercisable
|
|
Number
of Securities Underlying Unexercised Options Unexercisable |
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned
Options
|
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of
Stock That Have Not Vested |
|
Market Value
of Shares or Units of Stock That Have
Not Vested ($)(2) |
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That
Have Not Vested ($)(3) |
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares,
Units or Other Rights That Have
Not Vested ($)(2) |
Mr. Dickson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA(4) |
|
10/31/13 |
|
|
|
|
|
|
|
|
|
|
|
108,439 |
|
801,364 |
|
|
|
|
RSUs(5) |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
102,040 |
|
754,076 |
|
|
|
|
RSUs(5) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
494,558 |
|
3,654,784 |
|
|
|
|
RSUs(5) |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
593,469 |
|
4,385,736 |
|
|
|
|
PShares |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306,122 |
|
2,262,238 |
PUnits |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,920 |
|
2,741,095 |
PUnits |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
296,736 |
|
2,192,875 |
Mr.
Spence |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(5) |
|
08/25/14 |
|
|
|
|
|
|
|
|
|
|
|
27,027 |
|
199,730 |
|
|
|
|
RSUs(6) |
|
08/25/14 |
|
|
|
|
|
|
|
|
|
|
|
58,559 |
|
432,751 |
|
|
|
|
RSUs(5) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
118,694 |
|
877,149 |
|
|
|
|
RSUs(5) |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
207,714 |
|
1,535,006 |
|
|
|
|
PShares(7) |
|
08/25/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,081 |
|
599,189 |
PUnits |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,021 |
|
657,861 |
PUnits |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,858 |
|
767,507 |
Mr. Austin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(5) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
49,454 |
|
365,465 |
|
|
|
|
RSUs(6) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
24,726 |
|
182,725 |
|
|
|
|
RSUs(5) |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
59,346 |
|
438,567 |
|
|
|
|
PUnits |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,674 |
|
219,287 |
Ms.
Hinrichs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQSO |
|
03/04/10 |
|
45,313 |
|
|
|
|
|
13.09 |
|
03/04/17 |
|
|
|
|
|
|
|
|
NQSO |
|
03/04/11 |
|
22,080 |
|
|
|
|
|
25.64 |
|
03/04/18 |
|
|
|
|
|
|
|
|
NQSO |
|
03/05/12 |
|
35,970 |
|
|
|
|
|
14.44 |
|
03/05/19 |
|
|
|
|
|
|
|
|
NQSO |
|
03/05/13 |
|
56,700 |
|
|
|
|
|
10.50 |
|
03/05/20 |
|
|
|
|
|
|
|
|
RSUs(8) |
|
03/05/13 |
|
|
|
|
|
|
|
|
|
|
|
6,547 |
|
48,382 |
|
|
|
|
RSUs(5) |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
25,510 |
|
188,519 |
|
|
|
|
RSUs(5) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
98,910 |
|
730,945 |
|
|
|
|
RSUs(5) |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
148,365 |
|
1,096,417 |
|
|
|
|
PShares |
|
03/05/12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,845 |
|
80,145 |
PShares |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,530 |
|
565,557 |
PUnits |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,184 |
|
548,216 |
PUnits |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,184 |
|
548,216 |
56 2017
Proxy Statement
Table of Contents
Executive Compensation
Tables |
|
|
|
|
Option
Awards(1) |
|
Stock
Awards |
Name |
|
Grant Date |
|
Number
of Securities Underlying Unexercised Options Exercisable
|
|
Number
of Securities Underlying Unexercised Options Unexercisable |
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned Options |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of
Stock That Have Not Vested |
|
Market Value
of Shares or Units of Stock That Have
Not Vested ($)(2) |
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That
Have Not Vested ($)(3) |
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares,
Units or Other Rights That Have
Not Vested ($)(2) |
Mr. Kennefick |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQSO |
|
03/04/10 |
|
3,489 |
|
|
|
|
|
13.09 |
|
03/04/17 |
|
|
|
|
|
|
|
|
NQSO |
|
03/04/11 |
|
4,416 |
|
|
|
|
|
25.64 |
|
03/04/18 |
|
|
|
|
|
|
|
|
NQSO |
|
03/05/12 |
|
6,906 |
|
|
|
|
|
14.44 |
|
03/05/19 |
|
|
|
|
|
|
|
|
NQSO |
|
03/05/13 |
|
9,894 |
|
|
|
|
|
10.50 |
|
03/05/20 |
|
|
|
|
|
|
|
|
RSUs(8) |
|
03/05/13 |
|
|
|
|
|
|
|
|
|
|
|
1,904 |
|
14,071 |
|
|
|
|
RSUs(5) |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
6,802 |
|
50,267 |
|
|
|
|
RSUs(5) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
29,672 |
|
219,276 |
|
|
|
|
RSUs |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
59,346 |
|
438,567 |
|
|
|
|
PShares |
|
03/05/12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,041 |
|
7,693 |
PShares |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,653 |
|
56,556 |
PUnits |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,255 |
|
164,464 |
PUnits |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,674 |
|
219,287 |
Mr. Allen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(5) |
|
03/06/14 |
|
|
|
|
|
|
|
|
|
|
|
3,679 |
|
27,188 |
|
|
|
|
RSUs(5) |
|
05/12/14 |
|
|
|
|
|
|
|
|
|
|
|
12,288 |
|
90,808 |
|
|
|
|
RSUs(5) |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
28,520 |
|
210,763 |
|
|
|
|
RSUs(5) |
|
02/26/16 |
|
|
|
|
|
|
|
|
|
|
|
14,261 |
|
105,389 |
|
|
|
|
PShares |
|
05/12/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,636 |
|
315,080 |
PUnits |
|
03/05/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,235 |
|
164,317 |
(1) |
The awards in this column
represent grants of stock options, which generally become exercisable in
one-third increments on each of the first, second and third anniversaries
of the grant date. |
(2) |
Market values in these columns
are based on the closing price of our common stock as reported on the NYSE
as of December 30, 2016 ($7.39). |
(3) |
The awards in this column
represent grants of performance shares or performance units, which, for
the awards made in 2012, generally may vest on the third, fourth and/or
fifth anniversaries of the grant date, and for the awards made in 2014,
2015 and 2016 generally may vest on the third anniversary of the grant
date, based on the attainment of stated performance levels. The number and
value of the 2012, 2015 and 2016 performance shares or performance units
listed are based on achieving threshold performance, and the number and
value of the 2014 performance units listed are based on achieving maximum
performance, each as of the nearest year-end measurement date under the
applicable grant agreement. |
(4) |
The award to Mr. Dickson
represents a grant of restricted stock, the outstanding portion of which
will generally vest on June 15, 2017. |
(5) |
These awards represent grants
of restricted stock units, which generally vest in one-third increments on
each of the first, second and third anniversaries of the grant
date. |
(6) |
These awards represent
one-time awards of restricted stock units made to Messrs. Spence and
Austin to compensate them for the forfeiture of incentives from their
prior employer. The restricted stock units generally vest 1/3 per year on
the first, second and third anniversaries of the grant
date. |
(7) |
This award vests on March 6,
2014 based on the attainment of stated performance
levels. |
(8) |
These awards represent grants
of restricted stock units, which generally vest in one-fourth increments
on each of the first, second, third and fourth anniversaries of the grant
date. |
McDermott International,
Inc. 57
Table of Contents
Executive Compensation
Tables |
Option Exercises
and Stock Vested
The following Option Exercises and
Stock Vested table provides information about the value realized by our NEOs on
exercises of option awards and vesting of stock awards during the year ended
December 31, 2016.
|
|
Option
Awards |
|
Stock
Awards(1) |
Name |
|
Shares Acquired on Exercise (#) |
|
Value Realized on Exercise |
|
Shares Acquired on
Vesting (#) |
|
Value Realized on
Vesting ($) |
Mr. Dickson |
|
0 |
|
N/A |
|
303,497 |
|
$1,226,040 |
Mr.
Spence |
|
0 |
|
N/A |
|
92,437 |
|
$422,747 |
Mr. Austin |
|
0 |
|
N/A |
|
24,109 |
|
$93,543 |
Ms.
Hinrichs |
|
0 |
|
N/A |
|
58,879 |
|
$228,451 |
Mr.
Kennefick |
|
0 |
|
N/A |
|
16,715 |
|
$64,854 |
Mr.
Allen |
|
0 |
|
N/A |
|
31,224 |
|
$126,419 |
(1) |
The number of shares acquired
on vesting reflected in this table represents the aggregate number of
shares that vested during 2016 in connection with awards of restricted
stock and restricted stock units. The value realized on vesting was
calculated based on the fair market value of the underlying shares on the
vesting date. The following table sets forth the number of shares withheld
by McDermott to satisfy the minimum statutory withholding tax due upon
vesting of such restricted stock and restricted stock
units: |
|
Name |
Shares
Withheld by McDermott on Vesting of Stock
Awards (#) |
|
Mr. Dickson |
154,262 |
|
Mr. Spence |
52,495 |
|
Mr. Austin |
12,981 |
|
Ms. Hinrichs |
22,633 |
|
Mr. Kennefick |
6,827 |
|
Mr.
Allen |
17,431 |
58 2017
Proxy Statement
Table of Contents
Executive Compensation
Tables |
Pension
Benefits
The following Pension Benefits table
shows the present value of accumulated benefits payable to the only two of our
NEOs who are entitled to benefits under the defined benefit pension plans that we sponsor. All benefits under the defined
benefit pension plans that we sponsor are frozen.
Name |
|
Plan
Name |
|
Number
of Years Credited Service |
|
Present Value
of Accumulated Benefit ($) |
|
Payments During 2016 ($) |
Mr.
Dickson |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Mr. Spence |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Mr. Austin |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Ms. Hinrichs |
|
U.S. Retirement
Plan(1) |
|
11.167 |
|
506,346 |
|
0 |
|
|
U.S. Excess
Plan(1) |
|
11.167 |
|
211,966 |
|
0 |
Mr.
Kennefick |
|
U.S. Retirement Plan(1) |
|
9.583 |
|
225,902 |
|
0 |
Mr. Allen |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
(1) |
The present value of
accumulated benefits reflected above for the U.S. Retirement Plan and the
U.S. Excess Plan is based on a 4.1% discount rate and the RP2014 mortality
table for annuitants projected with generational mortality improvement
scale MP2016. |
We refer to our qualified defined
benefit pension plan as the U.S. Retirement Plan. Ms. Hinrichs and Mr. Kennefick
are the only NEOs who participate in the U.S. Retirement Plan, which plan has
been frozen since 2006 and under which they are accruing no additional benefits.
The U.S. Retirement Plan is funded by a trust, and includes provisions related
to eligibility, participation and benefit formulas for applicable employees.
Under the U.S. Retirement Plan, normal
retirement is the later of (1) age 65 or (2) the fifth anniversary of the date
an employee becomes a participant. The normal form of payment is a single-life
annuity or a 50% joint and survivor annuity, depending on the employees marital
status when payments are scheduled to begin. Early retirement eligibility and
benefits under the Retirement Plan depend on the employees date of hire and
age. For employees hired on or after April 1, 1998 (including Ms. Hinrichs and Mr. Kennefick), an
employee is eligible for early retirement upon the latter of completing at least
15 years of continuous service and attaining the age of 55. Early retirement
benefits are based on the same formula as normal retirement, but the pension
benefit is generally reduced 0.4% for each month that benefits commence before
age 62. Ms. Hinrichs is eligible for early retirement under the U.S. Retirement
Plan.
Ms. Hinrichs and Mr. Kenneficks
benefits under the U.S. Retirement Plan are calculated as follows: 1.2% of final
average monthly compensation as of June 30, 2010 up to the Social Security limit
times credited service up to 35 years, plus 1.65% of final average monthly
compensation as of June 30, 2010 in excess of the Social Security limit times
credited service up to 35 years. Final average monthly compensation excludes
bonuses and commissions.
We refer to our nonqualified pension
plan as the U.S. Excess Plan. Ms. Hinrichs is the only NEO who participates in
the U.S. Excess Plan, which plan has been frozen since 2006 and under which she
is accruing no additional benefits. To the extent benefits payable under the
U.S. Retirement Plan are limited by Section 415(b) or 401(a)(17) of the U.S. Internal Revenue Code, pension benefits will be
paid under the terms of the U.S. Excess Plan. Because benefits entitlement under
the U.S. Excess Plan and the U.S. Retirement Plan are linked, benefits under the
U.S. Excess Plan have been frozen since 2006, when benefit accruals under the
U.S. Retirement Plan were frozen.
We refer to our defined benefit pension
plan for certain non-U.S. employees as the TCN Pension Plan. There are no NEO
participants in the TCN Pension Plan, which is now frozen. The TCN Pension Plan
is funded by a trust, and includes provisions
related to eligibility, participation and benefit formulas for employees who
were employed by certain of our non-U.S. subsidiaries.
McDermott International,
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Under the TCN Pension Plan, normal
retirement age is 65. The normal form of payment is a single-life annuity or a 66% joint
and survivor annuity, depending on the employees marital status when the
payments are scheduled to begin. Early retirement eligibility and benefits under
the TCN Pension Plan are generally available for employees who have completed at
least 10 years of service and attained the age of 55. Early retirement benefits
are based on the same formula as normal retirement, but the pension benefit is
generally reduced 0.5% for each month that benefits commence before age
60.
Normal retirement benefits under the
TCN Pension Plan are calculated as follows: Number of years of credited service
times 1/100th of the average of the highest three successive annual
base salaries during the last 10 years of credited service preceding December
31, 2011, the normal retirement date, date of death or severance from service
date, whichever occurs first.
For more information on our retirement
plans, see Compensation Discussion and Analysis 2016 Other Compensation
Elements Retirement and Excess Plans.
Nonqualified
Deferred Compensation
The following Nonqualified Deferred
Compensation table summarizes our NEOs compensation under the Deferred
Compensation Plan. The compensation shown in this table is entirely attributable
to the Deferred Compensation Plan.
The Deferred Compensation Plan is an
unfunded, defined contribution retirement plan for officers of McDermott and its
subsidiaries selected to participate by our Compensation Committee. Benefits
under the Deferred Compensation Plan are based on: (1) the participants
deferral account, which is comprised of the notional account balance reflecting any executive contributions of deferred
compensation; and (2) the participants vested percentage in his or her company
account, which is comprised of the notional account balance reflecting any
contributions by us. A participant is at all times 100% vested in his or her
deferral account. A participant generally vests in his or her company account
20% each year, subject to accelerated vesting for death, disability, termination
of service by McDermott without cause or the occurrence of a change in control.
Mr. Austin was not a participant in the Deferred Compensation Plan in
2016.
Name |
|
Executive Contributions in
2016 ($)(1) |
|
Company Contributions in
2016 ($)(2) |
|
Aggregate Earnings in
2016 ($)(3) |
|
Aggregate Withdrawals/ Distributions ($) |
|
Aggregate Balance
at 12/31/16 ($)(4) |
|
Percentage Vested
at 12/31/16 ($)(5) |
Mr. Dickson |
|
0 |
|
70,100 |
|
13,794 |
|
0 |
|
170,932 |
|
40 |
% |
Mr. Spence |
|
0 |
|
27,283 |
|
4,922 |
|
0 |
|
55,149 |
|
20 |
% |
Mr. Austin |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Hinrichs |
|
0 |
|
32,248 |
|
1,409 |
|
0 |
|
290,897 |
|
100 |
% |
Mr. Kennefick |
|
0 |
|
18,474 |
|
0 |
|
0 |
|
18,474 |
|
0 |
% |
Mr. Allen |
|
0 |
|
26,417 |
|
3,107 |
|
0 |
|
47,379 |
|
100 |
% |
(1) |
In November 2010, our
Compensation Committee approved the deferral of eligible executives
compensation beginning January 1, 2011. Under the terms of our Deferred
Compensation Plan, an eligible executive may defer up to 50% of his or her
annual salary and/or up to 100% of any bonus earned in any
year. |
(2) |
We make annual contributions
to specified participants notional accounts equal to a percentage of the
participants prior-year compensation. Under the terms of the Deferred
Compensation Plan, the contribution percentage does not need to be the
same for each participant. Additionally, our Compensation Committee may
make a discretionary contribution to a participants account at any time.
Our contributions on behalf of NEOs who were participants equaled 5% of
their respective Compensation (as defined in the Deferred Compensation
Plan) received in 2015. All of our 2016 contributions are included in the
Summary Compensation Table above as All Other
Compensation. |
(3) |
The amounts reported in this
column represent notional accrued gains or losses during 2016 on each
NEOs account. The accounts are participant-directed, in that each
participant personally directs the investment of contributions made on his
or her behalf. As a result, any accrued gains or losses are attributable
to the performance of the NEOs notional mutual fund investments. No
amount of the earnings shown is reported as compensation in the Summary
Compensation Table. |
(4) |
The amounts reported in this
column consist of contributions made by McDermott and notional accrued
gains or losses as of December 31, 2016. The balances shown include
contributions from previous years which have been reported as compensation
to the NEOs in the Summary Compensation Table for those years to the
extent a NEO was included in the Summary Compensation Table during those
years. The amounts of such contributions previously included in the
Summary Compensation Table and years reported are as follows: we made
contributions to Mr. Dicksons account of $42,500 in 2014 and $42,500 in
2015; we made contributions to Mr. Spences account of $23,750 in 2015; we
made contributions to Ms. Hinrichs account of $23,888 in 2015, $22,437 in
2013, $37,662 in 2012 and $43,511 in 2011; and we made contributions to
Mr. Allens account in the amount of $18,333 in 2015. |
(5) |
Under the terms of his
separation agreement, Mr. Allen became 100% vested in his Deferred
Compensation Plan balance as of his resignation
date. |
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Potential Payments
Upon Termination or Change in Control
The following tables show potential
payments to our NEOs under existing contracts, agreements, plans or
arrangements, whether written or unwritten, for various scenarios under which a
payment would be due (assuming each is applicable) involving a change in control
or termination of employment of each of our NEOs, assuming a December 31, 2016
termination date and, where applicable, using the closing price of our common
stock of $7.39 as of December 30, 2016 (as reported on the NYSE). These tables
do not reflect amounts that would be payable to the Continuing NEOs pursuant to
benefits or awards that are already vested.
The amounts reported in the below
tables for stock options, restricted stock, restricted stock units and
performance shares or performance units represent the value of unvested and
accelerated shares or units, as applicable, calculated by:
● |
for stock options: multiplying the number of accelerated
options by the difference between the exercise price and $7.39 (the
closing price of our common stock on December 30, 2016, as reported on the
NYSE); and |
● |
for restricted stock,
restricted stock units and performance shares or performance units:
multiplying the number of accelerated shares or units by $7.39 (the
closing price of our common stock on December 30, 2016, as reported on the
NYSE). |
Mr. Allen resigned from his position as
Senior Vice President, Human Resources in July 2016. In connection with Mr.
Allens resignation, we entered into a separation agreement with Mr. Allen
providing for various compensation-related benefits in exchange for, among other
things, his agreement to comply with several restrictive covenants. See page 46
of this proxy statement for information on compensation received by Mr. Allen
under that separation agreement.
Estimated Value of Benefits to Be Received Upon Termination
Due to Death or Disability |
The following table shows the value of
payments and other benefits due the listed NEOs, assuming their death or
disability as of December 31, 2016.
|
|
Dickson ($) |
|
Spence ($) |
|
Austin ($) |
|
Hinrichs ($) |
|
Kennefick ($) |
Severance Payments |
|
|
|
|
|
|
|
|
|
|
EICP |
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
Plan(1) |
|
102,559 |
|
44,119 |
|
|
|
0 |
|
18,474 |
Stock
Options(2) (unvested and accelerated) |
|
|
|
|
|
|
|
0 |
|
0 |
Restricted Stock
Awards(3) |
|
801,364 |
|
|
|
|
|
|
|
|
Restricted Stock
Units(4) (unvested and accelerated) |
|
8,794,595 |
|
3,044,636 |
|
986,757 |
|
2,064,263 |
|
722,180 |
Performance Shares or
Units(5) (unvested) |
|
12,130,179 |
|
3,449,925 |
|
438,574 |
|
2,838,566 |
|
831,752 |
Total |
|
21,828,697 |
|
6,538,680 |
|
1,425,331 |
|
4,902,829 |
|
1,572,406 |
(1) |
The amounts reported represent
60% of Mr. Dicksons, 80% of Mr. Spences, and 100% of Mr. Kenneficks DCP
balance as of December 31, 2016 that would become vested on death or
disability. Mr. Austin was not a participant in the DCP as of December 31,
2016. Because Ms. Hinrichs is 100% vested in her DCP balance, no
additional amount would become vested on her death or
disability. |
(2) |
Under the terms of the
outstanding stock option awards held by each of the listed NEOs as of
December 31, 2016, all unvested option awards would become vested and
exercisable on death or disability. Due to the exercise price of the stock
options outstanding and the closing price of our common stock on December
31, 2016, the aggregate value of stock options that would become vested
and exercisable on death or disability for each applicable NEO would be
$0. |
(3) |
Under the terms of the
restricted stock award agreement between McDermott and Mr. Dickson, all
unvested restricted stock would become vested upon Mr. Dicksons death or
disability. |
(4) |
Under the terms of the
outstanding restricted stock unit awards held by each of the listed NEOs
as of December 31, 2016, all unvested restricted stock unit awards would
become vested and exercisable on his or her death or
disability. |
(5) |
Under the terms of the
outstanding 2012 performance share awards held by each of the listed NEOs
as of December 31, 2016, 100% of the initial performance shares granted
would vest on the third, fourth and fifth anniversary of the grant date on
his or her death or disability. The number of performance shares that
would vest is the number of performance shares that would have vested
based on actual performance had the NEO remained employed with McDermott
until the third, fourth and fifth |
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|
anniversaries of the grant
date. Under the terms of the outstanding 2014, 2015 and 2016 performance
share or performance unit awards held by each of the listed NEOs as of
December 31, 2016, 100% of the initial performance shares or performance
units granted would vest on the third anniversary of the grant date on his
or her death or disability. The number of performance shares or
performance units that would vest is the number of performance shares or
performance units that would have vested based on actual performance had
the NEO remained employed with McDermott until the third anniversary of
the grant date. Accordingly, each applicable listed NEO may vest in a
number of performance shares or performance units ranging from 0% - 200%
of the initial performance shares or performance units granted, depending
on McDermotts performance during the applicable measurement periods.
|
|
The amounts reported represent
a total of 50% of the initial performance shares granted for the 2012
awards, a total of 150% of the initial performance shares granted for the
2014 awards, in each case based on actual performance as of December 31,
2016, and assume that a total of 100% of the initial performance units
granted for the 2015 and 2016 awards will vest during the applicable
measurement periods, all valued at the closing price of McDermott stock as
reported on the NYSE on December 30, 2016. The actual value of performance
units granted for the 2015 and 2016 awards that may vest could be $0 for
each NEO and up to $19,735,882 for Mr. Dickson, $ 5,701,474 for Mr.
Spence, $ 877,149 for Mr. Austin, $4,385,729 for Ms. Hinrichs, and $
1,535,006 for Mr. Kennefick, in each case, as applicable, representing a
total of 200% of the initial performance units granted for the 2015 and
2016 awards. Additionally, the value of McDermott common stock could be
greater or less than the amount used to value the performance shares or
performance units for this table. |
Estimated Value of Benefits to Be Received Upon Change in
Control and Termination |
We have change in control agreements
with various officers, including each of our NEOs. Generally, under these
agreements, if a NEO is terminated within one year following a change in control
either: (1) by our company for any reason other than cause or death or
disability; or (2) by the NEO for good reason, McDermott is required to pay the
NEO a severance payment based on the NEOs salary and a severance payment based
on the NEOs target EICP percentage. In addition to these payments, the NEO
would be entitled to various accrued benefits earned through the date of
termination, such as earned but unpaid salary, earned but unused vacation and
reimbursements.
Under these agreements, a change in
control generally occurs on the occurrence of any of the following:
● |
a person becomes the beneficial
owner of 30% or more of the combined voting power of McDermotts then
outstanding voting stock unless such acquisition is made directly from
McDermott in a transaction approved by a majority of McDermotts incumbent
directors; |
● |
individuals who are incumbent
directors cease for any reason to constitute a majority of McDermotts
board; |
● |
completion of a merger or
consolidation of McDermott with another company or an acquisition by
McDermott or its subsidiaries, unless immediately following such merger,
consolidation or acquisition: (1) all or substantially all of the
individuals or entities that were the beneficial owners of outstanding
McDermott voting securities immediately before such merger, consolidation
or acquisition beneficially own at least 50% of the then outstanding
shares of voting stock of the parent corporation resulting from the
merger, consolidation or acquisition in the same relative proportions as
their ownership immediately before such merger, consolidation or
acquisition; (2) if such merger,
consolidation or acquisition involves the issuance or payment by McDermott
of consideration to another entity or its stockholders, the total fair
market value of such consideration plus the principal amount of the
consolidated long-term debt of the entity or business being acquired, does
not exceed 50% of the sum of the fair market value of the outstanding
McDermott voting stock plus the principal amount of our consolidated
long-term debt; (3) no person beneficially owns 30% or more of the then
outstanding shares of the voting stock of the parent company resulting
from such merger, consolidation or acquisition; and (4) a majority of the
members of the board of directors of the parent corporation resulting from
such merger, consolidation or acquisition were incumbent directors of
McDermott immediately before such merger, consolidation or acquisition;
|
● |
completion of the sale or
disposition of 50% or more of the assets of McDermott and its subsidiaries
on a consolidated basis, unless immediately following such sale or
disposition: (1) the individuals and entities that were beneficial owners
of outstanding McDermott voting stock immediately before such sale or disposition
beneficially own at least 50% of the then outstanding shares of voting
stock of McDermott and of the entity that acquires the largest portion of
such assets, and (2) a majority of the members of the McDermott Board (if
it continues to exist) and the board of directors of the entity that
acquires the largest portion of such assets were incumbent directors of
McDermott immediately before the completion of such sale or disposition;
or |
● |
any other set of circumstances is
deemed by the Board in its sole discretion to constitute a change in
control. |
The change in control agreements do not
provide for excise tax gross-ups. They do, however, provide for the potential
reduction in payments to the applicable officer in order to avoid excise taxes.
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The following table shows the estimated
value of payments and other benefits due the listed NEOs, assuming a change in
control and termination as of December 31, 2016.
|
|
Dickson ($) |
|
Spence ($) |
|
Austin ($) |
|
Hinrichs ($) |
|
Kennefick ($) |
Salary-Based Severance
Payment(1) |
|
4,250,000 |
|
1,615,000 |
|
487,500 |
|
1,624,350 |
|
1,125,000 |
EICP-Based
Severance Payment(2) |
|
850,000 |
|
332,500 |
|
162,500 |
|
334,425 |
|
187,500 |
Deferred Compensation
Plan(3) |
|
102,559 |
|
44,119 |
|
|
|
0 |
|
18,474 |
Stock
Options(4) (unvested and accelerated) |
|
|
|
|
|
|
|
0 |
|
0 |
Restricted Stock
Awards(4) (unvested and accelerated) |
|
801,364 |
|
|
|
|
|
|
|
|
Restricted Stock
Units(4) (unvested and accelerated) |
|
8,794,595 |
|
3,044,636 |
|
986,757 |
|
2,064,263 |
|
722,180 |
Performance Shares or
Units(4) (unvested and accelerated) |
|
12,130,179 |
|
3,449,925 |
|
438,574 |
|
2,918,710 |
|
839,445 |
Total |
|
26,928,697 |
|
8,486,180 |
|
2,075,331 |
|
6,941,749 |
|
2,892,599 |
(1) |
The salary-based severance
payment made to Mr. Dickson in connection with a change in control would
be a cash payment equal to 250% of the sum of his annual base salary prior
to termination and his EICP target award applicable to the year in which
the termination occurs. The severance payment made to Messrs. Spence and
Kennefick and Ms. Hinrichs in connection with a change in control would be
a cash payment equal to 200% of the sum of his or her annual base salary
prior to termination and his or her EICP target award applicable to the
year in which the termination occurs. The severance payment made to Mr.
Austin in connection with a change in control would be a cash payment
equal to the sum of his annual base salary prior to termination and his
EICP target award applicable to the year in which the termination
occurs. |
|
For a hypothetical termination
as of December 31, 2016, the salary-based severance payment under a change
in control would have been calculated based on the following base salary
and target EICP awards. See Grants of Plan-Based Awards above for more
information on the calculation of target EICP
awards. |
NEO |
|
Annual Base
Salary ($) |
|
Target EICP
Award ($) |
Mr.
Dickson |
|
850,000 |
|
850,000 |
Mr.
Spence |
|
475,000 |
|
332,500 |
Mr.
Austin |
|
325,000 |
|
162,500 |
Ms.
Hinrichs |
|
477,750 |
|
334,425 |
Mr.
Kennefick |
|
375,000 |
|
187,500 |
(2) |
Each listed NEO could receive
up to two EICP-based severance payments in connection with a change in
control depending on the timing of the termination relative to the payment
of an EICP award, as follows: |
|
●If an EICP award for the
year prior to termination is paid to other EICP participants after the
date of the NEOs termination, the NEO would be entitled to a cash payment
equal to the product of the NEOs target EICP percentage (or, if greater,
the actual amount of the bonus determined under the EICP for the year
prior to termination) and the NEOs annual base salary for the applicable
period. No such payment would have been due a NEO on a December 31, 2016
termination, because the 2015 EICP awards had already been paid. |
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|
●The NEO would be entitled to a prorated EICP payment
based upon the NEOs target EICP percentage for the year in which the
termination occurs and the number of days in which the NEO was employed
with us during that year. Based on a hypothetical December 31, 2016
termination, each NEO would have been entitled to an EICP payment equal to
100% of his or her 2016 target EICP percentage times annual base salary,
calculated based on the following base salary and target EICP
percentage: |
NEO |
|
Annual Base
Salary ($) |
|
Target EICP
Percentage ($) |
Mr.
Dickson |
|
850,000 |
|
100% |
Mr. Spence |
|
475,000 |
|
70% |
Mr. Austin |
|
325,000 |
|
50% |
Ms. Hinrichs |
|
477,750 |
|
70% |
Mr. Kennefick |
|
375,000 |
|
50% |
(3) |
The amounts reported represent 60% of Mr. Dicksons, 80%
of Mr. Spences and 100% of Mr.. Kenneficks respective DCP balances as of
December 31, 2016 that would become vested on a change in control. Mr.
Austin was not a participant in the DCP as of December 31, 2016. Because
Ms. Hinrichs is 100% vested in her DCP balance, no additional amount would
become vested in connection with a termination of employment following a
change in control. Under the Deferred Compensation Plan, a change in
control generally occurs if: |
|
● a person (other than a McDermott employee benefit plan or a
corporation owned by McDermott stockholders in substantially the same
proportion as the ownership of McDermott voting shares) is or becomes the
beneficial owner of 30% or more of the combined voting power of
McDermotts then outstanding voting stock;
● during any period of two consecutive years, individuals who at the
beginning of such period constitute McDermotts Board of Directors, and
any new director whose election or nomination by McDermotts Board was
approved by at least two-thirds of the directors of McDermotts Board then
still in office who either were directors at the beginning of the period
or whose election or nomination was previously approved, cease to
constitute a majority of McDermotts Board;
● a merger or consolidation of McDermott with any other corporation
or entity has been completed, other than a merger or consolidation which
results in the outstanding McDermott voting securities immediately prior
to such merger or consolidation continuing to represent at least 50% of
the combined voting power of the voting securities of McDermott or the
surviving entity outstanding immediately after such merger or
consolidation;
● McDermotts stockholders approve (1) a plan of complete liquidation
of McDermott; or (2) an agreement for the sale or disposition by McDermott
of all or substantially all of McDermotts assets; or
● within one year following the completion of a merger or
consolidation transaction involving McDermott, (1) individuals who, at the
time of execution and delivery of definitive agreements completing such
transaction constituted the Board, cease for any reason (excluding death,
disability or voluntary resignation) to constitute a majority of the
Board; or (2) either individual, who at the first execution and delivery
of definitive agreements completing the transaction, served as Chief
Executive Officer or Chief Financial Officer does not, for any reason
(excluding death, disability or voluntary resignation), serve as the Chief
Executive Officer or Chief Financial Officer, as applicable, of McDermott,
or if McDermott does not continue as a registrant with a class of equity
securities registered pursuant to Section 12(b) of the Securities Exchange
Act of 1934, as amended, as the Chief Executive Officer or Chief Financial
Officer, as applicable, of a corporation or other entity that is (A) a
registrant with a class of equity securities registered pursuant to
Section 12(b) of the Securities Exchange Act of 1934, as amended, and (B)
the surviving entity in such transaction or a parent entity of the
surviving entity or McDermott following the completion of such
transaction; provided, however, that a change in control would not be
deemed to have occurred pursuant to this clause in the case of a merger or
consolidation which results in the voting securities of McDermott
outstanding immediately prior to the completion of the transaction
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 55% of
the combined voting power of the voting securities of the McDermott or the
surviving entity outstanding immediately after such merger or
consolidation. |
(4) |
Under the terms of the stock option, restricted stock and the 2013, 2014 and 2015 restricted stock unit awards outstanding,
all unvested stock options would become vested and exercisable and all unvested restricted stock and restricted stock units
would become vested on a change in control, regardless of whether there is a subsequent termination of employment. Under
the terms of the 2016 restricted stock unit awards outstanding, all unvested restricted stock units would become vested on a
change in control, regardless of whether there is a subsequent termination of employment, only if the awards are not assumed
in the transaction. Due to the exercise price of the stock options outstanding for our NEOs and the closing price of our common
stock on the NYSE on December 31, 2016, the aggregate value of stock options that would become vested and exercisable on
a change in control would be $0. Under the terms of the 2012, 2014 and 2015 performance share or performance unit awards
outstanding, the greater of (1) 100% of the initial performance shares or performance units granted, or (2) the vested percentage
of initial performance shares or performance units determined in accordance with the grant agreement would become vested
on a change in control, regardless of whether there is a subsequent termination of employment. Under the terms of the 2016
performance unit awards outstanding, the greater of (1) target level, or (2) the actual performance level measured through the
date the change in control becomes effective as determined in accordance with the grant agreement would become vested
on a change in control, regardless of whether there is a subsequent termination of employment, only if the awards are not
|
64
2017 Proxy Statement
Table of
Contents
Executive Compensation
Tables |
|
assumed in the transaction. If
the 2016 performance unit awards are assumed in a change in control, such
awards would only vest on a subsequent termination of employment by the
employer without cause or by the executive for good reason. Under the 2009
LTIP, a change in control generally occurs under the same circumstances
described above with respect to our Deferred Compensation Plan. Under the
2014 LTIP, a change in control generally occurs under the same
circumstances described in the first three bullets in note (3) above with
respect to our Deferred Compensation Plan, as well as on the occurrence of
the below circumstances:
● McDermotts stockholders approve a plan of complete
liquidation of McDermott;
● the consummation of a sale or disposition by McDermott
of all or substantially all of McDermotts assets other than to an entity
that is under common control with McDermott or to an entity for which at
least fifty percent (50%) of the combined voting power of its voting
securities outstanding immediately after such sale or disposition are
owned or controlled by the stockholders of McDermott immediately prior to
such sale or disposition; or
● within one year following the completion of a merger or
consolidation transaction involving McDermott, (1) individuals who, at the
time of execution and delivery of definitive agreements relating to such
transaction constituted the Board, cease for any reason (excluding death,
disability or voluntary resignation) to constitute a majority of the
Board; or (2) the individual, who at the first execution and delivery of
definitive agreements relating to the transaction, served as Chief
Executive Officer does not, for any reason (excluding death, disability or
voluntary resignation), serve as the Chief Executive Officer of McDermott,
or if McDermott does not continue as a registrant with a class of equity
securities registered pursuant to Section 12(b) of the Securities Exchange
Act of 1934, as amended, as the Chief Executive Officer of a corporation
or other entity that is (A) a registrant with a class of equity securities
registered pursuant to Section 12(b) of the Securities Exchange Act of
1934, as amended, and (B) the surviving entity in such transaction or a
parent entity of the surviving entity or McDermott following the
completion of such transaction; provided, however, that a change in
control would not be deemed to have occurred pursuant to this clause in
the case of a merger or consolidation which results in the voting
securities of McDermott outstanding immediately prior to the completion of
the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) at
least 55% of the combined voting power of the voting securities of the
McDermott or the surviving entity outstanding immediately after such
merger or consolidation.
Under the 2016 LTIP, a change
in control generally occurs under the same circumstances described in the
first three bullets in note (3) above with respect to our Deferred
Compensation Plan, and under the same circumstances described in the first
two bullets above with respect to our 2014 LTIP, as well as on the
occurrence of the below circumstance:
● within one year following the consummation of a merger
or consolidation transaction involving the Company (whether as a
constituent corporation, the acquiror, the direct or indirect parent
entity of the acquiror, the entity being acquired, or the direct or
indirect parent entity of the entity being acquired), as a result of which
the voting securities of the Company outstanding immediately prior thereto
continue to represent more than fifty percent (50%) but less than
fifty-five percent (55%) of the combined voting power of the voting
securities of the Company or the surviving entity outstanding immediately
after such merger or consolidation (a Merger of Equals): (i) individuals
who, at the time of the execution and delivery of the definitive agreement
pursuant to which such transaction has been consummated by the parties
thereto (a Definitive Transaction Agreement) (or, if there are multiple
such agreements relating to such Merger of Equals, the first time of
execution and delivery by the parties to any such agreement) (the
Execution Time), constituted the Board cease, for any reason (excluding
death, disability or voluntary resignation but including any such
voluntary resignation effected in accordance with any Definitive
Transaction Agreement), to constitute a majority of the Board; or (ii) the
individual who, at the Execution Time, served as the Chief Executive
Officer of the Company does not, for any reason (excluding as a result of
death, disability or voluntary termination but including any such
voluntary termination effected in accordance with any Definitive
Transaction Agreement), serve as the Chief Executive Officer of the
Company or, if the Company does not continue as a registrant with a class
of equity securities registered pursuant to Section 12(b) of the Exchange
Act, as the Chief Executive Officer of a corporation or other entity that
is (A) a registrant with a class of equity securities registered pursuant
to Section 12(b) of the Exchange Act and (B) the surviving entity in such
Merger of Equals or a direct or indirect parent entity of the surviving
entity or the Company following the consummation of such Merger of
Equals.
The amounts reported in the chart above
represent a total of 100% of the initial performance shares or units
granted for the 2012, 2015 and 2016 awards and a total of 150% of the
initial performance shares granted for the 2014 awards.
|
McDermott International,
Inc. 65
Table of
Contents
FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE
COMPENSATION
Item 3 Advisory
Vote on Frequency of Advisory Votes on Executive Compensation
As required by Section 14A(a)(2) of the
Exchange Act, we are providing our stockholders with the opportunity to vote, on
a non-binding, advisory basis, on how frequently we should seek future advisory
votes on the compensation of our named executive officers, as disclosed in
accordance with disclosure rules established by the SEC. By voting with respect
to this proposal, stockholders may indicate whether they would prefer that we
conduct future advisory votes on the compensation of our named executive
officers once every one, two or three years. Our Board believes having an
advisory vote on our named executive officer compensation every year, rather
than every two or three years, is the best practice, in that it provides
stockholders the opportunity to provide us their views on our compensation
programs, as they potentially change to meet market and McDermott specific
needs, on an annual basis.
For the reasons discussed above, the
Board of Directors recommends that stockholders vote to hold the advisory vote
on compensation of our named executive officers every year. Stockholders are not
voting, however, to approve or disapprove of this particular recommendation. The
proxy card provides for four choices and stockholders are entitled to vote on
whether the advisory vote on compensation of our named executive officers should
be held every one, two or three years, or to abstain from voting. While the
result of this advisory vote on the frequency of the vote on named executive
officer compensation is nonbinding, the Board of Directors plans to consider the
outcome of the vote when deciding how frequently to conduct the vote on named
executive officer compensation.
The Board of Directors unanimously
recommends that you vote to hold the advisory vote on named executive officer
compensation EVERY YEAR.
|
Our Board of Directors recommends that
stockholders vote FOR holding the advisory vote on named executive
officer compensation EVERY YEAR. |
66
2017 Proxy Statement
Table of Contents
AUDITOR AND
AUDIT COMMITTEE MATTERS
Item 4 Ratification of Appointment of
Independent Registered Public Accounting Firm for Year Ending December 31,
2017
Our Board of Directors has ratified the
decision of the Audit Committee to appoint Deloitte & Touche LLP (D&T)
to serve as the independent registered public accounting firm to audit our
financial statements for the year ending December 31, 2017. Although we are not
required to seek stockholder approval of this appointment, it has been our
practice to do so. No determination has been made as to what action the Audit
Committee or the Board of Directors would take if our stockholders fail to
ratify the appointment. Even if the appointment is ratified, the Audit Committee
retains discretion to appoint a new independent registered public accounting
firm at any time if the Audit Committee concludes such a change would be in the
best interests of McDermott. Representatives of D&T will be
present at the Annual Meeting and will have an
opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
Our Board of Directors recommends that
stockholders vote FOR the ratification of the decision of our Audit Committee
to appoint Deloitte & Touche LLP as our independent registered public
accounting firm for the year ending December 31, 2017. The proxy holders will
vote all proxies received for approval of this proposal unless instructed
otherwise. Approval of this proposal requires the affirmative vote of a majority
of the outstanding shares of common stock present in person or represented by
proxy and entitled to vote and actually voting on this proposal at the Annual
Meeting. Because abstentions are not actual votes with respect to this proposal,
they have no effect on the outcome of the vote on this proposal.
|
Our Board of Directors recommends
that stockholders vote FOR the ratification of appointment of Deloitte
& Touche LLP |
Audit Committee Report
The Board of Directors appoints an
Audit Committee to review McDermott International, Inc.s financial matters.
Each member of the Audit Committee meets the independence requirements
established by the NYSE. The Audit Committee is responsible for the appointment,
compensation, retention and oversight of McDermotts independent registered
public accounting firm. We are also responsible for recommending to the Board
that McDermotts audited financial statements be included in its Annual Report
on Form 10-K for the fiscal year.
In making our recommendation that
McDermotts financial statements be included in its Annual Report on Form 10-K
for the year ended December 31, 2016, we have taken the following
steps:
● |
We reviewed, and discussed with
McDermotts management and D&T, McDermotts audited consolidated
balance sheet at December 31, 2016, and consolidated statements of income,
comprehensive income, cash flows and stockholders equity for the year
ended December 31, 2016. |
● |
We discussed with D&T,
McDermotts independent registered public accounting firm for the year
ended December 31, 2016, those matters required to be discussed under the
applicable standards of the Public Company
Accounting Oversight Board, including information regarding the scope and
results of the audit. These communications and discussions are intended to
assist us in overseeing the financial reporting and disclosure
process. |
● |
We received and reviewed the
written disclosures and the letter from D&T required by applicable
requirements of the Public Company Accounting Oversight Board regarding
D&Ts communications with the Audit Committee concerning D&Ts
independence from McDermott, and have discussed with D&T its
independence from McDermott. We also considered whether the provision of
non-audit services to McDermott is compatible with D&Ts
independence. |
● |
We conducted periodic executive
sessions with D&T, with no members of McDermott management present
during those discussions. D&T did not identify any material audit
issues, questions or discrepancies, other than those previously discussed
with management, which were resolved to the satisfaction of all
parties. |
● |
We conducted periodic executive
sessions with McDermotts internal audit department and regularly received
reports regarding McDermotts internal control
procedures. |
McDermott International,
Inc. 67
Table of Contents
Auditor and Audit
Committee Matters |
● |
We reviewed, and discussed with
McDermotts management and D&T, managements report and D&Ts
report and attestation on internal control over financial reporting, each
of which was prepared in accordance with Section 404 of the Sarbanes-Oxley
Act. |
● |
We determined that there were no former D&T
employees, who previously participated in the McDermott audit, engaged in
a financial reporting oversight role at McDermott. |
Based on the reviews and actions
described above, we recommended to the Board that McDermotts audited financial
statements be included in its Annual Report on Form 10-K for the year ended
December 31, 2016 for filing with the Securities and Exchange
Commission.
THE AUDIT COMMITTEE
William H. Schumann, III, Chair
John
F. Bookout, III
Stephen G. Hanks
Erich
Kaeser
David A. Trice
For the years ended December 31, 2016
and 2015, the aggregate fees billed to McDermott by D&T, including expenses
and taxes, totaling $4,213,047 and $4,684,488, which can be categorized as
follows:
|
|
2016 ($) |
|
2015 ($) |
Audit |
|
3,520,809 |
|
4,177,240 |
The Audit fees for the years ended December
31, 2016 and 2015 were for professional services rendered for the audits
of the consolidated financial statements of McDermott, the audit of
McDermotts internal control over financial reporting, statutory and
subsidiary audits, reviews of the quarterly consolidated financial
statements of McDermott and assistance with review of documents filed with
the SEC. |
|
|
|
|
Audit-Related |
|
34,722 |
|
73,185 |
The Audit-Related fees for
the years ended December 31, 2016 and 2015 were for assurance and related
services, employee benefit plan audits and advisory services related to
Sarbanes-Oxley Section 404 compliance. |
|
|
|
|
Tax |
|
657,516 |
|
434,063 |
The Tax fees for the years ended December
31, 2016 and 2015 were for professional services rendered for
consultations on various U.S. federal, state and international tax
matters, international tax compliance and tax planning, and assistance
with tax examinations. |
|
|
|
|
All Other |
|
0 |
|
0 |
During the years ended
December 31, 2016 and December 31, 2015, there were no other
services. |
|
|
|
|
Total |
|
4,213,047 |
|
4,684,488 |
It is the policy of our Audit Committee
to preapprove all audit, review or attest engagements and permissible non-audit
services to be performed by our independent registered public accounting firm,
subject to, and in compliance with, the de minimis exception for non-audit services described in Section 10A(i)(1)(B) of the
Securities Exchange Act of 1934 and the applicable rules and regulations of the
SEC. Our Audit Committee did not rely on the de minimis exception for any of the fees
disclosed above.
68 2017
Proxy Statement
Table of Contents
STOCK OWNERSHIP
INFORMATION
Security Ownership of Directors and
Executive Officers
The following table sets forth the
number of shares of our common stock beneficially owned as of March 13, 2017 by each director or nominee as a director,
and each NEO and all of our directors and executive officers as a
group, including shares
that those persons have the right to acquire within 60 days on the exercise of stock options.
Name |
|
Shares that may
be Acquired on Stock Option Exercise(1) |
|
Shares held in Thrift
Plan(2) |
|
Total
Shares Beneficially Owned(3) |
Linh Austin |
|
|
|
|
|
61,077 |
John F. Bookout,
III |
|
5,233 |
|
|
|
332,109 |
Roger A. Brown |
|
1,744 |
|
|
|
141,933 |
David Dickson |
|
|
|
|
|
969,817 |
Stephen G. Hanks |
|
|
|
|
|
109,495 |
Liane K.
Hinrichs |
|
114,750 |
|
2,840 |
|
488,139 |
Erich Kaeser |
|
|
|
|
|
24,287 |
Jonathan
Kennefick |
|
21,216 |
|
876 |
|
97,270 |
Gary P. Luquette |
|
|
|
|
|
77,436 |
William H. Schumann,
III |
|
|
|
|
|
107,733 |
Mary Shafer-Malicki |
|
|
|
|
|
99,665 |
Stuart A. Spence |
|
|
|
|
|
252,520 |
David A. Trice |
|
|
|
|
|
129,040 |
Stephen L.
Allen(4) |
|
|
|
|
|
43,089 |
All
directors and executive officers as a group (19 persons) |
|
172,568 |
|
4,107 |
|
3,157,961 |
(1) |
This column includes shares of
common stock that the director or NEO has the right to acquire within 60
days on the exercise of stock options. As of March 13, 2017, the share
price of our common stock ($6.61) did not exceed the strike price of any
of the stock option awards in this column. |
(2) |
This column includes shares of
common stock held in the NEOs McDermott Thrift Plan
account. |
(3) |
Shares beneficially owned by
each individual in all cases constituted less than one percent of the
outstanding shares of common stock on March 13, 2017, as determined in
accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of
1934. Shares beneficially owned by all directors and executive officers as
a group constituted approximately 1.30% of the outstanding shares of
common stock on March 13, 2017. |
(4) |
The number of shares reported
as beneficially owned by Mr. Allen is as of his July 1, 2016 resignation
date. |
McDermott International,
Inc. 69
Table of Contents
Stock Ownership
Information |
Security Ownership of Certain Beneficial
Owners
The following table furnishes
information concerning all persons known by us to beneficially own 5% or more of
our outstanding shares of common stock as of March 13, 2017, which is our only
class of voting stock outstanding:
Title of
Class |
|
Name and Address of
Beneficial Owner |
|
Amount
and Nature of Beneficial Ownership |
|
Percent
of Class(1) |
Common Stock |
|
The Vanguard Group |
|
22,279,625 |
(2) |
|
9.17% |
|
|
100 Vanguard Blvd. |
|
|
|
|
|
|
|
Malvern, PA 19355 |
|
|
|
|
|
Common Stock |
|
BlackRock, Inc. |
|
16,669,250 |
(3) |
|
6.86% |
|
|
55 East 52nd
Street |
|
|
|
|
|
|
|
New York, NY
10055 |
|
|
|
|
|
Common Stock |
|
Fairpointe Capital LLC |
|
16,248,869 |
(4) |
|
6.69% |
|
|
One N. Franklin, Ste 3300 |
|
|
|
|
|
|
|
Chicago, IL 60606 |
|
|
|
|
|
Common Stock |
|
Dimensional Fund Advisors
LP |
|
13,803,751 |
(5) |
|
5.68% |
|
|
Building One |
|
|
|
|
|
|
|
6300 Bee Cave
Road |
|
|
|
|
|
|
|
Austin, Texas, 78746 |
|
|
|
|
|
(1) |
Percent is based on
outstanding shares of our common stock on March 13, 2017. |
(2) |
As reported on the Schedule
13G/A filed with the SEC on February 10, 2017. The Schedule 13G/A reports
beneficial ownership of 22,279,625 shares, sole voting power over 287,109
shares, shared voting power over 23,700 shares, sole dispositive power
over 21,980,916 shares and shared dispositive power over 298,709
shares. |
(3) |
As reported on the Schedule
13G/A filed with the SEC on January 25, 2017. The Schedule 13G/A reports
beneficial ownership of 16,669,250 shares, sole voting power over
15,968,869 shares and sole dispositive power over 16,669,250 shares. The
Schedule 13G/A further reports that various subsidiaries of BlackRock,
Inc. beneficially own shares reported on by the filing and lists those
subsidiaries. |
(4) |
As reported on the Schedule
13G/A filed with the SEC on February 13, 2017. The Schedule 13G/A reports
beneficial ownership of 16,248,869 shares, sole voting power over
15,759,008 shares, sole dispositive power over 15,987,169 shares and
shared dispositive power over 261,700 shares. |
(5) |
As reported on the Schedule
13G filed with the SEC on February 9, 2017. The Schedule 13G reports
beneficial ownership of 13,803,751 shares, sole voting power over
13,398,845 shares and sole dispositive power over 13,803,751
shares. |
Section 16(a) Beneficial Ownership
Compliance
Section 16(a) of the Securities
Exchange Act of 1934 requires our directors and executive officers, and persons
who own 10% or more of our voting stock, to file reports of ownership and
changes in ownership of our equity securities with the SEC and the NYSE.
Directors, executive officers and 10% or more holders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of
those forms furnished to us, or written representations that no forms were
required, we believe that our directors, executive officers and 10% or more
beneficial owners complied with all Section 16(a) filing requirements during the
year ended December 31, 2016.
70 2017
Proxy Statement
Table of Contents
OTHER INFORMATION
Questions and Answers About the Annual
Meeting of Stockholders and Voting
What is the
purpose of these proxy materials?
As more fully described in the Notice,
the Board of Directors of McDermott has made these materials available to you in
connection with our 2017 Annual Meeting of Stockholders, which will take place
on May 5, 2017 at 10:00 a.m., local time (the Annual Meeting or Meeting). We
mailed the Notice to our stockholders beginning on March 24, 2017, and our proxy
materials were posted on the Web site referenced in the Notice on that same
date.
McDermott, on behalf of its Board of
Directors, is soliciting your proxy to vote your shares at the 2017 Annual
Meeting of Stockholders. We solicit proxies to give all stockholders of record
an opportunity to vote on matters that will be presented at the Annual Meeting.
In this proxy statement you will find information on these matters, which is
provided to assist you in voting your shares.
Who will pay for
the cost of this proxy solicitation?
We will bear all expenses incurred in
connection with this proxy solicitation, which we expect to conduct primarily by
mail. We have engaged Georgeson to assist in the solicitation for a fee that
will not exceed $12,500, plus out-of-pocket expenses. In addition, our officers
and regular employees may solicit your proxy by telephone, by facsimile
transmission or in person, for which they will not be separately compensated. If
your shares are held through a broker or other nominee (i.e., in street name) and
you have requested printed versions of these materials, we have requested that
your broker or nominee forward this proxy statement to you and obtain your
voting instructions, for which we will reimburse them for reasonable
out-of-pocket expenses. If your shares are held through the McDermott Thrift
Plan and you have requested printed versions of these materials, the trustee of
that plan has sent you this proxy statement and you can instruct the trustee on
how to vote your plan shares.
Who is entitled
to vote at the Annual Meeting?
Our Board of Directors selected March
13, 2017 as the record date for determining stockholders entitled to vote at the
Annual Meeting. This means that if you owned McDermott common stock on the
Record Date, you may vote your shares on the matters to be considered by our
stockholders at the Annual Meeting.
There were 243,047,477 shares of our
common stock outstanding on the Record Date. Each outstanding share of common
stock entitles its holder to one vote on each matter to be acted on at the
meeting.
Who may attend
the Annual Meeting?
Attendance at the meeting is limited to
stockholders and beneficial owners as of the record date or duly appointed
proxies. No guests will be admitted, except for guests invited by McDermott.
Registration will begin at 9:00 a.m., and the meeting will begin promptly at
10:00 a.m. If your shares are held in street name through a broker, bank,
trustee or other nominee, you are a beneficial owner, and beneficial owners will
need to show proof of beneficial ownership, such as a copy of a brokerage
account statement, reflecting stock ownership as of the Record Date in order to
be admitted to the meeting. If you are a proxy holder for a stockholder, you
will need to bring a validly executed proxy naming you as the proxy holder,
together with proof of record ownership of the stockholder naming you as proxy
holder. Please note that you may be asked to present valid photo identification,
such as a valid drivers license or passport, when you check in for
registration. No cameras, recording equipment or other electronic devices will
be allowed to be brought into the meeting room by stockholders or beneficial
owners.
What is the
difference between holding shares as a stockholder of record and as a beneficial
owner through a brokerage account or other arrangement with a holder of
record?
If your shares are registered in your
name with McDermotts transfer agent and registrar, Computershare Trust Company,
N.A., you are the stockholder of record of those shares. The Notice and the
proxy materials have been provided or made available directly to you by
McDermott.
If your shares are held in a stock
brokerage account or by a bank or other holder of record, you are considered the
beneficial owner but not the holder of record of those shares, and the Notice
and the proxy materials have been forwarded to you by your broker, bank or other
holder of record. As the beneficial owner, you have the right to direct your
broker, bank or other holder of record how to vote your shares by using the
voting instruction card or by following their instructions for voting by
telephone or on the Internet.
How do I cast my
vote?
Most stockholders can vote by proxy in
three ways:
● |
by Internet at
www.proxyvote.com; |
● |
by telephone; or |
● |
by
mail. |
McDermott International,
Inc. 71
Table of Contents
If you are a stockholder of
record, you can vote your shares in person at
the Annual Meeting or vote now by giving us your proxy via Internet, telephone
or mail. You may give us your proxy by following the instructions included in
the Notice or, if you received a printed version of these proxy materials, in
the enclosed proxy card. If you want to vote by mail but have not received a
printed version of these proxy materials, you may request a full packet of proxy
materials by following the instructions in the Notice. If you vote using either
the telephone or the Internet, you will save us mailing expenses.
By giving us your proxy, you will be
directing us how to vote your shares at the meeting. Even if you plan on
attending the meeting, we urge you to vote now by giving us your proxy. This
will ensure that your vote is represented at the meeting. If you do attend the
meeting, you can change your vote at that time, if you then desire to do
so.
If you are the beneficial owner of
shares, but not the holder of record, you
should refer to the instructions provided by your broker or nominee for further
information. The broker or nominee that holds your shares has the authority to
vote them, absent your approval, only as to matters for which they have
discretionary authority under the applicable NYSE rules. Neither the election of
directors, the advisory vote to approve named executive officer compensation,
nor the advisory vote on the frequency of advisory votes on named executive
officer compensation are considered routine matters. That means that brokers may
not vote your shares with respect to those matters if you have not given your
broker specific instructions as to how to vote. Please be sure to give specific
voting instructions to your broker.
If you received a printed version of
these proxy materials, you should have received a voting instruction form from
your broker or nominee that holds your shares. For shares of which you are the
beneficial owner but not the holder of record, follow the instructions contained
in the Notice or voting instruction form to vote by Internet, telephone or mail.
If you want to vote by mail but have not received a printed version of these
proxy materials, you may request a full packet of proxy materials as instructed
by the Notice. If you want to vote your shares in person at the Annual Meeting,
you must obtain a valid proxy from your broker or nominee. You should contact
your broker or nominee or refer to the instructions provided by your broker or
nominee for further information. Additionally, the availability of telephone or
Internet voting depends on the voting process used by the broker or nominee that
holds your shares.
Why did I
receive more than one Notice or proxy statement and proxy card or voting
instruction form?
You may receive more than one Notice,
proxy statement, proxy card or voting instruction form if your shares are held
through more than one account (e.g., through different brokers or
nominees). Each proxy card or voting instruction
form only covers those shares of common stock held in the applicable account. If
you hold shares in more than one account, you will have to provide voting
instructions as to each of your accounts in order to vote all your
shares.
What is
householding?
SEC rules regarding the delivery of the
Notice of Internet Availability of Proxy Materials, proxy statements and annual
reports permit us, in specified circumstances, to deliver a single set of these
materials to any address at which two or more stockholders reside. This method
of delivery, often referred to as householding, will reduce the amount of
duplicative information that stockholders receive and lower printing and mailing
costs for us. Each stockholder will continue to receive a separate proxy
card.
We have delivered only one Notice of
Internet Availability of Proxy Materials to eligible stockholders who are the
beneficial owner of shares who share an address, unless contrary instructions
were received from any such stockholder prior to the mailing date. We will
deliver promptly, upon written or oral request, a separate copy of the Notice of
Internet Availability of Proxy Materials to a stockholder at a shared address to
which a single copy of such document was delivered. Any stockholder who would
like to receive a separate copy of the Notice of Internet Availability of Proxy
Materials should submit this request to McDermotts Corporate Secretary at the
following address: McDermott International, Inc., 757 N. Eldridge Pkwy.,
Houston, Texas 77079, Attn: Corporate Secretary. Beneficial owners sharing an
address who receive multiple copies of the Notice of Internet Availability of
Proxy Materials and who would like to receive a single copy of such materials in
the future will need to contact their broker, bank or other nominee to request
that only a single copy of such document be mailed to all stockholders at the
shared address in the future.
What can I do if
I change my mind after I vote?
If you are a stockholder of
record, you may change your vote by written
notice to our Corporate Secretary, by granting a new proxy before the Annual
Meeting or by voting in person at the Annual Meeting. Unless you attend the
meeting and vote your shares in person, you should change your vote before the
meeting using the same method (by Internet, telephone or mail) that you first
used to vote your shares. That way, the inspectors of election for the meeting
will be able to verify your latest vote.
If you are the beneficial owner, but
not the holder of record, of shares, you
should follow the instructions in the information provided by your broker or
nominee to change your vote before the meeting. If you want to change your vote
as to shares of which you are the beneficial owner by voting in person at the
Annual Meeting, you must obtain a valid proxy from the broker or nominee that
holds those shares for you.
72 2017
Proxy Statement
Table of Contents
What is a broker
non-vote?
If you are a beneficial owner whose
shares are held of record by a broker or other holder of record, you must
instruct the broker or other holder of record how to vote your shares. If you do
not provide voting instructions, your shares will not be voted on any proposal
on which the broker does not have discretionary authority to vote. This is
called a broker non-vote. In these cases, the broker or other holder of record
can include your shares as being present at the Annual Meeting for purposes of
determining the presence of a quorum but will not be able to vote on those
matters for which specific authorization is required under the rules of the
NYSE.
For this Annual Meeting, if you are a
beneficial owner whose shares are held by a broker or other holder of record,
your broker or other holder of record has discretionary voting authority under
NYSE rules to vote your shares on the ratification of Deloitte & Touche LLP,
even if it has not received voting instructions from you. However, such holder
does not have discretionary authority to vote on the election of directors, the
advisory vote to approve named executive officer compensation or the advisory
vote on the frequency of advisory votes on named executive officer compensation
without instructions from you, in which case a broker non-vote will result and
your shares will not be voted on those matters.
What is the
quorum for the Annual Meeting?
The Annual Meeting will be held only if
a quorum exists. The presence at the meeting, in person or by proxy, of holders
of a majority of our outstanding shares of common stock as of the Record Date
will constitute a quorum. If you attend the meeting or vote your shares by
Internet, telephone or mail, your shares will be counted toward a quorum, even
if you abstain from voting on a particular matter. Broker non-votes will be
treated as present for the purpose of determining a quorum.
Which items will
be voted on at the Annual Meeting?
At the Annual Meeting, we are asking
you to vote on the following:
● |
the election of John F. Bookout,
III, David Dickson, Stephen G. Hanks, Erich Kaeser, Gary P. Luquette,
William H. Schumann, III, Mary L. Shafer-Malicki and David A. Trice to our
Board of Directors, each for a term of one year; |
● |
the advisory vote to approve
named executive officer compensation; |
● |
the advisory vote on the
frequency of advisory votes on named executive officer compensation;
and |
● |
the ratification of our Audit
Committees appointment of Deloitte & Touche LLP as our independent
registered public accounting firm for the year ending December 31,
2017. |
We are not aware of any other matters
that may be presented or acted on at the Annual Meeting. If you vote by signing
and returning the enclosed proxy card or using
the telephone or Internet voting procedures, the individuals named as proxies on
the card may vote your shares, in their discretion, on any other matter
requiring a stockholder vote that comes before the meeting.
What are the
Boards voting recommendations?
For the reasons set forth in more
detail previously in this proxy statement, our Board recommends a
vote:
● |
FOR the election of each director
nominee; |
● |
FOR the advisory vote to approve
named executive officer compensation; |
● |
for holding the advisory vote on
named executive officer compensation EVERY YEAR; and |
● |
FOR the ratification of our Audit
Committees appointment of Deloitte & Touche LLP as our independent
registered public accounting firm for the year ending December 31,
2017. |
What are the
voting requirements to elect the Directors and to approve each of the proposals
discussed in this proxy statement?
Each proposal requires the affirmative
vote of a majority of our outstanding shares present in person or represented by
proxy at the meeting and entitled to vote and actually voting on the matter.
Because votes withheld in the election of any director, abstentions and broker
non-votes are not actual votes with respect to a proposal, they will have no
effect on the outcome of the vote on any proposal.
Our Corporate Governance Guidelines
provide that, in an uncontested election of directors, the Board expects any
incumbent director nominee who does not receive FOR votes by a majority of
shares present in person or by proxy and entitled to vote and either voting
FOR or registering a decision to withhold a vote with respect to the election
of such director to promptly tender his or her resignation to the Governance
Committee, subject to acceptance by our Board. Any shares subject to broker
non-votes shall not be considered in making any determination pursuant to the
immediately preceding sentence. The Governance Committee will then make a
recommendation to the Board with respect to the director nominees resignation
and the Board will consider the recommendation and take appropriate action
within 120 days from the date of the certification of the election
results.
What happens if
I do not specify a choice for a proposal when returning a proxy or do not cast
my vote?
You should specify your choice for each
proposal on your proxy card or voting instruction form. Shares represented by
proxies will be voted in accordance with the instructions given by the
stockholders.
If you are a stockholder of
record and your proxy card is signed and returned without voting instructions,
it will be voted according to the recommendations of our Board. If
McDermott International,
Inc. 73
Table of Contents
you do not return your proxy card or
cast your vote, no votes will be cast on your behalf on any of the items of
business at the Annual Meeting.
If you are the beneficial owner, but
not the holder of record, of shares and fail
to provide voting instructions, your broker or other holder of record is
permitted to vote your shares on the ratification of Deloitte as our independent
registered public accounting firm. However, absent instructions from you, your
broker or other holder of record may not vote on the election of directors, the
advisory vote to approve named executive officer compensation, or the advisory
vote on the frequency of advisory votes on named executive officer compensation,
and no votes will be cast on your behalf for those matters.
Is my vote
confidential?
All voted proxies and ballots will be
handled in a manner intended to protect your voting privacy as a stockholder.
Your vote will not be disclosed except:
● |
to meet any legal
requirements; |
● |
in limited circumstances such as
a proxy contest in opposition to our Board of
Directors; |
● |
to permit independent inspectors
of election to tabulate and certify your vote; or |
● |
to respond to your written
comments on your proxy card. |
Stockholders Proposals
Any stockholder who wishes to have a
qualified proposal considered for inclusion in our proxy statement for our 2018
Annual Meeting must send notice of the proposal to our Corporate Secretary at
our principal executive office no later than November 24, 2017. If you make such
a proposal, you must provide your name, address, the number of shares of common
stock you hold of record or beneficially, the date or dates on which such common
stock was acquired and documentary support for any claim of beneficial
ownership.
In addition, any stockholder who
intends to submit nominees for election as directors or a proposal for
consideration at our 2018 Annual Meeting, in each case not for inclusion in our
proxy materials, must notify our Corporate Secretary. Under our By-Laws, such
notice must (1) be received at our executive offices no earlier than November 6,
2017 or later than January 5, 2018, and (2) satisfy specified requirements. A
copy of the pertinent By-Law provisions can be found on our Web site at
www.mcdermott.com at INVESTORS Corporate Governance.
By Order of the Board of
Directors,
LIANE K. HINRICHS
Secretary
Dated: March 24, 2017
74
2017 Proxy Statement
Table of Contents
APPENDIX
Reconciliation of
Non-GAAP to GAAP Financial Measure
McDermott reports its financial results
in accordance with the U.S. generally accepted accounting principles (GAAP).
This Proxy Statement includes references to Adjusted Operating Income, a
Non-GAAP financial measure as defined under the SECs Regulation G. The
following table reconciles the Non-GAAP financial measures to Operating Income,
the most comparable GAAP financial measures.
|
Year Ended Dec 31,
2016 |
(Dollars In thousands) |
|
|
GAAP Operating Income |
$142,253 |
Add: Adjustments |
|
Restructuring
Charges1 |
11,263 |
Impairment
Loss2 |
54,958 |
Non-Cash
Actuarial Loss (Gain) on Benefit Plans3 |
(5,391) |
Total
Non-GAAP Adjustments |
60,830 |
Non-GAAP Adjusted Operating Income |
$203,083 |
1 |
Restructuring charges were
primarily associated with personnel reductions, facility closures,
consultant fees, lease terminations and asset
impairments. |
2 |
Impairment charges: (i) $11.8
million and $10.9 million in the third and fourth quarters, respectively,
related to certain marine assets after we determined their carrying values
were either not recoverable or exceeded their respective fair values; (ii)
$32.8 million in the first quarter related to our Agile vessel following
the customer's termination of the vessel charter in May 2016 and given the
lack of opportunities for the vessel. The Agile was decommissioned and
disposed of in the third quarter. |
3 |
Our Non-GAAP measures exclude
100% of pension actuarial loss (gain) included in our Consolidated
Financial Statements, including the $5.4 million gain from year-end mark
to market pension adjustments for the year ended December 31, 2016. This
adjustment is recorded in selling, general and administrative expenses in
the fourth quarter of each year in accordance with our pension accounting
policy. Actuarial gains and losses are primarily driven by changes in the
actuarial assumptions, discount rates and actual return on pension assets.
The $5.4 million 2016 mark to market adjustment was comprised of a $4.5
million gain on our pension plan assets and $0.9 million of lower
actuarial pension liabilities. The $4.5 million of mark to market
adjustment is the difference between $21.6 million of expected return on
pension plan assets recognized during 2016 and a $26.1 million actual gain
on plan assets as of December 31, 2016. Our non-GAAP pension adjustment
does not include $1.0 million of net pension benefit recognized during
2016 related to expected return on plan assets net of interest costs for
our non-contributory defined benefit pension
plans. |
McDermott International,
Inc. 75
Table of Contents
Table of
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|
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McDermott International,
Inc.
Annual Meeting
Friday, May 5, 2017 at 10:00
a.m.
The Westin Houston Hotel 945
Gessner Road Houston, Texas
77024 |
Dear
Stockholder:
McDermott
International, Inc. encourages you to vote the shares electronically through the
Internet or the telephone, which are available 24 hours a day, 7 days a week.
This eliminates the need to return the proxy card.
Your
electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you
choose to vote the shares electronically, there is no need for you to mail back
the proxy card.
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com
IF YOU HAVE NOT VOTED VIA THE
INTERNET OR TELEPHONE, FOLD ALONG PERFORATION,
DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE
McDERMOTT INTERNATIONAL,
INC.
This proxy is solicited on behalf
of the Board of Directors
Annual Meeting of Stockholders - Friday, May 5,
2017 at 10:00 a.m.
The
undersigned hereby appoints David Dickson and Liane K. Hinrichs, and each of
them individually as proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side of this ballot, all of the shares of Common Stock of MCDERMOTT
INTERNATIONAL, INC. ("McDermott") that the stockholder(s) is/are entitled to
vote at the Annual Meeting of Stockholders to be held at 10:00 a.m. local time, on
Friday, May 5, 2017 at The Westin Houston Hotel, 945 Gessner Road, Houston,
Texas 77024, and any adjournment or postponement thereof.
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S)
SIGNATORY(IES). IF NO DIRECTION IS MADE, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED FOR ALL FOR ITEM 1, FOR ITEMS 2 AND 4 AND 1 YEAR ON ITEM 3. IF ANY
OTHER MATTERS PROPERLY COME BEFORE THE MEETING, INCLUDING PROCEDURAL MATTERS AND
MATTERS RELATING TO THE CONDUCT OF THE MEETING, THE PERSONS NAMED IN THIS PROXY
ARE AUTHORIZED TO VOTE IN THEIR DISCRETION.
THE STOCKHOLDER(S) SIGNATORY(IES)
HERETO ACKNOWLEDGE(S) RECEIPT OF MCDERMOTT'S ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 2016 AND ITS NOTICE OF 2017 ANNUAL MEETING AND RELATED PROXY
STATEMENT.
ATTENTION PARTICIPANTS IN
MCDERMOTT'S THRIFT PLAN: If the shares of
McDermott Common Stock represented hereby are held through the McDermott Thrift
Plan, this proxy covers all shares for which the undersigned has the right to
give voting instructions to Vanguard Fiduciary Trust Company ("Vanguard"),
Trustee of the McDermott Thrift Plan. Your proxy must be received no later than
11:59 p.m., Eastern Time, on May 2, 2017. Any shares of McDermott Common Stock
held in the McDermott Thrift Plan for which Vanguard does not receive timely
voting instructions will be voted in the same proportion as the shares for which
Vanguard receives timely voting instructions from other participants in the
McDermott Thrift Plan.
|
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE REPLY CARD ENVELOPE |
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Address
Changes/Comments: |
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(If you noted any Address Changes/Comments above, please
mark corresponding box on the reverse side.) |
CONTINUED AND TO BE SIGNED ON REVERSE
SIDE
Table of
Contents
MCDERMOTT INTERNATIONAL,
INC.
757 N. ELDRIDGE PKWY
HOUSTON, TX 77079
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet
to transmit your voting instructions and for electronic delivery of information
up until 11:59 P.M., Eastern Time, on May 4, 2017 (May 2, 2017 for participants
in McDermott's Thrift Plan). Have your proxy card in hand when you access the
Web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M., Eastern
Time, on May 4, 2017 (May 2, 2017 for participants in McDermott's Thrift Plan).
Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Using a blue or black ink pen, mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return it to
Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
If you would like to reduce the
costs incurred by our company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials
electronically in the future.
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
E20003-P87974 |
KEEP THIS PORTION
FOR YOUR RECORDS |
DETACH AND
RETURN THIS PORTION ONLY |
THIS PROXY CARD IS
VALID ONLY
WHEN SIGNED
AND DATED. |
MCDERMOTT
INTERNATIONAL, INC. |
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The Board of Directors
recommends you vote FOR the following: |
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For All |
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Withhold All |
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For
All Except |
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1.
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To elect eight members to our Board
of Directors, each for a one year term. |
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☐ |
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☐ |
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☐ |
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Nominees |
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01) |
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John F. Bookout, III |
05) |
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Gary P. Luquette |
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02) |
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David Dickson |
06) |
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William H. Schumann, III |
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03) |
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Stephen G. Hanks |
07) |
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Mary L. Shafer-Malicki |
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04) |
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Erich Kaeser |
08) |
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David A. Trice |
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To withhold
authority to vote for any individual nominee(s), mark For All Except and
write the number(s) of the nominee(s) on the line
below. |
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The Board of Directors recommends you vote FOR the following
proposal: |
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For |
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Against |
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Abstain |
2. |
To conduct an advisory vote to approve named executive officer
compensation. |
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☐ |
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☐ |
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☐ |
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The Board of Directors recommends you vote 1 Year
on the following
proposal: |
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1 Year |
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2 Years |
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3 Years |
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Abstain |
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3. |
To
conduct an advisory vote on the frequency with which to hold advisory votes on named executive officer
compensation. |
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☐ |
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☐ |
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☐ |
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☐ |
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The Board of Directors
recommends you vote FOR the following proposal: |
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For |
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Against |
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Abstain |
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4. |
To ratify our Audit Committee's appointment of Deloitte
& Touche LLP as our independent registered public accounting firm for
the year ending December 31,
2017. |
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☐ |
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☐ |
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☐ |
The shares
represented by this proxy when properly executed will be voted in the manner
directed herein by the undersigned Stockholder(s). If no direction is made, the shares represented by this proxy will be
voted FOR ALL for item 1, FOR items 2 and 4 and 1 Year on item 3. If any other
matters properly come before the meeting, including procedural matters and
matters relating to the conduct of the meeting, the persons named in this proxy
are authorized to vote in their discretion.
For address changes and/or comments, please check this box and
write them on the back where
indicated. |
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☐ |
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Please indicate if
you plan to attend this meeting. |
☐ |
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☐ |
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Yes |
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No |
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Please sign your name exactly as it appears hereon. When
signing as attorney, executor, administrator, trustee, guardian or other
fiduciary, please give full title as such. When signing as joint tenants,
all parties in the joint tenancy must sign. If a signer is a corporation
or partnership, please sign in full corporate or partnership name by duly
authorized officer. |
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Signature
[PLEASE SIGN WITHIN BOX] |
Date |
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Signature
(Joint Owners) |
Date |
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This regulatory filing also includes additional resources:
mdr_courtesy-pdf.pdf
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