DEF 14A
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SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant                               

Filed by a Party other than the Registrant  

Check the appropriate box:

 

 

Preliminary Proxy Statement

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material pursuant to Rule 14a-12

Martin Marietta Materials, Inc.

(Name of Registrant as Specified In Its Charter)

         

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

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

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

 

(1)

 

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(3)

 

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Fee paid previously with preliminary materials.

   
   

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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April 18, 2018

Dear Fellow Shareholder:

 

On behalf of the Martin Marietta Board of Directors and executive officers, it is my pleasure to invite you to our 2018 Annual Meeting of Shareholders.

 

Strong Financial Performance

2017 was an exceptional year for Martin Marietta. We established several new financial records and demonstrated the earnings power of our strategically-positioned assets, driven by a more durable, construction-centric recovery. We delivered record revenues, profitability and earnings per diluted share for both the fourth quarter and full year 2017, building on the momentum created by record performance in prior years. And, as always, we achieved these results while remaining committed to the safety, ethics, integrity and values that are the hallmark of Martin Marietta.

 

World-Class Safety Performance

Our 2017 safety performance was the best in Martin Marietta’s history. Through the hard work and focus of our employees, safety awareness has been elevated across the Company, yielding impressive results. Our employees know world-class safety performance is possible; and, importantly, 2017’s results demonstrate this goal is attainable. Specifically, half of our operating divisions exceeded the

  

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world-class Total Injury Incident Rate (TIIR) (i.e., a TIIR of 0.90 or lower), and company-wide, with a Lost Time Incident Rate (LTIR) of 0.13, we bested the world-class LTIR of 0.20 or lower.

Shareholder Engagement and Governance

Our investor outreach in 2017 extended to 86 meetings with 296 investor groups, and conversations with most of our top 20 shareholders. We visited with our shareholders across the United States and in Toronto, Amsterdam, Brussels, The Hague, London, Edinburgh and Paris. We also issued our third Sustainability Report in 2017 - Building. Caring. Growing. - in response to our shareholders’ request that we share our story on the efforts and improvements we are making in this important aspect. From our world-class safety programs and performance, to our targeted and intentional support of education and health, and environmental programs that ensure operational excellence, we have a solid foundation and an exciting opportunity to build upon.

We also have a commitment to sound corporate governance and independent leadership in our boardroom. In this regard, we made several important changes to our corporate governance. First, our Board adopted a proxy access bylaw in response to the favorable advisory vote of a majority of our shareholders at our 2017 annual meeting of shareholders. Second, our Board adopted formal guidelines and policies relating to Stock Ownership for Board members and executive officers, Hedging and Pledging of Stock for Board members and executive officers, and Clawbacks for executive officers, which you can read more about in the attached proxy statement. Our Board continues to review our governance policies to ensure we are able to create appropriate value for our shareholders.

Board Member Changes

We also are nominating for election a new Board member in 2018, namely Smith W. Davis, a partner with the law firm of Akin Gump Strauss Hauer & Feld LLP in Washington DC. Mr. Davis is an expert in legal and regulatory matters, as well as governance, environmental and compensation matters. We are delighted to nominate Mr. Davis to our Board, who brings a strong background and adds a new and diverse perspective to our Board mix.

Proxy Voting

Because your proxy vote matters, I urge you to cast it promptly - even if you plan to attend the Annual Meeting. We encourage you to vote so that your shares will be represented and voted at the meeting.

Thank you for your continued support of Martin Marietta.

Sincerely,

 

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C. Howard Nye

Chairman of the Board, President and Chief Executive Officer

 


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MARTIN MARIETTA MATERIALS, INC.

2710 Wycliff Road, Raleigh, North Carolina 27607

Notice of Annual Meeting of Shareholders

To Be Held May 17, 2018

To Our Shareholders:

The Annual Meeting of Shareholders of Martin Marietta Materials, Inc. will be held on Thursday, May 17, 2018, at 11:30 a.m. at our principal office located at 2710 Wycliff Road, Raleigh, North Carolina. At the meeting, the holders of our outstanding common stock will act on the following matters:

 

  (1)

Election as Directors the seven (7) nominees named in the attached proxy statement, each to serve their respective term as described in the attached proxy statement, and until their successors are duly elected and qualified;

 

  (2)

Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for 2018;

 

  (3)

Advisory vote to approve the compensation of our named executive officers; and

 

  (4)

Any other business that may properly come before the meeting.

All holders of record of Martin Marietta common stock (NYSE: MLM) at the close of business on March 9, 2018 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements of the meeting.

The Board of Directors unanimously recommends that you vote FOR proposals 1, 2, and 3.

This notice and the accompanying proxy statement are being first mailed to shareholders on or about April 18, 2018. We have enclosed our 2017 Annual Report to Shareholders. The report is not part of the proxy soliciting materials for the Annual Meeting.

Whether or not you expect to attend the meeting, we hope you will date and sign the enclosed proxy card and mail it promptly in the enclosed stamped envelope. Submitting your proxy now will not prevent you from voting your shares at the meeting, as your proxy is revocable at your option.

Sincerely,

 

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Roselyn R. Bar

Executive Vice President, General

  Counsel and Secretary

Raleigh, North Carolina

April 18, 2018

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL SHAREHOLDER MEETING TO BE HELD ON MAY 17, 2018:

Martin Marietta’s proxy statement, form of proxy card and 2017 Annual Report to Shareholders are also available at ir.martinmarietta.com/investor-relations/reports-filings.

 


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Proxy Summary

     1  

The Board of Directors

     6  

Proposal 1 – Election of Directors

     8  

Director Compensation

     13  
Security Ownership of Certain Beneficial Owners and Management      15  

Section 16(a) Beneficial Ownership Reporting Compliance

     16  
Corporate Governance Matters      17  

Corporate Governance Philosophy

     17  

Board Committees

     21  
Proposal 2 – Independent Auditors      27  

Summary of Fees

     28  

Audit Fees

     28  

Audit-Related Fees

     28  

Tax Fees

     28  

All Other Fees

     28  

Pre-Approval Policies and Procedures

     28  

Audit Committee Review

     28  
Audit Committee Report      29  
Management Development and Compensation Committee Report      30  
Compensation Committee Interlocks and Insider Participation in Compensation Decisions      30  
Compensation Discussion and Analysis      31  

Introduction

     31  

Executive Summary

     31  

2017 Say-On-Pay Vote and Shareholder Outreach

     34  

Performance-Related Compensation

     35  

Pay Decisions in 2017 Made in Light of Performance

     36  

Our Compensation Strategy

     38  

Ongoing Corporate Governance Policies

     39  

Compensation Decisions Process

     40  

Determination of CEO Compensation

     41  

Compensation Program Risk Assessment

     42  

Considerations Regarding 2017 Compensation

     43  

Stock-Based Awards Generally

     48  

Stock Ownership Guidelines

     48  

Perquisites

     49  

Retirement and Other Benefits

     49  

Potential Payments upon Termination or Change of Control

     50  

Tax and Accounting Implications

     50  
Executive Compensation      51  

Executive Officer Compensation

     51  

Summary Compensation Table

     51  

Grants of Plan-Based Awards

     53  

Outstanding Equity Awards at Fiscal Year-End

     55  

Option Exercises and Stock Vested

     56  

Pension Benefits

     58  

Potential Payments Upon Termination or Change of Control

     59  

CEO Pay Ratio Disclosure

     62  
Proposal 3 – Advisory Vote on the Compensation of Our Named Executive Officers      63  
Securities Authorized for Issuance Under Equity Compensation Plans      64  

Description of the TXI Legacy Plan

     64  

Description of the Deferred Compensation Plan

     65  
General Information      66  
Incorporation by Reference      68  
Shareholders’ Proposals for 2019 Annual Meeting      68  
Appendix A – Martin Marietta Guidelines for Potential New Board Members      A-1  

Appendix B – Non-GAAP Measures

     B-1  

 

 


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Proxy Summary

This Proxy Summary highlights information about Martin Marietta that can be found elsewhere in this proxy statement. It does not contain all of the information you should consider in voting your shares. We encourage you to read the entire proxy statement for more detailed information on each topic prior to casting your vote. This proxy statement, the proxy card, and the notice of meeting are being sent commencing on approximately April 18, 2018 to shareholders of record on March 9, 2018.

2018 Annual Meeting of Shareholders

 

 

Meeting Date:

 

 

May 17, 2018

   

 

Place:

 

 

2710 Wycliff Road, Raleigh, NC

Time:

 

11:30 am ET

 

    Record Date:   March 9, 2018

Your vote is important. You may vote in person at the Annual Meeting or submit a proxy over the internet. If you have received a paper copy of the proxy card (or if you request a paper copy of the materials), you may submit a proxy by telephone or by mail.

 

 

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Via the Internet

 

www.voteproxy.com.

    

 

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In Person

 

Attend the Annual Meeting and vote by ballot.

 

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By Telephone

 

1-800-PROXIES (1-800-776-9437)

in the United States or 1-718-921-8500 from outside the United States.

    

 

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By Mail

 

Sign, date and mail your proxy card in the envelope provided.

If you submit your proxy by telephone or over the internet, you do not need to return your proxy card by mail.

 

PROPOSALS AND VOTING RECOMMENDATIONS

 

 
  Proposal       Description   Board Voting Recommendation   Page    

1

  Election of Seven Director Nominees  

LOGO  FOR ALL DIRECTOR NOMINEES

    8  

2

  Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors  

LOGO  FOR

    27  

3

  Advisory Vote on Company’s Executive Compensation  

LOGO  FOR

    63  

 

 

 

 

 

 

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Shareholders Benefit from Martin Marietta’s Record 2017 Performance

 

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Record total revenues of almost $4.0 billion up 3.9% from 2016

 

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Record gross profit of $972 million up 6.6%, and a 24.5% gross margin

 

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Record operating earnings of $700 million up 3.4%

 

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Record net earnings attributable to Martin Marietta of $713.4 million, an increase of 68% over 2016

 

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Record earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.004 billion, up 3% from 2016

 

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Record earnings attributable to common shareholders per diluted share of $11.25.

 

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* Reconciliation of Net Earnings Attributable to Martin Marietta to EBITDA is included in Appendix B.

 

 

 

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Corporate Governance Highlights: Creating Sustainable Long-Term Shareholder Value

Recent Updates

 

   

Our shareholders have the ability to nominate director candidates and have those nominees included in our proxy statement, subject to meeting the requirements in our Bylaws, a shareholder right known as proxy access

 

 

   

Declassified Board phase-in continues—Directors elected annually in 2017 and 2018 to serve one-year terms

 

 

   

Adoption of Stock Ownership Guidelines

 

 

   

Adoption of Hedging and Pledging Policy

 

 

   

Adoption of Clawback Policy

 

Board of Directors

 

   

Lead Independent Director

 

 

   

10 Directors/Nominees; 9 are non-employees; 9 are independent

 

 

   

Key committee Chairs are independent

 

 

   

Executive sessions of non-management Directors at each regularly-scheduled meeting

 

 

   

All Directors attended 100% of all Board and committee meetings in 2017

 

 

   

Limited membership on other public company boards

 

 

   

Code of Ethical Business Conduct and ethics program that reports to a Board Committee

 

 

   

Regular Board self-assessments and Director peer review

 

 

   

Risk oversight by full Board and Committees

 

Shareholder Interest

 

   

Majority voting standard for uncontested Director elections

 

 

   

No shareholder rights plan

 

 

   

Annual advisory vote to ratify independent auditor

 

 

   

Annual advisory vote to approve executive compensation

 

 

   

Longstanding active shareholder engagement

 

 

   

We publish annually a Sustainability Report that discusses our commitment to our shareholders, employees and the communities that we serve

 

Board Composition

We nominated for election at our 2018 annual meeting of shareholders a new Director to the Board who has extensive experience in regulatory and legal matters. We were recognized in 2017 and 2015 at the Women’s Forum of New York at its Biennial Breakfast of Corporate Champions for our Board diversity. We were also recognized by 2020 Women on Boards as a Winning ‘W’ Company for seven consecutive years for championing board diversity.

 

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These charts assume that Smith W. Davis is elected at the annual meeting of shareholders.

 

 

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Board Attendance

In 2017, all directors attended 100% of the total Board and committee meetings to which they were assigned. All directors attended the May 2017 Annual Meeting.

Our Compensation Approach

A substantial portion of compensation paid to our named executive officers (NEOs) is variable and performance-based. We use the 50th percentile of our comparator group as a reference point when determining target compensation, but target pay is set based on a variety of factors and actual pay realized by our NEOs is dependent on our financial, operational and other related performance. Based on our record levels of performance in 2017, variable compensation payable under both our short-term and long-term incentive plans exceeded the target amounts established for each NEO, which is consistent with our pay-for-performance philosophy. All compensation paid to our CEO and other NEOs in 2017 was performance-based other than base salary: 86% of our CEO’s compensation was performance-based and approximately 80% of our NEOs compensation was performance based.*

 

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  *

Based on grant date value of PSUs and RSUs. Other NEO Compensation includes Mr. Nickolas, who commenced employment with the Company in August 2017.

 

 

 

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Shareholder Rights and Governance Practices

 

 

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Will any other matters be presented at the Annual Meeting?

At the time this proxy statement was filed with the Securities and Exchange Commission, the Board of Directors was not aware that any matters not referred to herein would be presented for action at the Annual Meeting. If any other matters properly come before the meeting, it is intended that the persons named in the enclosed proxy will vote the shares represented by proxies on such matters in accordance with the recommendation of the Board of Directors, or, if no recommendation is given, in their own discretion. It is also intended that discretionary authority will be exercised with respect to the vote on any matters incident to the conduct of the meeting.

What are the Board’s recommendations?

Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation, as well as a description of each proposal, is set forth in this proxy statement. The Board recommends a vote:

 

   

FOR the election of the nominated slate of Directors;

 

 

   

FOR the ratification of the selection of PricewaterhouseCoopers LLP as independent auditors; and

 

 

   

FOR the approval, on a non-binding advisory basis, of the compensation of our NEOs as described in this proxy statement.

 

 

 

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein are generally identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on the beliefs and assumptions of our management and on currently available information. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our annual report on Form 10-K for the fiscal year ended December 31, 2017. We undertake no responsibility to publicly update or revise any forward-looking statement.

The Board of Directors

The Board of Directors currently consists of nine members, eight of whom are non-employee Directors. At the 2016 Annual Meeting, shareholders approved the Board of Directors’ proposal to amend our Articles of Incorporation to phase out the classification of the terms of our Directors and to provide instead for the annual election of our Directors. Prior to the charter amendment, our Board of Directors was divided into three classes, with each class serving three-year terms. Commencing with the 2017 Annual Meeting of Shareholders, our Directors are elected to one-year terms of office after the current terms of the Directors of each class expire at this 2018 Annual Meeting of Shareholders and the 2019 Annual Meeting.

The Board of Directors has nominated seven persons for election as Directors to serve a one-year term expiring in 2019. Unless otherwise directed, proxies will be voted in favor of these nominees. Each nominee has agreed to serve if elected. Each of the nominees, except Mr. Davis, is currently serving as a Director. Should any nominee become unable to serve as a Director, the persons named in the enclosed form of proxy will, unless otherwise directed, vote for the election of such other person for such position as the present Board of Directors may recommend in place of such nominee. Proxies cannot be voted for a greater number of persons than the number of nominees named.

Under our Bylaws, nominations of persons for election to the Board of Directors may be made at an Annual Meeting of Shareholders by the Board of Directors and by any shareholder who complies with the notice procedures set forth in the Bylaws. As described in the proxy statement for our 2017 Annual Meeting, for a nomination to be properly made by a shareholder at the 2018 Annual Meeting, the shareholder’s notice must have been sent to, and received by, our Secretary at our principal executive offices between January 17, 2018 and February 16, 2018. No such notice was received during this period. Should any of the following nominees be unavailable for election by reason of death or other unexpected occurrence, the proxy, to the extent permitted by applicable law, may be voted with discretionary authority in connection with the nomination by the Board of Directors and the election of any substitute nominee.

Working closely with the full Board, the Nominating and Corporate Governance Committee develops criteria for open Board positions. In developing these criteria, the Committee takes into account a variety of factors, which may include: the current composition of the Board and expected retirements from the Board; the range of talents, experiences and skills that would best complement those already represented on the Board; and the need for financial or other specialized expertise. Applying these criteria, the Committee considers candidates for Board membership suggested by Committee members, other Board members, and management. The Committee has also retained a third-party executive search firm to identify and review candidates from time to time.

Once the Committee has identified a prospective nominee, it makes an initial determination as to whether to conduct a full evaluation. In making this determination, the Committee takes into account various information, including information provided at the time of the candidate recommendation, the Committee’s own knowledge, and information obtained through inquiries to third parties to the extent the Committee deems appropriate. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the criteria that the Committee has established. If the Committee determines, in consultation with the Chairman, President and CEO and other Directors as appropriate, that additional consideration is warranted, it may request management or a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the specific criteria that it has established for the position, as well as the standards and qualifications set out in the Company’s Corporate Governance Guidelines, including:

 

   

the ability of the prospective nominee to represent the interests of the shareholders of the Company;

 

 

   

the prospective nominee’s standards of integrity, commitment and independence of thought and judgment;

 

 

 

 

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the prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee’s service on other public company boards, as specifically set out in the Company’s Corporate Governance Guidelines;

 

 

   

the extent to which the prospective nominee contributes to the range of talent, skill and expertise appropriate for the Board; and

 

 

   

the extent to which the prospective nominee helps the Board reflect the diversity of the Company’s shareholders, employees, customers and the communities in which it operates.

 

If the Committee decides, on the basis of its preliminary review, to proceed with further consideration, members of the Committee, the Chairman, President and CEO, as well as other members of the Board as appropriate, interview the nominee. After completing this evaluation and interview, the Committee makes a recommendation to the full Board, which makes the final determination whether to nominate or appoint the new Director after considering the Committee’s report. A background check is completed before a final recommendation is made to the Board to appoint a candidate to the Board.

In selecting nominees for Director, the Board seeks to achieve a mix of members who together bring experience and personal backgrounds relevant to the Company’s strategic priorities and the scope and complexity of the Company’s business. The Board also seeks demonstrated ability to manage complex issues that involve a balance of risk and reward. The background information on current nominees beginning on page 8 sets out how each of the current nominees contributes to the mix of experience and qualifications the Board seeks. In making its recommendations with respect to the nomination for re-election of existing Directors at the annual shareholders meeting, the Committee assesses the composition of the Board at the time and considers the extent to which the Board continues to reflect the criteria set forth above.

The following sets forth the age and certain other biographical information for each of the nominees for election and for each of the other members of the Board of Directors as of the date of this proxy statement.

 

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Proposal No. 1

Election of Directors

Nominees for Election to the Board of Directors for a Term Continuing Until 2019:

 

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SUE W. COLE

 

Director Since: 2002

 

Age: 67

 

Chair of the Nominating and Corporate Governance Committee and member of the Management Development and Compensation Committee.

 

 

 

Ms. Cole is the managing partner of SAGE Leadership & Strategy, LLC, an advisory firm for businesses, organizations and individuals relating to strategy, governance and leadership development. Ms. Cole was previously a principal of Granville Capital Inc., a registered investment advisor, from 2006 to 2011, and before that she was the Regional CEO, Mid-Atlantic Region, of U.S. Trust Company, N.A., where she was responsible for the overall strategic direction, growth, and leadership of its North Carolina, Philadelphia and Washington, D.C. offices. Ms. Cole previously held various positions in the U.S. Trust Company, N.A. and its predecessors. Ms. Cole has previously served on the public-company board of UNIFI, Inc. She has also been active in community and charitable organizations, including previously serving as Chairman of the North Carolina Chamber, on the Investment Committee of the University of North Carolina at Greensboro and as a member on the North Carolina Economic Development Board. Ms. Cole attended the University of North Carolina at Greensboro where she earned a Bachelor of Science degree in Business Administration and a Masters in Business Administration in Finance.

  

 

Key attributes, experience and skills:

 

  Valuable experience in executive compensation, corporate governance, human resources, finance and financial statements, and customer service

 

  Chief executive officer of several financial services businesses as well as several non-profit organizations

 

  Strong leadership skills and familiarity with North Carolina, an important state for the Company

 

 

 

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SMITH W. DAVIS

 

Age: 70

 

 

Mr. Davis is a senior partner at Akin Gump Strauss Hauer & Feld LLP, an international law firm, where he provides counsel on a wide variety of legislative and regulatory matters, including those before a variety of congressional committees. Mr. Davis joined Akin Gump in 1979 and his practice has included advising on legal matters relating to environmental issues, financial institutions, mergers and acquisitions, and pension reform. Mr. Davis also has served on the law firm’s compensation and management committees. Prior to joining Akin Gump, Mr. Davis served as a counsel to the House Judiciary Committee. Mr. Davis attended Yale University where he received a Bachelors of Arts degree, magna cum laude and Yale Law School where he received his Juris Doctor degree.

  

 

Key attributes, experience and skills:

 

  Extensive experience in legal, compliance, and corporate governance

 

  Strong leadership skills and expertise in governmental and regulatory issues, safety, health and environmental matters, mergers and acquisitions, executive compensation, financial affairs, and risk assessment.

 

  Brings new perspective to the Board on diversity and corporate citizenship

 

 

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Director Nominees    Proposal 1: Election of Directors

 

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JOHN J.

    KORALESKI

 

Director Since: 2016

 

Age: 67

 

Member of the Audit Committee, Executive Committee and Management Development and Compensation Committee.

 

 

Mr. Koraleski joined the Martin Marietta Board in 2016. Mr. Koraleski served from February 2015 through his retirement in September 2015 as executive Chairman of the Board of the Union Pacific Corporation (UP), which through its subsidiaries operates North America’s premier railroad franchise, covering 23 states across the western two-thirds of the United States. Prior to that, he was named President and Chief Executive Officer of the UP in March 2012, elected as a Director of the UP in July 2012 and appointed Chairman of the Board in 2014. Since joining the Union Pacific (Railroad) in 1972, Mr. Koraleski held a number of executive positions in the UP and the Railroad, including, Executive Vice President – Marketing and Sales from 1999 to 2012, Executive Vice President – Finance and Information Technology, Chief Financial Officer and Controller. Mr. Koraleski served as the Chairman of The Bridges Investment Fund, Inc., a general equity fund whose primary investment objective is to seek long-term capital appreciation, from 2005 through March 2012 and is a past Chairman of the Association of American Railroads. Mr. Koraleski earned a Bachelor’s and Master’s degree in business administration from the University of Nebraska at Omaha.

  

 

Key attributes,
experience and skills:

 

  Experience with the demands and challenges associated with managing a large publicly-traded organization from his experience as Chairman and CEO of Union Pacific

 

  Extensive knowledge of financial system management, public company accounting, disclosure requirements and financial markets

 

  Valuable expertise in talent management, compensation, governance and succession planning

 

  Understanding of complex logistic operations, safety and rail operations

 

  Broad strategic analysis and experience with acquisitions, integration, marketing and information technologies

 

 

 

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DAVID G.

    MAFFUCCI

 

Director Since: 2005

 

Age: 67

 

Chair of the Audit Committee and member of the Ethics, Environment, Safety and Health Committee.

 

 

Mr. Maffucci is a Director of Domtar Corporation, which designs, manufactures, markets and distributes a wide variety of fiber-based products, including communication papers, specialty and packaging papers, market pulp and absorbent hygiene products. He is currently the Chair of its Audit Committee and a member of its Finance Committee and Nominating and Corporate Governance Committee. Mr. Maffucci previously served as Executive Vice President and Chief Financial Officer of Xerium Technologies, Inc., a manufacturer and supplier of consumable products used in paper production, from 2009 to 2010, as well as on its Board of Directors from 2008 until 2010, serving on its Audit and Compensation Committees from 2008 to 2009. On March 30, 2010, Xerium Technologies, Inc. filed a voluntary petition for relief under Chapter 11 of the Federal bankruptcy laws as part of a “pre-arranged” restructuring plan with the support of its lenders. On May 25, 2010, Xerium Technologies, Inc. emerged from Chapter 11 protection. Mr. Maffucci also served as Executive Vice President and Chief Financial Officer of Bowater Incorporated. Mr. Maffucci previously worked at KPMG and is a Certified Public Accountant. He received his Bachelor’s degree from Sacred Heart University.

  

 

Key attributes,
experience and skills:

 

  Extensive financial experience with a large public accounting firm

 

  Accounting principles and practices, auditing, internal control over financial reporting, and risk management processes

 

 

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2018 PROXY STATEMENT

 

 

 

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Table of Contents

Proposal 1: Election of Directors    Director Nominees

 

LOGO

 

MICHAEL J.

    QUILLEN

Director Since: 2008

Age: 69

Lead Independent Director, Chair of the Management Development and Compensation Committee, Member of the Executive Committee and the Nominating and Corporate Governance Committee.

 

 

Mr. Quillen was the founder and served as Chief Executive Officer of Alpha Natural Resources, Inc. (ANR), a leading Appalachian coal supplier, since its formation in 2004 until its merger with Foundation Coal Holdings, Inc. in July 2009, and served as President and Chairman of ANR from 2006 to 2009, and non-Executive Chairman until May 2012. Mr. Quillen held senior executive positions in the coal industry throughout his career at Pittston/Pittston Coal Sales Corp., AMVEST Corporation, NERCO Coal Corporation, Addington, Inc. and Mid-Vol Leasing, Inc. He has also served as Chairman (Rector) of the Board of Visitors of Virginia Polytechnic Institute and State University from July 2012 to June 2014 and was reappointed to an additional four-year term on the Board of Governors in July 2014. He was Chairman of the Audit and Finance Committee of Virginia Polytechnic Institute and State University from July 2010 to June 2012. He also served on the Virginia Port Authority from 2003 to 2012 and as Chairman from July 2011 to December 2012. Mr. Quillen attended Virginia Polytechnic Institute and State University, earning both Bachelor’s and Master’s degrees in Civil Engineering.

  

 

Key attributes,
experience and skills:

   Valuable business, leadership, management, financial, and mergers and acquisitions experience

 

   Extensive experience related to mining companies, governmental and regulatory issues, safety, health and environmental matters

 

   Tremendous insight and expertise with respect to strategic analysis, the natural resources industry, and energy

 

   Wealth of knowledge related to transportation

 

 

 

LOGO

 

DONALD W.

    SLAGER

 

Director Since: 2016

 

Age: 56

 

Member of the Finance Committee and the Nominating and Corporate Governance Committee.

 

 

Mr. Slager serves as President and Chief Executive Officer of Republic Services, Inc., a service provider in the non-hazardous solid waste industry, holding this position since January 2011. Prior to this, he served as President and Chief Operating Officer of Republic from December 2008 until his promotion to CEO. Prior to that, Mr. Slager served in the same capacity for Allied Waste Industries, Inc. (“Allied Waste”), from 2005 to 2008, prior to its merger with Republic Services. Mr. Slager was Executive Vice President and Chief Operating Officer of Allied Waste between 2003 and 2004. Prior to that, Mr. Slager held varying positions of increasing responsibility with Allied Waste. Mr. Slager also has served as a Director of Republic since 2010. Mr. Slager previously served as an independent Director of UTi Worldwide Inc. (UTi) from 2009 to January 2016, where he served as Chairman of the Nominating and Corporate Governance Committee and as a member of both the Compensation and Risk Committees. UTi, a former NYSE listed company, was an international, non-asset-based supply chain services and solutions company providing air and ocean freight forwarding, contract logistics, customs brokerage, distribution, inbound logistics, truckload brokerage and other supply chain management services until it was acquired by DSV A/S a third-party logistics services provider, in January 2016. Mr. Slager has completed the Northwestern University Kellogg School Advanced Executive Program and holds a certificate from the Stanford University Board Consortium Development Program.

  

 

Key attributes, experience and skills:

 

  More than 13 years of C-Suite experience

 

  More than 26 years of general management experience in a complex, capital intensive and logistics business

 

  Extensive experience in mergers and acquisitions, integration, and strategic development and analysis

 

  Valuable experience from his membership on two publicly-traded board of directors

 

 

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2018 PROXY STATEMENT

 

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Table of Contents

Director Nominees    Proposal 1: Election of Directors

 

LOGO

 

STEPHEN P.

     ZELNAK, JR.

Director Since: 1993

 

Age: 73

 

Chair of the Finance Committee and Member of the Ethics, Environment, Safety and Health Committee.

 

 

Mr. Zelnak currently serves as Chairman of the Board of Beazer Homes USA, Inc., a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States. He previously served as Chief Executive Officer of Martin Marietta from 1993 to 2009, President from 1993 to 2006, Chairman of the Board from 1997 through 2009, Executive Chairman from January 2010 to May 2010, and non-Executive Chairman from May 2010 until May 2014. Mr. Zelnak joined Martin Marietta Corporation in 1981 and was responsible for the aggregates operations since 1982. Mr. Zelnak is also Chairman and majority owner of ZP Enterprises, LLC, a private investment firm. In addition to community and charitable organizations, Mr. Zelnak has served as Chairman of the North Carolina Chamber and the National Stone, Sand and Gravel Association. He currently serves on the Advisory Board of the College of Management at North Carolina State University and is a Trustee Emeritus of the Georgia Tech Foundation Board. Mr. Zelnak received a Bachelor’s degree from Georgia Institute of Technology and Master’s degrees in Administrative Science and Business Administration from the University of Alabama system.

  

 

Key attributes, experience and skills:

 

  Former Chairman and CEO of Martin Marietta

 

  Extensive mentorship, business and operating experience

 

  Knowledge of all aspects of Martin Marietta and the construction aggregates industry

 

  Broad strategic and financial experience

 

  Knowledge of the homebuilding industry and factors that impact construction

 

  LOGO    

The Board Unanimously Recommends a Vote “FOR

All Nominees for Election to the Board of Directors
on this Proposal 1

 

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Table of Contents

Proposal 1: Election of Directors    Director Nominees

 

Other Directors Whose Terms Continue Until 2019:

 

LOGO

 

C. HOWARD NYE

 

Director Since: 2010

 

Age: 55

 

Chairman of the Board and Chair of the Executive Committee

 

 

Mr. Nye has served as Chairman of the Board since 2014 and as President and Chief Executive Officer of Martin Marietta since January 1, 2010. He previously served as President and Chief Operating Officer of Martin Marietta from August 2006 to 2009. From 2003 to 2006, Mr. Nye served as Executive Vice President of Hanson Aggregates North America, a producer of aggregates for the construction industry, and in other managerial roles since 1993. Mr. Nye is also currently an independent Director of CREE, Inc., a multi-national manufacturer and market-leading innovator of lighting-class LEDs, LED lighting, and semiconductor solutions for wireless and power applications, where he serves as a member on the Compensation Committee and Chair of the Governance and Nominations Committee. Mr. Nye has also been active in a number of various business, civic, and education organizations, including serving as Chairman of the Steering Committee, as a member of the Executive Committee and Nominating & Leadership Development Committee and past Chairman of the Board of Directors of the National Stone, Sand & Gravel Association, Vice Chairman of the Board of Directors of the American Road & Transportation Builders Association (ARTBA), and a member of the Board of Directors of the United States Chamber of Commerce. Mr. Nye has also been a gubernatorial appointee to the North Carolina Mining Commission. Mr. Nye received a Bachelor’s degree from Duke University and a Juris Doctor degree from Wake Forest University.

  

 

Key attributes, experience and skills:

 

  Extensive knowledge of the construction aggregates industry

 

  Extensive leadership, business, operating, marketing, mergers and acquisitions, legal, customer-relations, and safety and environmental experience

 

  Understands the competitive nature of the business and has strong management skills and broad executive experience

 

  Broad strategic vision for the future growth of Martin Marietta

 

 

 

LOGO

 

LAREE E. PEREZ

 

Director Since: 2004

 

Age: 64

 

Chair of the Ethics, Environment, Safety and
Health Committee and
member of the Audit
Committee

 

 

Ms. Perez is an investment consultant with DeRoy & Devereaux, an independent investment adviser, where she has provided client consulting services since 2015. She was previously Owner and Managing Partner of The Medallion Company, LLC, a consulting firm, from 2003 to 2015. Ms. Perez was previously a Director of GenOn Energy, Inc., one of the largest power producers in the United States, from 2002 to 2012, and served as the Chairman of the Audit Committee of GenOn Energy, Inc. from 2002 to 2007 and a member of its Audit and Risk and Finance Oversight Committees from 2008 to 2012. Previously, she was Vice President of Loomis, Sayles & Company, L.P. and co-founder, President and Chief Executive Officer of Medallion Investment Company, Inc. In addition to civic and charitable organizations, Ms. Perez recently served as Vice Chairman of the Board of Regents at Baylor University and previously served on the Board of Trustees of New Mexico State University, where she was also Chairman of the Board. Ms. Perez earned a Bachelor’s degree from Baylor University in Finance and Economics.

  

 

Key attributes, experience and skills:

 

  Significant business, financial and private investment experience

 

  Significant expertise with respect to financial statements, corporate finance, accounting and capital markets, mergers and acquisitions, and strategic analysis

 

  Insight into auditing best practices

 

  Familiarity with the southwestern United States

 

 

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Table of Contents

Director Nominees    Proposal 1: Election of Directors

 

LOGO

 

DENNIS L.

    REDIKER

 

Director Since: 2003

 

Age: 74

 

Member of the Audit Committee and the Finance Committee

 

 

Mr. Rediker served as the President and Chief Operating Officer of Utility Composite Solutions International, a developer and maker of composite materials for utility and municipal lighting applications, from 2011 until its sale to Highland Industries in 2016. He is currently providing consulting and transition services to Highland Industries. From 2009 to 2011, Mr. Rediker served as the President and Chief Operating Officer of B4C, LLC, a developer and maker of ceramic materials for defense and aerospace applications. He previously served as President and Chief Executive Officer and Director of The Standard Register Company, and as the Chief Executive Officer and a Director of English China Clays, plc. Mr. Rediker received a Bachelor’s degree from the University of California at Santa Barbara in electrical engineering.

  

 

Key attributes,

experience and skills:

 

  Significant operating, financial, leadership, strategic, audit, and marketing experience

 

  Extensive experience in mergers and acquisitions, environmental and safety, and customer service

 

  Expertise in corporate strategy

 

 

 

Director Compensation

Martin Marietta uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board of Directors. In setting Director compensation, Martin Marietta considers the significant amount of time that Directors expend in fulfilling their duties to Martin Marietta as well as the skill level required by Martin Marietta of members of the Board. The Board determines reasonable compensation for Directors upon recommendation of the Management Development and Compensation Committee of the Board, which retains an independent compensation consultant to assist it in making each recommendation.

Cash Compensation Paid to Board Members

The cash-based elements of annual Director compensation for fiscal year 2017 paid in quarterly installments, measured from the end of the month during which the Annual Meeting of Shareholders is held. were as follows.      

 

Annual Board cash retainer

    $ 100,000                       

Annual committee chair retainer1

    $ 8,000          

Annual Audit Committee chair retainer2

    $ 15,000          

Annual Audit Committee member retainer1

    $ 5,000          

Annual Lead Director retainer3

    $ 25,000          
1 

This is in addition to the annual retainer in view of increased responsibilities

2 

This is in addition to the annual retainer and the annual Audit Committee member retainer, but in lieu of the annual committee chair retainer in view of increased responsibilities

3

This is in addition to the annual retainer and the annual committee chair retainers in view of increased responsibilities

The Company reimburses Directors for the travel expenses of, or provides transportation on Company aircraft for, Board and Committee meetings, meetings with management or independent consultants or advisors, and other Company-related events, such as Investor Day and meetings with potential Board candidates. Martin Marietta’s plane was used to transport some Directors to and from Board and committee meetings, but no Directors received personal use of Martin Marietta’s plane or other perquisites and personal benefits in 2017.

Equity Compensation Paid to Board Members

Non-employee Directors received an award of restricted stock units (RSUs) with a value of $100,000 (rounded up to the nearest RSU) based on the closing price as of the date of grant, which was generally immediately following the 2017 Annual Meeting of Shareholders in May 2017. In 2017, this award was 437 RSUs. The RSUs granted to the Directors in 2017 were fully vested upon award. Directors are required to defer at least 50% of the RSUs until retirement from the Board. Directors may choose to voluntarily defer an additional portion of their RSUs, and any RSUs that are not so deferred are settled in shares of common stock of Martin Marietta as soon as practicable following the grant date. The RSUs were awarded under the Martin Marietta Amended and Restated Stock-Based Award Plan (the “Stock Plan”), which was approved by shareholders on May 19, 2016. The Stock Plan provides that, during any calendar year, no non-employee Director may be granted (i) restricted shares and other full-value stock-based awards, including RSUs, in respect of more than 7,000 shares of common stock of Martin Marietta or (ii) options or stock appreciation rights in respect of more than 20,000 shares of common stock of Martin Marietta.

 

 

 

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Table of Contents

Proposal 1: Election of Directors    Director Compensation

 

The Directors do not have voting or investment power for their respective RSUs.

Deferred Compensation Program for Board Members

The Common Stock Purchase Plan for Directors provides that non-employee Directors may elect to receive all or a portion of their fees earned in 2017 in the form of Martin Marietta’s common stock units. If deferral is elected, there is a mandatory deferral minimum time of three years with, subject to certain restrictions, redeferrals at each Director’s election up to the date the person ceases to be a Director or the date that is one year and one month following the date that the person ceases to be a Director. Directors may elect to receive payment of the

deferred amount in a single lump sum or in equal annual installments for a period up to ten years. Amounts deferred under the plan in common stock are credited toward units of common stock at a 20% discount from the fair market value of the common stock (the closing price of the common stock as reported in the Wall Street Journal) on the date the Director fees would otherwise be paid. There are no matching contributions made by Martin Marietta. Dividend equivalents are paid on the units at the same rate as dividends are paid to all shareholders. The Directors do not have voting or investment power for their respective common stock units. Directors may also elect to defer their fees into a cash-based account on the same basis. Amounts deferred under the plan in cash are credited with interest at the prime rate as of January 1 of that year.

 

 

Director Compensation Table

The table below summarizes the compensation paid by Martin Marietta to each person who served as a non-employee Director during the fiscal year ended December 31, 2017.

 

Name1

(a)

 

Fees
Earned or

Paid in Cash

 ($)2

(b)

 

Stock
Awards

 ($)3

(c)

   

Change in Pension
Value and
Nonqualified
Deferred
Compensation

Earnings

 ($)5

(f)

 

All Other
Compensation

($)6

(g)

 

Total

($)

(h)

 

Sue W. Cole

  108,000     100,195     12,565   68,449     289,209  

John J. Koraleski

  105,000     100,195            34     1,432     206,661  

David G. Maffucci

  120,000     100,195       7,403   34,872     262,470  

William E. McDonald7

  25,000     —       6,279   33,774     65,053  

Laree E. Perez

  113,000     100,195       5,721   23,959     242,875  

Michael J. Quillen

  133,000     100,195       5,387   61,748     300,330  

Dennis L. Rediker

  105,000     100,195       9,683   37,691     252,569  

Donald W. Slager

  100,000     100,195            44     1,499     201,738  

Stephen P. Zelnak, Jr.

  108,000     100,195       4,178   37,215     249,588  

 

1 

Mr. Nye, who is the Chief Executive Officer of Martin Marietta and a member of the Board of Directors, is not included in this table because he is not compensated separately for his service as a Director. The compensation received by Mr. Nye as an employee of Martin Marietta is shown in the Summary Compensation Table on page 51.

 

2 

The amounts in column (b) reflect fees earned in 2017. Some of these fees were deferred pursuant to the Common Stock Purchase Plan for Directors in the form of common stock units. The number of units of common stock credited in 2017 to each of the Directors under the Common Stock Purchase Plan for Directors and the grant date fair value for these awards determined in accordance with FASB ASC Topic 718, which includes the 20% discount, are as follows: Ms. Cole, 630 units and $108,337 value, respectively; Mr. Koraleski, 0; Mr. Maffucci, 141 units and $24,249 value, respectively; Mr. McDonald, 145 units and $25,050 value, respectively; Ms. Perez, 0; Mr. Quillen, 776 units and $133,441 value, respectively; Mr. Rediker, 124 units and $21,326 value, respectively; Mr. Slager, 0; and Mr. Zelnak, 316 units and $54,344 value, respectively. The number of units credited to each of the Directors as of December 31, 2017, including units accumulated under the plan for all years of service as a Director, is as follows: Ms. Cole, 15,252; Mr. Koraleski, 0; Mr. Maffucci, 9,036; Mr. McDonald, 6,507; Ms. Perez, 5,258; Mr. Quillen, 7,593; Mr. Rediker, 9,833; and Mr. Zelnak, 6,197. The 20% discount from the market price of Martin Marietta’s common stock used in converting to common stock is reported in column (g).

 

3 

Each Director who was serving immediately following the 2017 Annual Meeting of Shareholder received 437 RSUs in 2017. The amounts in column (c) reflect the grant date fair value for these awards determined in accordance with FASB ASC Topic 718. The RSUs fully vested upon award and will be distributed to the Director upon retirement, except Mr. Maffucci, Ms. Perez and Mr. Quillen each received a distribution of 219 unrestricted shares of common stock and deferred the distribution of 218 RSUs until retirement. As of December 31, 2017, each Director held RSUs in the amounts as follows: Ms. Cole, 8,944; Mr. Koraleski, 939; Mr. Maffucci, 7,675; Ms. Perez, 8,725; Mr. Quillen, 8,725; Mr. Rediker, 8,944; Mr. Slager, 978; and Mr. Zelnak, 7,565. As of December 31, 2017, each Director held options for common stock in the amounts as follows: Ms. Cole, 3,000; Mr. Koraleski, 0; Mr. Maffucci, 0; Ms. Perez, 3,000; Mr. Quillen, 3,000; Mr. Rediker, 0; Mr. Slager, 0; and Mr. Zelnak, 0.

 

4 

The amounts in column (f) reflect interest paid on fees deferred in cash under the Common Stock Purchase Plan for Directors.

 

5 

The amounts in column (g) reflect for each Director: (i) an amount equal to the 20% discount from the market price of Martin Marietta’s common stock used in converting fees deferred in 2017 into common stock units pursuant to the Common Stock Purchase Plan for Directors, and (ii) the dollar value of dividend equivalents paid in 2017 on common stock units held under the plan. The Directors did not receive perquisites or other personal benefits in 2017.

 

6 

Mr. McDonald retired at the 2017 Annual Meeting of Shareholders in accordance with the Bylaws that provide for retirement following the Director’s 75th birthday.

 

 

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Table of Contents

Security Ownership of Certain

Beneficial Owners and Management

How much stock do Martin Marietta’s Directors and executive officers own?

The following table sets forth information as of March 9, 2018 with respect to the shares of common stock that are beneficially owned by the Directors, the Chief Executive Officer, the Chief Financial Officer, and the three other named executive officers who are listed in the Summary Compensation Table on page 51 of this proxy statement, individually, and by all Directors and executive officers of Martin Marietta as a group.

 

Name of Beneficial Owner

 

Amount and Nature of  

Beneficial Ownership1  

   

Deferred and  

Restricted  Units5  

          Total        

Roselyn R. Bar

      48,0962                         19,808                  67,904      

Sue W. Cole

      33,9883,4                     —                      33,988      

Daniel L. Grant

        3,9052                         13,308                  17,213      

John J. Koraleski

        1,6003                       —                        1,600      

Anne H. Lloyd6

      58,7802                         21,673                  80,453      

David G. Maffucci

      17,2383                       —                      17,238      

Donald A. McCunniff

      13,6952                         14,689                  28,384      

James A. J. Nickolas

    —                               8,317                    8,317      

C. Howard Nye

    131,5972                         66,810                198,407      

Laree E. Perez

      14,2023                       —                      14,202      

Michael J. Quillen

      20,2833                       —                      20,283      

Dennis L. Rediker

      18,8103                       —                      18,810      

Donald W. Slager

           9783                       —                           978      

Stephen P. Zelnak, Jr.

      13,8453                       —                      13,845      

All Directors and executive officers as a group

(15 individuals including those named above)

    392,3413,4                     158,785                  551,126      

 

1 

As to the shares reported, unless indicated otherwise, (i) beneficial ownership is direct, and (ii) the person indicated has sole voting and investment power. None of the Directors or named executive officers individually own in excess of one percent of the shares of common stock outstanding. All Directors and executive officers as a group own 0.75% of the shares of common stock outstanding as of March 9, 2018. None of the shares reported are pledged as security.

 

2 

The number of shares owned for each of Mr. Nye, Ms. Bar, Mr. McCunniff, Mr. Grant, Ms. Lloyd and all Directors and executive officers as a group assumes that options held by each of them covering shares of common stock in the amounts indicated, which are currently exercisable within 60 days of March 9, 2018, have been exercised: Mr. Nye, 61,163; Ms. Bar, 16,865; Mr. McCunniff, 8,647; Mr. Grant, 767; Ms. Lloyd, 20,667 and all Directors and executive officers as a group, 97,112.

 

3 

Amounts reported include (1) compensation paid on an annual basis that Directors have received in common stock units that are deferred pursuant to the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors and (2) RSUs that each Director received in 2017 as part of their compensation. The Directors do not have voting or investment power for their respective common stock units and RSUs. The number of common stock units credited to each of the Directors pursuant to the Common Stock Purchase Plan as of March 9, 2018 is as follows: Ms. Cole, 15,418; Mr. Koraleski, 161; Mr. Maffucci, 9,073; Ms. Perez, 5,258; Mr. Quillen, 7,457; Mr. Rediker, 9,866; Mr. Slager, 0; and Mr. Zelnak, 6,280. Amounts reported also include 3,000 options for common stock held by each of Ms. Cole and Mr. Quillen.

 

4 

Includes an approximation of the number of shares in IRA account.

 

5 

The amounts reported include common stock units credited to each of the NEOs in connection with (i) their deferral of a portion of their cash bonus under the Martin Marietta Materials, Inc. Incentive Stock Plan, and (ii) RSUs (not including any performance-based share units (PSUs) granted under the Stock Plan that are subject to forfeiture in accordance with the terms of the plan, each in the following amounts: Mr. Nye, 16,550 and 50,260, respectively; Ms. Bar, 2,813 and 16,995, respectively; Mr. Nickolas, 0 and 8,317, respectively; Mr. McCunniff, 1,440 and 13,249, respectively; Mr. Grant, 1,750 and 11,558, respectively; Ms. Lloyd, 3,119 and 18,554, respectively; and all Directors and executive officers as a group, 23,875 and 113,237 respectively. There are no voting rights associated with the stock units.

 

6 

Ms. Lloyd retired as Executive Vice President – Chief Financial Officer as of December 31, 2017. The amounts reported reflect ownership as of May 24, 2017 and includes restricted stock awards that vested and were distributed before March 9, 2018.

 

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Security Ownership of Certain Beneficial Ownership and Management    Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires Directors and officers of Martin Marietta and persons who own more than 10% of the common stock to file with the Securities and Exchange Commission initial reports of ownership and reports in changes in ownership of the common stock. Directors, officers and more than 10% shareholders are required by Securities and Exchange Commission regulations to furnish to Martin Marietta copies of all Section 16(a) reports filed. Based solely on its review of copies of reports furnished to Martin Marietta and written representations of Directors and officers, the company believes that during fiscal year 2017, such filing requirements were satisfied.

Who are the largest owners of Martin Marietta’s stock?

The following table sets forth information with respect to the shares of common stock which are held by persons known to Martin Marietta to be the beneficial owners of more than 5% of such stock as of March 9, 2018. To the best of Martin Marietta’s knowledge, based on filings with the Securities and Exchange Commission as noted below, no person beneficially owned more than 5% of any class of Martin Marietta’s outstanding voting securities at the close of business on March 9, 2018, except for those shown below.

 

Name and Address

of Beneficial Owner

 

Amount and Nature

of Beneficial Ownership

    

Percent

    of Class    

The Vanguard Group1

100 Vanguard Boulevard V26

Malvern, PA 19355

  6,510,846      10.35%

BlackRock, Inc.2

55 East 52nd Street

New York, NY 10055

  3,861,669      6.1%

 

1 

As reported in Schedule 13G/A reporting beneficial ownership as of December 31, 2017 filed with the Securities and Exchange Commission on February 9, 2018, indicating sole power to vote 88,098 shares, shared power to vote 12,310 shares, sole power to dispose of 6,410,973 shares, and shared power to dispose of 99,873 shares.

 

2 

As reported in Schedule 13G/A reporting beneficial ownership as of December 31, 2017 filed with the Securities and Exchange Commission on January 25, 2018, indicating sole power to vote 3,337,349 shares and sole power to dispose of 3,861,669 shares.

 

 

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Corporate Governance Matters

Corporate Governance Philosophy

 

Martin Marietta has a culture dedicated to ethical business behavior and responsible corporate activity, which we believe promotes the long-term interests of shareholders. This commitment is reflected in our Corporate Governance Guidelines, posted and available for public viewing on Martin Marietta’s website at www.martinmarietta.com, which set forth a flexible framework within which the Board, assisted by its Committees, directs the affairs of Martin Marietta. The Guidelines address, among other things, the composition and functions of the Board of Directors, director qualifications and independence, Chief Executive Officer performance evaluation and management succession, Board Committees and the selection of new Directors.

Martin Marietta’s Code of Ethical Business Conduct has been in place since the 1980s and is regularly updated. It and applies to all Board members, officers, and employees, providing our policies and expectations on a number of topics, including our commitment to good citizenship, promoting a positive and safe work environment,

avoiding conflicts of interest, honoring the confidentiality of sensitive information, preservation and use of Company assets, compliance with all laws, and operating with integrity in all that we do. To implement the Code of Ethical Business Conduct, Board members, officers, and employees participate regularly in ethics training. There have been no waivers from any provisions of our Code of Ethical Business Conduct to any Board member or executive officer.

In addition, the Board believes that accountability to shareholders is a mark of good governance and critical to Martin Marietta’s success. To that end, management regularly engages with shareholders on a variety of topics throughout the year, including sustainability and governance, to ensure we are addressing their questions and concerns, to seek input and to provide perspective on Company policies and practices. Feedback received during these discussions is shared with the Board and directly impacts deliberations on material topics. See discussion of our shareholder outreach on page 34.

 

 

The chart below provides a snapshot of Martin Marietta’s governance highlights.

 

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Corporate Governance Matters    Corporate Governance Philosophy

 

Who are Martin Marietta’s Independent Directors?

All of Martin Marietta’s Directors and nominee are non-employee Directors except Mr. Nye. Mr. Nye does not sit in the executive sessions of the independent Directors unless invited to attend for a specific discussion nor does he participate in any action of the Board relating to any executive compensation which he may receive.

In assessing the independence of its members and nominee, the Board has adopted for Martin Marietta a set of Guidelines for Director’s Independence. The Guidelines are posted and available for public viewing on Martin Marietta’s website at www.martinmarietta.com. These Guidelines reflect the rules of the New York Stock Exchange, applicable requirements of the SEC, and other standards determined by the Board to be important in assessing the independence of Board members. The Board has determined that, other than Mr. Nye, all members of the Board and Mr. Davis are “independent” under these Guidelines, resulting in more than two-thirds of the Board being independent. The Board of Directors has determined that no Director or nominee (except Mr. Nye), or any person or organization with which the Director or nominee has any affiliation, has a relationship with Martin Marietta that may interfere with his or her independence from Martin Marietta and its management. In making this “independence” determination, the Board considered other entities with which the Directors and Mr. Davis were affiliated and any business Martin Marietta had done with such entities.

Do the independent Directors ever meet without management?

Martin Marietta’s Corporate Governance Guidelines adopted by the Board provide that at least two Board meetings each year will include an executive session of the non-employee Directors to discuss such topics as they may choose, including a discussion of the performance of Martin Marietta’s Chairman and Chief Executive Officer. In 2017, Martin Marietta’s non-employee Directors met at each regularly scheduled Board meeting, consisting of four times in executive session without management, in addition to executive sessions held by committees of the Board. In addition, at least once a year the independent Directors meet in executive session.

What is the Board’s leadership structure?

Our Corporate Governance Guidelines provide that the Board’s policy as to whether the Chairman and CEO positions should be separate is to adopt the practice that best serves the Company’s needs at any particular time. The Nominating and Corporate Governance Committee and the Board discussed board leadership alternatives in connection with combining the Chairman and CEO roles.

The Board believes that, at the present time, the Company is best served by allocating governance responsibilities between a combined Chairman and CEO and a Lead Independent Director

with robust responsibilities. This structure allows the Company to present a single face to our constituencies through the combined Chairman and CEO position while at the same time providing an active role and voice for the independent directors through the Lead Independent Director.

 

REASONS FOR COMBINED CHAIR AND CEO

Key highlights:

 

    The independent Board members believe that Mr. Nye has extensive experience in all facets of the construction materials industry, in both the U.S. and with global competitors.

 

    Mr. Nye has been effective in creating shareholder value through strategic acquisitions and divestitures, with achievement of expected synergies.

 

    Mr. Nye has in-depth knowledge of safety, environmental, and regulatory considerations that impact the business and oversight of management.

 

    Mr. Nye has demonstrated his leadership and vision to guide the Board in its oversight of management with the development of two five-year strategic plans, with the current Strategic Operating Analysis and Review (SOAR 2020) discussed with and approved by the Board in August 2015.

 

    Mr. Nye has engaged in an active investor relations program, including the Company’s Investor Day presentations, and leads the Board in understanding the perspective of the Company’s shareholders.

 

    Strong independent directors and nominee comprise 90% of the Board, and open communications exist between Mr. Nye and the independent directors.

 

As a result of Mr. Nye’s tenure at Martin Marietta and strong performance as a leader since his election as CEO, the Board believes he is uniquely qualified through his experience, education and expertise to be the person who promotes strong and visionary leadership for our Board as well as important recognition as the leader of Martin Marietta by our customers, employees and other constituencies. The Board also believes that Mr. Nye’s serving as both Chairman and CEO is appropriate taking into consideration the size and nature of our business, Mr. Nye’s effective and careful formulation and execution of our strategic plan, his established working relationship and open communication with our other Directors, both during meetings and in the intervals between meetings, the significant board-level experience of our independent Directors as a whole, the strong independent leadership and accountability to shareholders provided by 90% of our Directors (including the Board’s nominee for Director, Mr. Davis) being independent, the independent leadership provided by our Committee chairs, and our Board culture in which Mr. Nye and the other Directors are able to thoughtfully debate different points of view and reach consensus in an efficient manner.

 

 

 

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Does the Board have a Lead Independent Director?

In deciding that a combined Chairman and Chief Executive Officer position is the appropriate leadership structure for the Company at this time, the Nominating and Corporate Governance Committee and Board also recognized the benefit of independent leadership to enhance the effectiveness of the Board’s oversight role and communications between the Board and Mr. Nye. Accordingly, in November 2014, our Corporate Governance Guidelines were revised to provide that in the event the Chairman and Chief Executive Officer positions are held by one person, our independent Directors may designate a Lead Independent Director from among the independent Directors. The designation of the Lead Independent Director is to be made annually, although with the expectation of the Board that the Lead Independent Director will be re-appointed for multiple, consecutive one-year terms. Michael J. Quillen currently serves as the Lead Independent Director.

The responsibilities of the Lead Independent Director include:

 

   

Presiding at Board meetings when the Chairman is not present.

 

   

Presiding at executive sessions of the non-management Directors and the independent Directors, with or without the attendance of the Chairman, and meeting separately with the Chairman after executive sessions to review the matters discussed during the executive sessions.

 

   

Acting as a liaison between the Chairman and the independent Directors.

 

   

Suggesting to the Chairman agenda items for Board meetings and consulting with the Chairman regarding Board meeting schedules.

 

   

Calling, where necessary, meetings of independent Directors and executive sessions.

 

   

Being available to meet with shareholders and other key constituents.

 

   

Acting as a resource for, and counsel to, the Chairman.

In addition, the Lead Independent Director attended and met with shareholders at the Company-sponsored Investor Days.

What is the Board’s role in risk oversight?

Our Board currently has eight independent members and only one non-independent member, Mr. Nye. In addition, Mr. Davis, who is nominated for election, is independent. A number of our independent Board members are serving or have served as members of senior management of other public companies, have served as directors of other public companies, and otherwise have experience and/or educational backgrounds that we believe qualify them to effectively assess risk. Each of our Board Committees, including our key committees of Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees, are comprised solely of independent Directors, each with a different independent

Director serving as Chair of the Committee (other than the Executive Committee, which does not meet on a regular basis).

The Board has overall responsibility for oversight of risk management. The Board believes that an effective risk management system will (1) timely identify the material risks that Martin Marietta faces, (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board Committee, (3) determine whether the risk is excessive or appropriate under the circumstances and designed to achieve a legitimate corporate goal, (4) implement risk management responses consistent with Martin Marietta’s risk profile, and (5) integrate risk management into Martin Marietta’s decision-making.

The Board delegates certain responsibilities to Board Committees to assist in fulfilling its risk oversight responsibilities. Each of the Committees reports regularly to the full Board of Directors as to actions taken and topics discussed. In addition, the Board regularly reviews with management the most significant risks facing Martin Marietta, the probabilities of those risks occurring, the steps taken to mitigate any impact of risks, and management’s general risk management strategy. In addition, the Board encourages management to promote a corporate culture that incorporates risk management into Martin Marietta’s day-to-day operations.

The Board has designated the Audit Committee to take the lead in overseeing risks related to financial reporting, financial statements, internal control environment, internal audit, independent audit, cybersecurity, and accounting processes. The Finance Committee evaluates risks associated with Martin Marietta’s capital structure, including credit and liquidity risks. The Management Development and Compensation Committee oversees aspects of risk related to the annual performance evaluation of our Chief Executive Officer, succession planning and ensuring that executive compensation is appropriate to meet Martin Marietta’s objectives. That Committee’s assessment of the design features of our executive compensation program that reduce the risk of excessive risk-taking are discussed in the Compensation Discussion and Analysis on page 31. The Nominating and Corporate Governance Committee oversees aspects of risk related to the composition of the Board and its Committees, Board performance and best practices in corporate governance. The Ethics, Environment, Safety and Health Committee monitors risks in key areas of Martin Marietta’s sustainability program, including health, safety, and the environment as well as the Company’s ethics program.

While the Board oversees Martin Marietta’s risk management, the executive officers are responsible for the day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Company and is appropriate whether the positions of Chairman and Chief Executive Officer are separate or held by the same individual.

 

 

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How would interested parties make their concerns known to the independent Directors?

The Board of Directors provides a process for shareholders and other interested parties to send communications to the Board. Shareholders and other interested parties may communicate anonymously and confidentially with the Board through Martin Marietta’s Ethics Hotline at 1-800-209-4508. The Board has also designated the Corporate Secretary to facilitate communications to the Board. Shareholders and other interested parties may communicate directly with the Board of Directors, or directly with non-management Directors, or an individual Director, including the Lead Independent Director, by writing to Martin Marietta, Attn: Corporate Secretary, 2710 Wycliff Road, Raleigh, North Carolina 27607-3033.

All communications by shareholders or other interested parties addressed to the Board will be sent directly to Board members. While Martin Marietta’s Ethics Office and the Corporate Secretary may review, sort, and summarize these communications, all direct communications will be presented to the non-management Directors unless there is instruction from them to filter such communications (and in such event, any communication that has been filtered out will be made available to any non-employee Director who wishes to review it).

Martin Marietta and its Board of Directors will continue to review and evaluate the process by which shareholders or other

interested persons communicate with Martin Marietta and the Board and may adopt other or further processes and procedures in this regard. If so, Martin Marietta will identify those policies and procedures on our website at www.martinmarietta.com.

How often did the Board meet during 2017?

Martin Marietta’s Board of Directors held five meetings during 2017, four of which were regularly scheduled meetings and one of which was a special meeting. There were also a total of 24 committee meetings in 2017. In addition, management confers frequently with its Directors on an informal basis to discuss Company affairs.

How many times did Directors attend meetings of the Board and its Committees?

In 2017, all Directors attended 100% of the meetings of the Board of Directors. All Directors attended 100% of the meetings of the committees of the Board on which they served (during the periods that they served).

Will the Directors attend the Annual Meeting?

Martin Marietta’s Directors are expected to attend Martin Marietta’s Annual Meeting of Shareholders. In 2017, all Directors attended the Annual Meeting in May.

 

 

 

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Board Committees    Corporate Governance Matters

 

Board Committees

 

Martin Marietta’s Board of Directors has six standing committees: the Audit Committee, the Ethics, Environment, Safety and Health Committee, the Executive Committee, the Finance Committee, the Management Development and Compensation Committee, and the Nominating and Corporate Governance Committee. Each committee has a written charter

that describes its purposes, membership, meeting structure, authority and responsibilities. These charters are reviewed by the respective committee on an annual basis with any recommended changes adopted upon approval by our Board. The charters of our six standing committees are posted on our website.

 

 

Below is a summary of our current committee structure and membership information.

 

Director   Audit
    Committee    
 

Ethics,

Environment,
    Safety and    

Health

Committee

  Executive
    Committee    
  Finance
    Committee    
 

Management
    Development    
and

Compensation
Committee

   

Nominating
    and Corporate    

Governance
Committee

Sue W. Cole

            LOGO     Chair

John J. Koraleski

Financial Expert

 

 

LOGO

   

 

LOGO

   

 

 

 

LOGO

 

 

 

David G. Maffucci

Financial Expert

 

 

Chair

 

 

LOGO

       

 

C. Howard Nye

      Chair      

Laree E. Perez

Financial Expert

 

 

LOGO

 

 

Chair

       

Michael J. Quillen

Lead Independent Director

     

 

LOGO

   

 

 

 

Chair

 

 

 

 

LOGO

Dennis L. Rediker

Financial Expert

 

 

LOGO

     

 

LOGO

   

 

Donald W. Slager

       

 

LOGO

 

   

 

LOGO

 

 

Stephen P. Zelnak, Jr.

   

 

LOGO

   

 

Chair

   

Number of Meetings
in 2017

 

 

8

 

 

2

 

 

0

 

 

5

 

 

 

 

6

 

 

 

 

3

 

The Executive Committee held no meetings during 2017. It has the authority to act during the intervals between the meetings of the Board of Directors and may exercise the powers of the Board in the management of the business and affairs of Martin Marietta as may be authorized by the Board of Directors,

except to the extent such powers are by statute, the Articles of Incorporation or Bylaws reserved to the full Board. The Committee’s current members are Directors Nye (Chair), Koraleski, and Quillen.

 

 

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The primary responsibilities, membership and meeting information for our other standing committees are summarized below.

 

LOGO

Current Members:

David G. Maffucci (Chair)

John J. Koraleski

Laree E. Perez

Dennis L. Rediker

  

Meetings in 2017:

8

  

Average Attendance in 2017:

100%

Primary Responsibilities:

 

   reviews our significant accounting principles, policies and practices in reporting our financial results under generally accepted accounting principles;

 

   reviews our annual audited financial statements and related disclosures;

 

   reviews management letters or internal control reports, and reviews our system of internal control over financial reporting;

 

   appoints, retains and oversees the work of the independent accountants;

 

   reviews the effectiveness of the independent audit effort;

 

   pre-approves audit and permissible non-audit services provided by the independent registered public accounting firm;

 

   reviews our interim financial results for each fiscal quarters;

 

   reviews the qualifications and the plan and scope of work of the corporate internal audit function;

 

   reviews and discusses the reports of our internal audit group;

 

   reviews and discusses management’s assessment of the effectiveness of Martin Marietta’s system of internal control over financial reporting;

 

   discusses Martin Marietta’s earnings press releases, as well as financial information and earnings guidance provided to analysts, investors and rating agencies;

 

   discusses matters related to risk assessment and risk management and how the process is handled by management;

 

   reviews and oversees related party transactions;

 

   reviews complaints regarding accounting, internal controls or auditing matters;

 

   considers allegations of possible financial fraud or other financial improprieties;

 

   reviews annually the adequacy of the committee charter and recommends proposed changes to the Board; and

 

   prepares the annual Audit Committee Report to be included in the proxy statement.

 

Other Governance Matters:

All members satisfy the audit committee experience and independence standards required by NYSE, and have been determined to be financially literate.

 

Each member of the Audit Committee has been determined to be an ‘‘audit committee financial expert’’ under applicable SEC regulations.

 

 

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LOGO

Current Members:

Laree E. Perez (Chair)

David G. Maffucci

Stephen P. Zelnak, Jr.

  

Meetings in 2017:

2

  

Average Attendance in 2017:

100%

Primary Responsibilities:

 

   monitors compliance with our Code of Ethical Business Conduct and reviews all matters presented to it by the Corporate Ethics Officer concerning the ethical practices of Martin Marietta and its Directors, officers, and employees, including conflicts or potential conflicts of interest between Martin Marietta and any of its Directors, officers, and employees;

 

   reviews and monitors the adequacy of our policies and procedures and organizational structure for ensuring compliance with environmental laws and regulations;

 

   reviews matters relating to our health and safety programs and performance; and

 

   reviews annually the adequacy of the committee charter and recommends proposed changes to the Board.

 

 

LOGO

Current Members:

Stephen P. Zelnak, Jr. (Chair)

Dennis L. Rediker

Donald W. Slager

  

Meetings in 2017:

5

  

Average Attendance in 2017:

100%

Primary Responsibilities:

   provides general oversight relating to the management of our financial affairs;

 

   reviews and approves establishment of lines of credit or other short-term borrowing arrangements and investing excess working capital funds on a short-term basis;

 

   reviews and makes recommendations to the Board concerning changes to capital structure, including the incurrence of long-term debt, issuance of equity securities, share repurchases, and the payment of dividends, as well as capital expenditures;

 

   approves our contributions budget; and

 

   reviews annually the adequacy of the committee charter and recommends proposed changes to the Board.

 

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LOGO

Current Members:

Michael J. Quillen (Chair)

Sue W. Cole

John J. Koraleski

  

Meetings in 2017:

6

  

Average Attendance in 2017:

100%

Primary Responsibilities:

 

   establishes an overall strategy with respect to compensation for officers and management to enable Martin Marietta to attract and retain qualified employees;

 

   reviews and oversees executive succession and management development plans;

 

   reviews and approves management’s assessment of the performance of executive officers, and reviews and approves the salary, incentive compensation, and other compensation of such officers;

 

   approves and administers our equity and other plans relating to compensation of Martin Marietta’s directors and elected officers;

 

   reviews and discusses the Compensation Discussion and Analysis and produces a compensation committee report as required by the SEC to be included in this proxy statement;

 

   provides oversight of our Benefit Plan Committee, which administers Martin Marietta’s defined benefit and contribution plans;

 

   reviews and approves the goals and objectives for the CEO’s compensation, evaluates the CEO’s performance in light of those goals and objectives, and determines and approves the CEO’s compensation;

 

   makes recommendations to the Board on changes in the compensation of non-employee directors;

 

   reviews annually the adequacy of the committee charter and recommends proposed changes to the Board; and

 

   has the authority, in its sole discretion, to retain, pay, and terminate any consulting firm, if any, used to assist in evaluating director, chief executive officer, or senior executive compensation.

 

Other Governance Matters:

All members are non-employee, independent Directors, as required by the rules of the NYSE, the Martin Marietta Guidelines for Director’s Independence and the Committee’s charter.

 

LOGO

    

Current Members:

Sue W. Cole (Chair)

Michael J. Quillen

Donald W. Slager

  

Meetings in 2017:

3

  

Average Attendance in 2017:

100%

Primary Responsibilities:

 

   develops criteria for nominating and appointing directors, including Board size and composition, corporate governance policies, and individual director expertise, attributes and skills;

 

   recommends to the Board the individuals to be nominated as directors;

 

   recommends to the Board the appointees to be selected for service on the Board committees;

 

   oversees an annual review of the performance of the Board and each committee;

 

   reviews annually the adequacy of the committee charter and recommends proposed changes to the Board; and

 

   oversees the development and implementation of a set of corporate governance principles applicable to Martin Marietta.

 

Other Governance Matters:

All members are non-employee, independent Directors, as required by the rules of the NYSE.

 

Upon recommendation of this Committee, the Board of Directors has adopted a set of Corporate Governance Guidelines for Martin Marietta. The Guidelines are posted and available for public viewing on our website at www.martinmarietta.com. A copy may also be obtained upon request from Martin Marietta’s Corporate Secretary.

 

 

 

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Will the Nominating and Corporate Governance Committee consider any Director candidates recommended by shareholders?

The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders for election as a Director at an Annual Meeting of Shareholders of Martin Marietta, if the shareholder making such recommendation complies with the advance notice provisions of the Bylaws of Martin Marietta. The Bylaws of Martin Marietta require advance notice for any proposal for the nomination for election as a Director at an Annual Meeting of Shareholders that is not included in Martin Marietta’s notice of meeting or made by or at the direction of the Board of Directors. In general, nominations must be delivered to the Secretary of Martin Marietta at its principal executive offices, 2710 Wycliff Road, Raleigh, North Carolina 27607, not less than 60 days nor more than 90 days prior to the first anniversary of the mailing of the proxy statement in connection with the preceding year’s Annual Meeting of Shareholders and must contain specified information concerning the nominee and the shareholder proposing the nomination. Any shareholder desiring a copy of the Bylaws of Martin Marietta will be furnished a copy without charge upon written request to the Secretary of Martin Marietta. Since the 2017 Annual Meeting, Martin Marietta has not made any material changes to the procedures by which shareholders may recommend nominees to Martin Marietta’s Board of Directors. Additional information is contained in the section entitled “Shareholders’ Proposals For 2019 Annual Meeting” below.

How does the Board select nominees for the Board?

The Nominating and Corporate Governance Committee will consider candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. The Committee has also retained a third-party executive search firm to identify potential candidates for its consideration from time to time. The Committee makes an initial determination as to whether to conduct a full evaluation of the candidate, and reviews all information provided to the Committee, including the recommendations for the prospective candidate and the Committee’s own knowledge of the prospective candidate. If the Committee determines that additional consideration is warranted, interviews are conducted by the members of the Committee, as well as the Chief Executive Officer of Martin Marietta; appropriate inquiries are conducted into the background and qualifications of potential candidates; the Committee meets to discuss its evaluation and feedback from the Chief Executive Officer; and, if the Committee determines to do so, it makes a recommendation to the full Board as to the persons who should be nominated by the Board. The Board of Directors determines the nominees after considering the recommendation and report of the Committee.

In evaluating any potential candidate, the Nominating and Corporate Governance Committee considers the extent to which the candidate has the personal characteristics and core competencies outlined in the Guidelines for Potential New Board

Members adopted by the Committee, and takes into account all other factors it considers appropriate. A copy of these Guidelines is attached to this proxy statement as Appendix A.

Our Articles of Incorporation provide that the size of the Board shall be not less than nine nor more than 11, with the number of Directors to serve on the Board being set within that range by the Board. The Board has set the size of the Board to ten, effective upon commencement of the 2018 Annual Meeting. The Board has nominated Smith W. Davis to stand for election by shareholders at the 2018 Annual Meeting of Shareholders for a one-year term to fill the vacancy created by the increase in the size of the Board to ten. The Nominating and Corporate Governance Committee did not retain a search firm in 2018 to help identify director prospects and other tasks relating to potential new Board members. Mr. Davis was initially identified by the Chairman, President and CEO and was recommended as a Director nominee by the Nominating and Corporate Governance Committee.

Do the Board Committees have charters? How can shareholders obtain them?

Martin Marietta’s Board of Directors has adopted written charters meeting the requirements of the NYSE for the Audit Committee, Management Development and Compensation Committee, and Nominating and Corporate Governance Committee. These charters address the purposes and responsibilities of each committee, as described above, and provide for an annual performance evaluation of each committee. Copies of these charters, and the charters of the other committees of the Board, are posted on Martin Marietta’s website at www.martinmarietta.com, along with copies of Martin Marietta’s Corporate Governance Guidelines, Code of Ethical Business Conduct, and Guidelines for Director’s Independence.

How are transactions with persons related to Martin Marietta reviewed?

The SEC requires Martin Marietta to disclose in this proxy statement certain transactions in which Martin Marietta participates and in which certain persons considered “related persons” of Martin Marietta have a direct or indirect material interest. These “related persons” would include the Directors and executive officers of Martin Marietta, nominees for Director, certain control persons, and their immediate family members. Since January 1, 2017, there have been no such transactions.

Each Director, executive officer, and nominee for Director of Martin Marietta receives and agrees to abide by Martin Marietta’s Code of Ethical Business Conduct. Martin Marietta considers that any transaction in which Martin Marietta participates and in which any related person of Martin Marietta has a direct or indirect material interest will be subject to review, approval or ratification, as appropriate under the circumstances, by Martin Marietta under the standards enumerated in Martin Marietta’s Code of Ethical Business Conduct. If a proposed transaction is one in which a Director of Martin Marietta has an actual or potential conflict of interest, it will be subject to review

 

 

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by the Chairman of the Board of Directors and the Chairman of the Nominating and Corporate Governance Committee.

Any waivers of the Code of Ethical Business Conduct for Directors and executive officers may be made only by Martin Marietta’s Board of Directors or any committee to which it delegates that authority. Any waivers for Directors and executive officers and any amendments to the Code of Ethical Business Conduct will be

promptly disclosed to Martin Marietta’s shareholders by posting on our website, www.martinmarietta.com.

In assessing the independence of its members, the Board considers any interests a director may have in any transactions in which Martin Marietta participates. The Board also considers other entities with which the Directors are affiliated and any business Martin Marietta has done with such entities.

 

 

 

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Proposal 2

Independent Auditors

(Item 2 on Proxy Card)

The Board of Directors recommends that the shareholders ratify the appointment of PricewaterhouseCoopers LLP (“PwC”), an independent registered public accounting firm, to audit the consolidated financial statements of Martin Marietta and the effectiveness of Martin Marietta’s internal control over financial reporting for the 2018 fiscal year. The ratification of the appointment of PwC is being submitted to the shareholders because the Board of Directors believes this to be good corporate practice. Should the shareholders fail to ratify this appointment, the Audit Committee will review the matter and determine, in its sole discretion, whether PwC or another independent registered public accounting firm should be retained.

PwC served as Martin Marietta’s independent auditors for 2017 and audited the consolidated financial statements of Martin Marietta for the year ended December 31, 2017 and the effectiveness of Martin Marietta’s internal control over financial reporting as of December 31, 2017. In connection with the audit of Martin Marietta’s 2017 consolidated financial statements, Martin Marietta entered into an engagement letter with PwC that sets forth the terms by which PwC would perform audit services for Martin Marietta in 2017.

The Audit Committee conducted a competitive process with multiple firms to determine the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016. The Audit Committee invited several firms to participate in this process, including its then-incumbent independent auditor, Ernst & Young LLP (EY). As a result of this process, on March 14, 2016, the Audit Committee dismissed EY as its independent registered public accounting firm for the fiscal year ending December 31, 2016. During the fiscal year ended December 31, 2015 and in the subsequent interim period through March 14, 2016, there were no “disagreements” (as that term is described in Item 304(a)(1)(iv) of Regulation S-K of the rules and regulations of the SEC and the related instructions) with EY on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of EY, would have caused EY to make reference to the subject matter of such disagreements in their reports on the consolidated financial statements.

The audit reports of EY on the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2015 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal year ended December 31, 2015 and in the subsequent interim period through March 14, 2016 there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K of the rules and regulations of the SEC.

On March 14, 2016, the Audit Committee approved the appointment of PwC as the Company’s new independent registered public accounting firm for the year ending December 31, 2016. During the fiscal years ended December 31, 2015 and 2014 and in the subsequent interim period through March 14, 2016, neither the Company nor anyone acting on its behalf consulted with PwC regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that PwC concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event as defined in Item 304(a)(1)(v) of Regulation S-K of the rules and regulations of the SEC.

The Audit Committee is solely responsible for retaining or terminating Martin Marietta’s independent auditors. Representatives of PwC are expected to attend the Annual Meeting, will have the opportunity to make a statement if they so desire, and will be available to respond to questions from shareholders.

 

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The Board Unanimously Recommends a Vote “FOR

on this Proposal 2

 

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Proposal 2: Independent Auditors    Summary of Fees

 

Summary of Fees

The following table summarizes the aggregate fees billed for professional services rendered to Martin Marietta by PwC in 2017 and 2016.

 

    

 

2017

 

    

 

2016

 

Audit Fees1

 

   $ 2,872,000      $2,473,000    

 

 

Audit-Related Fees2

 

     103,000     

 

     103,000    

 

 

Tax Fees3

 

     20,000     

 

       40,000    

 

 

All Other Fees4

 

  

 

 

 

 

                0

 

 

 

  

 

                0    

 

 

TOTAL

 

   $ 2,995,000     

 

$2,616,000    

 

 

Percentage of Audit & Audit-Related Fees to Total Fees

     99.3   

 

       98.5%

 

1 

Services in connection with the annual consolidated financial statement audit, the annual internal controls audit, and reviews of the consolidated financial statements included in the quarterly reports.

 

2 

Services in connection with audit-related services, including agreed-upon procedures reports, subsidiary audits and continuing education.

 

3 

Services in connection with tax advice related to transfer pricing issues.

 

4 

There were no other fees billed for other professional services rendered or products provided by PwC to Martin Marietta for 2017 or 2016.

 

Pre-Approval Policies and Procedures

The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax services, and other services performed by its independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. The Audit Committee has delegated to the Chair of the Audit Committee authority to approve permitted services, provided that the Chair reports any decision to the Committee at its next scheduled meeting.

Audit Committee Review

In connection with the Audit Committee’s review of services rendered and fees billed by the independent auditor, the Audit Committee has considered whether the provision of the non-audit related services described above is compatible with maintaining the independent auditors’ independence and has concluded that the provision of these services did not compromise such independence.

 

 

 

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Audit Committee Report

The Audit Committee operates under a written charter adopted by the Board of Directors, which is reassessed at least annually for adequacy by the Audit Committee. The Directors who serve on the Audit Committee have no financial or personal ties to Martin Marietta (other than Director compensation and equity ownership as described in this proxy statement) and are all “independent” for purposes of the Securities and Exchange Commission’s regulations, the New York Stock Exchange listing standards, and the Guidelines for Director’s Independence adopted by the Board of Directors. The Board of Directors has determined that none of the Audit Committee members has a relationship with Martin Marietta that may interfere with the Director’s independence from Martin Marietta and its management. Copies of the Audit Committee’s charter and Martin Marietta’s Guidelines for Director’s Independence can be viewed on Martin Marietta’s website at www.martinmarietta.com.

The Board of Directors has charged the Audit Committee with a number of responsibilities, including review of the adequacy of Martin Marietta’s financial reporting, accounting systems, and internal controls. Martin Marietta’s independent auditors and the vice president of the internal audit function report directly and are ultimately accountable to the Audit Committee.

In the discharge of its responsibilities, the Audit Committee has reviewed and discussed with management and the independent auditors Martin Marietta’s audited consolidated financial statements for fiscal year 2017. In addition, the Committee has discussed with the independent auditors matters such as the quality (in addition to acceptability), clarity, consistency, and completeness of Martin Marietta’s financial reporting, as required by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.

The Audit Committee has received from the independent auditors written disclosures and a letter concerning the independent auditors’ independence from Martin Marietta, as required by the Public Company Accounting Oversight Board in Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with the independent auditors the independent auditors’ independence. These disclosures have been reviewed by the Committee and discussed with the independent auditors.

Based on these reviews and discussions, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in Martin Marietta’s 2017 Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

February 21, 2018

AUDIT COMMITTEE

David G. Maffucci, Chair

John J. Koraleski

Laree E. Perez

Dennis L. Rediker

 

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Management Development and

Compensation Committee Report

The Management Development and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis beginning on page 31 of this Proxy Statement. Based on this review and discussion, the Management Development and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Martin Marietta’s Annual Report on Form 10-K and this Proxy Statement.

February 22, 2018

MANAGEMENT DEVELOPMENT AND

COMPENSATION COMMITTEE

Michael J. Quillen, Chair

Sue W. Cole

John J. Koraleski

Compensation Committee Interlocks and Insider

Participation in Compensation Decisions

The members of Martin Marietta’s Management Development and Compensation Committee are Directors Cole, Koraleski, and Quillen, none of whom has ever been an officer or employee of Martin Marietta or any of its subsidiaries, or had any relationship requiring disclosure by Martin Marietta under Item 404 of Regulation S-K. There are no executive officer-Director interlocks where an executive of Martin Marietta serves on the compensation committee of another corporation that has an executive officer serving on Martin Marietta’s Board of Directors.

 

 

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Compensation Discussion and Analysis

Introduction

 

This Compensation Discussion and Analysis, or CD&A, describes our 2017 executive compensation program and the attendant oversight provided by the Management Development and Compensation Committee of the Board of Directors (the Committee). It also summarizes our executive compensation structure and discusses the compensation earned by Martin

Marietta’s NEOs (the CEO, the CFO, and the three other most highly compensated executive officers in 2017) as presented below in the tables under “Executive Compensation” following this CD&A, which contain detailed compensation information quantifying and further explaining our NEOs’ compensation.

 

 

For 2017, our NEOs were:

 

 

NEO

 

  

 

Title

 

 

C. Howard Nye

 

 

  

 

Chairman of the Board, President and Chief Executive Officer

 

 

James A. J. Nickolas

 

 

  

Senior Vice President and Chief Financial Officer

 

 

Roselyn R. Bar

 

 

  

Executive Vice President, General Counsel and Corporate Secretary

 

 

Daniel L. Grant

 

 

  

Senior Vice President – Strategy and Development

 

 

Donald A. McCunniff

 

  

Senior Vice President – Human Resources

 

      

 

  *

Also included in the Executive Compensation information starting on page 51 is Anne H. Lloyd, former Executive Vice President and Chief Financial Officer, who retired from the Company as of December 31, 2017. The terms of her separation from the Company are described on pages 60 and 62 of this proxy statement.

Executive Summary

 

By almost any meaningful measure, 2017 was a remarkable year for Martin Marietta. We had record financial performance, delivering net earnings of $713.4 million and over $1 billion dollars in EBITDA.* We continue to focus not only on the operations of the Company, but on the best practices needed to make Martin Marietta not just the best aggregates

company, but rather one of the world’s best companies. Our Company performance, coupled with the achievement of key strategic goals, delivered excellent results in 2017, and established an enhanced solid foundation for continued performance and delivery of shareholder value.

 

 

Another Record Year: Performance Through Transformation

 

   

  Record total revenues of $4.0 billion

   
   
   

  Record gross profit of $971.9 million

   
   
   

  Record net earnings of $713.4 million, despite 1 million tons lower of aggregates shipments than 2016

   
   
   

  Record EBITDA* of $1.004 billion

   
   
   

  Record earnings per diluted share of $11.25

   

* See Appendix B for a reconciliation of net earnings attributable to EBITDA.

 

 

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Our performance earned us recognition, including being ranked #72 in Fortune’s 100 fastest growing companies in the world in 2017. Our TSR for the 3-year and 5-year periods represented a premium relative to the performance of the S&P 500 TSR and the S&P 500 Materials Index TSR.

 

LOGO

In 2017, we continued to focus on strategically positioning ourselves in high-growth areas. Consistent with our strategic plan and our assessment of the attractiveness of markets, we entered into an agreement to acquire Bluegrass Materials, the largest privately-held, pure-play aggregates business in the United States with locations in Maryland, Georgia, Kentucky, Tennessee and South Carolina.

 

 

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Despite significant precipitation in many of our key markets and shipment volume decreases, we achieved record financial performance in 2017 that led to increased profits versus the prior year. Effective management provided us the ability to prudently reinvest in our business, pursue strategic opportunities, and return cash to our shareholders. Based on our strategy, we have achieved the number 1 or 2 position in 85% of the regions in which we operate, giving us a foundation for durable growth.

In summary, Martin Marietta continued to execute its strategic plan while delivering strong performance in 2017 as compared to 2016:

 

   

Record earnings per diluted share of $11.25 compared with $6.63; 2017 includes $4.07 per share benefit for the impact of the Tax Cuts and Jobs Act of 2017 (2017 Tax Act)

 

   

Record net earnings attributable to Martin Marietta of $713.3 million, an increase of 68%, including a $258.1 million income tax benefit from the remeasurement of deferred tax assets and liabilities following enactment of the 2017 Tax Act

 

   

Record consolidated EBITDA of over $1.00 billion compared with $971.6 million

 

   

Record consolidated total revenues of $3.97 billion compared with $3.82 billion, an increase of 3.8%

 

   

Aggregates product line pricing increase of 4.5% despite aggregates product line volume decline of 0.6%

   

Cement product line total revenues of $384.1 million and gross profit of $117.3 million

 

   

Return on shareholders’ equity of 16.2%

 

   

Record Magnesia Specialties’ total revenues of $270.0 million and earnings from operations of $79.4 million

 

   

Effective management of controllable production costs, as evidenced by a 60-basis-point improvement in consolidated gross margin

 

   

Selling, general and administrative (SG&A) expenses representing 6.6% of total revenues

 

   

Operating cash flow of $657.9 million

 

 

 

 

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Executive Summary    Compensation Discussion and Analysis

 

This financial performance allowed us to achieve our additional strategic objectives, including:

 

   

Pursuing aggregates-led expansion through acquisitions that complement existing operations (i.e., bolt-on acquisitions) and acquisitions that provide leadership entry into new markets or similar product lines (i.e., platform acquisitions)

 

   

Returning $209 million to our shareholders in 2017 through share repurchases ($100.0 million) and meaningful dividends ($108.9 million) that were recently increased, and totaling over $1.2 billion since announcing our repurchase authorization in February 2015

Martin Marietta continues to be recognized as the best of the best in our industry. All awards are meaningful, but it is particularly satisfying when we are recognized for achievement against a core value, such as safety. At the 2017 Fall meeting of the National Stone, Sand and Gravel Association (NSSGA), several of our facilities were recognized as NSSGA Safety Excellence Award winners. These awards recognize operations that have gone the longest duration without a reportable injury in their size category, based on data provided by the Mine Safety and Health Administration (MSHA). Our Rio Medina Quarry, located in San Antonio, Texas, earned a gold-level Safety Excellence award in the large quarry category. Silver-level award winners include Helotes Quarry (Texas), Cedarville Quarry (Ohio), 3 Bells Sand & Gravel (Colorado), New Harvey Sand (Iowa), Linn County Sand (Iowa) and Onslow Quarry (North Carolina). In addition, 20 of our operations were recognized as bronze-level award winners.

Stewardship is another of our core values and our operations were well-represented among the NSSGA Environmental Excellence Award winners. These awards provide national recognition for operations actively contributing to the maintenance of the environment in and around their operations as evidenced by a commitment to the exemplary use of environmental controls and systems. This award is based, in part, on the extent to which an operation meets and exceeds technical environmental and regulatory requirements. In addition, in order to be eligible for the award, the operation must certify its compliance with all applicable governmental environmental regulatory requirements and does not have a pattern of violations during the time period of two full years prior to the date of application. Two of our operations, Central Rock (North Carolina) and Mill Creek Limestone (Oklahoma), were recognized as gold-level award winners. Silver-level winners included Kings Mountain Quarry (North Carolina), Maiden Quarry (North Carolina) and North Columbia Quarry

(South Carolina). Eleven of our operations were recognized as bronze-level award winners.

In 2017, Forbes Magazine unveiled two new lists and Martin Marietta was recognized on both: We ranked #146 on the Global 2000 Growth Champions list and #209 on the Global 2000 World’s Best Employers list. Sales are one of four metrics used to rank the companies on the Global 2000 Growth Champions list – the others are profits, assets and market value. Our financial performance put us on this list. Our employees put us on the Global 2000 World’s Best Employers list. Employees were asked to rate their employer and the likelihood they would recommend the company to a friend or family member. We were one of only 9 employers from the Construction Materials sector recognized in the top 500. In addition, we were the highest ranked U.S.-based employer from the Construction Materials sector in the top 500.

Further, for the second year in a row, Martin Marietta was also recognized by Fortune Magazine as one of the World’s 100 Fastest Growing Companies. 2017 marked the 31st edition of Fortune’s Fastest Growing Companies list which reveals the top three-year performers in revenues, profits and stock returns. Martin Marietta was ranked #57 in 2016 and #72 in 2017. None of our industry or sector peers made the Fortune ranking.

Martin Marietta was also identified as North Carolina’s best-run public company for 2017 by the American City Business Journals. Seven performance factors were considered in the ranking: return on equity, profit margin, debt-to-equity ratio, revenue growth, liquidity, shareholder return and employee growth. We bested Bank of America, BB&T, Duke Energy, Lowes, Nucor, Hanes Brands, VF Corporation, Red Hat, and IQVIA (formerly Quintiles), among others, due to our impressive financial performance.

We were also well-represented on the Institutional Investor All-America Executive Team for 2018, where, among other recognitions, the Martin Marietta Analyst Day was ranked second overall.

Finally, our Information Services team was honored at OpenWorld in San Francisco for Digital Innovation. The award recognized the team’s pioneering efforts in installing JD Edwards on Oracle’s SuperCluster technology platform. This project significantly improved application performance, created a robust business continuity and disaster recovery platform, and provides a foundation for growth that will serve the Company for years.

 

 

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Compensation Discussion and Analysis    Executive Summary

 

With a primary Martin Marietta strategic objective being value-enhancing growth, it is important that the Mission, Vision, and Values of the Company are unified, aligned, and equally well-known and understood. In 2017, a team of specifically chosen, high-performing employees were tasked with refreshing this message. The team, comprised of nine individuals, met several times as they worked through this important initiative. The message was delivered to all employees in 2017 and will guide our strategic and tactical decisions into the future.

LOGO

 

 

In 2017, we updated our Code of Ethical Business Conduct and provided in-person ethics training to our over 8,000 employees and contractors. The training in 2017 demonstrated how an employee could use the Code in real-life scenarios and provided employees other tools to help in making the right decisions and considering the hard questions of ‘right vs. right.’ Each class opened with an in-depth discussion of the refreshed Mission, Vision, and Values, and continued to cover important and relevant topics. The in-person training, which occurs every three years, is an important component of the Company’s overall ethics program, which includes computer-based training and an ethics hotline.

 

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2017 Say-On-Pay Vote and

Shareholder Outreach

 

Our shareholders expressed their continued support of our executive compensation programs by approving our non-binding advisory vote on executive compensation at our 2017 Annual Meeting of Shareholders. More than 96% of votes cast supported our executive compensation policies and practices. Management and the Committee considered this strong support by our shareholders as indicating that our pay structure aligns our compensation programs with the interests of our shareholders.

The Committee feels strongly that our executive compensation programs should evolve and be adjusted over time to support the achievement of our business goals, to reflect our challenges, and to promote both the near- and long-term profitable growth of Martin Marietta. During 2017, the Committee reviewed and evaluated market trends and best practices in designing and implementing elements of our compensation program. The Committee continues to believe that the goals for our executive compensation programs

are to incentivize and reward achievement that creates value for our shareholders.

We view a continuing, constructive dialogue with our long-term shareholders as critically important to ensuring that we remain aligned with their interests. With that in mind:

 

   

At our 2017 Annual Meeting of Shareholders, more than 96% of shares cast voted in favor of the advisory vote on executive compensation.

 

   

We regularly talk to long-term shareholders and appreciate the opportunity to gain further insight and understanding into their views. In 2017 our investor relations outreach extended to 86 meetings with 296 investment groups in the United States, Canada, and Europe.

 

   

We update the Committee and the Board on our conversations with investors, and this investor input, along

 

 

 

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2017 Say-On-Pay Vote and Shareholder Outreach    Compensation Discussion and Analysis

 

   

with the feedback from its independent compensation consultant, assists the Committee as it maintains its focus on aligning pay and performance.

 

   

We speak to almost all of our top 25 shareholders at least annually, which represents approximately 70% of our outstanding shares.

   

Institutional Investor magazine named Martin Marietta to its All-America Executive Team 2018. Martin Marietta finished second overall (in the Homebuilders & Building Products category) for the Best Investor Relations Program and the Martin Marietta Analysts Day was ranked second overall.

 

Shareholder Feedback on Proxy Access

At our 2017 Annual Meeting, a nonbinding advisory shareholder proposal to adopt a proxy access Bylaw was supported by a majority of the shares that voted on the proposal. Martin Marietta engaged in discussion with some of our largest shareholders regarding proxy access and, while not unanimous in their view, they generally supported the concept of proxy access. Based on the vote, these discussions, and additional dialogue with the proposal’s proponent, the Board amended our Bylaws in February 2018 to implement proxy access.

Components of Executive Compensation – Performance-Related Compensation

Each NEO receives a mix of fixed and variable components of compensation. A substantial portion of our CEO’s and other executive officers’ compensation is at risk and will vary depending upon our performance. All of the opportunities to achieve long-term equity incentives (LTI) granted to our CEO and other executive officers in 2017 (other than Mr. Nickolas, who did not receive a PSUs award in 2017 as he was hired in August 2017) were performance-related consisting of PSUs that comprised 55% of the long-term equity awards and performance-related RSUs that comprised 45% of the awards. The following charts summarize the various forms of compensation and demonstrate that in 2017 over 87 percent of the CEO’s compensation and 79 percent of other NEO compensation is variable and tied to company performance.

 

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Compensation Discussion and Analysis    Pay Decisions and Compensation Governance Practices

 

Pay Decisions and Compensation Governance Practices

 

WHAT WE DO

 

 

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Pay for performance. Tie pay to performance by ensuring that a significant portion of NEO compensation is performance-based and at-risk.

 

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Median compensation targets. We generally aim to align all compensation elements for our executives with the median of our peer group companies.

 

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PSUs are a substantial portion of LTI. PSU grants, tied to our achievement of specified performance measures, comprised approximately 55% of the total value of annual long-term incentive grants made to our NEOs in 2017. Performance-based RSUs comprised the remaining 45%.

 

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Independent compensation consultant. The Compensation Committee uses an independent compensation consultant.

 

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Robust share ownership requirements. We have robust stock ownership guidelines of 7 times base salary for the CEO, 5 times base salary for our other NEOs, and 5 times annual retainer for Directors. We also have an equity retention requirement of 50% of net shares paid as incentive compensation until ownership guidelines are met.

 

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Clawback policy. We have a compensation recovery (clawback) policy that requires officers to forfeit certain cash-based incentive compensation and/or equity-based incentive compensation if the company restates its financial statements due to the officer’s misconduct.

 

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Regular engagement with shareholders. We engage with shareholders to hear their views on compensation and other issues.

WHAT WE DON’T DO

 

 

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No employment contracts. None of our NEOs or other executive officers have employment contracts that guarantee continued employment.

 

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No dividends on unvested awards. Our 2017 RSU and PSU awards require three years to fully vest and dividends paid on shares of common stock of Martin Marietta during the vesting period are only paid to award holders if and when an award vests.

 

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No pledging of shares. Our directors and executive officers are not permitted to pledge Martin Marietta shares as collateral for loans or any other purpose.

 

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No hedging. We prohibit directors and executive officers from engaging in short sales of Martin Marietta stock or similar transactions intended to hedge or offset the market value of Martin Marietta stock owned by them.

 

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Minimal executive perquisites. We do not provide NEOs country club reimbursements, personal use of the Company aircraft unrelated to business travel, or other excessive perks.

 

 

 

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2017 Chairman, President and CEO Compensation    Compensation Discussion and Analysis

 

A number of key 2017 compensation-related decisions resulted from these significant events and accomplishments, which are discussed more fully below. The Committee believes that our executive compensation program continues to reflect a strong pay-for-performance philosophy and is well-aligned with the interests of shareholders

2017 Chairman, President and CEO Compensation

 

Base Salary. For 2017, Mr. Nye’s base salary was set at $1,045,000 (effective March 1, 2017).

2017 Annual Incentive. Mr. Nye’s target annual incentive amount for 2017 was $1,143,083 (110% of salary received for the year).

2017-2019 Long-Term Incentives. In 2017, Mr. Nye was granted an LTI award of approximately $4.6 million, which was allocated 55% or $2.53 million in PSUs and 45% or $2.07 million in performance-based RSUs. RSUs will pro rata vest over three years if the performance measure is satisfied, while the vesting of PSUs will be based upon our results relative to the three-year performance goals that were established in the beginning of 2017.

Benefit and Retirement Plans. Mr. Nye is eligible for benefit and retirement programs similar to other employees. None of our executives received additional years of service credits or other forms of formula enhancements under our benefit or retirement plans. Our pension formula is based on years of service and pension eligible compensation, which is a similar formula offered by other companies with defined benefit plans. Mr. Nye is not eligible for retiree health benefits.

Perquisites. Mr. Nye received limited executive perquisites. We provide company-leased cars to the NEOs for their use. Additionally, we pay for the insurance, maintenance and fuel for such vehicles. Executives reimburse our Company for a portion of the expense associated with personal use of these vehicles. In addition, the value of personal mileage is charged to the NEO as imputed income. We make the company-owned aircraft available to the CEO and other senior executives for business travel. We do not provide other perquisites, such as country club memberships, to the NEOs. The Committee reviews our policies and determines whether and to what extent perquisites should be modified or continued.

2017 Target Pay Mix. We believe that, to the maximum extent possible, the compensation opportunities of our CEO should be variable and the variable elements of the compensation package should tie to the Company’s long-term success and the achievement of sustainable long-term total return to our shareholders. As shown in the chart below, a significant portion of our CEO’s target compensation is variable and in the form of LTI, and more than half of total target pay is in the form of equity incentives.

 

 

CEO Target Opportunity Mix*

 

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*

We consider base salary and annual incentives as short-term pay and PSUs and RSUs as long-term pay. We do not include retirement or other compensation components in the chart.

 

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Compensation Discussion and Analysis    Our Compensation Strategy

 

Our Compensation Strategy

Our executive compensation program is specifically designed to:

 

 

Attract and retain top-caliber, knowledgeable and experienced senior executives.

 

 

Motivate our executives to achieve superior results and build long-term value for shareholders.

 

 

Reward performance that meets or exceeds established goals consistent with our strategic aims and upholding integrity.

 

 

Align individual objectives with the Company’s objectives without fostering excessive or inappropriate risk-taking.

 

 

Encourage an ownership mentality and align the long-term financial interests of our executives with those of our shareholders.

 

 

Be market competitive with our peers.

 

 

Provide reward systems that are measurable and easily understood by our managers and shareholders.

 

 

Reinforce the succession planning process undertaken on a company-wide basis by building bench strength and by identifying and retaining senior leadership, both capable of achieving the Company’s growth, profitability and other objectives.

In 2017, our executive compensation structure consisted of three primary components: base salary, annual incentives, and long-term incentives. Within the long-term incentive component, we utilized a balanced portfolio of PSUs and performance-based RSUs.

 

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Martin Marietta has a long-standing commitment to pay for performance. We fulfill that aim by providing a majority of compensation through programs in which the amounts

ultimately received vary in order to best reflect our financial, operational and strategic performance.

 

 

 

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Our Compensation Strategy    Compensation Discussion and Analysis

 

The following table summarizes the key elements of our 2017 executive compensation program:

 

Element

  Primary Purpose   Key Characteristics

 

Base Salary

 

 

 

To compensate the executive fairly and competitively for the responsibility level of the position.

 

 

 

Fixed compensation that is reviewed annually.

 

 

Annual Performance-
Based Incentive Awards

 

 

 

To motivate and reward organizational and individual achievement of annual strategic, financial and individual objectives.

 

 

 

Variable compensation component; based on pre-established Company and individual performance goals.

 

 

Incentive Stock Plan

 

 

 

To ensure executives invest certain levels of their annual incentive compensation into Martin Marietta stock units.

 

 

 

To promote sustainable performance results, a portion of each NEO’s annual cash incentive compensation (35% for the CEO and 20% for the other NEOs) is automatically converted into common stock units. NEOs may elect to convert up to 50% of their annual cash incentive compensation into common stock units.

 

 

Long-Term

Incentive Awards

 

 

 

To align executives with shareholder interests, to reinforce long-term value creation, and to provide a balanced portfolio of long-term incentive opportunities.

 

 

 

Variable compensation component. Reviewed and granted annually. New program in 2017 splits long-term incentives for NEOs at 55% PSUs and 45% RSUs.

 

 

Performance Share
Units (PSUs)

 

 

 

To motivate executives by tying incentives to our multi-year financial goals and relative TSR reinforcing the link between our executive officers and our shareholders.

 

 

 

Grants based on three-year, EBITDA and Sales Growth, with a modifier based on TSR performance relative to peers.

 

 

Restricted Stock Units (RSUs)

 

 

 

To motivate the appropriate behaviors delivering superior long-term total shareholder return. Also promotes a base-level of executive retention.

 

 

 

Stock price growth. Awards are subject to achievement of one-year EBITDA.

 

 

Health/Welfare Plan and

Retirement Benefits

 

 

 

To provide competitive benefits promoting employee health and productivity and support financial security.

 

 

 

Fixed compensation component.

 

 

Perquisites and Other Benefits

 

 

 

To provide limited business-related benefits, where appropriate, and to assist in attracting and retaining executive officers.

 

 

 

Fixed compensation component.

 

 

Change-in-Control Protection

 

 

 

To provide continuity of management and bridge future employment if terminated following a change-in-control.

 

 

 

Fixed compensation component; only paid in the event the executive’s employment is terminated other than “for cause” or for “good reason”, in either case, in connection with a change in control

 

Ongoing Corporate Governance Policies

 

We endeavor to maintain good corporate governance standards relating to our executive compensation policies and practices, including the following that were in effect during 2017 that directly impacted compensation:

 

   

The Committee is comprised solely of independent Directors who regularly schedule and meet in executive sessions without management present.

 

   

The Committee’s independent compensation consultant is retained directly by the Committee.

 

 

 

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Compensation Discussion and Analysis    Ongoing Corporate Governance Policies

 

   

The Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation-related risk profile, to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the Company.

 

   

We pay for performance, with approximately 86% of our CEO’s total target pay opportunity being performance-based “at-risk” compensation.

 

   

We cap PSU payments at target if three-year TSR is negative, regardless of our ranking.

 

   

We limit perquisites and other benefits.

Compensation Decision Process

Role of Management and the Committee

The Committee is responsible for carrying out the philosophy and objectives of the Board of Directors related to executive compensation in addition to its responsibilities of overseeing the development and succession of executive management of Martin Marietta. The Committee has the authority to determine compensation and benefits for Martin Marietta’s executive officers. The Committee members are each non-employee, independent Board members pursuant to the New York Stock Exchange rules, and the Committee operates pursuant to a written charter, a copy of which can be viewed on Martin Marietta’s website at www.martinmarietta.com.

The performance of the CEO and each other executive officer is reviewed regularly by the Committee. Based on this review, the Committee sets compensation for all executive officers. Compensation decisions with respect to the executive officers other than the CEO are based in part on recommendations by the CEO, with input from the Senior Vice President–Human Resources, with respect to salary adjustments and annual cash and equity awards. The Committee can accept, reject or modify any recommended adjustments or awards to executive officers. For the CEO, the Committee sets the levels of annual adjustments and awards based on the criteria it deems to be appropriate under the circumstances with input from the independent compensation consultant. There are no employment agreements between Martin Marietta and any executive officer of Martin Marietta, including the CEO.

Role of the Independent Compensation Consultant

The Committee retained an independent compensation consultant in accordance with the Committee’s charter. The consultant reports directly to the Committee. The Committee retains sole authority to hire or terminate the consultant, approve its compensation, determine the nature and scope of services, and evaluate performance. A representative of the compensation consultant attends Committee meetings, either in person or by telephone, as requested, and communicates with the Committee Chair between meetings. The Committee makes all final decisions.

The compensation consultant’s specific compensation consultation roles include, but are not limited to, the following:

 

   

Advise the Committee on executive compensation trends and regulatory developments.

 

   

Provide a total compensation assessment for executives compared to peer companies and recommendations for executive pay.

 

   

Summarize and report to the Committee on trends, regulatory developments and other factors affecting executive officer compensation, as well as any other areas of concern or risk.

 

   

Serve as a resource to the Committee Chair for meeting agendas and supporting materials in advance of each meeting.

 

   

Review and comment on proxy disclosure items, including this CD&A.

 

   

Advise the Committee on management’s pay recommendations.

Based on these activities, the compensation consultant makes recommendations regarding, and proposes adjustments to, our executive officer compensation program as it deems appropriate. While the consultant works closely with the appropriate members of our executive management team in performing these activities, the consultant reports directly to and is retained by the Committee on all executive compensation matters, and speaks to the Committee and the Chair of the Committee on a regular basis without management present. The compensation consultant periodically attends Committee meetings.

Mercer was paid $150,758 for its compensation advisory services in 2017. During 2017, Mercer and its Marsh & McLennan affiliates were also retained by management to provide services unrelated to executive compensation, including property/casualty insurance brokerage services and administration of a risk management information system. The aggregate fees paid for those other services for 2017 were $312,943. The Committee and the Board did not review or approve the other services provided to us by Mercer and its Marsh & McLennan affiliates as those services are approved by management in the normal course of business.

We have been advised by Mercer that the reporting relationship and compensation of the individual Mercer consultants who perform executive compensation consulting services for our Committee is separate from, and is not determined by reference to, Mercer’s or Marsh & McLennan’s other lines of business or their other work for us. The Committee considered these separate reporting relationships and compensation structures, the provision of other services to the Company by Mercer and Marsh & McLennan, the absence of any business or personal relationship between our officers and Directors and the specific

 

 

 

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Compensation Decision Process    Compensation Discussion and Analysis

 

Mercer consultants advising the Company (other than the consulting relationship with the Committee), Mercer’s Global Business Standards intended to address potential conflict of interests with respect to their executive compensation consulting services, and the other factors required to be considered by applicable SEC and stock exchange rules, in approving the Committee’s engagement of Mercer for fiscal 2017. Based on this review, the Committee did not identify that Mercer had any conflicts of interest that would prevent Mercer from independently advising the Committee.

The Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, that could give rise to a potential conflict of interest with respect to the individual independent compensation consultants that provided services in 2017. Based on this review, there are no conflicts of interest raised by the work performed by Mercer.

Role of Peer Companies and Competitive Market Data

The Committee considered peer groups for two elements of the executive compensation program in 2017: the Compensation Peer Group, consisting of 17 companies that the Committee believes compete with us for talent, and the TSR Peer Group,

consisting of a group of 25 companies that the Committee believes compete with us for investors and is used to assess the achievement of TSR measured for the PSU awards.

This section only describes the Compensation Peer Group. The TSR peer group is discussed below in the descriptions of the other elements of our compensation program.

Annually, the Committee studies competitive total compensation market data provided by its independent compensation consultant. To assess competitive pay levels, the Committee reviews and approves the composition of our Compensation Peer Group. The following peer group criteria are considered:

 

   

Company size (approximately 0.4 times to 2.5 times Martin Marietta’s annual revenues);

 

   

Companies in similar industries based on GICS code classifications;

 

   

Direct competitors for business and management talent;

 

   

Companies covered by the investment analysts that track Martin Marietta; and

 

   

Companies that include Martin Marietta in their compensation peer group.

 

 

 

The following companies comprised our Compensation Peer Group for 2017 base salary and long-term incentive pay decisions:

 

Albermarle Corporation

 

Granite Construction Inc.

  

Owens Corning

  

Vulcan Materials Company

Armstrong World Industries

 

Louisiana-Pacific Corporation

  

Peabody Energy Corp.

  

W. R. Grace & Co.

Compass Minerals International

 

Masco Corporation

  

USG Corp.

   Westlake Chemical Corporation

CONSOL Energy, Inc.

 

Nucor Corporation

  

The Valspar Corporation

  

Weyerhaeuser Company

FMC Corporation

       

 

The Committee studies competitive total compensation data from various sources, including proxy statements of the peer group. Since proxy statements do not provide precise comparisons by position to our executive officers, the Committee also in 2017 took into consideration published independent compensation surveys of companies with revenue in the range of $3.0 billion to $4.0 billion as to median levels for each executive officer as well as private compensation survey data. Where available, size-adjusted market values were developed using regression analysis. This statistical technique accounts for revenue size differences within the peer group and develops an estimated market value for a similar-size company as Martin Marietta. The size-adjusted 50th percentile for total compensation is a key reference point for the Committee. On average, the target for our NEO total compensation opportunities is competitively positioned within a reasonable range of the size-adjusted 50th percentile.

Although the Committee uses the size-adjusted 50th percentile as its starting point in setting compensation levels, the compensation packages for executive officers may vary materially from it based on several factors. Market data, position, tenure, individual and organization performance, retention needs and internal pay equity have been the primary

factors considered in decisions to increase or decrease compensation opportunities. Specifically, the Committee typically sets compensation levels below the size-adjusted 50th percentile for executive officers with relatively less relevant experience, less responsibility, less tenure with Martin Marietta and/or lower performance ratings. Conversely, if an officer consistently receives favorable performance ratings, accumulates years of service and expertise in relevant areas, has more responsibility and/or has significant other achievements, his or her compensation will typically be above the size-adjusted 50th percentile.

Determination of CEO Compensation

At each February Committee meeting, without the CEO present, the Committee reviews and evaluates CEO performance, and determines achievement levels for the prior year. The Committee also reviews competitive compensation data. At this meeting, the Committee discusses salary and annual incentive pay recommendations for the CEO, as well as an evaluation of the CEO’s performance, with the independent members of the Board. The Committee also reviews and discusses an award of RSUs and the target PSU grant size for the CEO at that meeting, which is also discussed with the independent members of the Board.

 

 

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Compensation Discussion and Analysis    Compensation Program Risk Assessment

 

Compensation Program Risk Assessment

 

We perform a thorough annual review of our compensation program structure and all compensation programs, which are also reviewed in detail with the Committee. We believe our executive pay is reasonable and provides appropriate incentives to our executives to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions. Our compensation structure does not include features that are reasonably likely to have a material adverse effect on the Company. Compensation program features that mitigate against risks include the following:

 

   

Our annual incentive compensation plan does not provide payment for poor individual or corporate performance, regardless of whether the failure to achieve target was outside management’s control.

 

   

There are caps on the long-term equity awards, even if the required performance-related criteria are exceeded.

 

   

A majority of the NEOs’ compensation is long-term, with equity grants vesting over three to five years, depending on the award.

 

   

Our compensation is not based on highly-leveraged short-term incentives that encourage high risk investments at the expense of long-term value.

 

   

Long-term compensation to executive officers is based on specific performance measures that balance long-term growth and returns.

 

   

The Committee uses benchmarking data and the advice of its independent compensation consultant to keep compensation in line with typical market practices and appropriate to Martin Marietta’s needs.

 

   

We use a balanced portfolio of long-term incentive programs.

 

   

The Committee’s governance process requires review and approval of all compensation over a certain amount.

 

 

 

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Considerations Regarding 2017 Compensation    Compensation Discussion and Analysis

 

Considerations Regarding 2017 Compensation

The following chart summarizes the target compensation in our 2017 executive compensation program:

 

 

Pay Component

 

 

 

Summary

 

   

 

Base Salary

 

 

    At the February 2017 meeting, the Committee reviewed competitive market data and individual performance evaluations.

    The Committee approved base salary increases as follows:

    Mr. Nye: 3.5% increase, based on his excellent achievements as CEO since 2010 in an economic environment that resulted in muted shipment volume recovery, and specifically his performance in 2017.

    Other NEOs: approximately 3.0% to 3.3% increases, based on a review of competitive market data and individual performance evaluations.

 

 

 

Target Annual Cash Incentives

 

 

    NEO target bonuses (as a percentage of base earnings) did not change in 2017 other than Ms. Bar, whose target increased in connection with a promotion in November 2016.

    Our shareholders in 2016 approved a new Cash Incentive Plan that fixed the bonus amounts based on certain objective criteria and allowed the Committee to reduce the award based on enumerated factors in the plan. The Committee implemented the Executive Cash Incentive Plan by reference to amounts payable under our Executive Incentive Plan.

    Our CEO is required to invest a minimum of 35% of his annual cash bonus into stock units, which are held generally for a period of three years.

    Other NEOs are required to invest a minimum of 20% of their annual cash bonus into stock units, which are held generally for a period of three years. Mr. Nickolas and Ms. Lloyd did not participate in this program in 2017.

 

 

 

Long-Term

Incentives

 

 

    Our LTI structure consisted of PSUs and performance-based RSUs.

    The LTI awards for NEOs in 2017 were weighted 55% PSUs and 45% RSUs. The LTI grant size is based on competitive market data.

    PSU awards in 2017 are earned based on achievement of performance levels, with 33% based on three-year cumulative Sales Growth and 67% based on three-year cumulative EBITDA performance. The Company’s relative TSR ranking compared to major U.S. companies in similar industries provides a modifier to the award up to 20%.

   RSU awards to NEOs in 2017 are subject to the achievement of one-year EBITDA performance.

 

 

 

Total Compensation

 

 

The Committee uses the size-adjusted 50th percentile of our Compensation Peer Group as a guidepost in setting the target for the total compensation opportunity, but considers a variety of factors in setting compensation. Overall, the Committee believes targeted compensation should be more heavily weighted on variable “at-risk” compensation and longer-term components.

 

The Committee approved the following actual compensation items in 2017.

Base Salary

The Committee determines base salaries for the NEOs and other executives based on a number of factors, including but not limited to, market data, individual performance, the Company’s performance, and management recommendations (except for the CEO). At the February 2017 meeting (other than for Mr. Nickolas), based on a review of competitive market data and management’s recommendations based on individual performance (except for the CEO), and the Committee’s assessment of Mr. Nye’s performance, the Committee approved the following increases.

 

NEO

 

 

 

2017    

Base Salary    

 

  

Effective    

Date*    

 

 

2016 

Base Salary 

 

 

 

C. Howard Nye

 

  $1,045,000    

 

   3/1/17    

 

  $

 

1,010,000

 

 

 

 

James A. J. Nickolas

 

  $   470,000    

 

   8/21/17    

 

   

 

—  

 

 

 

Roselyn R. Bar

 

  $   514,200    

 

   3/1/17    

 

  $

 

   497,300

 

 

 

 

Donald A. McCunniff

 

  $   384,300    

 

   3/1/17    

 

  $

 

   372,000

 

 

 

 

Daniel L. Grant

 

  $   362,300    

 

   3/1/17    

 

  $

 

   351,100

 

 

 

 

*

NEO base salaries were increased on March 1, 2017. Mr. Nickolas commenced employment with the Company in August 2017.

 

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Compensation Discussion and Analysis    Considerations Regarding 2017 Compensation

 

Annual Cash Incentive: Executive Cash Incentive Plan

NEOs and other executives are eligible to earn annual incentive compensation under our Executive Cash Incentive Plan based on the achievement of various performance metrics. Individual NEO targets (as a percent of base salary) are approved by the Committee at the beginning of the year based on a review of competitive market data and internal pay equity.

The Committee awards actual annual cash incentive compensation based on achievement against corporate performance objectives and individualized targeted goals. This furthers Martin Marietta’s compensation philosophy to encourage superior performance and reward the achievement of Martin Marietta’s annual goals. In 2017, all of the executive officers participated in the plan. The annual incentive compensation level for 2017 for the NEOs other than Mr. Nye was 100% to 155% of target. The annual incentive compensation level for 2017 for Mr. Nye was 175%.

In determining the incentive payments, the Committee first reviews the achievements of Martin Marietta for the past year as compared to its targeted goals set at the end of the previous

year. The maximum incentive compensation is fixed based on objective criteria as described in the Executive Cash Incentive Plan, and the Committee then determines an appropriate award payout beneath the maximum amount after considering the following:

 

   

A detailed assessment of Martin Marietta’s overall financial performance and each segment’s financial performance.

 

   

Shareholder returns, including the consistent delivery of value to Martin Marietta’s shareholders.

 

   

Our safety performance, which continues to be industry leading even though we increased hourly headcount and trained new employees hired through our acquisitions made during the year.

 

   

Outstanding environmental and regulatory compliance results.

 

   

Continuing achievement of excellent management of working capital.

 

   

The successful organic and inorganic growth of Martin Marietta.

 

 

LOGO

 

¹

Total Injury Incident Rate per 200,000 hours worked

²

General Industry, Asphalt Paving, Cement and Ready Mix reported via BLS through 2016

3 

Aggregates Industry reported per MSHA website - Stone, Sand & Gravel

*

Martin Marietta Year End 2017 performance

These safety metrics are ones that we are proud of:

 

 

More than 90% of our 400+ facilities had no reportable incidents

 

 

19 sites reached 500,000 hours without any incidents and 11 surpassed one million hours of incident-free work

 

 

64 sites surpassed 500,000 hours without a lost time incident and 11 exceeded the million-hour mark in that category

 

 

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The Committee also considered our efforts to tell our sustainability story, which is part of our core strategy. We completed and issued the Company’s third annual sustainability report. “Building. Caring. Growing.” represents our latest publication sharing Martin Marietta’s sustainability story – in 2017 from the perspective of our employees. From our world-class safety programs and performance, to our targeted and intentional support of housing, hunger reduction and healthcare, to environmental programs that ensure operational excellence, we have a solid foundation and an exciting opportunity to build upon.

 

LOGO

 

The Committee also reviewed and considered management’s furtherance of its strategic plan, including a primary objective of value-enhancing growth, and the adoption of Mission, Vision, and Values of the Company to unify management with the same objectives.

The Committee then conducted a comparative review of the individual contributions of each of the executive officers towards achieving these goals. The Committee also considered qualitative measures of performance for the executive officers, such as adherence to and implementation of Martin Marietta’s Code of Ethical Business Conduct, safety, customer satisfaction, and product quality.

Key individual performance criteria are established for each NEO, which are intended to drive strategic and support operational results in the Company and the functional groups. These performance metrics are established at the beginning of each plan year and are based upon Martin Marietta’s Long-Range Operating Plan, which is set at the end of the previous year. For executives in corporate staff positions, 50% of the determination is made with respect to Martin Marietta’s performance and 50% is based on the individual’s performance

against established objectives. Similar to the Committee’s assessment of financial goals, the Committee’s assessment of individual performance goals generally excludes certain non-recurring or extraordinary items. We do not disclose specific individual performance goals due to the potential for competitive harm. Our targeted individual goals are “stretch but reasonable.”

The individualized target goals are tailored for each executive, his or her specific areas of responsibility and the then-current and longer-term goals of Martin Marietta. In addition, achievement of the goals typically is in part dependent on conditions outside the control of each of the named executive officers. For example, our business may be adversely affected by hurricanes or other weather-related conditions, which could have the result of impeding the achievement of certain performance-based goals.

Although there is substantial uncertainty with respect to achieving the target levels at the time the goals are set and communicated, our NEOs have a reasonable expectation of receiving a cash incentive award at a level that is at least near their target level.

 

 

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Compensation Discussion and Analysis    Considerations Regarding 2017 Compensation

 

2017 Actual Incentive Cash Earned

The table below summarizes the targets for 2017 and annual incentive award earned by each NEO:

 

NEO

 

 

 

Target Annual

Incentive Bonus
(% of Salary)

 

   

2017 Target

Annual

Incentive*

 

    

2017 Actual

Annual

Incentive

 

 

 

C. Howard Nye

 

   

 

110%       

 

 

 

  $

 

1,143,083

 

 

 

   $

 

2,000,000

 

 

 

 

James A. J. Nickolas

 

   

 

75%        

 

 

  $

 

129,702

 

 

 

   $

 

162,127

 

 

 

 

Roselyn R. Bar

 

   

 

80%        

 

 

  $

 

409,107

 

 

 

   $

 

634,115

 

 

 

 

Donald A. McCunniff

 

   

 

70%        

 

 

  $

 

267,575

 

 

 

   $

 

401,363

 

 

 

 

Daniel L. Grant

 

   

 

70%        

 

 

  $

 

252,303

 

 

 

   $

 

340,609

 

 

 

 

*

Based on actual base earnings in 2017.

 

Annual Incentive Feature: Performance-Based Stock Purchase Plan

The Incentive Stock Plan provides an executive the opportunity to invest a portion of his or her annual incentive compensation in Martin Marietta stock. There are both voluntary and mandatory deferrals under the plan.

The voluntary election allows executives to invest up to 50% of their annual cash incentive compensation to purchase units that are subsequently converted into shares of common stock pursuant to the terms of the plan at a 20% discount from the market price of Martin Marietta’s common stock on the date the amount of the incentive compensation is determined. The discount is used to account for the risk of trading current cash compensation for “at-risk” shares which may decline in value.

The mandatory portion requires executives to invest a minimum of 20% of their cash incentive compensation towards the crediting of units under the plan (other than Mr. Nickolas, who was not hired until after the deferral deadline under the Incentive Stock Plan, and Ms. Lloyd, who retired as of December 31, 2017). The CEO is required to invest a minimum of 35% of his cash incentive compensation towards the crediting of such units.

The units generally vest in three years from the date of the award and are distributed in shares of common stock. If an executive officer voluntarily terminates employment before the units vest, the stock units are forfeited and the executive officer receives a cash payment equal to the lesser of the cash that was invested or the fair value of the share units on the day of termination.

The mandatory contribution requirement directly links a portion of executive officer compensation to shareholder returns. The vesting aspect, combined with the yearly stock purchase requirement, creates continuous overlapping three-year cycles, which encourage executive officer retention and provide a continuous link of a significant portion of executive officer compensation with shareholder return over the long term to reward these executive officers in line with our shareholders when our stock price increases.

Long-Term Incentive Compensation

Our Long Term Incentive (LTI) plan’s design reflects the objectives of our compensation program and is in-line with current market approaches, based on the advice of the Committee’s independent compensation consultant. Our plan design objectives are a simplified LTI program, that is transparent and enhances the line of sight between our performance and compensation.

The award in 2017 for all NEOs other than Mr. Nickolas was based on a fixed percentage of base salary with some variation for position and grade, which amount was converted into common stock units based on the average Martin Marietta stock price for the 20-day period ending on March 28, 2017, the day the Martin Marietta Board of Directors confirmed the award, or $212.439. This award value was then divided into PSUs and performance-based RSUs, with 55% of the total award for NEOs consisting of target level for the PSUs and 45% of the total award for NEOs consisting of RSUs. The Committee believes that the incentive mix (PSUs and RSUs) constitutes a simplified pay process and streamlined plan, which more fully reflects the performance of the Company and is better aligned with each manager’s role within Martin Marietta. The RSUs granted to Mr. Nickolas were awarded on August 21, 2017 in connection with his hiring and vest over one-, two- and five-year periods subject to his continued employment. See a further description under Outstanding Equity Awards at Fiscal Year-End and corresponding footnotes on pages 55 to 56.

One of our compensation objectives is to align the potential rewards to senior management with increases in shareholder value. In that regard, the PSUs give the recipient the opportunity to receive Martin Marietta common stock if specific performance goals are achieved, consisting of:

 

(1)

Earnings before Interest, Income Taxes, Depreciation and Amortization (EBITDA), measuring profitability and comprising 67% of the total award, and

 

 

 

 

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(2)

Sales Growth, measuring growth and comprising 33% of the awards.

 

(3)

In addition, the relative Total Shareholder Return (rTSR) will act as a modifier for the performance such that Martin Marietta’s performance will be measured against the S&P 500, and will modify the total award by a range of -20% to +20% depending on the rTSR.

EBITDA and Sales Growth are two of the drivers of our performance and metrics of significance to our investors. The total payout opportunity for PSUs in 2017 is 0% to 240%: 50% of target if the threshold level is satisfied, 100% of target if the target level is satisfied, and 200% of target if the maximum level is satisfied. The rTSR modifier over the three-year measurement period is then applied to the final award to adjust it up or down up to 20%. The threshold must be satisfied to receive PSUs for each performance measure. If the threshold is not met, none of the PSUs will vest. Performance in each metric is measured independently, so PSUs can be earned as long as the threshold is satisfied for at least one level. The “Target” level is generally viewed as achievable. The “Maximum” level is a stretch that is attainable if we outperform in the area measured.

The performance will be measured in February 2020 for the three-year period beginning January 2017 through December 2019 to determine (1) the three-year cumulative EBITDA for Martin Marietta against the target identified in the PSU Award Agreement, and (2) the three-year cumulative Sales Growth against the target identified in the PSU Award Agreement. This amount will be modified by the rTSR for the three-year period as against the peer group of the S&P 500, as set forth in the PSU Award Agreement. The Committee in its discretion may adjust

the final award values only downwards, either collectively or on an individual basis, in recognition of factors that are unusual or nonrecurring.

A change in the 2017 awards is that participants can “bank” PSUs each year during the three-year measurement period if the Company’s EBITDA and/or Sales Growth for that year equals or exceeds a third of the three-year cumulative target. This gives the participant the ability to earn some level of payout for interim achievements rather than be potentially faced with no award for the entire three-year period. The banked PSUs will vest but will not be distributed until the end of the three-year measurement period, when the cumulative performance is determined and the amount of the rTSR modifier is applied.

The PSUs will convert to unrestricted common stock and be paid conditioned upon and to the extent that the performance goals have been met, which will be determined in February 2020.

These awards are also generally subject to continued employment through the date the PSUs vest. The actual financial performance targets and achievement against those targets will be disclosed at the end of the three-year performance period.

RSUs vest in three equal portions, each on the anniversary of the award date (March 28, 2017) over a period of three years, subject to satisfaction of the performance measure and generally to continued employment through each one of those anniversaries. Once the restricted period ends (each anniversary for one third of the total RSU award), the recipient will be issued unrestricted shares of common stock (minus applicable taxes). The 2017 RSUs awarded to executive officers are also subject to a performance measure for the first year. If the performance measure is satisfied, then the RSUs will continue to vest. If the performance measure is not satisfied, then the RSUs will be forfeited.

 

 

 

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The following table provides a summary of the long-term incentives that each of the NEOs received in 2017.

 

NEO

  

RSUs

(3 year annual
installment vesting
subject to achievement
of performance
measure)

(# of shares)

   

PSUs – Target

(3 year cliff vesting

subject to achievement

of performance

measures)

(# of shares)

 

 

C. Howard Nye

 

  

 

 

 

 

9,755

 

 

 

 

 

 

 

 

 

11,355

 

 

 

 

 

James A. J. Nickolas

 

  

 

 

 

 

6,636

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

Roselyn R. Bar

 

  

 

 

 

 

2,807

 

 

 

 

 

 

 

 

 

3,267

 

 

 

 

 

Donald A. McCunniff

 

  

 

 

 

 

2,122

 

 

 

 

 

 

 

 

 

2,470

 

 

 

 

 

Daniel L. Grant

 

  

 

 

 

 

1,898

 

 

 

 

 

 

 

 

 

2,210

 

 

 

 

*

The RSUs granted to Mr. Nickolas were awarded on August 21, 2017 in connection with his hiring and vest over one-, two-, and five-year periods subject to his continued employment.

2017 Long-Term Incentive Vesting of Prior Grants

PSUs that were granted in 2015 vested on December 31, 2017, because the applicable performance criteria were satisfied. These PSUs were certified and paid out in February 2018 at 94.75% of the amount of the original grant made in 2015 based on: (1) 3-year average Return on Sales (ROS) of 18.4% as against a target of 19.5%; (2) 3-year cumulative EBITDA of $2.91 billion as against a target of $3.42 billion, and (3) TSR performance of our common stock relative to the TSR Peer Group of 93rd percentile as against a target of the 50th percentile.

 

Payment Calculation for PSUs Granted in 2015

Certified on February 22, 2018

 

NEO

  Target
Units Granted
in 2015
     Percentage
Payable
       Units
Payable
 

 

C. Howard Nye

 

 

 

 

 

 

3,612

 

 

 

 

  

 

 

 

 

95

 

 

 

    

 

 

 

 

3,423

 

 

 

 

 

James A.J. Nickolas*

 

 

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

—  

 

 

 

 

    

 

 

 

 

—  

 

 

 

 

 

Roselyn R. Bar

 

 

 

 

 

 

1,620

 

 

 

 

  

 

 

 

 

95

 

 

 

    

 

 

 

 

1,535

 

 

 

 

 

Donald A. McCunniff

 

 

 

 

 

 

1,328

 

 

 

 

  

 

 

 

 

95

 

 

 

    

 

 

 

 

1,259

 

 

 

 

 

Daniel L. Grant

 

 

 

 

 

 

1,253

 

 

 

 

  

 

 

 

 

95

 

 

 

    

 

 

 

 

1,188

 

 

 

 

 

*

Mr. Nickolas commenced employment with the Company in August 2017.

 

Stock-Based Awards Generally

The stock purchase awards under our Incentive Stock Plan and the PSUs and RSUs awarded under our LTI program, each as described above, were granted in 2017 at the Committee’s regularly scheduled meetings in February (other than for Mr. Nickolas) following the availability of financial results for the prior year. Newly hired executive officers, such as Mr. Nickolas, may, subject to the discretion of the Committee, receive an award of RSUs as of the date of their hire. The number of RSUs is based on the average New York Stock Exchange closing price of Martin Marietta’s common stock on the date of the grant. The Committee’s schedule is determined several months in advance and the proximity of any awards to earnings announcements or other market events is coincidental.

All of Martin Marietta’s active equity-based award plans have been approved by shareholders.

Stock Ownership Guidelines

In 2018, the Board adopted robust formal Stock Ownership Guidelines for executive officers and members of the Board of Directors. These require the following ownership levels as a multiple of base salary or annual cash retainer, as applicable:

 

   

Chairman, President and CEO – 7 times

 

   

Other Executive Officers – 5 times

 

   

Other Members of the Board of Directors – 5 times

 

 

 

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Table of Contents

Stock Ownership Guidelines    Compensation Discussion and Analysis

 

The following types of equity instruments count in determining stock ownership for purposes of these guidelines:

 

   

Shares owned separately by the covered person or owned either jointly with, or separately by, his or her immediate family members residing in the same household;

 

   

Shares held in trust for the benefit of the covered person or his or her immediate family members;

 

   

Shares purchased on the open market;

 

   

Shares obtained through stock option exercise (and not thereafter sold);

 

   

Vested shares of RSUs;

 

   

Unvested RSUs;

 

   

Shares held pursuant to deferred stock unit plans for Directors or executive officers; and

 

   

Shares acquired under the Company’s Savings and Investment Plan and similar plans or arrangements

Covered persons who are employees are expected to meet these requirements within five years of the later of becoming a covered person and the date of adoption of the policy. Until such time as such covered person has met these requirements, he or she is expected to retain 50% of any shares of common stock received upon vesting of RSUs, deferred stock unit awards, PSUs, the exercise of stock options, and other similar equity awards, net of amounts withheld to pay taxes and the exercise price of stock options until the applicable Guideline level is met.

Stock ownership does not include vested or unvested stock options, unvested PSUs and vested or unvested stock appreciation rights.

All of the Company’s executive officers and members of the Board of Directors are in compliance with the Stock Ownership Guidelines.

We also require a holding period of annual cash incentive compensation converted to Martin Marietta shares, with vesting generally in three years. There is no additional holding period beyond the vesting date, however a significant portion of the executive compensation program is in the form of equity awards that vest over three years generally.

Our CEO must invest a minimum of 35% of each year’s cash bonus award in common stock units of Martin Marietta. Executive officers must invest a minimum of 20% of their annual bonus. Stock is purchased at a 20% discount to the price on the grant date to account for the additional risk of taking a common

stock unit payment in lieu of a risk-free cash payment. In 2017, Mr. Nye deferred the maximum of 50% of his cash bonus in common stock units.

Perquisites

Martin Marietta provides executives with perquisites that the Committee believes are appropriate, reasonable and consistent with its overall compensation program to better enable Martin Marietta to attract and retain superior employees for key positions. The Committee periodically reviews the types and levels of perquisites provided to the NEOs. The value of each of the NEO’s perquisites is included in the annual compensation set forth in the Summary Compensation Table.

In 2017, we provided personal use of leased automobiles to NEOs. We pay for the insurance, maintenance and fuel for such vehicles, and the value of personal mileage and use is charged to the NEO as imputed income. We make the company-owned aircraft available to the CEO and other senior executives for business travel. When the NEO is accompanied by his or her spouse on such trips, that use is included in the NEO’s taxable income for the year. Martin Marietta also provides to executive officers and other employees certain other fringe benefits such as tuition reimbursement, airline club dues, professional society dues, and food and recreational fees incidental to official company functions. We do not provide other perquisites, such as country club memberships or financial planning services, to the NEOs.

Retirement and Other Benefits

In order to maintain market competitive levels of compensation, we provide retirement and other benefits to the NEOs and other employees, including:

 

   

Medical and dental benefits

 

   

Life, accidental death and disability insurance

 

   

Pension and savings plans

 

 

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Compensation Discussion and Analysis    Retirement and Other Benefits

 

The benefits under the defined benefit pension plan are more valuable for employees who remain with Martin Marietta for longer periods, thereby furthering our objectives of retaining individuals with more expertise in relevant areas and who can also participate in management development for purposes of executive succession planning. All of Martin Marietta’s salaried employees in the United States are eligible to participate in our retirement and other plans, and the NEOs participate in the plans on the same terms as Martin Marietta’s other salaried employees.

Additional information regarding these benefits is under the heading Pension Benefits Table on page 58 and the accompanying narrative.

Potential Payments upon Termination or Change of Control

We do not have written employment agreements with executives. Instead, each of our NEOs has a change of control severance agreement (an Employment Protection Agreement) that provides for retention and continuity in order to minimize disruptions during a pending or anticipated change of control. The agreements are triggered only by a qualifying termination of employment following a change of control. Martin Marietta’s equity-based award plans and retirement plans also provide for certain post-termination payments and benefits, as well as the acceleration of time periods for purposes of vesting in, or realizing gain from, any outstanding equity award in the event of a change of control. The Committee believes these payments and benefits are also important to align the interests of the executive officers with the interests of the shareholders because the agreements will reduce or eliminate the reluctance to pursue potential change of control transactions that may ultimately lead to termination of their employment but would otherwise be in the best interests of our shareholders. The Employment

Protection Agreement is described on pages 59 and 60 of this Proxy Statement.

Tax and Accounting Implications

In administering the compensation program for NEOs, for awards made in 2017 the Committee considered the applicability of Section 162(m) of the Code, the consequences under financial accounting standards, the tax consequences in our analysis of total compensation and the mix of compensation elements, base, bonus and long-term incentives. Prior to amendment as part of the 2017 Tax Act, Section 162(m) prohibited public companies from taking a tax deduction for compensation that is paid to any one of certain employees in excess of $1.0 million, unless the compensation is “qualified performance-based compensation” within the meaning of the Code. To preserve the deductibility of compensation, grants in 2017 of our long-term incentives are intended to qualify as “qualified performance-based compensation.”

The performance-based exception under Section 162(m) was eliminated in the 2017 Tax Act, which was enacted on December 22, 2017. As a result, except to the extent provided in limited transition relief, which is expected to apply to the 2017 grants, compensation that the Committee intended to structure as performance-based compensation under Section 162(m), including LTI awards, will no longer be deductible to the extent that compensation to a covered employee in any year exceeds the $1.0 million limit. While the Committee considers the deductibility of awards as one factor in determining executive compensation, the Committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program to attract talent, promote retention, or recognize and reward desired performance even if the awards are not deductible for income tax purposes.

 

 

 

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Table of Contents

Executive Compensation

Executive Officer Compensation

The following tables show annual and long-term compensation, for services in all capacities to Martin Marietta, earned by the Chief Executive Officer, each individual who served as Chief Financial Officer during 2017, and three other executive officers serving as such on December 31, 2017, which we refer to collectively in this section of this proxy statement as the “named executive officers” or “NEOs.” These tables and the accompanying narratives should be read in conjunction with the Compensation Discussion and Analysis section of this proxy statement, which provides a detailed overview of the methods used by Martin Marietta to compensate its officers, including the named executive officers.

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by each of the named executive officers for the fiscal years set forth below. Martin Marietta has not entered into any employment agreements with any of the named executive officers.

SUMMARY COMPENSATION TABLE

 

Name and

Principal Position

(a)

 

Year

(b)

   

Salary

($)

(c)

   

Bonus

($)1

(d)

   

Stock

Awards

($)2
(e)

    Option
Awards
($)
3
(f)
   

Non-Equity
Incentive Plan

Compensation
($)
4

(g)

    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
5
(h)
    All Other
Compensation
($)
6
(i)
    Total
($)
(j)
 

 

C. Howard Nye

Chairman, President

and CEO

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

1,039,167

 

 

 

 

 

 

 

 

 

 

 

 

5,431,412

 

 

       

 

 

 

 

1,000,000

 

 

 

 

 

 

 

 

1,414,782

 

 

 

 

 

 

103,804

 

 

 

 

 

 

8,989,165

 

 

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

1,005,000

 

 

 

 

 

 

 

 

 

1,300,000

 

 

 

 

 

 

 

 

 

4,682,240

 

 

 

 

         

 

 

 

 

687,864

 

 

 

 

 

 

 

 

 

364,227

 

 

 

 

 

 

 

 

 

8,039,331

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

977,500

 

 

 

 

 

 

 

 

 

603,606

 

 

 

 

 

 

 

 

 

1,697,067

 

 

 

 

 

 

 

 

 

731,763

 

 

 

 

   

 

 

 

 

496,430

 

 

 

 

 

 

 

 

 

241,027

 

 

 

 

 

 

 

 

 

4,747,393

 

 

 

 

 

James A.J. Nickolas

Senior Vice

President and CFO

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

172,936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,320,232

 

 

 

 

       

 

 

 

 

162,127

 

 

 

 

    25,995    

 

 

 

 

8,534

 

 

 

 

    1,689,824  
                 

 

Roselyn R. Bar

Executive Vice President,

General Counsel and

Corporate Secretary

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

511,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,433,583

 

 

 

 

       

 

 

 

 

475,586

 

 

 

 

    1,039,249    

 

 

 

52,062

 

 

    3,511,863  
 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

496,583

 

 

 

 

 

 

 

 

 

498,967

 

 

 

 

 

 

 

 

 

1,001,335

 

 

 

 

         

 

 

 

 

528,522

 

 

 

 

 

 

 

 

 

100,915

 

 

 

 

 

 

 

 

 

2,626,322

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

445,121

 

 

 

 

 

 

 

 

 

241,033

 

 

 

 

 

 

 

 

 

491,597

 

 

 

 

 

 

 

 

 

190,732

 

 

 

 

   

 

 

 

 

276,972

 

 

 

 

 

 

 

 

 

76,735

 

 

 

 

 

 

 

 

 

1,722,190

 

 

 

 

 

Donald A. McCunniff

Senior Vice President,

Human Resources

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

382,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,044,225

 

 

 

 

       

 

 

 

 

321,090

 

 

 

 

    292,574    

 

 

 

 

51,251

 

 

 

 

    2,091,390  
 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

370,050

 

 

 

 

 

 

 

 

 

323,276

 

 

 

 

 

 

 

 

 

629,840

 

 

 

 

         

 

 

 

 

160,803

 

 

 

 

 

 

 

 

 

71,038

 

 

 

 

 

 

 

 

 

1,555,007

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

359,425

 

 

 

 

 

 

 

 

 

191,214

 

 

 

 

 

 

 

 

 

397,832

 

 

 

 

 

 

 

 

 

153,682

 

 

 

 

   

 

 

 

 

116,533

 

 

 

 

 

 

 

 

 

64,564

 

 

 

 

 

 

 

 

 

1,283,250

 

 

 

 

 

Daniel L. Grant

Senior Vice President,

Strategy & Development

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

360,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

947,503

 

 

 

 

       

 

 

 

 

255,457

 

 

 

 

    193,221    

 

 

 

 

 

38,825

 

 

 

    1,795,439  
 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

349,250

 

 

 

 

 

 

 

 

 

303,149

 

 

 

 

 

 

 

 

 

525,032

 

 

 

 

         

 

 

 

 

98,052

 

 

 

 

 

 

 

 

 

63,434

 

 

 

 

 

 

 

 

 

1,338,917

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

339,083

 

 

 

 

 

 

 

 

 

180,392

 

 

 

 

 

 

 

 

 

292,075

 

 

 

 

 

 

 

 

 

83,853

 

 

 

 

   

 

 

 

 

130,575

 

 

 

 

 

 

 

 

 

56,853

 

 

 

 

 

 

 

 

 

1,082,831

 

 

 

 

Former Executive Officer:

Anne H. Lloyd

Executive Vice

President and CFO

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

580,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,353,145

 

 

 

 

       

 

 

 

 

446,227

 

 

 

 

    869,162    

 

 

 

 

78,089

 

 

 

 

    3,327,046  
 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

540,850

 

 

 

 

 

 

 

 

 

526,139

 

 

 

 

 

 

 

 

 

1,067,845

 

 

 

 

         

 

 

 

 

490,109

 

 

 

 

 

 

 

 

 

91,421

 

 

 

 

 

 

 

 

 

2,716,364

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

525,325

 

 

 

 

 

 

 

 

 

319,398

 

 

 

 

 

 

 

 

 

603,530

 

 

 

 

 

 

 

 

 

233,668

 

 

 

 

         

 

 

 

 

253,253

 

 

 

 

 

 

 

 

 

88,118

 

 

 

 

 

 

 

 

 

2,023,292

 

 

 

 

 

1 

The amounts in column (d) for 2016 and 2015 reflect the cash bonuses to the named individuals earned under annual incentive arrangements. The amounts in this column include the amounts of bonus irrevocably deferred in common stock units at the election of each named executive officer pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 46 under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan.” Column (e) includes the amounts mandatorily deferred in 2016 and 2015 under the Incentive Stock Plan.

 

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Executive Compensation    Summary Compensation Table

 

2 

The amounts in column (e) reflect the aggregate grant date fair value of awards made in the year reported, determined in accordance with FASB ASC Topic 718 (without any assumption for early forfeiture), of awards of RSUs; and awards of PSUs, which are described in more detail on pages 46 to 48 under the heading “Long-Term Incentive Compensation.” The amounts included in the table reflects the value of the units granted, which is subject to forfeiture if the executive does not remain in the employment of Martin Marietta for the requisite time period (generally three years) and, in the case of the PSUs, if Martin Marietta does not achieve the applicable performance criteria. The amounts reported for 2016 and 2015 include awards related to the amount of cash bonus irrevocably and mandatorily deferred in common stock units by each named executive officer pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 46 under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan”. The amounts in column (e) for 2016 and 2015 do not include the 20% discount on the Incentive Stock Plan units, which is reported in column (i). The amount in column (e) includes PSUs based on the target level of performance. Assuming the maximum payout under the PSUs granted in 2017, which will be determined in January 2020 based on the Company’s performance in 2017-2019, the amounts reported above for 2017 would be as follows: Mr. Nye, $4,767,283; Mr. Nickolas, $0; Ms. Bar, $1,371,617; Mr. McCunniff, $1,037,005; Mr. Grant, $927,846; and Ms. Lloyd, $1,455,585. Assumptions used in the calculation of these amounts are included in Note A to Martin Marietta’s audited financial statements for the fiscal year ended December 31, 2017, included in Martin Marietta’s Annual Report on Form 10-K filed with the SEC on February 24, 2018. The amounts of cash bonus deferred in 2017 for each named executive officer are included in column (e) as follows: Mr. Nye, $1,000,000; Mr. Nickolas, $0; Ms. Bar, $158,529; Mr. McCunniff, $80,273; Mr. Grant, $85,152; and Ms. Lloyd, $0.

 

3 

The amounts in column (f) reflect the grant date fair value, determined in accordance with FASB ASC Topic 718 (without any assumption for early forfeiture), of option awards made in the year reported.

 

4 

The amounts in column (g) for 2017 reflect the cash paid to the named individuals earned in 2017 and paid in 2018 under annual incentive arrangements discussed in further detail on pages 44 to 48 under the headings “Annual Cash Incentive: Executive Cash Incentive Plan” and “2017 CEO Annual Incentive Award Earned” and not deferred pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 46 under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan.”

 

5

The amounts in column (h) reflect the aggregate increase in the actuarial present value of the named executive officer’s accumulated benefits during 2017, 2016 and 2015, respectively, under all defined benefit retirement plans established by Martin Marietta determined using interest rate and mortality rate assumptions consistent with those used in Martin Marietta’s financial statements and include amounts which the named executive officer may not currently be entitled to receive because such amounts are not vested.

 

6 

The amount shown in column (i) for 2017 reflects for each named executive officer: matching contributions allocated by Martin Marietta to each of the named executive officers pursuant to the Savings and Investment Plan, which is more fully described on page 56 under the heading “Retirement and Other Benefits,” the value attributable to life insurance benefits provided to the named executive officers, which is more fully described on page 56 under the heading “Retirement and Other Benefits”; and the value attributable to personal use of leased automobiles provided by Martin Marietta. These values are included as compensation on the W-2 of named executive officers who receive such benefits. Each such named executive officer is responsible for paying income tax on such amount. None of the elements that are perquisites or personal benefits exceed the greater of $25,000 or 10% of the total perquisites for each named executive officer. The amounts in column (i) also reflect the 20% discount from the market price of Martin Marietta’s common stock pursuant to the elective deferrals under the Incentive Stock Plan in each of 2016 and 2015, and the dollar value of dividend equivalents on units credited under the equity awards as computed for financial statement reporting purposes for each fiscal year ended December 31, 2017, 2016 and 2015 in accordance with FASB ASC Topic 718.

 

 

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Grants of Plan-Based Awards    Executive Compensation

 

Grants of Plan-Based Awards

The table below shows each grant of an award made to a named executive officer in the fiscal year ended December 31, 2017. This includes equity awards made to the named executive officers under the Stock Plan and the Incentive Stock Plan.

GRANTS OF PLAN-BASED AWARDS TABLE

 

         

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards

    Estimated Future Payouts
Under Equity Incentive
Plan Awards
   

All Other
Stock
Awards:
Number
of Shares

of Stock
or Units
(#)

    Grant Date
Fair Value
of Stock
and
Option
Awards
4
 

Name

 

Grant

Date

   

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

     

(a)

  (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (l)  

 

C. Howard Nye

 

 

 

 

 

2/22/18

 

 

1 

 

     

 

571,542

 

 

 

   

 

3,750,000

 

 

 

     

 

3,233

 

 

 

   

 

21,214

 

 

 

     

 

685,784

 

 

 

 

 

 

 

 

3/28/17

 

 

 

 

       

 

 

 

 

5,678

 

 

 

 

 

 

 

 

 

11,355

 

 

 

 

 

 

 

 

 

22,710

 

 

 

 

   

 

 

 

 

2,383,642

 

 

 

 

 

 

 

 

 

3/28/17

 

 

2 

 

             

 

 

 

 

9,755

 

 

 

 

 

 

 

 

 

2,047,770

 

 

 

 

 

James A. J. Nickolas

   

 

 

2/22/18

 

 

1  

 

 

     

 

129,702

 

 

 

   

 

7,500,000

 

 

 

         
    8/21/17 2                  6,636       1,320,232  

 

Roselyn R. Bar

   

 

2/22/18

 

1 

 

     

 

306,830

 

 

 

 

 

 

 

 

5,625,000

 

 

 

 

     

 

579

 

 

 

   

 

10,607

 

 

 

      122,817  
 

 

 

 

 

3/28/17

 

 

3 

 

       

 

 

 

 

1,634

 

 

 

 

 

 

 

 

 

3,267

 

 

 

 

 

 

 

 

 

6,534

 

 

 

 

   

 

 

 

 

685,809

 

 

 

 

 

 

 

 

 

3/28/17

 

 

2 

 

             

 

 

 

 

2,807

 

 

 

 

 

 

 

 

 

589,245

 

 

 

 

 

Donald A. McCunniff

 

 

 

 

2/22/18

 

1 

   

 

 

 

214,060

 

 

 

 

 

 

6,000,000

 

 

      303       8,486         64,272  
 

 

 

 

3/28/17

 

3 

       

 

 

 

1,235

 

 

 

 

 

 

2,470

 

 

 

 

 

 

4,940

 

 

   

 

 

 

518,502

 

 

 

 

 

 

 

3/28/17

 

 

2 

 

             

 

 

 

 

2,122

 

 

 

 

 

 

 

 

 

445,450

 

 

 

 

 

Daniel L. Grant

 

 

 

 

 

2/22/18

 

 

1 

 

     

 

 

189,227

 

 

 

 

 

   

 

5,625,000

 

 

 

     

 

357

 

 

 

   

 

10,607

 

 

 

      75,727  
 

 

 

 

 

3/28/17

 

 

3 

 

       

 

 

 

 

1,105

 

 

 

 

 

 

 

 

 

2,210

 

 

 

 

 

 

 

 

 

4,420

 

 

 

 

   

 

 

 

 

463,923

 

 

 

 

 

 

 

 

 

3/28/17

 

 

2 

 

             

 

 

 

 

1,898

 

 

 

 

 

 

 

 

 

398,428

 

 

 

 

 

Former Executive Officer:

Anne H. Lloyd

 

 

 

 

 

2/22/18

 

 

1 

 

   

 

 

 

 

446,227

 

 

 

 

 

 

 

 

 

7,500,000

 

 

 

 

         
 

 

 

 

 

3/28/17

 

 

3 

 

       

 

 

 

 

1,734

 

 

 

 

 

 

 

 

 

3,467

 

 

 

 

 

 

 

 

 

6,934

 

 

 

 

   

 

 

 

 

727,793

 

 

 

 

   

 

 

 

 

3/28/17

 

 

2 

 

                                                 

 

 

 

 

2,979

 

 

 

 

 

 

 

 

 

625,352

 

 

 

 

 

1 

The amounts shown in this row reflect the annual bonus that could have been earned in 2017, payable in 2018, pursuant to the Executive Cash Incentive Plan. For each named executive officer, the amounts shown in columns (d) and (e) reflect the portion of the annual bonus that would have been paid in cash if, respectively, target and maximum performance was achieved for the year (i.e., after reduction for the total portion that would be deferred pursuant to the Incentive Stock Plan pursuant to both mandatory and voluntary deferrals). The amounts shown in columns (g) and (h) reflect the portion of the annual bonus that would have been deferred pursuant to the Incentive Stock Plan if, respectively, target and maximum performance was achieved for the year, inclusive of the 20% discount. Participants in the Incentive Stock Plan for 2017 were approved on May 18, 2017. Therefore, Mr. Nickolas, who commenced employment with the Company in August 2017, did not participate in the Incentive Stock Plan in 2017. These awards are discussed under the heading “Annual Incentive Feature: Performance-Based Stock Purchase Plan” on page 46. The actual amounts paid are reflected in the Summary Compensation Table on page 51.

 

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Executive Compensation    Grants of Plan-Based Awards

 

2 

The amounts shown in column (i) reflect the number of RSUs granted in 2017 to each of the named executive officers pursuant to the Stock-Based Award Plan. These awards are discussed under the heading “Long-Term Incentive Compensation” on pages 46 to 48. These awards are also included in column (e) of the Summary Compensation Table on page 51.

 

3 

The amounts shown in columns (f), (g) and (h) reflect the threshold, target and maximum, respectively, levels of PSUs payable if the performance measurements are satisfied in the period 2017-2019. These awards are discussed under the heading “Long-Term Incentive Compensation” on pages 46 to 48.

 

4 

No options to purchase shares of Martin Marietta’s common stock were granted in 2017. The amounts shown in column (l) reflect the grant date fair value of each equity award computed in accordance with FASB ASC Topic 718.

 

Stock-based incentive awards have been a significant component of Martin Marietta’s management compensation. In 1998, the Board of Directors adopted and Martin Marietta’s shareholders approved the Stock Plan. In 2016, the Board of Directors and the shareholders approved amendments to the plan increasing the number of shares of Martin Marietta’s common stock available for equity awards. They also approved amendments to the plan designed to more directly tie long-term compensation incentives to Martin Marietta’s performance and enhance flexibility in structuring long-term incentive compensation packages by providing a mix of different types of long-term stock-based incentives. In addition, dividend equivalents that would have been paid in cash during the vesting period will be paid only if and when an award vests.

As amended, the plan authorizes the Management Development and Compensation Committee to award stock options, restricted stock and other stock-based incentive awards to employees of Martin Marietta for the purpose of attracting,

motivating, retaining and rewarding talented and experienced employees. Since 2016, Martin Marietta’s long-term compensation program consists of a mix of RSUs and PSUs for senior level employees and other select employees.

Vesting of the awards granted in 2017 is based on the achievement by Martin Marietta of performance measures described under “Long-Term Incentive Compensation” on pages 46 to 48.

A maximum of 5,800,000 shares of Martin Marietta’s common stock are authorized under the plan for grants to key employees. Each award under the plan is evidenced by an award agreement setting forth the number and type of stock-based incentives subject to the award and such other terms and conditions applicable to the award as determined by the Committee. No employee may receive annual grants for more than 300,000 shares of common stock with respect to (i) full-value awards or (ii) stock options or stock appreciation rights.

 

 

 

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Outstanding Equity Awards at Fiscal Year-End     Executive Compensation

 

Outstanding Equity Awards at Fiscal Year-End

The table below shows for each of the named executive officers information with respect to the unexercised stock options (columns (b), (c), (e), and (f)), stock unit awards (columns (g) and (h)) that have not vested, and equity incentive plan awards (columns (d), (i), and (j)) outstanding on December 31, 2017.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

 

    OPTION AWARDS     STOCK AWARDS  

Name

 

Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable

   

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

   

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 Vested1

($)

   

Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have

Not Vested
(#)

   

Equity
Incentive
Plan
Awards:
Market or
Payout
Value or
Unearned
Shares,
Units or

Other
Rights
That
Have Not
Vested
1

($)

 

(a)

 

 

(b)

 

   

(c)

 

   

(e)

 

   

(f)

 

   

(g)

 

   

(h)

 

   

(i)

 

   

(j)

 

 

C. Howard Nye

   

11,196

12,609

16,317

14,475

3,396

3,170

 

 

 

 

 

 

   

0

0

0

0

3,396

6,340

 

 

 

 

2 

3 

   

95.27

86.90

69.12

108.24

121.00

154.58

 

 

 

 

 

 

   

5/27/2018

5/12/2019

5/24/2020

5/23/2023

5/22/2024

5/21/2025

 

 

 

 

 

 

   

22,070

6,340

7,112

9,755

4,666

5,991

4 

5 

6 

7 

8 

9 

   

4,878,353

1,401,394

1,572,036

2,156,245

1,031,373

1,324,251

 

 

 

 

 

 

   

3,612

21,339

11,355

10 

11 

12 

   

798,396

4,716,773

2,509,909

 

 

 

James A. J. Nickolas

            6,636 13      1,466,821      

Roselyn R. Bar

   

3,096

3,485

4,513

4,004

940

827

 

 

 

 

 

 

   

0

0

0

0

937

1,651

 

 

 

 

2 

3 

   

95.27

86.90

69.12

108.24

121.00

154.58

 

 

 

 

 

 

   

5/27/2018

5/12/2019

5/24/2020

5/23/2023

5/22/2024

5/21/2025

 

 

 

 

 

 

   

9,913

1,653

1,566

2,807

757

1,121

4 

5 

6 

7 

8 

9 

   

2,191,170

365,379

346,149

620,459

167,327

247,786

 

 

 

 

 

 

   

1,620

4,697

3,267

10 

11 

12 

   

358,085

1,038,225

722,138

 

 

 

Donald A. McCunniff

   

1,818

3,226

2,271

1,332

 

 

 

 

   

0

805

756

1,331

 

 

2 

3 

   

69.12

108.24

121.00

154.58

 

 

 

 

   

5/24/2020

5/23/2023

5/22/2024

5/21/2025

 

 

 

 

   

8,127

1,332

980

2,122

481

485

4 

5 

6 

7 

8 

9 

   

1,796,392

294,425

216,619

469,047

106,320

107,240

 

 

 

 

 

 

   

1,328

2,942

2,470

10 

11 

12 

   

293,541

650,300

545,969

 

 

 

Daniel L. Grant

   

408

359

 

 

   

408

717

2 

3 

   

121.00

154.58

 

 

   

5/22/2024

5/21/2025

 

 

   

7,643

718

802

1,833

680

568

4 

5 

6 

7 

8 

9 

   

1,689,409

158,707

177,274

405,166

150,307

125,551

 

 

 

 

 

 

   

1,253

2,407

2,210

10 

11 

12 

   

276,963

532,043

488,498

 

 

 

Former Executive Officer:

Anne H. Lloyd

   

0

0

 

 

   

1,151

2,023

2 

3 

   

121.00

154.58

 

 

   

5/22/2024

5/21/2025

 

 

   

11,878

2,025

1,672

2,979

1,003

788

4 

5 

6 

7 

8 

9 

   

2,625,513

447,606

369,579

658,478

221,703

174,180

 

 

 

 

 

 

   

1,941

5,017

3,467

10 

11 

12 

   

429,039

1,108,958

766,346

 

 

 

 

1 

Based on the closing price of our common stock as of December 29, 2017 ($221.04).

 

2 

Options exercisable on May 22, 2018.

 

3 

Options exercisable ratably in installments on May 21, 2018 and 2019.

 

4 

RSU restrictions lapse August 21, 2019.

 

5 

RSU restrictions lapse on May 21, 2018.

 

6 

RSU restrictions lapse ratably in installments on February 4, 2018 and February 4, 2019.

 

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Executive Compensation    Outstanding Equity Awards at Fiscal Year-End

 

7 

RSU restrictions lapse ratably in installments on March 28, 2018, March 28, 2019 and March 28, 2020.

 

8 

Incentive Stock Plan units restrictions lapse on December 1, 2018.

 

9 

Incentive Stock Plan units restrictions lapse on December 1, 2019.

 

10 

The amount for these outstanding awards of PSUs are presented at the target performance levels. The awards generally vest at December 31, 2017.

 

11 

The amount for these outstanding awards of PSUs are presented at the target performance levels. The awards generally vest at December 31, 2018.

 

12 

The amount for these outstanding awards of PSUs are presented at the target performance levels. The awards generally vest at December 31, 2019.

 

13 

RSU vests as follows subject to continued employment on the dates of vesting: 1,506 units vest on December 31, 2018, 1,083 units vest on December 31, 2019, and 4,047 units vest on August 21, 2022. If Mr. Nickolas’ employment terminates prior to August 21, 2022 as a result of his voluntary termination or the Company’s termination of Mr. Nickolas for cause, all outstanding RSUs expire and he is required to return to the Company the value of any vested shares of common stock that vested in connection with this award.

Option Exercises and Stock Vested

The table below shows on an aggregated basis for each of the named executive officers information on (1) the exercise of options for the purchase of Martin Marietta’s common stock and (2) the vesting of stock, including RSUs, PSUs and Incentive Stock Plan units, during the last completed fiscal year. There are no awards of stock appreciation rights for Martin Marietta’s common stock or other similar instruments.

OPTION EXERCISES AND STOCK VESTED TABLE

 

    OPTION AWARDS     STOCK AWARDS  

Name

(a)

 

Number

of Shares
Acquired
on Exercise

(#)

(b)

   

Value

Realized
on Exercise

($)

(c)

   

Number of
Shares
Acquired
on Vesting

(#)

(d)

   

Value

Realized
on Vesting
1

($)

(e)

 

C. Howard Nye

    15,039       2,396,740       20,108       3,854,461  

James A. J. Nickolas

    0       0       0       0  

Roselyn R. Bar

    0       0       5,175       1,054,936  

Donald A. McCunniff

    1,819       308,057       3,789       792,065  

Daniel L. Grant

    0       0       3,085       979,118  

Former Executive Officer:

Anne H. Lloyd

    29,727       3,878,895       6,307       1,270,720  

 

1 

The amounts in column (e) include the value of RSUs and PSUs at the time of vesting and the appreciation of both mandatory and voluntary contributions under the Incentive Stock Plan.

 

Retirement and Other Benefits

In order to maintain market competitive levels of compensation, we provide retirement and other benefits to the named executive officers and other employees. The benefits under the defined benefit pension plan are more valuable for employees who remain with Martin Marietta for longer periods, thereby furthering Martin Marietta’s objectives of retaining individuals with more expertise in relevant areas and who can participate in management development for purposes of executive succession planning. All of Martin Marietta’s salaried employees in the United States are eligible to participate in the following retirement and other plans. The named executive officers participate in the plans on the same terms as Martin Marietta’s other salaried employees.

Pension Plan. We have a tax qualified defined benefit pension plan (“Pension Plan”) under which eligible full-time salaried

employees of Martin Marietta who have completed five continuous years of employment with Martin Marietta, including the named executive officers, earn the right to receive certain benefits upon retirement on a reduced basis at or after age 55 and on an unreduced basis at or after age 62. Retirement benefits are monthly payments for life based on a multiple of the years of service and the final average eligible pay for the five highest consecutive years in the last ten years before retirement, less an offset for social security. The amount is equal to the sum of (A) plus (B) plus (C) below:

 

(A)

1.165% of the participant’s final average eligible pay up to social security covered compensation, multiplied by the participant’s credited years of service up to 35 years;

 

(B)

1.50% of the participant’s final average eligible pay in excess of social security covered compensation, multiplied by the participant’s credited years of service up to 35 years; and

 

 

 

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Option Exercises and Stock Vested    Executive Compensation

 

(C)

1.50% of the participant’s final average eligible pay multiplied by the participant’s credited years of service in excess of 35 years.

Supplemental Excess Retirement Plan (SERP). We also have a nonqualified restoration plan that covers any employee in the defined benefit pension plan, including the named executive officers, who are highly compensated and whose qualified plan benefit is reduced by Internal Revenue Code benefit or pay limits in Sections 415(b) and 401(a)(17). The plan is based on the same formula as the qualified Pension Plan described above. Benefits under our nonqualified plan are paid from our general assets.

Savings and Investment Plan. The Savings and Investment Plan is a tax-qualified defined contribution retirement savings plan pursuant to which all employees in the United States, including the named executive officers, are eligible to contribute up to 25% or the limit prescribed by the Internal Revenue Service on a ROTH individual retirement account on a before-tax basis and up to an additional 17% of pay on an after-tax basis not to exceed a total of 25% of pay. We match 100% of the first 1% of pay and 50% of the next 5% of pay that is contributed by employees to the Savings and Investment Plan up to Internal Revenue Service limitations. All contributions as well as any matching contributions are fully vested upon contribution. Prior to 2015, the Company sponsored two defined contribution savings plans, the Performance Sharing Plan for salaried employees and the Savings and Investment Plan for hourly employees generally. The two plans were merged in 2014.

Retiree Medical. Eligible salaried employees who commenced employment with Martin Marietta prior to December 1, 1999 and who retire with at least 5 years of service are currently eligible for retiree medical benefits for life. Eligible salaried employees who commenced employment with Martin Marietta

between December 1, 1999 and December 31, 2001 and who retire with at least 15 years of service are currently eligible for retiree medical benefits until age 65. Eligible employees share the cost of retiree medical based on their years of service and a predetermined cap on total payments by Martin Marietta. Employees who commenced employment with Martin Marietta on or after January 1, 2002 are not eligible for retiree medical benefits. Mr. Nye, Mr. Nickolas, Mr. McCunniff and Mr. Grant are not eligible for retiree medical benefits as each commenced employment with Martin Marietta after 2002.

Medical Insurance. Martin Marietta provides an opportunity to all of its salaried employees in the United States and the employees’ immediate family members to select health, dental and vision insurance coverage. Martin Marietta pays a portion of the premiums for this insurance for all employees. All employees in the United States, including the named executive officers, pay a portion of the premiums depending on the coverage they choose.

Life and Disability Insurance. Martin Marietta provides to all of its salaried employees in the United States, including the named executive officers, long-term disability and life insurance that provides up to 1.5 times base salary at no cost to the employee. All employees in the United States, including the named executive officers, can choose additional coverage and pay a portion of the premiums depending on the coverage they choose. In addition, Martin Marietta pays an amount equal to one year of base salary in the event of death of any active salaried employee.

Housing Allowance and Relocation Costs. Martin Marietta provides relocation benefits, including a housing allowance, to certain employees upon their employment with Martin Marietta or in conjunction with a job relocation or promotion.

 

 

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