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)

 

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April 10, 2019

Dear Fellow Shareholder:

 

On behalf of the Martin Marietta Board of Directors and executive officers, it is my pleasure to invite you to our 2019 Annual Meeting of Shareholders.

 

Continued to Deliver Strong Financial Results

2018 was another outstanding year of achievement at Martin Marietta. Our results benefitted from the successful acquisition and integration of Bluegrass Materials. We delivered top-line revenue growth and translated that growth into increased profitability. We outperformed our peers in 2018, and also outperformed the S&P 500 and S&P 500 Materials indices over the 3- and 5-year periods ended December 31, 2018. Our shareholders saw a total return of 29% and 81%, respectively, over these periods. We increased our dividend 9% in August 2018 and have returned $1.4 billion to shareholders since announcing a 20 million share repurchase authorization in February 2015.

 

Shareholder Engagement, Enhanced Corporate Governance and Refreshed Board Membership

We stayed engaged with shareholders and other key stakeholders during 2018. In response to valuable feedback from shareholders and our 2018 Say On Pay vote of 78.9%, the Board eliminated the excise tax gross-up, walk-right and the value of perquisites in the severance calculation in the Employment Protection Agreements and eliminated the single-trigger vesting upon a change in control for equity grants beginning in 2019. Our investor outreach in 2018 extended to 111 meetings with 324 investor groups, and conversations with most of our top 30 shareholders. We visited with our shareholders across the United States and in Toronto, London, Edinburgh, Frankfurt, Geneva and Paris.

 

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Over the past three years, we have added four new independent directors, including Dorothy M. Ables who joined the Board in November 2018. We are delighted that Ms. Ables is on our Board, as she brings a strong background and adds a new and diverse perspective to our Board mix. We will continue to recruit directors who offer diverse perspectives, strong business and professional experience, and unique skills to the Board. We are grateful to Dennis L. Rediker who will retire from the Board upon the expiration of his term at the 2019 Annual Meeting. Dennis made many valuable contributions to the Board during his tenure.

World-Class Safety Performance

In 2018, we continued our impressive safety performance. 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, 2018’s results demonstrate this goal is attainable. Our company-wide Lost Time Incident Rate (LTIR) was 0.20, a world-class LTIR for the second year in a row.

Sustainability

We also issued our fourth Sustainability Report in 2018 in response to our shareholders’ request that we share our story on the efforts and improvements we are making in this important aspect. In addition, we have enhanced our reporting in this document and the 2018 Annual Report to further describe our world-class safety programs and performance, targeted and intentional support of education and health, and environmental programs that ensure operational excellence. We have also discussed more fully the risks associated with various sustainability matters.

Your Vote Matters

I urge you to cast your vote promptly—even if you plan to attend the Annual Meeting. We encourage you to vote so that your shares will be represented 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 9, 2019

To Our Shareholders:

The Annual Meeting of Shareholders of Martin Marietta Materials, Inc. will be held on Thursday, May 9, 2019, 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 nine (9) nominees named in the attached proxy statement, each to serve for a one-year term until 2020, and until their successors are duly elected and qualified;

  

 

2

  

Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for 2019;

  

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 8, 2019 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements of the meeting.

 

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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 10, 2019. We have enclosed our 2018 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 10, 2019

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL SHAREHOLDER MEETING TO BE HELD ON MAY 9, 2019:

Martin Marietta’s proxy statement, form of proxy card and 2018 Annual Report to Shareholders are also available at ir.martinmarietta.com/investor-relations/reports-filings.

 


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Table of Contents

 

Proxy Summary

     1  

The Board of Directors

     7  

Board Committees

     11  

Proposal 1 – Election of Directors

     15  

Director Compensation

     20  
Security Ownership of Certain Beneficial Owners and Management      22  

Section 16(a) Beneficial Ownership Reporting Compliance

     23  
Corporate Governance Matters      24  

Corporate Governance Philosophy

     24  
Proposal 2 – Independent Auditors      29  

Summary of Fees

     29  

Pre-Approval Policies and Procedures

     29  

Audit Committee Review

     29  
Audit Committee Report      30  
Management Development and Compensation Committee Report      31  
Compensation Committee Interlocks and Insider Participation in Compensation Decisions      31  
Compensation Discussion and Analysis      32  

Introduction

     32  

Executive Summary

     33  

Shareholder Outreach and Shareholder Feedback on 2018 Say On Pay

     33  

Our 2018 Performance

     34  

Safety and Sustainability

     36  

Components of Executive Compensation - Performance-Related Compensation

     39  

Pay Decisions and Compensation Governance Practices

     39  

2018 Chairman, President and CEO
Compensation

     40  

CEO Target Opportunity Mix

     40  

Determination of CEO Compensation

     40  

2018 Named Executive Officers’ Compensation - Our Compensation Strategy

     41  

Considerations Regarding 2018 Compensation

     43  

2018 Base Salary

     43  

2018 Annual Cash Incentive Goals and Results

     44  

2018 Long-Term Incentive Compensation

     46  

PSU Awards (55% of LTI Award)

     46  

Selection of Relative TSR

     47  

Performance-Based RSU Awards (45% of LTI Award)

     47  

2018 LTI (PSU and RSU) Goals

     47  

2018-2020 Performance Goals

     48  

2016-2018 PSU Award Payouts

     48  

Ongoing Corporate Governance Policies

     49  

Compensation Decision Process

     49  

Compensation Program Risk Assessment

     50  

Stock-Based Awards Generally

     51  

Stock Ownership Requirements

     51  

Clawback Policy

     51  

Our Use of Independent Compensation Consultants

     52  

Practice Regarding Timing of Equity Grants

     52  

Perquisites

     53  

Retirement and Other Benefits

     53  

Potential Payments upon Termination or Change of Control

     53  

Tax and Accounting Implications

     53  
Executive Compensation      54  

Executive Officer Compensation

     54  

Summary Compensation Table

     54  

Grants of Plan-Based Awards

     56  

Outstanding Equity Awards at Fiscal Year-End

     57  

Option Exercises and Stock Vested

     58  

Pension Benefits

     60  

Potential Payments Upon Termination or Change of Control

     61  

CEO Pay Ratio Disclosure

     64  
Proposal 3 – Advisory Vote on the Compensation of Our Named Executive Officers      65  
Securities Authorized for Issuance Under Equity Compensation Plans      66  

Description of the TXI Legacy Plan

     66  

Description of the Deferred Compensation Plan

     67  
Annual Meeting and Voting Information      68  
Incorporation by Reference      70  
Shareholders’ Proposals for 2020 Annual Meeting      70  
Appendix A – Martin Marietta Guidelines for Potential New Board Members      A-1  
Appendix B – Non-GAAP Measures      B-1  

 

 

 

 

 

 

2019 PROXY STATEMENT

 

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Proxy Summary

This Proxy Summary highlights information about Martin Marietta Materials, Inc. (“Martin Marietta” or the “Company”) 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 10, 2019 to shareholders of record on March 8, 2019.

2019 Annual Meeting of Shareholders

 

 

Meeting Date:

 

 

May 9, 2019

   

 

Place:

 

 

2710 Wycliff Road, Raleigh, NC

Time:

 

 

11:30 am ET

 

    Record Date:

 

 

March 8, 2019

 

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 Nine Director Nominees  

LOGO  FOR ALL DIRECTOR NOMINEES

    15  

2

  Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors  

LOGO  FOR

    29  

3

  Advisory Vote on the Company’s Named Executive Officer Compensation  

LOGO  FOR

    65  

 

 

 

 

 

 

 

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2019 PROXY STATEMENT

 

 

 

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Shareholders Benefit from Martin Marietta’s Record 2018 Performance

The past year was one of improved key financial metrics and disciplined capital allocation. In addition, through asset and portfolio rationalization, we strengthened our foundation for long-term financial success, including through our purchase of Bluegrass Materials Company in 2018. Largely driven by acquisitions, our record 2018 financial performance is a continuation of the growth in total revenues, gross profit, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) and adjusted earnings per diluted share (EPS) since 2011. These trends, along with our record financial results, validate both our strategic plan and our ability to logically and successfully execute against that plan. Disciplined execution against our capital allocation priorities extended beyond strategic acquisitions in 2018 as we resumed our share repurchase program and meaningfully increased our dividend.

 

 

Adjusted operating earnings growth1 of $33 million, or 5%, over 2017; reported 2018 gross profit of $966.6 million and earnings from operations of $690.7 million.

 

 

 

Net earnings attributable to Martin Marietta of $470 million, as compared with 2017 net earnings of $713.3 million, which was an increase of 68% over 2016 and included a one-time, non-cash benefit of $258.1 million resulting from the Tax Cuts and Jobs Act of 2017 (2017 Tax Act).

 

 

 

Record adjusted consolidated earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) of $1.104 billion, resulting in a 26% Adjusted EBITDA margin.2

 

 

 

$150 million contribution to the qualified defined benefit pension plan, which is fully funded.

 

 

 

Repurchase of 521,000 shares for $100.4 million. We have repurchased 5.9 million shares since announcing a 20 million share repurchase authorization in February 2015.

 

 

 

Dividend increase of 9% in August 2018.

 

 

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2018 adjusted earnings from operations excludes an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; asset and portfolio rationalization charges; and acquisition-related expenses, net. 2017 adjusted earnings from operations excludes acquisition-related expenses. See Appendix B for reconciliation to reported earnings from operations.

 

 

  2 

2018 EBITDA has been adjusted to exclude the impacts of acquisition-related items and the charge related to asset and portfolio rationalization. See Appendix B for reconciliation to reported net earnings attributable to Martin Marietta.

 

 

  3 

2018 adjusted gross profit excludes the $18.7 million impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. See Appendix B for reconciliation to reported gross profit.

 

 

  4 

The 2017 earnings per diluted share has been adjusted to exclude from the $11.25 2017 diluted earnings per share the one-time $4.07 per diluted share tax benefit of the 2017 Tax Act. See Appendix B for reconciliation to reported earnings per diluted share.

 

 

 

 

 

 

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2019 PROXY STATEMENT

 

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Corporate Governance Highlights:

Creating Sustainable Long-Term Shareholder Value

 

 

Recent Updates

 

   

 

   Directors elected annually to serve one-year terms

 

 

   Elimination of excise tax gross-up, walk-right and value of perquisites in the severance calculation in Employment Protection Agreements

 

 

   Elimination of single-trigger vesting in equity award agreements for grants beginning in 2019

 

 

 

   Adoption of Stock Ownership Guidelines

 

 

   Adoption of Hedging and Pledging Policy

 

 

   Adoption of Clawback Policy

 

 

   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

 

 

 

Board of Directors

 

   

 

   Lead Independent Director who is a former public company CEO

 

 

   10 current Directors; 9 or 90% are independent

 

 

   Key Committee Chairs are independent, consisting of independent Chairs of the Audit Committee, Management Development and Compensation Committee, and Nominating and Corporate Governance Committee

 

 

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

 

 

   All Directors attended 100% of all Board and Committee meetings during their term of service in 2018

 

 

   Two women, or 20%, of our Board serve in leadership roles

 

 

   90% of Board has experience on other public company boards and 60% are current or former public company CEOs

 

 

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

 

 

   Annual Board and individual performance evaluations are conducted, including Director peer review

 

 

   Risk oversight by full Board and Committees

 

 

   Chair/CEO is the only Board member who is currently also management

 

 

   Only two members of our 10-member Board of Directors are currently or formerly management of the Company

 

 

 

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. We also created a new position to better focus on these important issues—Senior Vice President–Sustainability, Community Relations and Communications

 

 

  No shares with enhanced voting rights

 

 

 

 

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Board Composition

 

 

We seek to include a diverse group of Directors on our Board to provide different perspectives to the Board’s oversight responsibilities. Our nominees for Board election demonstrate diversity in the form of experience, geography, gender, ethnicity, age and tenure. We were recognized in 2019, 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 eight consecutive years for championing board diversity. With the addition of Ms. Ables in 2018, our Board has strengthened an important element of diversity:

 

 

 

   33% of our Board nominees are women

 

   44% of our Board nominees bring diversity in gender or ethnicity to our Board

 

   Our Board refreshment has resulted in a decrease of the average tenure, with a greater mix of Directors with long-term knowledge of the Company, its strategy, opportunities and challenges and those with new perspectives

DIRECTOR NOMINEES

 

 

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Board Attendance

 

In 2018, during their term of service, all directors attended 100% of the total Board and Committee meetings to which they were assigned. All directors then in office attended the May 2018 Annual Meeting and all directors expect to attend the May 2019 Annual Meeting.

 

 

 

 

 

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2019 PROXY STATEMENT

 

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Effective Shareholder Engagement

Accountability to our shareholders is an important component of the Company’s success. We recognize the value of building informed relationships with our investors that promote further transparency and accountability. While proxy voting is one direct way to influence corporate behavior, proactive engagement with our investors can be effective and impactful. Investor views are communicated to the Board and are instrumental in the development of our governance, compensation and sustainability policies and inform our business strategy.

During 2018, we engaged in person, by telephone and/or written correspondence with our largest institutional investors and other significant shareholders on an array of governance topics, including our executive compensation programs.

At our 2018 Annual Meeting of Shareholders, 78.9% of the shares cast voted in favor of the advisory vote on executive compensation, or Say On Pay. In contrast, more than 96% of shares cast voted in favor of Say On Pay in 2017. We made meaningful changes in 2018 to our compensation program based on feedback from shareholders consisting of:

 

   

The elimination of the excise tax gross-up in executive officers’ Employment Protection Agreements

 

   

The elimination of the walk-right and value of perks in the severance calculation in executive officers’ Employment Protection Agreements

 

   

The decision to not include these provisions in future Employment Protection Agreements

 

   

The elimination of the single-trigger vesting for equity award beginning in 2019

 

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Proactively Engaging and Responding to Shareholders

 

   
 

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CORPORATE GOVERNANCE HIGHLIGHTS

 

 Eliminated staggered board—Directors elected for 1-year terms

 

Eliminated gross-up, walk-right on Change of Control

 

Eliminated single-trigger vesting for equity awards beginning in 2019

 

 Established robust stock ownership guideline for Officers and Directors

 

 Implemented hedging and pledging policy

 

 Adopted clawback policy

 

 Implemented majority voting standard

 

Eliminated shareholder rights plan

 

 Adopted proxy access

 

 Added 4 new Board members since 2016

 

 Published Annual Sustainability Report

   

 

 

          

 

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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 2018, 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 2018 was performance-based other than base salary: 87% of our CEO’s compensation was performance-based and approximately 80% of our other NEOs’ compensation was performance based.*

 

 

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  *

Based on grant date value of PSUs and RSUs.

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 all Director Nominees;

 

 

   

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.

 

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, 2018. We undertake no responsibility to publicly update or revise any forward-looking statement.

 

 

 

 

 

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2019 PROXY STATEMENT

 

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The Board of Directors

The Board of Directors currently consists of ten members, nine 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 2019 Annual Meeting of Shareholders, our Directors are elected to one-year terms of office.

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 2018 Annual Meeting, for a nomination to be properly made by a shareholder at the 2019 Annual Meeting, the shareholder’s notice must have been sent to, and received by, our Secretary at our principal executive offices between January 18, 2019 and February 17, 2019. No such notice was received during this period.

The Bylaws of the Corporation provide that a Director will retire at the Annual Meeting of Shareholders following the Director’s 75th birthday. One of our current Directors, Dennis L. Rediker, reached this mandatory retirement age this year and is not eligible for election at the Annual Meeting for a new term. Mr. Rediker has stated that he intends to serve as a Director through the commencement of the 2019 Annual Meeting of Shareholders, after which he will retire from the Board. Mr. David Maffucci also retired from Board service in 2018. The Board extends its sincere appreciation to both Mr. Rediker and Mr. Maffucci for their years of service and thoughtful Board leadership. Mr. Rediker and Mr. Maffucci gave generously of their time and consistently provided the Board with independent insight and advice, which have been invaluable to the Board and to Martin Marietta. In light of the retirement of Mr. Rediker, the Board of Directors has set the size of the Board at nine effective upon the commencement of the 2019 Annual Meeting.

The Board of Directors has nominated nine persons for election as Directors to serve a one-year term expiring in 2020. Unless otherwise directed, proxies will be voted in favor of these nominees. Each nominee has agreed to serve if elected. Each of the nominees 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. 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.

BOARD EFFECTIVENESS AND REFRESHMENT

Board composition is one of the most critical areas of focus for the Board of Directors. Having the right mix of people who bring diverse perspectives, business and professional experiences, and skills provides a foundation for robust dialogue, informed advice and collaboration in the boardroom. The Nominating and Corporate Governance Committee develops criteria for open Board positions, taking into account a variety of factors, which may include current Board member skills, composition, age, tenure, other diversity factors, the range of talents and experience that would best complement those already represented on the Board, the need for specialized expertise, and anticipated retirements to define gaps that may need to be filled through the board refreshment process. The Board strives to ensure an environment that encourages diverse critical thinking and values innovative, strategic discussions to achieve a higher level of success for the Company.

The Nominating and Corporate Governance Committee screens and recommends candidates for nomination by the full Board. It uses a variety of methods to help identify potential Board candidates with the desired skills and background needed for the Company’s business, including from time to time informal networks, third party search firms and other channels. When the Committee is assisted from time to time with its recruitment efforts by an outside search firm, the firm recommends candidates that satisfy the criteria defined by the Board. The search firm provides background research and pertinent information regarding prospective candidates.

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

 

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    The Board of Directors

 

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;

 

 

   

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 15 and the skills matrix on page 9 set 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.

 

 

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The Board of Directors    

 

The following sets forth certain information for each nominee for election regarding age, gender, diversity, tenure and skills that are important to the Board of Directors.

 

Demographics

and Background

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

Age

 

61     

 

68     

 

71     

 

68     

 

56     

 

65     

 

70     

 

57     

 

74     

 

Gender

 

F     

 

F     

 

M     

 

M     

 

M     

 

F     

 

M     

 

M     

 

M     

Ethnic Diversity

     

     

     

     

     

Tenure

 

<1     

 

17     

 

1     

 

3     

 

9     

 

15     

 

11     

 

3     

 

26     

 

Qualifications

and Experience

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

Why is this important to Martin Marietta?

   
 

 

Corporate Governance/Legal

 

                   

Ensures background and knowledge necessary to provide effective oversight and governance

 
 

 

Current or Former CEO of Public Company

 

                   

Strong leadership skills and critical experience with demands and challenges with managing a large public organization

 
 

 

Financial or Accounting

 

                   

Enables in-depth analysis of our financial statements, capital structure, financial transactions, and financial reporting process

 
 

 

Government Relations/

Regulatory/

Sustainability

 

                   

Critical for understanding complex regulatory and governmental environment that impacts our business and our strategic goals relating to sustainability

 
 

 

Logistics/

Operations

 

                   

Necessary in overseeing a sustainable company that relies heavily on logistics

 
 

 

Other Public

Boards

 

                   

Adds perspective important to shareholders and public company governance

 
 

Risk Management

                   

 

Facilitates understanding of the risks facing the Company and appropriate process and procedures for managing them

 

 
 

Strategy/M&A

                   

 

Supports setting of long-term corporate vision, disciplined strategic development and integration to facilitate company’s growth

 

 
 

Technology

                                 

 

Important to facilitate business objectives and security of Company’s proprietary and confidential data

 

   

The Board has implemented a number of processes to assist it in refreshing the Board in an appropriate manner that helps create shareholder value.

 

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    The Board of Directors

 

Board Refreshment Elements

 

 

Review of Board Candidates

 

 

The Board seeks a diverse group of candidates who, at a minimum, possess the background, skills, expertise and time to make a significant contribution to the Board, the Company and its shareholders. The Corporate Governance Guidelines list criteria against which candidates may be judged. In addition, the Nominating and Corporate Governance Committee considers, among other things:

 

  input from the Board’s self-assessment process to prioritize areas of expertise that were identified;

 

  investor feedback and perceptions;

 

  the candidates’ skills and competencies to ensure they are aligned with the Company’s future strategic challenges and opportunities; and

 

  the needs of the Board in light of recent and anticipated Board vacancies.

 

During the process of identifying and selecting director nominees, the Nominating and Corporate Governance Committee screens and recommends candidates for nomination by the full Board. The Bylaws provide that the size of the Board may range from 9 to 11 members.

 

Director candidates also may be identified by shareholders and will be evaluated under the same criteria applied to other director nominees and considered by the Nominating and Corporate Governance Committee. Information on the process and requirements for shareholder nominees may be found in our Bylaws on the Corporation’s website at ir.martinmarietta.com/investor-relations/corporate-governance.

 

 

Board Assignments

 

 

In February, the Nominating and Corporate Governance Committee reviews the membership, tenure, leadership and commitments of each of the Committees and considers possible changes given the qualifications and skill sets of members on the Board or a desire for committee rotation or refreshment. The Nominating and Corporate Governance Committee also takes into consideration the membership requirements and responsibilities set forth in each of the respective Committee charters and the Corporate Governance Guidelines as well as any upcoming vacancies on the Board due to our mandatory retirement age. The Nominating and Corporate Governance Committee recommends to the Board any proposed changes to Committee assignments and leadership to be made effective at the next annual meeting of shareholders. The Nominating and Corporate Governance Committee also reviews the operation of the Board generally.

 

 

Refreshment

 

 

The Board has added four new directors in the past three years. Mr. Rediker will retire at the Annual Meeting and Mr. Zelnak is expected to retire in May 2020, providing further opportunity for refreshment. At the same time, obtaining a detailed understanding of the Corporation’s business takes time. We believe that implementing term limitations may prevent the Board from taking advantage of insight that longer tenure brings.

 

 

Annual Performance

Assessment

 

 

The Board conducts a self-assessment of its performance and effectiveness as well as that of its Committees on an annual basis. The self-assessment helps the Nominating and Corporate Governance Committee track progress in certain areas targeted for improvement from year-to-year and to identify ways to enhance the Board’s and its Committees’ effectiveness. For 2018, each director completed a written questionnaire. The questions were open-ended to solicit candid feedback. The collective ratings and comments are compiled and summarized and then discussed by the Nominating and Corporate Governance Committee and the full Board.

 

 

Onboarding and

Continuing Education

 

 

New directors are provided with an orientation about the Company, including our business operations, strategy and governance. Directors also are provided continuing education by subject matter experts and/or continuing education programs sponsored by educational and other institutions to assist them in staying abreast of developments in corporate governance and critical issues relating to the operation of public company boards. Members of our senior management regularly review with the Board the operating plan of each of our business segments and the Company as a whole. The Board also conducts periodic visits to our facilities as part of its regularly scheduled Board meetings.

 

Tenure Guidelines

 

   

Mandatory Retirement Age

 

Directors must retire at the annual meeting following his or her 75th birthday.

   

Employment Change

 

Directors must report to the Chairman of the Board and Chairman of the Nominating and Corporate Governance Committee regarding any significant change in principal employment or responsibilities to assure he/she can commit the appropriate time to Board service.

 

 

 

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The Board of Directors    

 

BOARD, COMMITTEE AND INDIVIDUAL

DIRECTOR EVALUATIONS

 

As a part of our continuous improvement process intended to enhance the Board’s overall effectiveness, the Board regularly evaluates its performance through self-assessments, corporate governance reviews and periodic charter reviews. Those evaluations, changes in our business strategy or operating environment, and the future needs of the Board in light of anticipated director retirements are used to identify desired backgrounds and skill sets for future Board members. The feedback solicited from Board members regarding the Board, each Committee on which they serve, and individual Board members is one of the tools used to assist the Nominating and Corporate Governance Committee in its responsibility to evaluate Board and Committee performance annually. For 2018, each director completed a written questionnaire. The questions were intended to solicit candid feedback by asking for comments. The collective ratings and comments were compiled, summarized and presented to the Nominating and Corporate Governance Committee, the Chair of which then followed-up as appropriate and shared the feedback with the full Board and the Chair of each Board Committee.

 

LOGO

Board committee and individual performing assessments Questionnaire The Nominating and Corporate Governance Committee (the Committee) reviews the Questionnaire and performance assessment process to determine if they are effective and whether any changes are appropriate. Each director annually completes a questionnaire assessing the Board, Committees on which she/he serves and each director for review by the Chair of the Committee. One-on-One Discussions The Chair of the Committee follows up with each director who submits comments, suggestions or other feedback for a candid discussion. Closed Session The Chair of the Committee discusses the results and feedback on an unattributed basis with the Committee. Board Summary The results are discussed with each of a session of the independent Board members, with the Chairman of the Board, and with each Committee Chair. Feedback Policies and practices are updated as appropriate as a result of the feedback.

 

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     Independent    
Director
Audit
    Committee    

Ethics,

Environment,
    Safety and    

Health

Committee

Executive
    Committee    
Finance
    Committee    

Management
    Development    

and

Compensation
Committee

Nominating
    and Corporate    

Governance
Committee

             

Dorothy M. Ables

Financial Expert

 

LOGO

 

LOGO

             
             

Sue W. Cole

LOGO   LOGO Chair
             
             

Smith W. Davis

LOGO   LOGO LOGO
             
             

John J. Koraleski

Financial Expert

 

LOGO

 

LOGO

 

 

 

LOGO

 

 

 

 

LOGO

 

             
             

C. Howard Nye*

  Chair
             
             

Laree E. Perez

Financial Expert

 

LOGO

 

 

Chair

 

 

 

 

 

LOGO

 

 

 

             
             

Michael J. Quillen

Lead Independent Director

 

LOGO

 

 

 

 

LOGO

 

 

 

 

LOGO

 

 

 

 

 

Chair

 

 

 

             
             

Dennis L. Rediker

Financial Expert

 

LOGO

 

 

LOGO

 

 

 

 

 

Chair

 

 

 

             
             

Donald W. Slager

LOGO LOGO LOGO
             
             

Stephen P. Zelnak, Jr.

LOGO   LOGO Chair
             

Number of Meetings
in 2018

 

8

 

 

 

2

 

 

 

 

0

 

 

4

 

 

 

4

 

 

6

 

*

Mr. Nye is the only member of management who sits on the Board.

 

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Table of Contents

The Board of Directors    Board Committees

 

The Executive Committee held no meetings during 2018. 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.

 

 

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

 

LOGO

AUDIT COMMITTEE

 

Current Members:

Laree E. Perez (Chair)

Dorothy M. Ables

John J. Koraleski

Dennis L. Rediker

  

Meetings in 2018:

8

  

Average Attendance in 2018:

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 quarter.

 

  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.

 

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

 

 

Other Governance Matters:

All four members of the Audit Committee, including the Chair, are audit committee financial experts under applicable SEC regulations.

 

The Chair of the Audit Committee is an independent Director.

 

The Chair of the Audit Committee has experience serving as a Chair and member of other public company Audit Committees.

 

All members satisfy the audit committee experience and independence standards required by the New York Stock Exchange (NYSE).

 

 

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Board Committees    The Board of Directors

 

LOGO

 

Current Members:

Dennis L. Rediker (Chair)

Smith W. Davis

Laree E. Perez

Stephen P. Zelnak, Jr.

  

Meetings in 2018:

2

  

Average Attendance in 2018:

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 discusses our sustainability efforts and annual Sustainability Report.

 

  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.

 

  Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board.

ETHICS, ENVIRONMENT, SAFETY AND HEALTH COMMITTEE

 

LOGO

 

Current Members:

Stephen P. Zelnak, Jr. (Chair)

Michael J. Quillen

Donald W. Slager

  

Meetings in 2018:

4

  

Average Attendance in 2018:

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 charitable contributions budget.

 

  Reviews annually the adequacy of the Committee charter and recommends proposed changes to the Board.

FINANCE COMMITTEE

 

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The Board of Directors    Board Committees

 

LOGO

MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

 

Current Members:

Michael J. Quillen (Chair)

Sue W. Cole

John J. Koraleski

  

Meetings in 2018:

4

  

Average Attendance in 2018:

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 executive 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.

 

  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, applicable rules of the Securities and Exchange Commission (SEC), and the Committee’s charter.

 

 
LOGO

 

Current Members:

Sue W. Cole (Chair)

Smith W. Davis

Donald W. Slager

  

Meetings in 2018:

6

  

Average Attendance in 2018:

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.

 

  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 ir.martinmarietta.com/investor-relations/corporate-governance. A copy may also be obtained upon request from Martin Marietta’s Corporate Secretary.

 

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

 

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Table of Contents

Proposal No. 1

Election of Directors

The following sets forth the age, experience, key attributes and other biographical information for each member of the Board of Directors who is a nominee for election for a one-year term until 2020.

 

 

LOGO

 

DOROTHY M.

    ABLES

 

Director Since: 2018

 

Age: 61

 

Committees:

 

 

LOGO

   

 

Ms. Ables joined the Martin Marietta Board in November 2018. Ms. Ables held a number of executive positions with Spectra Energy and predecessor companies, including serving from 2008 to 2017 as the Chief Administrative Officer of Spectra Energy Corp., a global energy infrastructure company, where she was responsible for human resources, information technology, support services, community relations and audit services. Prior to that, she served as Vice President of Audit Services and Chief Ethics and Compliance Officer for Spectra Energy and Senior Vice President and Chief Financial Officer for Duke Energy Gas Transmission. Spectra Energy was a Fortune 500 Company and one of North America’s leading pipeline and midstream companies prior to its acquisition by Enbridge Inc. in 2017. Ms. Ables started her career in the audit department of Peat, Marwick, Mitchell & Co.

 

Ms. Ables serves as an Independent Director of Cabot Oil & Gas Corporation, an independent oil and gas company, where she is a member of the Audit Committee and Compensation Committee. She served as a Director of Spectra Energy Partners, an affiliate of Spectra Energy Corp., from 2013 to 2017. Ms. Ables attended the University of Texas at Austin where she earned a Bachelor of Business Administration degree in Accounting.

    

 

Key attributes, experience and skills:

 

   Financial expertise acquired through serving as CFO of Duke Energy Gas Transmission and as Vice President of Audit Services of Spectra Energy Corp.

 

   Valuable business leadership in human resources, information technology, community relations, finance and financial statements

 

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

 

 

 

LOGO

 

SUE W. COLE

 

Director Since: 2002

 

Age: 68

 

Committees:

 

LOGO    LOGO

Chair

   

 

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 serves as Chair of the Compensation Committee of Biscuitville, Inc., where she was previously Chairman of the Board. 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 of Commerce, 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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Proposal 1: Election of Directors    Director Nominees

 

LOGO

 

SMITH W. DAVIS

 

Director Since: 2018

 

Age: 71

 

Committees:

 

LOGO    LOGO

   

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

 

 

 

LOGO

 

JOHN J.

    KORALESKI

 

Director Since: 2016

 

Age: 68

 

Committees:

 

LOGO    LOGO    LOGO

   

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

 

 

LOGO

 

 

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Director Nominees    Proposal 1: Election of Directors

 

LOGO

 

C. HOWARD NYE

 

Director Since: 2010

 

Age: 56

 

Chairman of the Board

 

Committees:

 

LOGO

 

Chair

 

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 General Dynamics (NYSE: GD), an American aerospace and defense multinational corporation and the world’s fifth-largest defense contractor. 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 was previously a member of the Board of CREE, Inc., until October 2018. 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, broad executive experience, and corporate governance expertise

 

   Broad strategic vision for the future growth of Martin Marietta

 

 

 

LOGO

 

LAREE E. PEREZ

 

Director Since: 2004

 

Age: 65

 

Committees:

 

LOGO    LOGO

Chair

 

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

Proposal 1: Election of Directors    Director Nominees

 



LOGO

 

MICHAEL J.

    QUILLEN

 

Director Since: 2008

 

Age: 70

 

Lead Independent Director

 

Committees:

 

LOGO    LOGO    LOGO

Chair

 

 

 

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 2018. 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: 57

 

Committees:

 

LOGO    LOGO

 

 

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 14 years of C-Suite experience

 

   More than 27 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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2019 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: 74

 

Committees:

 

LOGO    LOGO

Chair

   

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 Compensation

 

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 2018 paid in quarterly installments, measured from the end of the month during which the Annual Meeting of Shareholders is held, were as follows.

 

     

Cash Component Amount

           
     

Annual Board cash retainer

    $ 120,000                       
     

Annual Audit Committee chair retainer1

    $ 20,000          
     

Annual Management Development and Compensation Committee chair retainer2

    $ 17,500          
     

Annual Finance Committee chair retainer2

    $ 15,000          
     

Annual Nominating and Corporate Governance Committee chair retainer2

    $ 15,000          
     

Annual Ethics, Environmental, Health & Safety Committee chair retainer2

    $ 8,000          
     

Annual Audit Committee member retainer2

    $ 5,000          
     

Annual Lead Independent Director retainer3

    $ 30,250          
1 

This is in addition to the annual retainer and the annual Audit Committee member retainer

2 

This is in addition to the annual 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 or personal benefits in 2018.

Equity Compensation Paid to Board Members

Non-employee Directors received an award of restricted stock units (RSUs) with a value of $130,000 (rounded up to the nearest RSU) based on the closing price as of the date of grant,

which was generally immediately following the 2018 Annual Meeting of Shareholders in May 2018. In May 2018, this award was 609 RSUs. Ms. Ables received her RSU award of 744 RSUs when she joined the Board. The RSUs granted to the Directors in 2018 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.

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 2018 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. By resolution adopted by Martin Marietta’s Board of Directors on May 17, 2018, amounts deferred under the plan in common stock are credited toward units of common stock at 100% of 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. Prior to that, amounts deferred under the plan in common stock were 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.

 

 

 

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Table of Contents

Director Compensation     Proposal 1: Election of Directors

 

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, 2018.

 

Name1

(a)

 

Fees
Earned or

Paid in Cash

 ($)2

(b)

 

Stock
Awards

 ($)3

(c)

   

Change in Pension
Value and
Nonqualified
Deferred
Compensation

Earnings

 ($)4

(f)

 

All Other
Compensation

($)5

(g)

 

Total

($)

(h)

 
         

Dorothy M. Ables

 

  31,250

 

 

130,073

 

 

         0

 

     357

 

 

161,680

 

         

Sue W. Cole

 

128,250

 

 

130,027

 

 

17,666

 

52,922

 

 

328,935

 

         

Smith W. Davis

 

  93,750

 

 

130,027

 

 

       13

 

  1,280

 

 

225,070

 

         

John J. Koraleski

 

120,000

 

 

130,027

 

 

     133

 

  9,887

 

 

260,047

 

         

David G. Maffucci6

 

  60,000

 

 

130,027

 

 

  4,600

 

17,075

 

 

211,702

 

         

Laree E. Perez

 

137,000

 

 

130,027

 

 

  8,287

 

26,381

 

 

301,695

 

         

Michael J. Quillen

 

158,625

 

 

130,027

 

 

  8,054

 

38,895

 

 

335,601

 

         

Dennis L. Rediker

 

126,000

 

 

130,027

 

 

13,625

 

37,034

 

 

306,686

 

         

Donald W. Slager

 

115,000

 

 

130,027

 

 

     142

 

  2,652

 

 

247,821

 

         

Stephen P. Zelnak, Jr.

 

128,250

 

 

130,027

 

 

  6,340

 

29,984

 

 

294,601

 

 

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 54.

 

2 

The amounts in column (b) reflect fees earned in 2018. 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 2018 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 for the February 28, 2018 payment, are as follows: Ms. Ables, 0; Ms. Cole, 665 units and $108,211 value, respectively; Mr. Davis, 463 units and $75,276 value, respectively; Mr. Koraleski, 624 units and $101,543, respectively; Mr. Maffucci, 64 units and $10,850 value, respectively; Ms. Perez, 0; Mr. Quillen, 824 units and $133,950 value, respectively; Mr. Rediker, 132 units and $21,477 value, respectively; Mr. Slager, 0; and Mr. Zelnak, 333 units and $54,182 value, respectively. The number of units credited to each of the Directors as of December 31, 2018, including units accumulated under the plan for all years of service as a Director, is as follows: Ms. Ables, 0; Ms. Cole, 15,917; Mr. Davis, 463; Mr. Koraleski, 624; Mr. Maffucci, 0; Ms. Perez, 5,258; Mr. Quillen, 7,266; Mr. Rediker, 9,965; Mr. Slager, 0; and Mr. Zelnak, 6,530. The 20% discount from the market price of Martin Marietta’s common stock used in converting to common stock units is reported in column (g). Ms. Ables joined the Board in November 2018 and her fees were prorated.

 

3 

Each Director who was serving immediately following the 2018 Annual Meeting of Shareholder received 609 RSUs in May 2018. Ms. Ables received 744 RSUs upon joining the Board in November 2018. 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 305 unrestricted shares of common stock and deferred the distribution of 304 RSUs until retirement. As of December 31, 2018, each Director held RSUs in the amounts as follows: Ms. Ables, 744; Ms. Cole, 9,553; Mr. Davis, 609; Mr. Koraleski, 1,548; Ms. Perez, 9,029; Mr. Quillen, 9,029; Mr. Rediker, 9,553; Mr. Slager, 1,587; and Mr. Zelnak, 8,174. As of December 31, 2018, none of the Directors held options for common stock. Mr. Maffucci’s RSUs were distributed upon his retirement.

 

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 on February 28, 2018 into common stock units pursuant to the Common Stock Purchase Plan for Directors, and (ii) the dollar value of dividend equivalents paid in 2018 on common stock units held under the plan. The Directors did not receive perquisites or other personal benefits in 2018.

 

6 

Mr. Maffucci resigned as a Director on June 5, 2018.

 

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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 8, 2019 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 54 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      
     

Dorothy M. Ables

  744 2 

 

 

 

744

 

     

Roselyn R. Bar

  48,006 3 

 

18,905

 

 

66,911

 

     

Sue W. Cole

  30,776 2,4 

 

 

 

30,776

 

     

Smith W. Davis

  1,232 2 

 

 

 

1,232

 

     

Daniel L. Grant

  7,826 3 

 

12,391

 

 

20,217

 

     

John J. Koraleski

  6,239 2 

 

 

 

6,239

 

     

Donald A. McCunniff

  8,527 3 

 

13,510

 

 

22,037

 

     

James A. J. Nickolas

  1,430 3 

 

9,246

 

 

10,676

 

     

C. Howard Nye

  148,104 3 

 

64,293

 

 

212,397

 

     

Laree E. Perez

  14,811 2 

 

 

 

14,811

 

     

Michael J. Quillen

  18,738 2 

 

 

 

18,738

 

     

Dennis L. Rediker

  19,554 2 

 

 

 

19,554

 

     

Donald W. Slager

  1,587 2 

 

 

 

1,587

 

     

Stephen P. Zelnak, Jr.

  22,144 2 

 

 

 

22,144

 

     

All Directors and executive officers as a group
(15 individuals including those named above)     

  331,400 2,4     126,972   458,372

 

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 0.73% of the shares of common stock outstanding as of March 8, 2019. None of the shares reported are pledged as security.

 

2 

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 2018 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 8, 2019 is as follows: Ms. Ables, 0; Ms. Cole, 15,860; Mr. Davis, 623; Mr. Koraleski, 791; Ms. Perez, 5,258; Mr. Quillen, 7,218; Mr. Rediker, 10,001; Mr. Slager, 0; and Mr. Zelnak, 6,620.

 

3 

The number of shares owned for each of Mr. Nye, Ms. Bar, Mr. McCunniff, Mr. Grant, Mr. Nickolas 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 8, 2019, have been exercised: Mr. Nye, 56,533; Ms. Bar, 11,221; Mr. McCunniff, 8,251; Mr. Grant, 1,534; Mr. Nickolas, 0 and all Directors and executive officers as a group, 77,539.

 

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 and are scheduled to vest within 60 days of March 8, 2019), each in the following amounts: Mr. Nye, 18,711 and 45,582, respectively; Ms. Bar, 3,441 and 15,464, respectively; Mr. Nickolas, 735 and 8,511, respectively; Mr. McCunniff, 1,561 and 11,949, respectively; Mr. Grant, 1,573 and 10,818, respectively; and all Directors and executive officers as a group, 26,488 and 100,484 respectively. There are no voting rights associated with the stock units.

 

 

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Table of Contents

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

 

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 2018, such filing requirements were timely 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 8, 2019. 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 8, 2019, 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

6,841,180 10.95%
   
   

BlackRock, Inc.2

55 East 52nd Street

New York, NY 10055

 

3,945,492

 

6.31%

 

 

 

1 

As reported in Schedule 13G/A reporting beneficial ownership as of December 31, 2018 filed with the Securities and Exchange Commission on February 11, 2019, indicating sole power to vote 77,275 shares, shared power to vote 13,245 shares, sole power to dispose of 6,751,400 shares, and shared power to dispose of 89,780 shares.

 

2 

As reported in Schedule 13G/A reporting beneficial ownership as of December 31, 2018 filed with the Securities and Exchange Commission on February 6, 2019, indicating sole power to vote 3,470,515 shares and sole power to dispose of 3,945,492 shares.

 

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Table of Contents

 

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 ir.martinmarietta.com/investor-relations/corporate-governance, 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 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 pages 5 and 33.

 

 

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

 

 

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Table of Contents

Corporate Governance Philosophy     Corporate Governance Matters

 

Who are Martin Marietta’s Independent Directors?

All of Martin Marietta’s Directors 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, 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 ir.martinmarietta.com/investor-relations/corporate-governance. These Guidelines reflect the rules of the NYSE, 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 are “independent” under these Guidelines, resulting in 90% of the Board being independent. The Board of Directors has determined that no Director (except Mr. Nye), or any person or organization with which the Director 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 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 2018, Martin Marietta’s independent 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 2018, all the independent Directors were non-employees.

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.

 

   Mr. Nye is the only member of management who sits on the Board.

 

  Strong independent directors comprise 90% of the current 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 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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Corporate Governance Matters     Corporate Governance Philosophy

 

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 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 attends and meets with shareholders at Company-sponsored Investor Days.

What is the Board’s role in risk oversight?

Our Board currently has nine independent members and only one non-independent member, Mr. Nye. 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 50. 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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Corporate Governance Philosophy    Corporate Governance Matters

 

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 the independent 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 independent 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 independent 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 2018?

Martin Marietta’s Board of Directors held four regularly scheduled meetings during 2018. There were also a total of 24 Committee meetings in 2018. 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 2018, all Directors attended 100% of the meetings of the Board of Directors during their term of service on the Board. 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 2018, all then-current Directors attended the Annual Meeting in May.

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 2018 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 2020 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 may also retain 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.

 

 

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Table of Contents

Corporate Governance Matters     Corporate Governance Philosophy

 

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 nine, effective upon commencement of the 2019 Annual Meeting. 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. Ms. Ables, who was first elected by the Board in November 2018, 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 ir.martinmarietta.com/investor-relations/corporate-governance, 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, 2018, 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 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 Audit Committee has appointed 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 2019 fiscal year and the Board of Directors recommends that the shareholders ratify this appointment. 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 2018 and audited the consolidated financial statements of Martin Marietta for the year ended December 31, 2018 and the effectiveness of Martin Marietta’s internal control over financial reporting as of December 31, 2018. In connection with the audit of Martin Marietta’s 2018 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.

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

Summary of Fees

The following table summarizes the aggregate fees billed for professional services rendered to Martin Marietta by PwC in 2018 and 2017.

 

    

2018

    

2017

 

  Audit Fees1

  

$

2,883,000

 

  

$

2,872,000

 

  Audit-Related Fees2

  

 

100,000

 

  

 

103,000

 

  Tax Fees3

  

 

22,000

 

  

 

20,000

 

  All Other Fees4

  

 


3,000


 


  

 


                0


 


  TOTAL

  

$

3,008,000

 

  

$

2,995,000

 

  Percentage of Audit & Audit-Related Fees to Total Fees

  

 

99.2

  

 

99.3

 

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 and subsidiary audits.

 

3 

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

 

4 

Other fees include license fees for technical accounting software.

 

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 ir.martinmarietta.com/investor-relations/corporate-governance.

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 2018. 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 2018 Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

February 21, 2019

AUDIT COMMITTEE

Laree E. Perez, Chair

Dorothy M. Ables

John J. Koraleski

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 32 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 2018 Annual Report on Form 10-K and this Proxy Statement.

February 20, 2019

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 of the SEC. 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      32    
   
    Executive Summary      33    
   
    Shareholder Outreach and Shareholder Feedback on 2018 Say On Pay      33    
   
    Our 2018 Performance      34    
   
    Safety and Sustainability      36    
   
    Components of Executive Compensation - Performance-Related Compensation      39    
   
    Pay Decisions and Compensation Governance Practices      39    
   
    2018 Chairman, President and CEO
Compensation
     40    
   
    CEO Target Opportunity Mix      40    
   
    Determination of CEO Compensation      40    
   
    2018 Named Executive Officers’ Compensation - Our Compensation Strategy      41    
   
    Considerations Regarding 2018 Compensation      43    
   
    2018 Base Salary      43    
   
    2018 Annual Cash Incentive Goals and Results      44    
   
    2018 Long-Term Incentive Compensation      46    
   
    PSU Awards (55% of LTI Award)      46    
   
    Selection of Relative TSR      47    
   
    Performance-Based RSU Awards (45% of LTI Award)      47    
   
    2018 LTI (PSU and RSU) Goals      47    
   
    2018-2020 Performance Goals      48    
   
    2016-2018 PSU Award Payouts      48    
   
    Ongoing Corporate Governance Policies      49    
   
    Compensation Decision Process      49    
   
    Compensation Program Risk Assessment      50    
   
    Stock-Based Awards Generally      51    
   
    Stock Ownership Requirements      51    
   
    Clawback Policy      51    
   
        
        
   
   

Our Use of Independent

Compensation Consultants

     52    
   
   

Practice Regarding Timing of

Equity Grants

     52    
   
    Perquisites      53    
   
    Retirement and Other Benefits      53    
   
   

Potential Payments upon Termination

or Change of Control

     53    
   
    Tax and Accounting Implications      53    
   
        

Introduction

This Compensation Discussion and Analysis, or CD&A, describes our 2018 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 2018) 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 2018, 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

 

   
 

 

 

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Executive Summary    Compensation Discussion and Analysis

 

Executive Summary

 

We are committed to maintaining strong pay and governance practices in which pay is tied to performance. We hired Mercer, a leading independent consulting firm to help us in this regard.

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 2018, 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.

Our annual incentives are based on the achievement of various performance metrics, including overall financial performance, shareholder returns, safety performance, sustainability, environmental and regulatory compliance results, management of working capital, and organic and inorganic growth. In addition to looking carefully at our results in these areas, we also conduct an annual assessment of compensation practices, which are more fully described below. Our long-term incentives are designed to align executives with shareholder interests and to tie incentives with long-term goals.

 

 

Shareholder Outreach and Shareholder Feedback on 2018 Say On Pay

 

We regularly engage with our shareholders to understand the topics that matter most to them as they relate to executive compensation. We consider the input of our shareholders, along with emerging best practices, to ensure alignment with our executive pay programs. Notably, in 2018, most investors with whom we engaged reacted positively to our pay-for-performance alignment and executive compensation programs. However, they indicated concern with the inclusion of an excise tax gross-up and walk-right in our legacy change in control agreements. We spoke to many of our shareholders in 2018, including most of our top 30 shareholders, and listened to their feedback. Based on that, we made meaningful changes to our compensation arrangements intended to be responsive to the concerns raised. In this regard:

 

   

We received over 96% support on our Say On Pay vote in 2017 and 2016. Prior to 2018, the lowest Say on Pay vote we received was 93.6%.

 

   

In connection with the 2018 Say On Pay vote of 78.9%, we engaged and integrated shareholder feedback. This led to the following changes:

 

   

The existing Employment Protection Agreement (EPA) with each executive officer has been modified to eliminate the IRS 280G excise tax gross-up

 

   

The existing EPA with each executive officer has been modified to also eliminate the walk-right and the inclusion of the value of perquisites in the severance calculation

 

   

New EPAs will not contain the provisions that were eliminated

 

   

Beginning in 2019, equity award agreements will no longer contain single-trigger vesting provisions

We have a history of being responsive to our shareholders. 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.

We regularly talk to long-term shareholders and appreciate the opportunity to gain further insight and understanding into their views. In 2018 our investor relations outreach extended to 111 meetings with 324 investment groups in the United States, Canada, the United Kingdom, and Europe.

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

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

 

 

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Compensation Discussion and Analysis    Our 2018 Performance

 

Our 2018 Performance

By almost any meaningful measure, 2018 was a remarkable year for Martin Marietta. We achieved full-year record financial results for the seventh year in a row. We continue to focus not only on the operations of the Company, but also 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 2018, and established an enhanced solid foundation for continued performance and delivery of shareholder value.

 

 

LOGO

 

  

Adjusted EBITDA* of $1.1 BILLION, an all-time high

 

 

LOGO

 

  

Revenue and profitability growth driven largely by

BLUEGRASS MATERIALS ACQUISITION

LOGO

 

  

SOLID PRICING GAINS AND MODEST IMPROVEMENT IN SHIPMENTS across heritage Building Materials business

 

 

LOGO

 

  

Meaningful INCREASE IN DIVIDEND and resumed SHARE REPURCHASE program

 

LOGO

  

Disciplined execution of our

LONG-TERM STRATEGIC PLAN

 

LOGO

   BEST HERITAGE SAFETY PERFORMANCE in Company’s history

 

  *

Adjusted for certain non-reconciliation. See Appendix B for reconciliation to reported net earnings. Adjusted EBITDA is a metric used for executive performances targets

We continue to focus on our capital allocation and shareholder returns to create shareholder value. Martin Marietta has returned more capital to its shareholders over the last five years than any of our peers in heavy construction materials.

Cumulative Capital Return as % of Operating Cash Flow (2014 – 2018)

 

LOGO

 

Source: company filings, FactSet as of 3/15/2019

In 2018, 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 completed the acquisition of Bluegrass Materials, the largest privately-held, pure-play aggregates business in the United States with locations in Maryland, Georgia, Kentucky, Tennessee and South Carolina.

 

 

LOGO

MARKET ATTRACTIVENESS DRIVER Population growth Market economic diversity Superior state financial position Population density High barriers to entry ADVANTAGE Increased per capita Aggregates consumption Market stability supports infrastructure growth Large infrastructure network leads to increased repair & maintenance expenditures Protects location advantage

 

 

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Our 2018 Performance    Compensation Discussion and Analysis

 

The successful, continued implementation of our strategic plan has helped us achieve a leading position in 90% of the markets in which we operate. Our strategic plan focuses on our trajectory in those regions with attractive population dynamics and long term expected growth. The following chart shows the 30-year forecasted population and gross state product growth for the highest growth states in which we generated sales in 2018, with the size of the circle for each state indicating the relative amount of our revenues attributable to sales in that state.

Martin Marietta Sales-Generating States1

 

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Source: Company filings and IHS Markit

  1 

Based on 2018 products and services revenue by state of destination; assumes equal sales-weighted exposure to all states with <1%

 

  2. 

Long-term Gross State Product growth calculated as forecasted 30-year CAGR (2018-2048)

 

  3. 

Long-term state population growth calculated as forecasted 30-year CAGR (2018-2048)

Despite significant precipitation in many of our key markets, we achieved record financial performance in 2018. Effective management provided us the ability to prudently reinvest in our business, pursue strategic opportunities, and return cash to our shareholders.

In summary, Martin Marietta continued to execute its strategic plan while delivering strong performance in 2018 as compared to 2017:

 

 

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*

2018 adjusted gross profit excludes the $18.7 million impact of selling acquired inventory after its markup to fair value as part of acquisition accounting. See Appendix B for reconciliation to reported gross profit.

**

2017 adjusted earnings per diluted share excludes the $4.07 per share one-time tax benefit from the 2017 Tax Act. See Appendix B for reconciliation to reported earnings per diluted share.

 

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Compensation Discussion and Analysis    Our 2018 Performance

 

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 $1.4 billion to shareholders, in the form of dividend payments and share repurchases, since announcing a 20 million share repurchase authorization in February 2015. As of December 31, 2018, 14.1 million shares remained under the current repurchase authorization and 62.5 million shares of Martin Marietta common stock were outstanding.

 

Safety and Sustainability

Sustainability Reporting

 

We continued to review and improve our approach to sustainability matters. Sustainability is an integral part of our strategy and our day-to-day business. We maintain a deliberate focus on fulfilling our responsibilities. Among other things, these responsibilities include safe operations, employee well-being, community well-being and environmental stewardship.

We have a long track record of building solid foundations, caring about our employees, our communities and the environment, and growing our company. Track records such as ours are not built by accident; they are the result of a deliberate focus on fulfilling our responsibilities to you. These responsibilities include:

 

   

Demanding a safe, ethical workplace for our employee

 

   

Creating a positive lasting impact on our communities and the environment

 

   

Growing our business and responsibly investing our capital for maximum return

In furtherance of these continuing commitments, we have:

 

   

Included performance relating to Environment, Health, Safety and Sustainability (collectively, EHS) in our management strategy

   

Considered achievement of individual and company-wide goals in regard to EHS in management compensation decisions

 

   

Developed a task force relating to Sustainability with a view towards assessing and improving Company performance and disclosure as against world-class achievements

 

   

Created a new senior management position, Senior Vice President-Sustainability, Community Relations and Communications

 

   

Regularly report, at least twice annually, our progress on EHS issues to the Ethics, Environment, Health and Safety Committee, an independent Committee of the Board of Directors

The Committee considered our efforts to tell our sustainability story, which is part of our core strategy. We completed and issued the Company’s fourth annual sustainability report. “Building. Caring. Growing. TOGETHER.” represents our latest publication sharing Martin Marietta’s sustainability story, which includes our world-class safety programs and performance, our targeted and intentional support of housing, hunger reduction and healthcare, and our environmental programs that help drive operational excellence.

 

 

 

 

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Martin Marietta continues to be recognized as the best of the best in our industry. Sustainability is a key component of our strategy and business plan at Martin Marietta. Sustainability excellence is not only the right thing to do and a key driver of shareholder value, it is a vital component of both our strategic planning process, or Strategic Operating Analysis and Review (SOAR), and our annual planning process. SOAR, supplemented by our annual plan, has guided us since 2010 as we have grown the business, driven our safety incidents to record low levels, achieved record financial performance and created positive impacts on our communities and the environment. Key managers from across our business and our senior leadership team engage throughout the year on material topics, including safety, employee wellbeing, community well-being and the environment.

Both SOAR and our annual plan are reviewed and endorsed by our Board of Directors. Martin Marietta’s Ethics, Environment, Safety and Health Committee (EESHC) of the Board of Directors, an experienced and knowledgeable group, has, for decades, overseen our ongoing efforts to hone truly sustainable business practices. Our full Board visits our operations frequently, to hear firsthand from our team and see the positive impact we have on our communities.

 

 

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Safety and Sustainability    Compensation Discussion and Analysis

 

We believe these achievements are driven by our culture and a primary strategic objective of value-enhancing growth that is articulated in our Mission, Vision, and Values. We developed teams of specifically chosen, high-performing employees who were tasked with refreshing this message and studying ways to improve our practices. These principles guide our strategic and tactical decisions.

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All awards are meaningful, but it is particularly satisfying when we are recognized for achievement against our core values.

Safety Performance

Beginning with safety, several of our facilities were recognized as National Stone, Sand and Gravel Association (NSSGA) Safety Excellence Award winners. These awards recognize operations that have gone the longest duration without a reportable incident in their size category, based on data provided by the

U.S. Department of Labor’s Mine Safety and Health Administration (MSHA). We earned two gold-level Safety Excellence awards in 2018. Our Helotes Quarry, located near San Antonio, Texas, earned a gold-level award in the small quarry category and our Benson Quarry, located near Raleigh, North Carolina, earned the award in the medium quarry category. One of our operations was recognized as a silver-level award winner and three of our operations were recognized as bronze-level award winners.

 

 

 

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Compensation Discussion and Analysis    Safety and Sustainability

 

NSSGA also recognizes company performance in safety with their Sterling Safety Award. Martin Marietta was awarded a bronze-level Sterling Safety Award in 2018 in the large company category.

 

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Community Relations

Another core value for which we are recognized by NSSGA is community. The NSSGA Community Relations Awards program recognizes aggregates producers whose community involvement and support activities enhance the public perception of the

aggregates industry in general and the public image of the individual producer’s aggregates operations in particular. Two of our operations, Ames Mine (Iowa) and Chico Quarry (Texas), were recognized as gold-level award winners. Spanish Springs Quarry (Nevada) was recognized with a silver-level award.

 

 

Environmental Stewardship

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. Churchville Quarry (Maryland) was recognized with a gold-level award. Nine of our operations were recognized as silver-level award winners and ten of our operations were recognized as bronze-level award winners.

 

Ethical Business Conduct

 

We strive to continually enhance our high standards and controls for ethical business conduct, compliance and transparency. Our Code of Ethical Business Conduct applies to all our employees, Board members, consultants, contract laborers and other agents when they represent or act on behalf of the Company. It describes our expectations and policies on a number of topics, including our commitments to compliance with laws, protection of human rights, maintenance of accurate business records, transparency in our public disclosures, protection of sensitive information, promotion of a positive and safe work environment, zero tolerance for corruption and general avoidance of even the appearance of impropriety in all that we do. Our Code also emphasizes employees’ responsibility to report any violation or suspected violation of the Code and emphasizes the Company’s non-retaliation policy. In 2018, we provided ethics training to our new employees and refresher training to our Board of Directors and executive officers. There were no waivers from any provisions of our Code of Conduct or amendments applicable to any Board member or executive officer in 2018.

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Components of Executive Compensation – Performance-Related Compensation    Compensation Discussion and Analysis

 

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 2018 were performance-related consisting of performance share unit awards (PSUs) that comprised 55% of the long-term equity awards and performance-related restricted stock unit awards (RSUs) that comprised 45% of the awards. The following charts summarize the various forms of compensation and demonstrate that in 2018 87 percent of the CEO’s compensation and approximately 80 percent of other NEO compensation is variable and tied to company performance.

 

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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 2018. Performance-based RSUs comprised the remaining 45%.

 

 

 

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Independent compensation consultant. The Committee retains 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.

 

 

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Annual elections. We no longer have a classified Board of Directors and all of our Directors stand for election each year.

 

 

 

  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 2018 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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No 280G gross-ups. We eliminated the excise tax gross-ups.

 

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Compensation Discussion and Analysis    Pay Decisions and Compensation Governance Practices

 

A number of key 2018 compensation-related decisions resulted from our achievements, 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

2018 Chairman, President and CEO Compensation

 

Base Salary. For 2018, Mr. Nye’s base salary was set at $1,100,000 (effective March 1, 2018).

2018 Annual Incentive. Mr. Nye’s target annual incentive amount for 2018 was $1,199,917 (110% of salary received for the year). His actual annual incentive for 2018 was $2,100,000, or 175% of target.

2018-2020 Long-Term Incentives. In 2018, Mr. Nye’s target LTI award was 400% of base salary earned. He was granted an LTI award of approximately $4.18 million, which was allocated 55%, or $2.30 million, in PSUs and 45%, or $1.88 million, in performance-based RSUs. RSUs will vest pro rata 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 2018.

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. 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.

2018 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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Elements of Compensation Base Salary 14% Annual incentive 16% Long-Term Incentive 70% Fixed vs. Variable Fixed 14% Variable 86%Short-Term Variable vs. Long -Term Variable Short-Term 20% Long Term 80%

 

*

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.

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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2018 Named Executive Officers’ Compensation – Our Compensation Strategy    Compensation Discussion and Analysis

 

2018 Named Executive Officers’ Compensation – 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 2018, 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.

 

 

Total Compensation Opportunity Base Salary Long-Term Incentives Annual Incentives PSUs - 55% of Award Vesting and size based on Marietta performance level RSUs - 45% of Award Vesting is conditioned on performance measured after year 1 and then continued employment over the three-year that the awards vest

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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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Compensation Discussion and Analysis    2018 Named Executive Officers’ Compensation – Our Compensation Strategy

 

The following table summarizes the key elements of our 2018 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. Program 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 adjusted EBITDA and Sales Growth goals, 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 adjusted EBITDA goals.

 

 

 

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.

 

 

 

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Considerations Regarding 2018 Compensation    Compensation Discussion and Analysis

 

Considerations Regarding 2018 Compensation

The following chart summarizes the target compensation in our 2018 executive compensation program:

 

 

Pay Component

 

 

 

Summary

 

   

Base Salary

 

 

  At the February 2018 meeting, the Committee reviewed competitive market data and individual performance evaluations. Increases were effective March 1, 2018 for all NEOs.

 

   

 

Target Annual Cash Incentives

 

 

  NEO target bonuses (as a percentage of base earnings) did not change in 2018. Our CEO’s target incentive for 2018 was 110% of base earnings. Other NEOs, target incentives for 2018 were 70% to 80% of base earnings.

  Our shareholders in 2016 approved a new Executive 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.

  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.

 

   

 

Long-Term

Incentives

 

 

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

  The LTI awards for NEOs in 2018 were weighted 55% PSUs and 45% RSUs. The LTI grant size is based on competitive market data.

  PSU awards in 2018 are earned based on achievement of performance levels, with 33% based on three-year cumulative Sales Growth and 67% based on three-year cumulative adjusted EBITDA performance. The Company’s relative TSR ranking compared to the S&P 500 provides a modifier to the award up to 20%.

  RSU awards to NEOs in 2018 are subject to the achievement of one-year adjusted EBITDA performance.

 

   
         

 

Total Compensation

 

 

The Committee uses the size-adjusted 50th percentile of our Compensation Peer Group as a guide 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 February 2018.

2018 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, internal pay equity, the advice of the Committee’s independent compensation consultant, management recommendations (except for the CEO), and, for the CEO, the Committee’s assessment of Mr. Nye’s performance. Based on these factors, the Committee approved the following increases in base salary.

 

 

Mr. Nye: 5.3% 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 2018.

 

 

Other NEOs: approximately 4.0% to 9.0% increases, based on a review of competitive market data and individual performance evaluations.

 

NEO

 

2018

Base Salary*

 

2017 

Base Salary 

 

 

C. Howard Nye

 

$1,100,000

 

$1,045,000

 

 

James A. J. Nickolas

 

$   488,800

 

$   470,000

 

 

Roselyn R. Bar

 

$   542,500

 

$   514,200

 

 

Donald A. McCunniff

 

$   418,900

 

$   384,300

 

 

Daniel L. Grant

 

$   384,000

 

$   362,300

 

 

*

NEO base salaries were increased effective March 1, 2018.

 

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Compensation Discussion and Analysis    2018 Annual Cash Incentive Goals and Results

 

2018 Annual Cash Incentive Goals and Results

 

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, the advice of the Committee’s independent compensation consultant, 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 2018, all of the executive officers participated in the plan. The annual incentive compensation level paid for 2018 for the NEOs other than Mr. Nye was 145% to 165% of target. The annual incentive compensation level paid for 2018 for Mr. Nye was 175%.

In determining the incentive payment for the CEO, 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. Our financial goals are established at the completion of our annual long-range planning process, which for 2018 were determined in November 2017. The long-range planning process includes reviews of the assumptions used by the business segments in generating their financial projections, such as industry trends and competitive assessments, current and future projected performance levels, and the risks and opportunities surrounding these baseline assumptions. The long-range plan on which our financial goals are based is tied to the business environment in which we operate and can vary year-over-year.

The objective financial metrics in our long-range plan that were measured for purposes of the 2018 Annual Cash Incentive were Pre-Tax Earnings and EBITDA, which are viewed as indicative of the Company’s profitability, and Days Sales Outstanding (DSO), which is viewed as indicative of the Company’s cash flow, important measures reflecting our performance and the creation of value for shareholders. In addition, the Committee considered the following:

 

   

A detailed assessment of Martin Marietta’s overall financial performance and each segment’s financial performance, including the highlights and the challenges.

 

   

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, sustainability initiatives, and cybersecurity protections.

 

   

Continuing achievement of excellent management of working capital.

 

   

The successful organic and inorganic growth of Martin Marietta.

In making the determination as to Mr. Nye’s annual incentive award, the Committee also took into consideration that his target bonus opportunity is below market.

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. For the NEOs other than Mr. Nye, 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.

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 NEOs. 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. Similar to the Committee’s assessment of financial goals, the Committee’s assessment of individual performance goals generally excludes non-recurring or extraordinary items.

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 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, customer satisfaction, and product quality.

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 based on the factors described above. 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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2018 Annual Cash Incentive Goals and Results    Compensation Discussion and Analysis

 

2018 Actual Incentive Cash Earned

In 2018, the Committee determined that Company and individual performance warranted the annual incentive payments in the chart below based on a review of financial metrics and other important achievements. The Committee reviews the NEOs’ performance based on continuous improvement from the preceding year. The Committee considered the following financial metrics in making this determination:

 

 

Pre-Tax Earnings (profitability) as against prior year

 

 

EBITDA (profitability) as against prior year

 

 

Days Sales Outstanding, or DSO (cash flow) as against prior year

The table below summarizes the targets for 2018 and annual incentive award earned by each NEO:

 

  NEO

 

2018 Performance Metrics

 

 

 

Target Annual

  Incentive Bonus  

(% of Salary)

 

 

  2018 Target  

Annual

Incentive*

 

 

  2018 Actual  

Annual

Incentive

 

 

  C. Howard Nye

 

  Continuous improvement on safety performance from prior year

 

  Successful organic and inorganic growth, including acquisition and integration of Bluegrass Materials

 

  Ongoing delivery of management succession and development plan and emergency CEO plan

 

 

 

110%

 

$

 

1,199,917

 

 

$

 

2,100,000

 

 

  James A. J. Nickolas

 

  Continue to develop and build finance team

 

  Develop new financial planning and internal reporting processes

 

  Establish finance team succession planning framework

 

 

  75%

 

$

 

364,250

 

 

$

 

564,588

 

 

  Roselyn R. Bar

 

  Effective management of legal function at high level, including resolution of disputes

 

  Legal support of acquisitions, including successful regulatory resolution of Bluegrass Materials

 

  Provide oversight of ethics program as Chief Ethics Officer

 

  Continued improvement of processes and management of Corporate Secretary function

 

 

  80%

 

$

 

430,227

 

 

$

 

709,874

 

 

  Donald A. McCunniff

 

  Continue to drive safety performance

 

  Transition health and welfare plans to more effective third party administrators

 

  Continue to mature learning and development programs

 

 

  70%

 

$

 

289,193

 

 

$

 

462,709

 

 

  Daniel L. Grant

 

  Continue to pursue projects that align with our strategic objectives, including Bluegrass Materials acquisition

 

  Development of Strategy and Development personnel

 

  Continue progress on world-class organization initiative

 

 

  70%

 

$

 

266,268

 

 

$

 

386,089

 

 

*

Based on actual base earnings in 2018.

 

Annual Incentive Feature: Performance-Based Stock Purchase Plan

The Incentive Stock Plan further promoted the alignment of executive compensation levels with our investors’ financial interests by requiring that a portion of the annual bonus award be deferred into Company stock units that vest based on continued service. Executive officers can also elect to defer amounts above the mandatory deferral amount.

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. 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.

 

 

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Table of Contents

Compensation Discussion and Analysis    2018 Annual Cash Incentive Goals and Results

 

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.

2018 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 2018 for all NEOs 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 February 22, 2018, the day the Martin Marietta Board of Directors confirmed the award, or $220.2915. This award value was then divided into PSUs and performance-based RSUs, with 55% of the total award for NEOs consisting of the PSUs at target level and 45% of the total award for NEOs consisting of performance-based RSUs. The Committee believes that the incentive mix (PSUs and performance-based 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. See a further description under Outstanding Equity Awards at Fiscal Year-End and corresponding footnotes on pages 57 to 58.

PSU Awards (55% of LTI Award)

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 target award, and

 

(2)

Sales Growth, measuring growth and comprising 33% of the total target award.

 

(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. See table show on page 48.

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 2018 was 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 metric. If the threshold is not met, none of the PSUs relating to that metric 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 metric. The “Target” level is generally viewed as achievable although it has not been achieved every year. The “Maximum” level is a stretch that is attainable if we outperform in the area measured.

The performance will be measured in February 2021 for the three-year period beginning January 2018 through December 2020 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 S&P 500, as set forth in the PSU Award Agreement. The Committee in its discretion may adjust the final award values only as set forth in the Agreement, either collectively or on an individual basis, in recognition of factors that are unusual or nonrecurring.

Over the three-year performance period, up to one-third of the target PSUs may be earned each year based on one-third of the three-year cumulative EBITDA and Sales Growth goals. Each year, any earned PSUs are capped at 100% of target, and are not distributed until the end of the three-year measurement period when the cumulative three-year performance is determined. The actual PSUs will equal the greater of the total PSUs earned for each of the annual periods (capped at 100% of target) or the amount earned for cumulative three-year performance (capped at 200% of target). The final amount of earned PSUs to be distributed are subject to the three-year rTSR modifier.

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 2021.

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.

 

 

 

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Table of Contents

Selection of Relative TSR     Compensation Discussion and Analysis

 

Selection of Relative TSR

We selected rTSR for the PSUs to measure our performance against the companies in the S&P 500 index. We recognize that every industry faces different challenges and opportunities, and that the S&P 500 index does not perfectly correlate to the environment in which Martin Marietta operates. However, we believe that the majority of most of our closest competitors are not publicly-held companies or are not U.S. companies, and therefore accurate information to potentially use as comparisons is not readily available. As a result, we believe that comparing our TSR against the S&P 500 index is appropriate because (1) it measures the interest of investors for whom we compete, (2) there is no consensus of a significantly better peer group with readily available comparable financial information; and (3) by using rTSR as a modifier rather than a primary measurement, we give our other performance measures more weight and their focus on profitability and growth both provide long-term value creation.

In tandem, we believe that these metrics drive the behaviors of our management team in ways that are intended to create the most value for our shareholders.

Peformance-Based RSU Awards (45% of LTI Award)

RSUs vest in three equal portions, each on the anniversary of the award date (February 22, 2018) 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 2018 RSUs awarded to executive officers are also subject to a performance measure that a stated level of EBITDA be achieved 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. The performance measure was satisfied.

2018 LTI (PSU and RSU) Goals

In setting minimum and maximum levels of payment, we reviewed historical levels of performance against our long-range plan commitments, and conducted sensitivity analyses on alternative outcomes focused on identifying likely minimum and maximum boundary performance levels. Levels between 100% and the minimum and maximum levels were derived using linear interpolation between the performance hurdles.

The specific EBITDA and Sales Growth target values for the 2018-2020 PSUs are not publicly disclosed at the time of grant due to the proprietary nature and competitive sensitivity of the information. However, the method used to calculate the awards will be based on actual performance compared to our 2018-2020 targets, with straight-line interpolation between points. The individual award agreements require the adjustment of goals to ensure that the ultimate payouts are not impacted to the benefit or detriment of management by specified events, such as unplanned pension contributions, changes in accounting (GAAP) standards or impact of an acquisition or divestiture. The Committee does not have discretion to adjust the results of the PSU awards beyond the adjustments specified in the award agreements. The Committee may exercise its discretion to reduce the final vesting percentage to no more than target if the Company’s three-year TSR is less than zero.

 

 

The following table provides a summary of the long-term incentives that each of the NEOs received in 2018.

 

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

 

 

 

 

 

8,539          

 

 

 

 

 

 

 

9,940          

 

 

 

   

 

James A. J. Nickolas

 

 

 

 

 

1,681          

 

 

 

 

 

 

 

1,956          

 

 

 

 

Roselyn R. Bar

 

 

 

 

 

1,839          

 

 

 

 

 

 

 

2,140          

 

 

 

   

 

Donald A. McCunniff

 

 

 

 

 

1,178          

 

 

 

 

 

 

 

1,371          

 

 

 

 

Daniel L. Grant

 

 

 

 

 

963          

 

 

 

 

 

 

 

1,120          

 

 

 

 

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Table of Contents

Compensation Discussion and Analysis    2018-2020 Performance Goals

 

2018-2020 Performance Goals

In setting performance goals for the three-year PSUs awarded in 2018, the Committee considered various factors in choosing the metrics and establishing the goals, including:

 

 

The metrics reflect drivers of our performance and we believe are important to our investors.

 

 

The goals are consistent with our business plan and positive over prior year.

 

 

We have a history of setting challenging target and maximum goals.

 

 

Our prior payouts on our PSUs, despite record financial performance, were on average below target:

 

   

2014 to 2016: 108%

 

   

2015 to 2017: 95%

 

   

2016 to 2018: 75%

In addition, we have looked at the alignment of our payouts with TSR and found that pay and performance are aligned.

2018 Performance Goals and Metrics

 

     
Relative TSR (Modifier +/- 20%)*         EBITDA (67%)         Sales Growth (33%)
           

TSR

Percentile
Achievement

 

Payout

Factor

       

EBITDA

Achievement

 

Payout

Factor**

       

Sales

Growth

Achievement

 

Payout

Factor**

    ³75th        

 

+20%  (Maximum) 

   

Plan + ³ $.24B

 

200%  (Maximum) 

   

Plan + ³ 4.5%

 

 200%  (Maximum) 

 

50th

 

 

0% adjustment (Target)

   

 

Plan EBITDA

 

 

100% (Target)

   

 

Plan Growth

 

 

100% (Target)

£ 25th

 

-20% (Threshold)

   

Plan - $.24B

 

50% (Threshold)

   

Plan - 1.5%

 

50% (Threshold)

   

Plan - < $.24B

 

0%

   

Plan - < 1.5%

 

0%

*   TSR is calculated as (i) the average of our closing stock price over the final 20 trading days of the measurement period, minus the average of our closing stock price over the first 20 trading days of the measurement period, plus the value of reinvested dividends divided by (ii) the average of our closing stock price over the first 20 trading days of the measurement period, and is measured against each of the companies in the S&P 500 index (excluding any Companies acquired during the measurement period.

**  Threshold and maximum are a percentage of the target.

 

2016-2018 PSU Award Payouts

PSUs that were granted in 2016 vested on December 31, 2018, because the applicable performance criteria were satisfied. These PSUs were certified and paid out in February 2019. The PSU payouts for the three-year performance period ended December 31, 2018, were calculated by comparing actual corporate performance for each metric for the period January 1, 2016 through December 31, 2018, against a table of payment levels from 0% to 200% (with the 100% payout level being considered target) established at the beginning of the performance period.

 

For the three-year performance period ended December 31, 2018, actual results were 75% of target. The results were above targeted level for Relative TSR (weighted 25%), which resulted in a 27% payout factor. For the same period, EBITDA (weighted 37.5%) was $3.145 billion compared to our pre-established target of $3.535 billion and generated a 27% payout factor and Return on Sales (weighted 37.5%) was 19.4% compared to our pre-established target of 23.5% and generated a 21% payout factor. The awards are calculated pursuant to the provisions provided in the award agreements. The Committee cannot make any adjustments to the final payout factor beyond the adjustments specified in the award agreements.

 

 

   

  Measure

 

  

Performance  

Target  

 

 

Performance  

Result  

 

 

  Weighting  

 

  

  Weighted  

  Payout Factor  

 

EBITDA

 

   $        3.535 B       

 

  $        3.145 B       

 

  37.5%

 

   27%

 

Return on Sales

 

                23.5%  

 

               19.4%  

 

  37.5%

 

   21%

 

Relative TSR

 

   50th  Percentile  

 

  52nd  Percentile  

 

  25.0%

 

   27%

 

 

 

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Table of Contents

2016-2018 PSU Award Payouts     Compensation Discussion and Analysis

 

Based on a weighted payout factor of 75%, the following table shows the payouts under the 2016-2018 PSU made in February 2019.

 

Payment Calculation for PSUs Granted in 2016

Certified on February 20, 2019

  NEO

 

Target Units Granted
in 2016 (shares)

 

Payout

(shares)

 

C. Howard Nye

 

    21,339    

  16,101    

James A. J. Nickolas*

Roselyn R. Bar

  4,697       3,545    

Donald A. McCunniff

  2,942       2,220    

Daniel L. Grant

  2,407       1,817    

 

*

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

 

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 2018 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.

 

   

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 87% 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 ir.martinmarietta.com/investor-relations/corporate-governance.

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 Mercer, 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 and other factors affecting executive officer compensation, as well as any other areas of concern or risk.

 

   

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

 

   

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

 

 

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Table of Contents

Compensation Discussion and Analysis    Compensation Decision Process

 

   

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.

Role of Peer Companies and Competitive Market Data

The Committee considered peer groups for two elements of the executive compensation program in 2018: the Compensation Peer Group, consisting of 15 companies that the Committee believes compete with us for talent, and the TSR Peer Group,

consisting of the S&P 500, which the Committee believes compete with us for investors and is used to assess the achievement of TSR measured for the PSU awards.

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 that are publicly-traded in the United States;

 

   

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 2018 base salary and long-term incentive pay decisions:

 

 

  Albermarle Corporation

  

 

Louisiana-Pacific Corporation

  

 

Owens Corning

  

 

Vulcan Materials Company

  Eagle Materials, Inc.

  

Masco Corporation

  

USG Corp.

  

Westlake Chemical Corporation

  FMC Corporation

  

Mosaic Co.

  

Stanley Black & Decker, Inc.

  

Weyerhaeuser Company

  Fortune Brands Home & Security

  

Nucor Corporation

  

Summit Materials, Inc.

    
                

 

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 2018 took into consideration published independent compensation surveys of companies with revenue in the range of $2.5 billion to $8.0 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.

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.

 

 

 

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Compensation Program Risk Assessment    Compensation Discussion and Analysis

 

   

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.

Stock-Based Awards Generally

All of Martin Marietta’s active equity-based award plans have been approved by shareholders. Our Stock-Based Award Plan requires a minimum vesting period of 12 months for restricted stock or RSUs and a minimum vesting period of 36 months for stock options or SARs. The Company has not issued SARs and has not issued options since 2015.

Stock Ownership Requirements

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:

 

  Title

 

Annual Base
Salary Multiple

 

 

Chairman, President and CEO

 

7 times    

 

Other Executive Officers

 

5 times    

 

Other Members of the Board of Directors

 

5 times    

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 as described below, 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 2018, Mr. Nye deferred the maximum of 50% of his cash bonus in common stock units.

Clawback Policy

We also have a clawback policy. If the Board determines that an officer’s intentional misconduct, gross negligence or failure to report such acts by another person was a contributing factor in requiring us to restate any of our financial statements or constituted fraud, bribery or another illegal act (or contributed to another person’s fraud, bribery or other illegal act) which adversely impacted our financial position or reputation, then the Board shall take such action as it deems in the best interest of the Corporation and necessary to remedy the misconduct and prevent its recurrence. Among other actions, the Board may seek to recover or require reimbursement of any amount awarded to the officer in the form of an annual incentive bonus or LTI award. There were no events requiring Board consideration of a clawback action during 2018.

 

 

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Table of Contents

Compensation Discussion and Analysis    Our Use of Independent Compensation Consultants

 

Our Use of Independent Compensation Consultants

The independent compensation consultant provides important information about market practices, the types and amounts of compensation offered to executives generally and the role of corporate governance considerations in making compensation decisions. The Committee’s charter authorizes it to retain outside advisors that it believes are appropriate to assist in evaluating executive compensation.

For 2018, the Committee continued to retain Mercer as an independent compensation consultant. In connection with its retention of Mercer, the Committee considered the following factors in assessing Mercer’s independence:

 

   

The provision of services provided by Mercer to Martin Marietta in addition to compensation advisory services.

 

   

The compensation paid to Mercer is less than 1% of Mercer’s revenues.

 

   

Mercer has business ethics and insider trading and stock ownership policies, which are designed to avoid conflicts of interest.

 

   

Mercer employees supporting the engagement do not own Martin Marietta securities.

 

   

Mercer employees supporting the engagement have no business or personal relationships with members of the Compensation Committee or with any Martin Marietta executive officer.

At its February 2018 meeting, the Committee renewed the engagement of Mercer. At that time, Mercer confirmed the continuing validity of each of the factors described above.

The nature and scope of Mercer’s engagement was determined by the Committee and not limited in any way by management. Mercer was paid $147,501 for its compensation advisory services in 2018. During 2018, 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 2018 were $330,780. 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, and the absence of any business or personal relationship between our officers and Directors and the specific Mercer consultants advising the Company (other than the consulting relationship with the Committee). The Committee also considered 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 2018. 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 2018. Based on this review, there are no conflicts of interest raised by the work performed by Mercer.

Practice Regarding Timing of Equity Grants

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 2018 at the Committee’s regularly scheduled meetings in February following the availability of financial results for the prior year. Newly hired executive officers 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 New York Stock Exchange closing price of Martin Marietta’s common stock on the date of the grant or the first date of employment, whichever is later. 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.

Our practice with regard to the timing of equity grants is:

 

   

No equity award may be backdated. A future date may be used if, among other reasons, the Committee’s action occurs in connection with a new employee who has not yet commenced employment.

 

   

Proposed equity awards are presented to the Committee in February of each year. Off-cycle awards may be considered in the Committee’s discretion in special circumstances, which may include hiring, retention or acquisition transactions.

In addition, our existing stock award plan prohibits repricing of stock options or paying cash for underwater stock options.

 

 

 

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2019 PROXY STATEMENT

 

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Table of Contents

Perquisites      Compensation Discussion and Analysis

 

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 2018, 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 executive officers and other employees with 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

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 60 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, for equity awards granted prior to 2019, the acceleration of time periods for purposes of vesting in, or realizing gain from, such 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 61 and 62 of this Proxy Statement.

Tax and Accounting Implications

In administering the compensation program for NEOs, for awards made in 2018 the Committee considered the applicability of Section 162(m) of the Internal Revenue 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.

However, the exemption from Section 162(m)’s deduction limit for performance-based compensation has generally been repealed, effective for taxable years beginning after December 31, 2017. As a result, we expect that we will no longer be able to deduct certain compensation paid to the NEOs that we have historically been able to deduct.

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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2019 PROXY STATEMENT

 

 

 

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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, the Chief Financial Officer, and the three other most highly compensated executive officers in 2018, 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

($)1

(c)

   

Bonus

($)2

(d)

   

Stock

Awards

($)3
(e)

    Option
Awards
($)
4
(f)
   

Non-Equity
Incentive Plan

Compensation
($)
5

(g)

    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
6
(h)
    All Other
Compensation
($)
7
(i)
    Total
($)
(j)
 

 

C. Howard Nye

Chairman, President

and CEO

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

1,090,833

 

 

 

 

   

 

 

 

 

5,046,900

 

 

 

 

   

 

 

 

 

1,050,000     

 

 

 

 

 

 

 

 

 

1,235,634     

 

 

 

 

 

 

 

 

 

110,091     

 

 

 

 

 

 

 

 

 

8,533,458

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

James A. J. Nickolas

Senior Vice

President and CFO

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

485,667

 

 

 

 

   

 

 

 

 

899,577

 

 

 

 

   

 

 

 

 

451,670     

 

 

 

 

 

 

 

 

 

91,960     

 

 

 

 

 

 

 

 

 

84,393     

 

 

 

 

 

 

 

 

 

2,013,267

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

537,783

 

 

 

 

   

 

 

 

 

1,073,594

 

 

 

 

   

 

 

 

 

496,912     

 

 

 

 

 

 

 

 

 

940,466     

 

 

 

 

 

 

 

 

 

52,958     

 

 

 

 

 

 

 

 

 

3,101,713

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

Donald A. McCunniff

Senior Vice President,

Human Resources

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

413,133

 

 

 

 

   

 

 

 

 

643,874

 

 

 

 

   

 

 

 

 

370,167     

 

 

 

 

 

 

 

 

 

271,632     

 

 

 

 

 

 

 

 

 

52,144     

 

 

 

 

 

 

 

 

 

1,750,950

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

382,250

 

 

 

 

   

 

 

 

 

1,044,225

 

 

 

 

   

 

 

 

 

321,090     

 

 

 

 

 

 

 

 

 

292,574