DEF 14A 1 def14a2019.htm DEF 14A Document






UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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  ý            
Filed by a Party other than the Registrant  ¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
¨
 
Definitive Additional Materials
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Soliciting Material under §240.14a-12
GENESEE & WYOMING INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
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Date Filed:
 
 








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GENESEE & WYOMING INC.
April 8, 2019
Dear Fellow Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the Annual Meeting of Stockholders of Genesee & Wyoming Inc. to be held at 10:00 a.m., Eastern Daylight Time, on Wednesday, May 22, 2019 at the Sheraton Stamford Hotel, 700 East Main Street, Stamford, Connecticut 06901. The notice and proxy statement for the annual meeting are attached to this letter and describe the business to be conducted at the annual meeting.
At this year’s annual meeting, the following matters are under consideration. We encourage you to carefully review the proxy materials and to vote:
FOR the election of the three directors listed in the proxy statement;
FOR the approval of a non-binding, advisory vote on the compensation paid to our named executive officers; and
FOR the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for our fiscal year ending December 31, 2019.
At the Annual Meeting, there will also be a report on the Company’s business, and stockholders will have an opportunity to ask questions.
In accordance with the rules of the Securities and Exchange Commission, we sent a Notice of Internet Availability of Proxy Materials on or about April 8, 2019 to our stockholders of record as of the close of business on April 1, 2019. We also provided access to our proxy materials over the Internet beginning on that date. If you received a Notice of Internet Availability of Proxy Materials by mail and did not receive, but would like to receive, a printed copy of our proxy materials, you should follow the instructions for requesting such materials included on page 5 of this proxy statement or in the Notice of Internet Availability of Proxy Materials.
To have your vote recorded, you should vote over the Internet or by telephone. In addition, if you have requested or received a paper copy of the proxy materials, you may vote by signing, dating and returning the proxy card sent to you in the envelope accompanying the proxy materials sent to you. We encourage you to vote by any of these methods even if you currently plan to attend the annual meeting. If you decide to attend, you can still vote your shares in person if you wish.
On behalf of the Board of Directors, I thank you for your cooperation and look forward to seeing you on May 22, 2019.

                            
Very truly yours,
 
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Allison M. Fergus
General Counsel and Corporate Secretary









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NOTICE OF 2019 ANNUAL MEETING OF
STOCKHOLDERS OF GENESEE & WYOMING INC.
DATE AND TIME:
Wednesday, May 22, 2019 at 10:00 a.m., Eastern Daylight Time
 
 
 
PLACE:
Sheraton Stamford Hotel
700 E. Main Street
Stamford, CT 06901

 
 
 
ITEMS OF BUSINESS:
The following matters of business are described in the accompanying proxy statement (the “Proxy Statement”):
 
 
 
 
1) Election of the three directors listed in the Proxy Statement;
 
 
 
 
 
 
 
2) A non-binding, advisory vote on the compensation paid to our named executive officers as described in this proxy statement;
 
 
 
 
3) Ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2019; and
 
 
 
 
 
 
 
4) Such other business as may properly come before our annual meeting or any adjournments or postponements of the meeting.
 
 
 
WHO CAN VOTE:
You are entitled to vote if you were a stockholder of record at the close of business on Monday, April 1, 2019 (the “Record Date”).
 
 
 
INTERNET AVAILABILITY:

A Notice of Internet Availability of Proxy Materials (the “Notice”) was sent on or about April 8, 2019 to our stockholders of record. We also provided Internet access to our proxy materials beginning on that date. If you received the Notice by mail and did not receive, but would like to receive, a printed copy of our proxy materials, you should follow the instructions for requesting such materials included on page 5 of the Proxy Statement or in the Notice.
 
 
 
VOTING:
We urge you to participate in the annual meeting, either by attending and voting in person or by voting through other acceptable means as promptly as possible. You may vote by telephone, through the Internet or by mailing your completed and signed proxy card (or voting instruction form, if you hold your shares through a broker, bank or other nominee). Your vote is important and we urge you to vote.
 
 
 
2018 ANNUAL REPORT:
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 accompanies the Proxy Statement.
 
 
 
DISTRIBUTION:
This Notice of Annual Meeting of Stockholders and Proxy Statement, along with our Annual Report to stockholders, which includes our Form 10-K for our fiscal year ended December 31, 2018, and our related audited financial statements, are first being distributed or made available to stockholders, as the case may be, on or about April 8, 2019.
 
 
BY ORDER OF THE BOARD OF DIRECTORS
 
 
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Allison M. Fergus
April 8, 2019
 
General Counsel and Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 22, 2019. The following proxy materials are available for you to view online at www.proxyvote.com: (1) this proxy statement (including all attachments, if any); (2) our annual report for the year ended December 31, 2018 (which is not deemed to be part of the official proxy soliciting materials); and (3) any amendments to the foregoing materials that are required to be furnished to stockholders. In addition, if you have not received a copy of our proxy materials and would like to, you may download an electronic copy of our proxy materials or request a paper copy at www.proxyvote.com. You will also have the opportunity to request paper or email copies of our proxy materials for all future meetings.








GENESEE & WYOMING INC.
Principal Executive Offices:
20 West Avenue
Darien, Connecticut 06820
PROXY STATEMENT
Our Board of Directors, or the Board, is soliciting proxies to be voted at our annual meeting of stockholders to be held at the Sheraton Stamford Hotel, 700 East Main Street, Stamford, Connecticut 06901, on May 22, 2019, at 10:00 a.m., Eastern Daylight Time, or at any adjournments or postponements of the annual meeting.
TABLE OF CONTENTS
 
 
 
 










QUESTIONS AND ANSWERS
ABOUT THE 2019 ANNUAL MEETING AND VOTING
WHY AM I BEING PROVIDED WITH THESE PROXY MATERIALS?
We have made this proxy statement and our annual report for the fiscal year ended December 31, 2018 (the “Annual Report” and, collectively with this proxy statement, the “Proxy Materials”) available to you on the Internet or, upon your request, have delivered printed versions of these materials and the proxy card to you by mail in connection with the solicitation by our Board of Directors (the “Board”) of proxies to be voted at our annual meeting of stockholders. Directors, officers and other Company employees may also solicit proxies by telephone or otherwise. We will bear the cost of this solicitation.
 
Our Board has fixed the close of business on April 1, 2019 as the record date (“Record Date”) for our annual meeting. Only stockholders as of the Record Date are entitled to notice of and to vote at our annual meeting or at any adjournments or postponements thereof, in person or by proxy. The Proxy Materials are being made available to you because you owned shares of our common stock as of the close of business on the Record Date. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed voting decision.
WHY DID I RECEIVE A ONE-PAGE NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD OF A FULL SET OF PROXY MATERIALS?
Pursuant to rules adopted by the United States Securities and Exchange Commission (the “SEC”), we have elected to provide stockholders access to our Proxy Materials over the Internet. We believe that this e-proxy process will expedite our stockholders’ receipt of Proxy Materials, reduce the environmental impact of our annual meeting and lower the costs of printing and distributing our Proxy Materials. Accordingly, we expect to send a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 8, 2019 to stockholders entitled to vote at the annual meeting. If you receive the Notice by mail, you will not
 
receive a printed copy of the Proxy Materials unless you specifically request a printed copy.
All stockholders will have the ability to access the Proxy Materials on the website referred to in the Notice, to download printable versions of the Proxy Materials from this website or to request and receive a printed copy of the Proxy Materials from us. Instructions on how to access the Proxy Materials over the Internet or to request a printed copy from us may be found in the Notice. If you receive paper copies of the Proxy Materials, a proxy card will also be enclosed.
WHAT WILL I BE VOTING ON?

The election of the three directors listed herein (see page 6);
A non-binding, advisory vote on the compensation paid to our named executive officers as described in this Proxy Statement (see page 59);
The ratification of the selection of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for our fiscal year ending December 31, 2019 (see page 61); and
Such other business as may properly come before our annual meeting or any adjournments or postponements of the meeting.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
The holders of a majority of the voting power of the Company’s Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), and Class B Common Stock, par value $0.01 per share (“Class B Common Stock”)
 
issued and outstanding and entitled to vote at the annual meeting, must be present in person or by proxy to hold our annual meeting.
HOW MANY SHARES ARE ENTITLED TO VOTE?
As of the close of business on April 1, 2019, there were 56,502,770 shares of our Class A Common Stock outstanding
 
and entitled to vote and 417,138 shares of our Class B Common Stock outstanding and entitled to vote.

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HOW MANY VOTES DO I HAVE?
If you are a holder of our Class A Common Stock, then you are entitled to one vote per share of Class A Common Stock that you held as of the close of business on April 1, 2019. If you are a holder of our Class B Common Stock, then you are entitled to ten votes per share of Class B Common Stock
 
that you held as of the close of business on April 1, 2019. All matters expected to be voted on at our annual meeting will be voted on by the holders of our Class A Common Stock and Class B Common Stock, voting together as a single class.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
Our Board recommends that you vote your shares:
FOR each of the three director nominees to the Board set forth in this proxy statement;
FOR the approval, in a non-binding, advisory vote, of the compensation paid to our named executive officers as described in this Proxy Statement; and
FOR the ratification of the selection of PwC as our independent registered public accounting firm for 2019.
If you are a registered holder and you sign and submit your proxy card without indicating your voting instructions, your shares will be voted in accordance with the Board’s recommendations set forth above.
HOW DO I VOTE MY SHARES WITHOUT ATTENDING THE ANNUAL MEETING AND WHAT IS THE VOTING DEADLINE?
By Internet: You may submit your proxy by going to www.proxyvote.com and by following the instructions on how to complete an electronic proxy card. You will need the 16-digit Control Number included on your Notice or your proxy card in order to vote by Internet.
By Telephone: You may submit your proxy by dialing (800) 690-6903. You will need the 16-digit Control Number included on your Notice or your proxy card in order to vote by telephone.
By Mail: If you have not already received a proxy card, you may request a hard copy of your Proxy Materials from us by following the instructions on your Notice. When you receive the proxy card, mark your selection on the proxy card, date and sign your name exactly as it appears on your proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity. Mail the proxy card in the postage-paid envelope that will be provided to you.
 
If you hold your shares in “street name,” you may vote by submitting voting instructions to your bank, broker or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail, as indicated above. Please refer to information from your bank, broker or other nominee on how to submit voting instructions.
Internet and telephone voting will close at 11:59 p.m. (Eastern Daylight Time) on May 21, 2019 for the voting of shares held by stockholders of record or held in “street name” and will close at 11:59 p.m. (Eastern Daylight Time) on May 20, 2019 for the voting of shares held by participants in our employee stock purchase plan.
Mailed proxy cards representing shares held by stockholders of record or held in “street name” must be received no later than May 21, 2019. Mailed proxy cards representing shares held by participants in our employee stock purchase plan must be received no later than May 20, 2019.

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WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND IN “STREET NAME AS A BENEFICIAL OWNER?
If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, the “stockholder of record.” We have
sent the Notice or, if requested, the Proxy Materials directly to you. If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in “street name.” The
 
Notice, or Proxy Materials, if you elected to receive a hard copy, have been forwarded to you by your broker, bank or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by following their instructions for voting.
HOW DO I VOTE MY SHARES IN PERSON AT THE ANNUAL MEETING?
First, as described below, you must satisfy the requirements to attend the annual meeting. Then, if you are a stockholder of record, you must bring proof of identification along with your Notice or proof of ownership. If you hold shares in “street name,” you may vote them at the annual meeting only if you obtain a signed proxy from the record holder (the broker or other nominee) giving you the right to vote the
 
shares. Shares held through our employee stock purchase plan cannot be voted in person at the annual meeting. Even if you plan to attend the annual meeting, we encourage you to vote in advance by Internet or telephone or by proxy card, if you elected to receive a hard copy of your Proxy Materials, so that your vote will be counted, even if you later decide not to attend the annual meeting.
WHAT DO I NEED TO DO IF I WANT TO ATTEND THE ANNUAL MEETING?
You do not need to make a reservation to attend the annual meeting. However, you will need to demonstrate that you were a stockholder on the Record Date to be admitted to the meeting. If your shares are held in the name of your bank, broker or through our employee stock purchase plan or other holder of record, you will need to bring evidence of your beneficial stock ownership. If you do not have proof that you owned our stock as of the Record Date, you may not be admitted to the meeting. Attendance at the annual meeting is
 
limited to our stockholders of record, participants of our employee stock purchase plan and beneficial owners, in each case as of the Record Date, members of their immediate families or their named representatives, as well as other invitees of the Company. We reserve the right to limit the number of representatives and immediate family members who may attend the meeting. Directions to the meeting are set forth on our website at https://ir.gwrr.com/annual-meeting.
CAN I CHANGE OR REVOKE MY VOTE?
Yes. If you are a stockholder of record or a participant in our employee stock purchase plan, you may revoke your proxy or change your vote at any time before your proxy is voted. The last vote cast is what counts. To revoke your proxy or change a vote previously submitted over the Internet, by telephone or by mail, you may simply vote again at a later time using any of the procedures, in which case your later submitted vote
 
will be recorded and your earlier vote revoked. If your shares are held in “street name,” please refer to the information forwarded to you by your bank, broker or other holder of record for procedures on revoking or changing your proxy vote. Please keep in mind the voting deadlines for your vote to count, which are presented on page 2.

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HOW MANY VOTES ARE REQUIRED FOR THE PROPOSALS TO PASS?
To be elected to the Board, the three director nominees described in this proxy statement must receive a majority of the votes cast in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to be elected), meaning that the number of shares voted “FOR” such director’s election must exceed the number of shares voted “AGAINST.” If the director nominee fails to attain the requisite majority vote in an uncontested election, the director nominee is subject to the resignation policy set forth in our Corporate Governance Principles, which requires such director nominee to offer to resign from the Board following certification of the stockholder vote. The Governance Committee will consider the resignation offer and recommend to the Board whether to accept the resignation. In the event of a resignation, the Board will act on the Governance Committee’s recommendation and publicly disclose its decision regarding the tendered resignation and the rationale behind the decision within 90 days following certification of the stockholder vote. Any director nominee who offers to resign may not participate in the Governance Committee’s recommendation or any Board action regarding whether to accept or reject the resignation offer.
 
In a contested election (i.e., where the number of director nominees exceeds the number of directors to be elected), director nominees will be elected by a plurality of the vote, which means that the three director nominees with the greatest number of affirmative votes cast, even if less than a majority, will be elected.
Under our by-laws, the non-binding advisory vote on the compensation paid to our named executive officers, and the proposal to ratify the selection of PwC as the Company’s independent registered public accounting firm for the
Company’s fiscal year ending December 31, 2019, each require the affirmative vote of a majority of the voting power of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter.
It is important to note that the votes on the compensation paid to our named executive officers and the proposal to ratify the selection of PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019, are non-binding and advisory. Therefore, the Company and/or the Board may determine to act in a manner inconsistent with the outcome of such proposals.
WHAT IF I DO NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY?
Stockholders should specify their choice for each matter described in the Notice, or the proxy card, as the case may be. If no specific instructions are given, proxies which are signed and returned will be voted FOR the election of each of the director nominees listed herein, FOR the advisory vote on the compensation paid to our named executive officers, FOR the proposal to ratify the
 
appointment of PwC as our independent registered public accounting firm for our fiscal year ending December 31, 2019, and in accordance with the discretion of the holders of the proxy with respect to all other matters that properly come before our annual meeting or any adjournment or postponement thereof.
HOW ARE VOTES COUNTED?
With respect to the election of directors, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Under our by-laws and Delaware law, abstentions will not count as votes cast and will have no impact on the proposal. With respect to the non-binding, advisory vote on the compensation paid to our named executive officers, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” this proposal. Broker non-votes on the aforementioned matters will have no effect in determining whether the proposals are approved because the shares subject to the “broker non-vote” will not be deemed entitled to vote on these matters or be deemed a vote cast.
With respect to the ratification of the selection of PwC as the
 
Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2019, you
may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” this proposal. There are no broker non-votes for auditor ratification because brokers have discretion to vote on the ratification of the selection of the Company’s independent registered public accounting firm.
Abstentions and broker non-votes will be counted as present for determining whether a quorum has been established at the annual meeting.

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WHAT IF I DON’T VOTE MY SHARES BY PROXY AND DON’T ATTEND THE COMPANY’S ANNUAL MEETING?
If you are a “stockholder of record” (that is, your shares are registered in your own name with our transfer agent) or a participant in our employee stock purchase plan and you do not vote your shares, your shares will not be voted. If you are a “beneficial owner” of shares held in “street name,” and you do not give your bank, broker or other holder of record specific voting instructions for your shares, under the New York Stock Exchange (“NYSE”) rules, your bank, broker or other holder of record will be unable to exercise discretionary authority for you with regard to the election of director nominees listed herein and the non-binding, advisory vote on
 
the compensation paid to our named executive officers.
However, if you are a “beneficial owner” of shares held in “street name,” and you do not give your bank, broker or other holder of record specific voting instructions for your shares, your bank, broker or other holder of record will be able to exercise discretionary authority for you with regard to the ratification of the selection of PwC as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2019.
WILL ANYONE CONTACT ME REGARDING THIS VOTE?
No arrangements or contracts have been made with any proxy solicitors as of the date of this proxy statement, although we reserve the right to engage solicitors if we deem
 
them necessary. Such solicitations may be made by mail, telephone, facsimile, electronically (including e-mail) or personal interviews.
WILL THE ANNUAL MEETING BE WEBCAST?
Our annual meeting will not be webcast.
 

HOW CAN I ACCESS ELECTRONICALLY OR RECEIVE A COPY OF THE COMPANY’S PROXY MATERIALS, INCLUDING THE ANNUAL REPORT?

This proxy statement, the proxy card and the Company’s Annual Report are being made available to the Company’s stockholders on the Internet at www.proxyvote.com through the notice and access process. The Annual Report includes our audited financial statements for our fiscal year ended December 31, 2018, along with other financial information about our Company, which we urge you to read carefully.    
All stockholders will have the ability to access the Proxy Materials on the website referred to in the Notice of Internet Availability and to download printable versions of the Proxy Materials through this website or to request and receive a printed set of the Proxy Materials from us. If you own your shares of common stock of the Company in your name or participate in
 
our employee stock purchase plan and wish to receive printed copies or stop receiving printed copies from us, you can make such a request by telephone at (800) 579-1639, by e-mail to sendmaterial@proxyvote.com or through the Internet at www.proxyvote.com. You will need your 16-digit Control Number located on your Notice to make such a request. If you hold your shares of common stock through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to request printed copies of future Proxy Materials. Your choice will remain in effect unless you change your election. You will be provided with the opportunity to receive hard copies of the Proxy Materials in future mailings.

                            





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PROPOSAL ONE:
ELECTION OF DIRECTORS
Our by-laws allow us to set the size of our Board to be between three and 15 directors. There are currently ten directors on our Board.
Our Restated Certificate of Incorporation provides for a classified Board, consisting of three classes of directors, with each class serving staggered three-year terms. As a result, only a portion of our Board is elected each year. The three directors identified below, Messrs. Bott, Lorentzen and Scudder, are to be elected by our stockholders for a three-year term expiring in 2022 or, in each case, until their respective successors are duly elected and qualified.
The following information describes the offices held and other directorships of each nominee. The particular experiences, qualifications, attributes or skills of each nominee that the Governance Committee believes will advance the Company’s goals are included in the individual biographies below. The Governance Committee and the Board believe that each of the nominees for election at the 2019 annual meeting possesses a strong and unique set of attributes. The Governance Committee and the Board believe that as a group, these nominees provide the Board with an optimal balance of experience, leadership, competencies, qualifications and skills.
Pursuant to our Corporate Governance Principles, individual non-management directors must submit a letter of resignation to the Board at the end of the term following their 70th birthday, which may be accepted or rejected by the Governance Committee. In evaluating whether to accept or reject such resignation, the Governance Committee is required to consider the specific needs of the Board at the time of receipt of such resignation and recommend to the Board whether to accept the resignation. Consistent with our Corporate Governance Principles, Mr. Bott submitted a letter of resignation to the Board in connection with the forthcoming end of his term, which resignation was not accepted by the Board, upon the recommendation of the Governance Committee. The Board, upon the recommendation of the Governance Committee, determined instead that it is in the best interest of the Company for Mr. Bott to serve an additional three-year term expiring in 2022. In reaching this determination, the Board considered Mr. Bott’s valuable insight into our operations and extensive finance, strategy and transactional experience.
Beneficial ownership of equity securities of the nominees is described in “Security Ownership of Certain Beneficial Owners and Management” on page 56.    
Our Board unanimously recommends that stockholders vote FOR the election of each
of Richard H. Bott, Øivind Lorentzen III and Mark A. Scudder
Proposed For Election as Director for a Three-Year Term Expiring in 2022
Name and Age on April 8, 2019
 
  
Principal Occupation, Business Experience and Other Directorships
 
 
 
 
RICHARD H. BOTT
Age 72
Director since 2012


 
Principal Occupation: Retired
 
Business Experience: Vice Chairman, Institutional Securities Group of Morgan Stanley & Co. Incorporated from 2003 to 2007; Vice Chairman, Investment Banking of Credit Suisse First Boston Corporation from 1998 to 2003; Managing Director, The First Boston Corporation and its successor companies, CS First Boston Corporation and Credit Suisse First Boston Corporation, from 1982 to 1998; Vice President, Assistant Vice President & Associate, The First Boston Corporation from 1972 to 1982
 
Other Directorships: Lear Corporation - Audit and Compensation Committees Member
 
Committees: Mr. Bott currently serves as a member of the Audit and Compensation Committees of our Board.
In connection with his nomination to the Board, the Board considered that Mr. Bott has extensive finance, strategy and transactional experience with larger companies, both domestic and international, from his 35-year career as an investment banker.


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Name and Age on April 8, 2019
 
  
Principal Occupation, Business Experience and Other Directorships
 
 
 
 
ØIVIND LORENTZEN III
Age 68
Director since 2006


 
 
Principal Occupation: Managing Director, Northern Navigation LLC, an investment management and ship-owning company, since 2016
 
Business Experience: Chief Executive Officer of SEACOR Holdings Inc., a diversified holding company with interests in domestic and international transportation, from September 2010 to February 2015; Founded Northern Navigation International, Ltd. in 1990; Chairman of NFC Shipping Funds from 2001 to 2008; Founding Sponsor of Northern Shipping Funds from 2008 to 2010; President and Chief Executive Officer of Northern Navigation International, Ltd. from June 1990 to September 2010
 
Other Directorships: SEACOR Holdings Inc. - Non-Executive Vice Chairman of the Board of Directors
 
Dorian LPG
 
ERA Group Inc. until October 2014
 
Committees: Mr. Lorentzen currently serves as Chairman of the Governance Committee of our Board.
In connection with his nomination to the Board, the Board recognized Mr. Lorentzen’s prior experience as the founder, President and Chief Executive Officer of an international shipping company, which provides the Board with valuable experience in evaluating international opportunities. Mr. Lorentzen’s recent experience as the Chief Executive Officer of a public company also provides a valuable perspective to the Board, which perspective has also been helpful in facilitating constructive and informative dialogue between management and the Board through Mr. Lorentzen, in his capacity as Lead Independent Director.
MARK A. SCUDDER
Age 56
Director since 2003


 
 
Principal Occupation: Chief Executive Officer and President, Scudder Law Firm, P.C., L.L.O. since January 2010; President of Scudder Law Firm from 2002 through 2009
 
Business Experience: Attorney with Scudder Law Firm since 1993, representing public and private companies in mergers and acquisitions, financing transactions and general corporate matters, with a particular focus on the U.S. trucking industry
 
Other Directorships: Mr. Scudder has not served on the Board of Directors of any other public companies in the last five years.
 
Committees: Mr. Scudder currently serves as Chairman of the Compensation Committee and as a member of the Audit Committee of our Board.
 
 
 
In connection with his nomination to the Board, the Board recognized Mr. Scudder’s background as an attorney, his expertise in advising public companies on mergers and acquisitions and governance matters, his extensive experience in the transportation industry, his extensive experience advising public companies on financial transactions and financial analysis, and his significant involvement with audit committee matters for other public companies, all of which provide a valuable perspective to the Board.
Unless voting instructions are given to the contrary, proxies received will be voted FOR the election of Richard H. Bott, Øivind Lorentzen III and Mark A. Scudder.
Our Board does not contemplate that any of the nominees will be unable to serve as a director, but if that contingency should occur prior to the voting of the proxies, the persons named in the proxy card reserve the right to vote for such substitute nominee or nominees as they, in their discretion, may determine. Therefore, if you vote by proxy, and if unforeseen circumstances make it necessary or desirable for our Board to substitute another person for a director nominee, the persons named in the proxy card will vote your shares for that person.

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Directors Whose Terms Do Not Expire at the 2019 Annual Meeting
The following table sets forth certain information with respect to each of our directors whose term in office does not expire at the 2019 annual meeting.
Term Expiring at Annual Meeting in 2020
Name and Age on April 8, 2019
 
Principal Occupation, Business Experience and Other Directorships
 
 
 
JOHN C. HELLMANN
Age 48
Director since 2006


 
Principal Occupation: Chairman of the Board since May 2017, Chief Executive Officer of Genesee & Wyoming Inc. since June 2007, and President since 2005
 
Business Experience: Chief Financial Officer of Genesee & Wyoming Inc. from 2000 to 2005
 
Other Directorships: Association of American Railroads. Mr. Hellmann has not served on the Board of Directors of any other public companies in the last five years.
 
Committees: Mr. Hellmann does not currently serve as a member of any of the Committees of our Board.
 
 
  
In connection with his nomination to the Board, the Board considered Mr. Hellmann’s extensive involvement in orchestrating the Company’s growth in his existing and previous managerial capacities, his in-depth knowledge of the Company’s operations, the leadership traits he has exhibited as Chief Executive Officer and his skill in developing effective strategies for the Company. Mr. Hellmann’s significant international business experience and his expertise in valuing and acquiring companies were also recognized when he was considered as a nominee.

 
 
 
ALBERT J. NEUPAVER
Age 68
Director since 2015


 
Principal Occupation: Executive Chairman of the Board of Directors, Westinghouse Air Brake Technologies Corporation, a supplier of technology-based products and services for rail, transit and other global industries, since 2014
 
Business Experience: Chairman of the Board and Chief Executive Officer, Westinghouse Air Brake Technologies Corporation from 2013 to 2014; President, Chief Executive Officer and Director, Westinghouse Air Brake Technologies Corporation from 2006 to 2013; President of the Electromechanical Group of AMETEK, Inc. from 1998 to 2006; President of the Industrial Metals Group of AMETEK, Inc. from 1993 to 1998; Vice President and General Manager of the Specialty Metals Products Division of AMETEK, Inc. from 1988 to 1993
 
Other Directorships: Westinghouse Air Brake Technologies Corporation
 
Koppers Holdings Inc. - Audit Committee Member, Management Development and Compensation Committee Member and Chairman of the Strategy and Risk Committee
 
Committees: Mr. Neupaver currently serves as a member of the Audit Committee of our Board.
 
 
 
In connection with his nomination to the Board, the Board considered Mr. Neupaver’s international business experience and his technological focus, noting his experience as a public company chief executive officer. The Board also noted when considering his nomination that Mr. Neupaver has significant experience in growth through acquisitions, integrating companies and managing a diverse international business.

JOSEPH H. PYNE
Age 71
Director since 2015


 
Principal Occupation: Non-Executive Chairman of the Board of Directors, Kirby Corporation, an operator of the largest inland and offshore tank barge fleets in the United States
 
Business Experience: Executive Chairman of Kirby Corporation from 2014 - 2018;
Chairman and Chief Executive Officer of Kirby Corporation from 2012 to 2014; President, Chief Executive Officer and Director, Kirby Corporation from 1995 to 2014; President of Dixie Carriers, Inc., a subsidiary of Kirby Corporation from 1984 to 1995; Executive Vice President, Vice President Administration, Assistant Vice President Operations, Director of Safety and Personnel and Project Manager of Dixie Carriers, Inc. from 1978 to 1984
 
Other Directorships: Kirby Corporation - Chairman of the Board of Directors
 
 DHT Holdings, Inc. - Audit Committee and Compensation Committee Member
 
Committees: Mr. Pyne currently serves as a member of the Compensation Committee of our Board.
 
 
 
In connection with his nomination to the Board, the Board considered Mr. Pyne’s transportation industry expertise and his extensive management experience. The Board also noted the integral role Mr. Pyne played in the significant growth of Kirby Corporation through acquisitions when considering his nomination.


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Name and Age on April 8, 2019
 
 
Principal Occupation, Business Experience and Other Directorships
 
 
 
HUNTER C. SMITH
Age 51
Director since 2015

 
Principal Occupation: Chief Financial Officer, Rhythm Pharmaceuticals Inc., a biopharmaceutical company, since 2017
 
Business Experience: Vice President, Finance, Inflammation and Immunology of Celgene Corporation, a biopharmaceutical company, from 2013 to 2017; Chief Financial Officer of Sugar & Bioenergy Segment, Bunge Limited from 2010 to 2013; Corporate Treasurer, Bunge Limited from 2007 to 2010; Chief Risk Officer, Bunge Limited from 2006 to 2007; Chief Financial Officer of Bunge Asia, Bunge Limited from 2003 to 2006; Director of Global Communications, Bunge Limited from 2001 to 2003; Assistant Treasurer, Bunge Limited from 1999 to 2001; Director of Commodities Finance, UBS AG from 1994 to 1999; Analyst, Commodities Finance, UBS AG from 1992 to 1994; Credit Analyst, Manufacturers Hanover Corporation from 1990 to 1992
 
Other Directorships: Mr. Smith has not served on the Board of Directors of any other public companies in the last five years.
 
Committees: Mr. Smith currently serves as a member of the Compensation and Governance Committees of our Board.
 
 
 
In connection with his nomination to the Board, the Board considered Mr. Smith’s expertise in accounting, finance and risk management. The Board believes that Mr. Smith brings to the Board extensive corporate finance and international business experience. The Board also noted Mr. Smith’s in-depth knowledge of the agribusiness industry when considering his nomination.

Term Expiring at Annual Meeting in 2021
Name and Age on April 8, 2019
 
  
Principal Occupation, Business Experience and Other Directorships
 
 
 
 
ANN N. REESE
Age 66
Director since 2012

 
Principal Occupation: Co-Executive Director and Co-Founder of the Center for Adoption Policy, a nonprofit organization providing research, analysis and education about current legislation and practices governing domestic and inter-country adoption, since 2001
 
Business Experience: Principal, Clayton, Dubilier & Rice from 1999 to 2000; Executive Vice President and Chief Financial Officer of ITT Corporation from 1995 to 1998; Treasurer of ITT Corporation from 1992 to 1995
 
Other Directorships: Depository Trust & Clearance Corporation - Audit Committee Member and Risk Committee Member
 
Xerox Corporation - Chairman of the Finance Committee and Corporate Governance Committee Member, and Audit Committee Member until May 2018
 
Sears Holdings Corporation - Chairman of the Audit Committee and Compensation Committee Member
 
Committees: Ms. Reese currently serves as the Chairman of our Audit Committee and as a member of the Governance Committee of our Board.
 
 
 
In connection with her nomination to the Board, the Board recognized Ms. Reese’s extensive executive experience in corporate finance and financial reporting, as well as her knowledge, perspective and corporate governance expertise. The Board also considered that her expertise in financial and accounting matters, her prior experience as the chief financial officer and treasurer of a large public company and her service on other public company boards and committees would significantly benefit the Company. In addition, the Board also noted Ms. Reese’s significant involvement with the University of Pennsylvania as a Trustee as another means to enrich the diverse perspectives of the Board.


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Name and Age on April 8, 2019
 
 
Principal Occupation, Business Experience and Other Directorships

 
 
 
 
BRUCE J. CARTER Age 60
Director since 2018
 
Principal Occupation: Professional director of public and private companies in Australia, including serving as a Company representative on the management committee of GW Australia Holdings, LP (“GWAH”)
 
Business Experience: Founding Managing Partner of Ferrier Hodgson, Adelaide from 1992 to 2012; Partner of Ernst & Young, Adelaide from 1988 to 1992
 
Other Directorships: Australia Submarine Corporation - Chairman of the Board of Directors
 
Bank of Queensland Ltd. - Chairman of Risk Committee and member of the Audit Committee and Investment Committee
 
SkyCity Entertainment Group Limited - Deputy Chairman and Chairman of the Audit & Risk Committee and Chair of the Due Diligence Committee for capital raisings
 
Aventus Capital Limited - Chairman of the Board of Directors
 
Committees: Effective May 23, 2018, Mr. Carter serves on the Audit Committee of our Board.
 
 
 
In connection with his nomination to the Board, the Board considered that Mr. Carter has extensive public company board experience in Australia and has served as a government adviser for projects of industrial significance to the economies of Australia, South Australia and the Northern Territory. Mr. Carter also provided numerous contributions to the Company’s business as a director of our Australian subsidiary, Genesee & Wyoming Australia Pty Ltd from 2011 until March 2019, and currently serves as a Company representative on the management committee of GWAH, which provides oversight of the Company's Australia operations following the acquisition of Glencore Rail (NSW) Pty Limited (“GRail”). Further, Mr. Carter’s experience as a chartered public accountant is also beneficial to the Board in its oversight of accounting matters.

CYNTHIA L. HOSTETLER Age 56
Director since 2018
 
Principal Occupation: Professional director of public companies and investment funds in the United States
 
Business Experience: Head of Private Equity and Vice President of Investment Funds of Overseas Private Investment Corporation (“OPIC”) from 2001 to 2009; Board member and President of First Manhattan Bancorporation from 1991 to 2006 and Board member, President and General Counsel of First Savings Bank, its largest subsidiary; Attorney with Simpson Thacher & Bartlett from 1988 to 1990
 
Other Directorships: Invesco Funds - Board Trustee and Member of the Governance, Investments and Audit Committees
 
Vulcan Materials Company - Board Director, Chairman of the Finance Committee and Member of the Executive and Audit Committees
 
TriLinc Global Impact Fund, LLC - Board Manager and Chairman of the Corporate Governance and Conflicts Committee                                                                                                                                                                                                                               
    
Eisenhower Foundation - Board of Directors
 
Aberdeen Asset Managers - Board Trustee until 2017

Edgen Group - Board Director until 2014                                                      
 
Committees: Effective May 23, 2018, Ms. Hostetler serves on the Compensation and Governance Committees of our Board.
 
 
 
In connection with her nomination to the Board, the Board considered that Ms. Hostetler has broad investment, financial and risk management skills developed through her public company service and her experience with OPIC. Further, the Board also believes Ms. Hostetler’s diverse perspective gleaned from her investment advisory roles, as well as her business leadership, managerial and legal background, are invaluable to the Board.



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RELATED PERSON TRANSACTIONS
Class B Stockholders’ Agreement and Issuances of Class B Common Stock
The Company, John C. Hellmann, our Chairman of the Board, and our officers who are subject to the reporting obligations of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (collectively, the “Section 16 Executive Officers”), and all holders of our Class B Common Stock are parties to a Class B Stockholders’ Agreement dated as of May 20, 1996 (the “Class B StockholdersAgreement”). Mortimer B. Fuller III, our former Chairman of the Board who retired on May 24, 2017, is also a party to the agreement. Under the agreement, if a party proposes to transfer shares of Class B Common Stock in a transaction that would result in the automatic conversion of those shares into shares of Class A Common Stock, the Section 16 Executive Officers have the right to purchase up to an aggregate of 50% of those shares, and Mr. Fuller has the right to purchase the balance, in each case at the then-current market price of the Class A Common Stock. If Mr. Fuller does not purchase the entire balance of the shares, the Section 16 Executive Officers have the right to purchase any shares that remain. In the event that the employment of any Section 16 Executive Officer terminates, these purchase rights also apply to any Class B Common Stock held by the Section 16 Executive Officer, if any. The effect of the Class B Stockholders’ Agreement is to concentrate ownership of the Class B Common Stock, which entitles the holders thereof to 10 times the voting power per share of the Class A Common Stock, in the hands of our management and Mr. Fuller. See “Security Ownership of Certain Beneficial Owners and Management” on page 56.
In 2012, our Corporate Governance Principles were amended to formalize the Company’s current policy on limiting additional issuances of Class B Common Stock. Generally, pursuant to the Corporate Governance Principles, the Board does not expect to approve any new issuances of Class B Common Stock other than (a) the transfer of outstanding Class B Common Stock: (1) by gift to a spouse, child or grandchild of a holder of record of any Class B Common Stock, or to a trust for the benefit thereof, (2) to a spouse, child or grandchild of a holder of record of any Class B Common Stock, or to a trust for the benefit thereof, which results, whether by bequest, operation of the laws of intestate succession or otherwise, from the death of such holder of record, or (3) to Mr. Fuller or any Section 16 Executive Officer, in accordance with the terms of the Class B Stockholders’ Agreement and (b) issuances in connection with the subdivision (whether in the form of a stock dividend or otherwise), consolidation, reclassification or other change in the Class B Common Stock, in each case in accordance with the conditions set forth in the Company’s Restated Certificate of Incorporation then in effect.
Policies and Procedures for Review, Approval or Ratification of Related Person Transactions
The Board has adopted a written Related Person Transaction Policy, which requires (1) the review and approval, or ratification, by the Governance Committee, or by a sub-committee of the Board composed solely of independent directors who are disinterested, of all related person transactions that would be required to be disclosed pursuant to the rules and regulations of the SEC and (2) that any employment relationship or employment transaction involving any of our officers with policy-making functions as set forth on page 25 (collectively, the “Executive Officers”) and any related compensation to such Executive Officer must be approved by the Compensation Committee of the Board or recommended by the Compensation Committee to the Board for its approval. In connection with the review and approval, or ratification, of related person transactions, management must disclose to the Governance Committee or the Compensation Committee, as applicable, the relevant facts and circumstances, including the material terms of the transaction, the approximate dollar value associated with the transaction, and the nature of the related person’s interest in the transaction, all of which will be considered by the Governance Committee or Compensation Committee. Information with respect to compliance with any applicable agreements and any disclosure obligations must also be provided for consideration. To the extent that the transaction involves an independent director, consideration must also be given, as applicable, to the NYSE listing standards, our categorical standards of independence included in our Corporate Governance Principles, and other relevant rules under the Exchange Act related to independence.

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BOARD OF DIRECTORS AND CERTAIN
CORPORATE GOVERNANCE MATTERS
Director Independence
General
Pursuant to the General Corporation Law of the State of Delaware, the state in which we are incorporated, and our by-laws, our business, property and affairs are managed by or under the direction of our Board. Members of our Board are kept informed of our business through discussions with our Chief Executive Officer (“CEO”) and other officers, by reviewing materials provided to them by management, by participating in meetings of the Board and its committees and by visiting various facilities and operations. We currently have 10 Board members, including nine independent non-management directors and one management director. Mr. Hellmann serves as our non-independent Chairman and Mr. Lorentzen serves as our Lead Independent Director.
Corporate Governance Principles and Categorical Independence Standards
In order to provide guidance on the composition and function of our governing body, our Board adopted our Corporate Governance Principles, which include, among other things, our categorical standards of director independence. These categorical independence standards are consistent with the NYSE standards regarding director independence and establish certain relationships that our Board, in its judgment, has deemed to be material or immaterial, as the case may be, for purposes of assessing a director’s independence. In the event that a director maintains any relationship with us that is not addressed in these standards and could reasonably be expected to impact a director’s independence, the independent members of our Board or the Governance Committee, as applicable, will make an affirmative determination as to whether such relationship is material and whether such relationship would compromise the director’s independence under our Corporate Governance Principles. You may find a link to our Corporate Governance Principles, which include our independence standards, on our website at http://ir.gwrr.com/governance.
Evaluations of Director Independence
The Governance Committee undertook its annual review of director independence in accordance with the independence standards set forth in our Corporate Governance Principles and the rules of the NYSE and SEC and reviewed with our Board its findings. During this review, our Board considered any transactions and relationships between each director (and members of their immediate families) and our Company, its subsidiaries and affiliates, including those reported under “Related Person Transactions” above. Our Board also examined any transactions and relationships between directors, the nominees, and their affiliates and members of our senior management. The purpose of this review was to determine whether any such relationships or transactions compromised a director’s independence.
As a result of our 2019 review, our Board affirmatively determined that all of our directors and nominees for director are independent for purposes of Section 303A of the Listed Company Manual of the NYSE, with the exception of John C. Hellmann by virtue of Mr. Hellmann’s position as CEO. Our Board has also determined that all of the directors who serve on Board committees are “independent” for purposes of Section 303A of the Listed Company Manual of the NYSE (including for purposes of serving on the applicable committees) and under our Corporate Governance Principles and that all of the members of the Compensation Committee are also “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act.
Board Leadership Structure
The Board believes that the decision to combine or separate the Chairman and CEO positions depends on the facts and circumstances facing the Company at a given time and could change over time. We do not have a formal policy regarding whether to separate the Chairman and CEO positions.
In May 2017, Mr. Hellmann was appointed as our Chairman. Mr. Hellmann also continues to serve as our CEO. In his role as Chairman of the Board and CEO, Mr. Hellmann, an experienced leader with extensive knowledge of the Company’s business, strategy and the rail industry, serves as a highly effective bridge between the Board and management and provides the vision and leadership to execute on the Company’s strategy and create shareholder value. As the Company continues to implement its ongoing business strategy, the independent directors believe that the Company is best served by having the leader and architect of that strategy as Chairman of the Board.

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In light of the Company’s continued growth, diversification and increased complexity in our business, the Board appointed Mr. Lorentzen as our Lead Independent Director in May 2017. As the Lead Independent Director, Mr. Lorentzen serves as liaison between the Chairman and CEO and the independent directors, approves meeting schedules and agendas to assure that there is sufficient time for discussion of all items, has the authority to call meetings of the independent directors, and if requested by major stockholders, ensures that he is available for consultation and direct communication. The Board believes this role, combined with the leadership of Mr. Hellmann as Chairman and CEO, is in the best interests of the Company and its stockholders at this time. As part of its most recent leadership assessment, the Board considered the strategic goals of the Company, its opportunities and challenges, the diverse capabilities of our directors, as well as best practices in the market, among other factors, in determining that this leadership structure will provide the right balance between effective independent oversight of the Company’s and the Board’s activities, consistent with strong corporate leadership. In addition, we believe that this leadership structure provides appropriate risk oversight of our activities.
The Board currently has 10 members and the following three standing committees: Audit, Compensation and Governance. Each of the standing committees is comprised solely of independent directors, and, consequently, Mr. Hellmann does not serve on any of the standing committees. From time to time, the Board will also establish “ad hoc” committees relating to special transactions to be considered by the Board.
We believe that the number of independent, experienced directors that make up our Board, along with the independent leadership of each of our committees, benefits our Company and our stockholders. The following table shows the current membership of each of our Board’s standing committees and the number of meetings held by each of those committees during 2018: 
Director
 
Audit
Committee
 
Compensation
Committee
 
Governance
Committee
Richard H. Bott
 
X
 
X
 
Bruce J. Carter(1)
 
X
 
 
John C. Hellmann
 
 
 
Cynthia L. Hostetler(2)
 
 
X
 
X
Øivind Lorentzen III
 
 
 
Chair
Albert J. Neupaver
 
X
 
 
Joseph H. Pyne
 
 
X
 
Ann N. Reese
 
Chair
 
 
X
Mark A. Scudder
 
X
 
Chair
 
Hunter C. Smith
 
 
X
 
X
2018 Meetings
 
9
 
6
 
4
(1)
Mr. Carter joined our Board on April 3, 2018 and was appointed to serve on the Audit Committee on May 23, 2018.
(2)
Ms. Hostetler joined our Board on April 3, 2018 and was appointed to serve on the Compensation and Governance Committees on May 23, 2018.
Committee Charters
Our Board has adopted a charter for each of the Audit, Compensation and Governance committees that addresses the composition and function of each committee. You may find links to current copies of our committee charters on our website at http://ir.gwrr.com/governance.
Audit Committee
The Audit Committee assists our Board in fulfilling its responsibility relating to the oversight of (1) the quality and integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and independence and (4) the performance of our internal audit function and independent registered public accounting firm. The Report of the Audit Committee relating to 2018 appears on page 62 of this proxy statement. Our Board has determined that each of the members of the Audit Committee is “financially literate” within the meaning of the listing standards of the NYSE. In addition, our Board has determined that Ms. Reese qualifies as an “Audit Committee Financial Expert,” as defined by applicable SEC regulations. The Board reached its conclusion as to Ms. Reese’s qualification based on, among other things, her education, her business experience, most notably her service as the Chief Financial Officer of ITT Corporation from 1995 through 1998, and her experience as an audit committee chairman at another public company.

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Compensation Committee
The Compensation Committee discharges the responsibilities of our Board relating to the (1) oversight of the Company’s compensation programs, which includes approval of the compensation paid to our Executive Officers and other key personnel and (2) evaluation of the CEO. In fulfilling its responsibilities, the Compensation Committee may delegate any or all of its responsibilities to a subcommittee of the Compensation Committee composed of two or more of its members. The Compensation Committee’s report relating to 2018 appears on page 42 of this proxy statement. The Compensation Committee also reports and makes recommendations to the Board regarding the Company’s compensation philosophy and new executive compensation policies and informs the other members of the Board about the Compensation Committee’s decisions regarding compensation for the Executive Officers.
Compensation Consultants
In accordance with the Compensation Committee Charter, the Compensation Committee also has the authority to retain outside consultants or advisors as it deems necessary or advisable. In July 2015, the Compensation Committee retained Echelon Compensation Partners LLC (“Echelon”) as its new independent compensation consultant to conduct an annual review of the Company’s executive compensation program and to provide other general executive compensation consulting services. Echelon also advised our Governance Committee on the compensation paid to our non-management directors in 2017. Additional information with respect to the Compensation Committee’s retention of compensation consultants or other outside advisors and their roles is set forth under “Executive Compensation—Compensation Discussion and Analysis,” beginning on page 27 of this proxy statement.
Compensation Committee Processes and Procedures
In performing its duties, the Compensation Committee meets periodically with our CEO. Our CEO participates in discussions of the Compensation Committee and makes recommendations with respect to compensation decisions (other than with respect to himself), but he does not vote or otherwise participate in the Compensation Committee’s ultimate decisions, which are determined in executive session, or sessions without the presence of management directors. Our Board believes that it is prudent to have our CEO participate in these discussions because his evaluations and recommendations with respect to the compensation and benefits paid to Executive Officers, other than himself, are extremely valuable to the Compensation Committee.
Generally, the Compensation Committee considers the compensation of Executive Officers and other key employees at the first regularly scheduled Compensation Committee meeting of the year. At this meeting, each element of the compensation paid under the executive compensation program is reviewed, including annual incentive compensation earned for the prior year, as well as base salaries, annual performance targets, and long-term incentive compensation for the current year. In addition to determining any new performance-based compensation programs as described below under “Executive Compensation—Compensation Discussion and Analysis,” the fair value of the annual stock-based long-term incentive compensation awards to employees, including Executive Officers, is also reviewed at this meeting. Approval of compensation matters generally occurs during the first quarter of each year. As a result of updates made by the Compensation Committee to the Company’s Stock-Based Awards Policy, effective February 2, 2016, stock-based long term incentive compensation awards are granted on February 28 each year (or if February 28 does not fall on a trading day of the NYSE, the preceding trading day).
Additional information regarding the participation of our CEO in matters that are the responsibility of the Compensation Committee and the criteria used by the Compensation Committee in making compensation decisions is set forth under “Executive Compensation—Compensation Discussion and Analysis,” beginning on page 27.

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Governance Committee
The Governance Committee assists our Board in fulfilling its responsibility relating to corporate governance by (1) identifying qualified individuals to become directors, (2) selecting, or recommending that our Board select, particular candidates for any directorships to be filled by our Board or by the stockholders, (3) developing and recommending the content of our Corporate Governance Principles to our Board and (4) otherwise taking a leadership role in shaping our corporate governance. The process for identifying qualified director nominees entails the Governance Committee identifying potential new candidates through recommendations from its members, other Board members, management and stockholders. In evaluating candidates for directorships, our Board, with the help of the Governance Committee, takes into account a variety of factors it considers appropriate, which include certain minimum individual qualifications such as strength of character, mature judgment and an ability to work collegially with other members of the Board. Other factors considered in evaluating candidates include the following: leadership skills; industry knowledge or experience; general business acumen and experience; broad knowledge of the rail freight business or of other modes of transportation; knowledge of strategy, finance and international business experience; government affairs experience related to transportation; legal experience; experience with corporate governance; age; the number of other board seats held; and willingness to commit the necessary time to ensure an active Board whose members work well together and possess the collective knowledge and expertise required. Although the Governance Committee does not have a formal policy with respect to diversity, the committee evaluates each candidate in the context of the Board’s membership as a whole and seeks to achieve a mix of members that represents a diversity of background and experience in order to promote the representation of diverse views on the Board. The Governance Committee is also tasked with, among other matters, enforcing the Company’s corporate governance policies associated with the issuances of new shares of Class B Common Stock, reviewing and recommending compensation of non-management directors to the Board and reviewing and recommending to the Board director and officer indemnification and insurance matters. Additional information with respect to non-management director compensation in 2018 is set forth under “Director Compensation,” beginning on page 18 of this proxy statement.
Australia Committee
The Australia Committee was formed in 2010 in light of the increase in the size and scope of the Company’s operations in Australia in order to provide updates to the Board on the Company’s business and affairs in Australia. Mr. Allert, who served on the Board until May 23, 2018, was appointed to the Australia Committee in April 2012 and served as a representative of the Board on the board of directors of the Company’s subsidiary, Genesee & Wyoming Australia Pty Ltd. (“GWA”), until the Company’s December 2016 acquisition of GRail. Following the GRail acquisition, oversight of the Company’s operations in Australia transitioned to the management committee of GW Australia Holdings, LP (“GWAH”). Effective upon Mr. Allert’s retirement from the Board on May 23, 2018, the Australia Committee was discontinued and Mr. Carter replaced Mr. Allert as a Company representative on the GWAH management committee.
Board Evaluations
Each year, our Board evaluates its performance through a self-evaluation process developed by the Governance Committee. Each member of our Board provides specific feedback on various aspects of the Board’s role, organization and meetings, and the Chairman of our Governance Committee presents the findings of the self-evaluation process to our Board. As part of the evaluation, our Board develops, as appropriate, recommendations to enhance its effectiveness. In addition to this process, each committee of our Board conducts its own annual performance evaluation.
Stockholder Recommendations for Director Nominations
As noted above, the Governance Committee considers and establishes procedures regarding recommendations for nomination to our Board, which includes nominations submitted by stockholders. Such recommendations should be sent to our principal executive offices to the attention of our Corporate Secretary. Any recommendations submitted to the Corporate Secretary should be in writing and include any supporting material that the stockholder considers appropriate in support of that recommendation. In addition, it must include the information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such candidate and a signed consent of the candidate to serve as one of our directors if elected. Stockholders must also satisfy the notification, timeliness, consent and information requirements set forth in our by-laws. For an explanation of some of such requirements, see “How Can I Submit a Proposal for the 2020 Annual Meeting” on page 63 of this proxy statement.

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The Governance Committee evaluates all potential candidates in the same manner, regardless of the source of the recommendation. Based on the information provided to the Governance Committee, it will make an initial determination whether to conduct a full evaluation of a candidate. As part of the full evaluation process, the Governance Committee may conduct interviews, obtain additional background information and conduct reference checks of candidates. The Governance Committee may also ask the candidate to meet with management and other members of our Board. When the Governance Committee reviews a potential candidate, the Governance Committee considers the candidate’s qualifications in light of the needs of the Board and the Company at that time given the current mix of director attributes. In evaluating a candidate, our Board, with the assistance of the Governance Committee, also takes into account a variety of additional factors as described in our Corporate Governance Principles.
Meeting Attendance
During 2018, our Board held a total of nine Board meetings, including four in-person meetings and five telephonic meetings, and our Board’s current standing committees held a total of 19 meetings. Our prior Australia Committee, which was discontinued on May 23, 2018, held a total of two meetings. During 2018, each director attended more than 91% of the aggregate of (a) the total number of meetings of the Board held during the period for which he or she served as a director and (b) the total number of meetings held by all Board committees of which such director was a member during the period that he or she served. All directors who served on the Board as of last year’s annual meeting, which occurred on May 23, 2018, attended the annual meeting of stockholders. We encourage and expect all of the directors to attend each annual meeting of stockholders. To that end, and to the extent reasonably practicable, we regularly schedule a meeting of the Board on the day of or following the annual meeting of stockholders.
Independent Sessions
Our Corporate Governance Principles require our independent directors to have at least four regularly scheduled meetings per year without management present. Our independent directors met without management present at 10 meetings during 2018. Mr. Lorentzen presided over these sessions in his capacity as the Lead Independent Director.
Hotline for Accounting or Auditing Matters
As part of the Audit Committee’s role to establish procedures for the receipt of complaints regarding accounting, internal accounting controls or auditing matters, we have established a hotline for the confidential and anonymous submission of concerns regarding questionable accounting or auditing matters. Any matters reported through the hotline that involve accounting, internal controls over financial reporting or audit matters, or any fraud involving management or persons who have a significant role in our internal controls over financial reporting, will be reported to the Chairman of our Audit Committee. Our hotline numbers in the various countries in which we operate are as follows:
Country
 
Hotline Number
Australia
 
1800-141-924
Belgium
 
0800-746-72
Germany
 
855-846-6723
The Netherlands
 
0800-023-4013
Poland
 
0-0-800-151-0002
United Kingdom
 
0808-234-8815
United States and Canada
 
1-800-589-3280

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Risk Management
The Board is actively involved, as a whole and through its committees, in overseeing management of the Company’s risks. The Board regularly reviews information regarding the Company’s credit, liquidity and operations, as well as the risks associated with each. In addition, the Company’s Compensation Committee is responsible for overseeing the risks that could arise out of the Company’s compensation policies, practices, plans and arrangements. The Audit Committee oversees management of financial risks. The Governance Committee manages risks associated with the independence of the Board and potential conflicts of interest. While each committee is responsible for evaluating particular types of risk and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks.
In addition, the Company’s Chief Financial Officer ("CFO") is responsible for the Company’s Enterprise Risk Management function and reports both to the CEO and to the Audit Committee in this capacity. In fulfilling his risk management responsibilities, the CFO works closely with other Executive Officers to keep the Audit Committee and the Board apprised of the Company’s ongoing Enterprise Risk Management efforts, which includes the Company’s cybersecurity initiatives.
Code of Ethics and Conduct
We have a Code of Ethics and Conduct applicable to all employees of our Company, including our CEO, CFO, Chief Accounting Officer and Global Controller and to all members of our Board. You can find a link to our Code of Ethics and Conduct on our website at http://ir.gwrr.com/governance. To the extent required, we will post amendments to, and any waivers or implied waivers of, our Code of Ethics and Conduct at the same location on our website as our Code of Ethics and Conduct.


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DIRECTOR COMPENSATION
Elements of Director Compensation
All of our directors receive compensation for their services, except for our CEO, who receives no additional compensation for his services as a director. From time to time, the Governance Committee engages a compensation consultant to review the Company’s non-management director compensation program in the context of the broader market and peer group medians and to recommend changes, if applicable. The Governance Committee engaged Echelon to conduct such a review in 2017 (the “2017 Director Compensation Study”) pursuant to which Echelon evaluated the Company’s director compensation program relative to the broader market and the Company’s peer group as described below under “Executive Compensation—Compensation Discussion and Analysis—Determination of Total Compensation—2017 Compensation Review and Benchmarking.” As a result of the 2017 Director Compensation Study, Echelon concluded that our director compensation program, even assuming full use of the cash deferral election, fell slightly below both the broader market and the peer group medians. Accordingly, following the 2017 Director Compensation Study, the Governance Committee recommended and the Board approved, an increase of the annual equity award paid to our non-management directors from $90,000 to $100,000, and payment of a new annual Lead Independent Director fee of $20,000, in each case effective May 23, 2018, to align non-management director compensation generally with the broader market and peer group medians. Except for the foregoing changes, all other elements of our 2018 director compensation program remained the same, which were established as a result of a 2014 non-management directors Compensation Study performed by Farient Advisors LLC, our former compensation consultant.
As summarized below, our director compensation program is composed of (1) an annual grant of restricted stock (or restricted stock unit) awards and (2) cash compensation in the form of an annual retainer, committee chair retainers, Board and committee meeting fees and a Lead Independent Director fee, as applicable. The directors are also subject to share ownership guidelines, as discussed below.
Our non-management directors can elect to defer their director compensation that would otherwise be payable in cash and receive payments for fees earned in the form of deferred stock units (“DSUs”) representing shares of our Class A Common Stock, with a value equal to 125% of the cash fees earned. In 2018, all of our non-management directors elected to defer all of the fees that they earned. We also reimburse our non-management directors for travel expenses in connection with their attendance of Board and committee meetings and trips to our facilities and operations. During 2018, our non-management directors earned an aggregate of $1.9 million in compensation for service to the Company, inclusive of the 25% premium associated with the deferral of applicable retainers and Board and committee meeting fees by all of our non-management directors.
Compensation Element
Director Compensation Program
Annual Equity Award (1)
$100,000 in the form of Restricted Stock (or Restricted Stock Unit) Awards
Annual Retainer (2)
$45,000
Committee Chair Retainer (2)
$15,000 for the Audit Committee
 
$15,000 for the Australia Committee (6)
 
$15,000 for the Compensation Committee
 
$15,000 for the Governance Committee
Board Attendance Fees (3)
$2,000 for in-person meetings
 
$1,000 for telephonic meetings
Committee Attendance Fees (3)
$1,500 for in-person meetings of Audit, Compensation and Governance Committees
 
$1,000 for telephonic meetings of Audit, Compensation and Governance Committees
 
$10,000 for in-person meetings of Australia Committee with overseas travel (4)(6)
 
$1,000 for in-person meetings of Australia Committee with no overseas travel (4)(6)
 
$1,000 for telephonic meetings of Australia Committee (4)(6)
Lead Independent Director Fee
$20,000
Share Ownership Guidelines (5)
Non-management directors must own Company shares in the amount of 10x the annual retainer of $45,000 within the first five years of being elected to the Board
(1)
Our non-management directors generally receive an annual equity award in the form of a grant of restricted stock or restricted stock units. The grants are made on the date of the annual meeting or the date on which a new non-management director joins the Board if the director joins the Board after the annual meeting. The number of shares to be granted is based on the closing stock price of our Class A Common Stock on the date of grant. If a new non-management director joins the Board after the annual meeting, the number of shares to be granted is pro-rated for the period until the Company’s next annual meeting of stockholders.

18








(2)
The annual retainer fee and any Committee Chair retainers, if applicable, are pro-rated on a quarterly basis, and these retainers (along with any additional fees earned for meeting attendance) are paid quarterly. Prior to his retirement from the Board effective May 23, 2018, Mr. Allert did not receive the $15,000 Australia Committee Chair Retainer in 2018 (see Note 4 below).
(3)
No fees are paid for meetings that last less than 30 minutes.
(4)
Generally, Mr. Allert, an Australian resident, prior to his retirement from the Board effective May 23, 2018, would have been entitled to receive fees for serving on the Australia Committee. However, as Mr. Allert also served as a member of the managing committee of GWAH in 2018, and the Australia Committee meetings and the GWAH managing committee meetings occurred simultaneously, Mr. Allert did not receive any additional compensation for attending the Australia Committee meetings so that he was not compensated twice for attending the same meeting. As a result, Mr. Allert did not receive any compensation for attending any Australia Committee meetings in 2018.
(5)
With the exception of Mr. Carter and Ms. Hostetler, each of whom joined the Board on April 3, 2018, all non-management directors have met these share ownership guidelines as of the Record Date.
(6)
The Australia Committee was discontinued effective May 23, 2018.

19








2018 DIRECTOR COMPENSATION TABLE
The following table and footnotes provide information on the compensation of our directors other than our CEO, who receives no additional compensation as a director. Following the table and footnotes, we describe additional information on compensation arrangements for service on the Board and Board committees for the year ended December 31, 2018.
Name
 
Fees Earned or
Paid in Cash (1)(2)
 
Stock
Awards (3)
 
All Other
Compensation (4)
 
Total Compensation
Richard H. Allert(5)
 
$
29,802

 
$
7,587

 
$
61,409

 
$
98,798

Richard H. Bott
 
$
77,000

 
$
119,402

 
$
5,000

 
$
201,402

Bruce J. Carter(6)
 
$
48,750

 
$
112,151

 
$
61,409

 
$
222,310

Cynthia L. Hostetler(7)

 
$
50,750

 
$
112,663

 
$

 
$
163,413

Øivind Lorentzen III(8)
 
$
90,667

 
$
120,586

 
$
5,000

 
$
216,253

Albert J. Neupaver
 
$
69,000

 
$
117,445

 
$

 
$
186,445

Hans Michael Norkus(5)
 
$
27,802

 
$
7,126

 
$

 
$
34,928

Joseph H. Pyne
 
$
66,000

 
$
116,661

 
$

 
$
182,661

Ann N. Reese
 
$
89,000

 
$
122,472

 
$
5,000

 
$
216,472

Mark A. Scudder
 
$
91,500

 
$
123,092

 
$
5,000

 
$
219,592

Hunter C. Smith
 
$
69,000

 
$
117,469

 
$

 
$
186,469

 
 
(1)
Reflects amounts earned during 2018. For 2018, all of the Company’s non-management directors elected to receive all of their cash retainer amounts and fees in the form of DSUs.
(2)
The fees forgone in favor of the DSUs are included in the Fees Earned or Paid in Cash column. Details of DSUs received are set forth in the stock awards table below.
(3)
Reflects the aggregate grant date fair value of equity awards, computed in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 718 “Compensation—Stock Compensation” (“ASC Topic 718”), that were granted to our non-management directors under the Fourth Amended and Restated 2004 Omnibus Incentive Plan (the “Omnibus Plan”) in 2018. For a discussion of the assumptions made in the valuations, refer to Note 15 of our consolidated financial statements for the fiscal year ended December 31, 2018 contained in our Annual Report on Form 10-K. In addition to the grant date fair value of the annual equity awards, the Stock Awards column includes the grant date fair value with respect to the 25% premium associated with the DSU awards granted to all non-management directors in lieu of cash payments for fees earned.
(4)
Amounts for Messrs. Allert and Carter reflect all other compensation reflects fees paid for serving on the managing committee of the Company’s subsidiary, GWAH. Mr. Allert served on the managing committee of GWAH until November 30, 2018. All other Director amounts reflect company contributions under the Directors’ Matching Gift Plan described in additional detail below.
(5)
Messrs. Allert and Norkus retired from the Board, effective May 23, 2018.
(6)
Mr. Carter joined the Board effective April 3, 2018 and was appointed to serve on the Audit Committee on May 23, 2018.
(7)
Ms. Hostetler joined the Board effective April 3, 2018 and was appointed to serve on the Compensation Committee and Governance Committee on May 23, 2018.
(8)
Due to an administrative oversight, Mr. Lorentzen was not paid the full amount due to him as Lead Independent Director in 2018. The additional fees owed to Mr. Lorentzen from 2018, as well as the additional 25% premium associated with the DSUs was granted in the form of DSUs on March 31, 2019.
    

20








Directors’ Stock Awards
The following table details grants of stock awards to each of our non-management directors in 2018 as well as the total number of outstanding unvested stock awards as of December 31, 2018. With the exception of the annual equity award on May 23, 2018, the number of stock awards and grant date fair value shown in the table below reflect only the 25% premium associated with the DSUs representing shares of our Class A Common Stock (see, “—Deferral of Cash Compensation” described below) as well as the aggregate number of outstanding, unvested stock awards associated with annual equity awards as of December 31, 2018:
Name
 
Grant Date (1)
 
Stock
Awards (#)
 
Grant Date
Fair Value (2)
 
Total Number of
Outstanding, 
Unvested
Stock Awards
(#) (3)
Richard H. Allert(4)
 
3/31/2018
 
67

 
$
4,743

 
 
 
 
5/23/2018
 
37

 
$
2,844

 
 
 
 
 
 
 
 
 
 

Richard H. Bott
 
3/31/18
 
71

 
$
5,026

 
 
 
 
5/23/18
 
1,301

 
$
99,995

 
 
 
 
6/30/18
 
59

 
$
4,798

 
 
 
 
9/30/18
 
50

 
$
4,550

 
 
 
 
12/31/18
 
68

 
$
5,033

 
 
 
 
 
 
 
 
 
 
2,525

Bruce J. Carter(5)
 
5/23/18
 
1,301

 
$
99,995

 
 
 
 
6/30/18
 
42

 
$
3,415

 
 
 
 
9/30/18
 
44

 
$
4,004

 
 
 
 
12/31/18
 
64

 
$
4,737

 
 
 
 
 
 
 
 
 
 
1,301

Cynthia L. Hostetler(6)
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
42

 
$
3,415

 
 
 
 
9/30/2018
 
48

 
$
4,368

 
 
 
 
12/31/2018
 
66

 
$
4,885

 
 
 
 
 
 
 
 
 
 
1,301

Øivind Lorentzen III
 
3/31/2018
 
72

 
$
5,097

 
 
 
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
65

 
$
5,286

 
 
 
 
9/30/2018
 
52

 
$
4,731

 
 
 
 
12/31/2018
 
74

 
$
5,477

 
 
 
 
 
 
 
 
 
 
2,525

Albert J. Neupaver
 
3/31/2018
 
61

 
$
4,318

 
 
 
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
54

 
$
4,391

 
 
 
 
9/30/2018
 
44

 
$
4,004

 
 
 
 
12/31/2018
 
64

 
$
4,737

 
 
 
 
 
 
 
 
 
 
2,227

Hans Michael Norkus(4)
 
3/31/2018
 
67

 
$
4,743

 
 
 
 
5/23/2018
 
31

 
$
2,383

 
 
 
 
 
 
 
 
 
 


21








Name
 
Grant Date (1)
 
Stock
Awards (#)
 
Grant Date
Fair Value (2)
 
Total Number of
Outstanding, 
Unvested
Stock Awards
(#) (3)
Joseph H. Pyne
 
3/31/2018
 
61

 
$
4,318

 
 
 
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
48

 
$
3,903

 
 
 
 
9/30/2018
 
44

 
$
4,004

 
 
 
 
12/31/2018
 
60

 
$
4,441

 
 
 
 
 
 
 
 
 
 
2,227

Ann N. Reese
 
3/31/2018
 
81

 
$
5,734

 
 
 
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
70

 
$
5,692

 
 
 
 
9/30/2018
 
58

 
$
5,277

 
 
 
 
12/31/2018
 
78

 
$
5,774

 
 
 
 
 
 
 
 
 
 
1,301

Mark A. Scudder
 
3/31/2018
 
83

 
$
5,876

 
 
 
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
70

 
$
5,692

 
 
 
 
9/30/2018
 
60

 
$
5,459

 
 
 
 
12/31/2018
 
82

 
$
6,070

 
 
 
 
 
 
 
 
 
 
2,525

Hunter C. Smith
 
3/31/2018
 
61

 
$
4,318

 
 
 
 
5/23/2018
 
1,301

 
$
99,995

 
 
 
 
6/30/2018
 
48

 
$
3,903

 
 
 
 
9/30/2018
 
48

 
$
4,368

 
 
 
 
12/31/2018
 
66

 
$
4,885

 
 
 
 
 
 
 
 
 
 
2,227

(1)
The May 23, 2018 grants relate to the annual equity awards made to the non-management directors in the form of restricted stock, other than Mr. Carter who received restricted stock units, all of which are subject to vesting conditions. All other grants relate to the director’s election to receive DSUs in lieu of cash payments for their annual retainer and Board and committee meeting fees. The number of DSUs shown as awarded and the grant date fair value thereof reflect only the 25% premium associated with the DSU awards. See “Deferral of Cash Compensation” below.
(2)
This column shows the grant date fair value of annual equity awards and the 25% premium associated with the DSU awards granted in 2018, computed in accordance with ASC Topic 718.
(3)
Notwithstanding any deferral elections by non-management directors, DSUs are deemed to be vested on the grant date and are, therefore, not included in outstanding unvested stock awards as of December 31, 2018.
(4)
Messrs. Allert and Norkus retired from the Board, effective May 23, 2018.
(5)
Mr. Carter joined the Board effective April 3, 2018 and was appointed to serve on the Audit Committee on May 23, 2018.
(6)
Ms. Hostetler joined the Board effective April 3, 2018 and was appointed to serve on the Compensation Committee and Governance Committee on May 23, 2018.



22








Directors’ Cash Compensation
Fees Paid or Earned in Cash
Each non-management director can elect to have all or a portion of his or her earned fees for service on our Board paid in DSUs representing shares of our Class A Common Stock. In 2018, all of our non-management directors elected to defer all of the fees that they earned. The following table outlines the fees earned by each of our non-management directors in 2018 for service on our Board, which were paid to all non-management directors in full in DSUs, but excludes DSUs relating to the 25% premium associated with the deferral of fees discussed below. See “Deferral of Cash Compensation” below. In the event a director attends an in-person meeting telephonically, their compensation is reduced accordingly.
 
 
 
 
Board Meeting Fees
 
Committee
Meeting Fees
 
 Chair Retainer/ Lead Independent Director Fee
 
 
Name
 
Annual
Retainer
 
In
Person
 
Telephonic
 
In
Person
 
Telephonic
 
 
Total
Richard H. Allert(1)
 
$
17,802

 
$
2,000

 
$
1,000

 
$
4,500

 
$
4,500

 
$

 
$
29,802

Richard H. Bott
 
45,000

 
8,000

 
5,000

 
12,000

 
7,000

 

 
77,000

Bruce J. Carter(2)
 
33,750

 
6,000

 
4,000

 
3,000

 
2,000

 

 
48,750

Cynthia L. Hosteltler(3)
 
33,750

 
6,000

 
4,000

 
6,000

 
1,000

 

 
50,750

Øivind Lorentzen III(4)
 
45,000

 
8,000

 
5,000

 
6,000

 

 
26,667

 
90,667

Albert J. Neupaver
 
45,000

 
8,000

 
5,000

 
6,000

 
5,000

 

 
69,000

Hans Michael Norkus(1)
 
17,802

 
2,000

 
1,000

 
6,000

 
1,000

 

 
27,802

Joseph H. Pyne
 
45,000

 
8,000

 
5,000

 
6,000

 
2,000

 

 
66,000

Ann N. Reese
 
45,000

 
8,000

 
4,000

 
12,000

 
5,000

 
15,000

 
89,000

Mark A. Scudder
 
45,000

 
8,000

 
5,000

 
10,500

 
8,000

 
15,000

 
91,500

Hunter C. Smith
 
45,000

 
8,000

 
5,000

 
9,000

 
2,000

 

 
69,000

Total
 
$
418,104

 
$
72,000

 
$
41,000

 
$
81,000

 
$
40,500

 
$
56,667

 
$
709,271

(1)
Messrs. Allert and Norkus retired from the Board, effective May 23, 2018.
(2)
Mr. Carter joined the Board effective April 3, 2018 and was appointed to serve on the Audit Committee on May 23, 2018.
(3)
Ms. Hostetler joined the Board effective April 3, 2018 and was appointed to serve on the Compensation Committee and Governance Committee on May 23, 2018.
(4)
Due to an administrative oversight, Mr. Lorentzen was not paid the full amount due to him as Lead Independent Director in 2018. The additional fees owed to Mr. Lorentzen from 2018, as well as the additional 25% premium associated with the DSUs was granted in the form of DSUs on March 31, 2019.
Deferral of Cash Compensation
Under the Omnibus Plan, each non-management director may elect to have all or a portion of his or her annual retainer, Board and committee meeting fees and chair retainers, as applicable, paid in DSUs representing shares of our Class A Common Stock. If a director elects to defer all or a portion of these fees, the participating director’s account is credited on a quarterly basis with DSUs having a value equal to 125% of the cash compensation he or she elected to defer. Specifically, the number of DSUs credited to each participating director’s account is equal to the result obtained by dividing the dollar amount of the deferred compensation by the per share market price of the Class A Common Stock at the close of business on the second to last business day of the quarter in which such director would have otherwise been entitled to receive the cash compensation and multiplying that number by 1.25. DSUs are subject to customary anti-dilution adjustments. A non-management director is not entitled to vote or transfer the Class A Common Stock represented by the DSUs in his or her account until the shares represented by DSUs are issued to him or her. These shares will be issued to the participating director or his or her designated beneficiaries (1) on the deferred payment date or dates previously elected by him or her or (2) if earlier, upon his or her death, long-term disability or cessation of service as a director. DSUs are deemed to be vested on the grant date. In 2018, all of our non-management directors received additional deferred shares with an aggregate value of $176,699 resulting from the 25% premium associated with the deferral of fees for service on our Board and committees.

23








Directors’ Annual Equity Award
Restricted Stock Grants
In 2018, each non-management director (other than Mr. Carter) received an annual equity award in the form of a grant of restricted stock with a value of $100,000 on May 23, 2018. Mr. Carter received his annual equity award in the form of a grant of restricted stock units with a value of $100,000 on May 23, 2018. The grant date fair values of these awards, computed in accordance with ASC Topic 718, are shown in the table on pages 21 to 22. The annual restricted stock (or unit) grant issued in the first year of a director’s three-year term vests in three equal installments on the dates of each of the next three annual meetings. The annual restricted stock (or unit) grant issued in the second year of a director’s term vests in two equal installments on the dates of each of the next two annual meetings. For the final year of the directors’ three-year term and for new non-management directors that have yet to be elected by our stockholders, the entire amount of the annual restricted stock (or unit) grant vests on the date of the following year’s annual meeting.
Directors’ Matching Gift Plan
Our Directors’ Matching Gift Plan is designed to provide an additional incentive for our non-management directors to contribute to educational, cultural, environmental and charitable organizations of their choice. We will match gifts up to a total of $5,000 per donor per year. Educational institutions can either be secondary schools, schools that offer two-year or four-year degrees above the high school level, graduate level schools or programs, accredited educational institutions or educational institutions that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code (“IRC”). Non-educational recipient organizations must be tax-exempt under Section 501(c)(3) of the IRC and must not be a religious organization. In addition, arts or cultural organizations must be open to and operated for the benefit of the public; environmental conservation organizations must be affiliated with national, regional or state-level organizations, must provide public benefits beyond individual communities and must engage in conservation efforts related to land, air and water use; and charitable organizations must be affiliated with local, state-regional or state-level organizations. All charitable deductions made pursuant to this plan are taken solely by our Company, and our individual directors do not derive any personal financial benefit from the plan’s implementation.

24








EXECUTIVE OFFICERS

Our current executive officers are Messrs. Hellmann, Gallagher and Walsh, Ms. Fergus and Michael Miller, our President, North America since October 2018 (the “Current Executive Officers”). Mr. Brown, who currently leads select operational performance projects and serves on the subsidiary boards of the Company’s 51%-owned Australia Operations and 100%-owned U.K./Europe Operations, served as our Chief Operating Officer (“COO”) until February 8, 2019. Messrs. Brown, Hellmann, Gallagher, and Walsh and Ms. Fergus shall be deemed “Executive Officers” for the purpose of our discussion of Executive Officers and Executive Compensation for fiscal year 2018 as set forth herein.
Set forth below is certain information regarding each of our Current Executive Officers and Mr. Brown.
John C. Hellmann, age 48, has been our Chairman of the Board since May 2017, President since May 2005, a director since 2006 and our CEO since June 2007. Previously, Mr. Hellmann was our CFO from 2000 to May 2005. Prior to that, Mr. Hellmann was an investment banker at Lehman Brothers Inc. and Schroder & Co. Inc. in New York. Mr. Hellmann also worked for Weyerhaeuser Company in Tokyo, Japan and Beijing, China. Mr. Hellmann has an A.B. from Princeton University, an M.B.A. from the Wharton School of the University of Pennsylvania and an M.A. in International Studies from the Johns Hopkins University School of Advanced International Studies (SAIS).
Timothy J. Gallagher, age 56, has been our CFO since May 2005. Prior to joining the Company in May 2005, Mr. Gallagher was Senior Vice President and Treasurer of Level 3 Communications. Prior to that, Mr. Gallagher held a number of financial positions during eight years at BP Amoco Corporation and nearly five years at WilTel Communications. Mr. Gallagher has a B.S.E. from Princeton University, an M.B.A. from the Wharton School of the University of Pennsylvania and an M.S. in Financial Mathematics from the University of Chicago.
David A. Brown, age 60, served as our COO from October 2012 until February 8, 2019. Prior to joining the Company in June 2012, Mr. Brown was Executive Vice President and COO of CSX Transportation from 2010 to early 2012. He was Chief Transportation Officer for CSX from 2006 to 2010 and, prior to that, served 25 years with Norfolk Southern in roles ranging from strategic planning to the integration of the Conrail acquisition. Mr. Brown has a B.S. in Business Administration from the University of Tennessee and has an M.B.A. from the same institution. Mr. Brown also completed Harvard University’s Advanced Management Program.
Allison M. Fergus, age 45, has been our General Counsel and Corporate Secretary since October 2006. Ms. Fergus joined the Company as Senior Counsel in November 2005. Prior to joining the Company, Ms. Fergus was an associate at Shearman & Sterling LLP in New York where she practiced in the capital markets group from 2001 to 2005. Prior to her employment at Shearman & Sterling, Ms. Fergus worked in the treasury group of Omnicom Group Inc., an advertising and marketing communications services company and at JPMorgan Chase, formerly Chase Manhattan Bank. Ms. Fergus has a B.S. in International Business from Georgetown University and a J.D. from Fordham University School of Law.
Michael O. Miller, age 49, was appointed President of the Company’s North American operations in October 2018. He joined the Company as Chief Commercial Officer for North America in September 2010 and was previously General Manager of Norfolk Southern’s Modalgistics Supply Chain Solutions, where he improved customers’ supply chain efficiencies through rail, transload and intermodal service. Prior to that, he served as Vice President of Strategic Development for Derivion Corp and held logistics-related positions with Georgia-Pacific and Roadway Express. Mr. Miller holds a bachelor’s degree in Industrial Engineering and a Masters in Business Management from North Carolina State University.
Matthew O. Walsh, age 44, joined the Company in 2001 and has been our Executive Vice President, Global Corporate Development since June 2015. Prior to that, Mr. Walsh served in various corporate development and finance roles at the Company, including Senior Vice President, Corporate Development and Treasurer. From 1996 to 2001, Mr. Walsh was an investment banker at Salomon Smith Barney and Schroder & Co. Inc. both in New York and London. Between April 2012 and August 2015, he served on the Executive Committee of the Board of Directors of the American Short Line and Regional Railroad Association. Until 2011, Mr. Walsh also served on the Board of the Railroad Clearinghouse, which was established to create the administrative systems and banking function for electronic settlement of all rail industry interline freight systems. Mr. Walsh has an A.B. from Princeton University.
The Executive Officers serve at the discretion of our Board without specified terms of office.

25








Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors and Section 16 Executive Officers, and any persons who beneficially own more than 10% of the Company’s stock, to file with the SEC initial reports of ownership and reports of changes in ownership in our stock. Such persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. As a matter of practice, the Company’s administrative staff assists the Company’s Section 16 Executive Officers and directors in preparing and filing these reports with the SEC.
To the Company’s knowledge, based solely on a review of the reports filed by the Company on behalf of these individuals, the copies of such reports furnished to the Company, and written representations that no other reports were required, all Section 16(a) filing requirements were met on a timely basis during 2018, except that the Form 4 filings filed on March 7, 2018 for each of Messrs. Brown, Gallagher, Hellmann, Liucci and Walsh and Ms. Fergus that reported the acquisition of shares of Class A Common Stock of the Company underlying the 2017 performance-based restricted stock unit awards and the surrender of shares to the Company for the payment of taxes in connection therewith, were filed late due to an administrative oversight and were subsequently amended on March 29, 2019.

26








EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) explains the key elements of our executive compensation program and compensation decisions as they related to our Executive Officers. The Company’s Executive Officers for the fiscal year ended December 31, 2018 were:
Name
 
Title
John C. Hellmann
 
Chairman and Chief Executive Officer
Timothy J. Gallagher
 
Chief Financial Officer
David A. Brown
 
Chief Operating Officer (until February 2019)
Allison M. Fergus
 
General Counsel and Corporate Secretary
Matthew O. Walsh
 
Executive Vice President, Global Corporate Development
Executive Summary
The Compensation Committee oversees our executive compensation program and reviews and approves all compensation decisions relating to our Executive Officers. The Compensation Committee endeavors to provide a compensation program that attracts, motivates and retains our Executive Officers, is competitive within our industry and provides a substantial emphasis on Company performance and building value for our stakeholders.
Key Features of Our Executive Compensation Program
The following summary provides highlights of our executive compensation program:
 
What We Do
 
 
What We Don’t Do
ü
Direct link between pay and performance using Genesee Value Added (“GVA”) methodology (as described below) that aligns business strategies with value creation
 
û
No employment contracts with executives
ü
Multiple performance factors under GVA methodology discourage excessive risk-taking by removing any incentive to focus on a single performance goal
 
û
No gross-up payments to cover personal income taxes or U.S. excise taxes relating to severance benefits
ü
Appropriate balance between short- and long-term compensation discourages short-term risk taking at the expense of long-term results
 
û
No excessive perquisites for executives
ü
Competitive executive compensation levels that have a significant emphasis on performance-based pay
 
û
No re-pricing or backdating of stock options
ü
Multi-year time horizon for long-term incentives (options, restricted stock and performance-based restricted stock units) to align executive and stakeholder interests
 
û
No golden parachute severance payments
ü
Limit short- and long-term incentive payouts to 200% of target(1)
 
û
No hedging or pledging of the number of shares of Class A Common Stock that are required to be held by our Executive Officers and directors to satisfy our share ownership guidelines
ü
Significant share ownership guidelines for senior executives
 
 
 
ü
Robust clawback policy that provides for the recovery of incentive compensation in the event of a restatement of the Company’s consolidated audited financial statements due to a material error
 
 
 
ü
Independent compensation consultant is retained by the Compensation Committee to advise on executive compensation matters

 
 
 
(1)
For awards granted in 2019, short- and long-term incentive payouts are limited to 250% of target.

27








2018 Performance Highlights
The safety of our employees is our number one priority. During 2018, we continued to deliver strong safety results with a combined reportable injury-frequency rate of 0.84 per 200,000 man-hours, approximately three times safer than the U.S. short line average. Our safety program also focuses on the safety and security of our train operations, and we monitor our reportable derailments worldwide in accordance with the guidelines established by the United States Federal Railroad Administration (“FRA”). During 2018, our operations achieved a consolidated reportable derailment frequency rate, defined as FRA reportable derailments per 200,000 man-hours worked, of 0.68. We are committed to continuous improvement in safety, and our goal is for every one of our subsidiaries to be injury-free, every day.
chart-e75ff4d45ba254b8a99.jpg
(a) Includes Freightliner Group Limited’s (“Freightliner”) 2015 safety performance, which is the year G&W acquired Freightliner.
chart-4a19e2328dd15ef5a77.jpg



28








During 2018, we continued to execute on our growth strategy that includes organic growth, acquisition or long-term lease of existing railroads, as well as investment in rail equipment and/or track infrastructure to serve new and existing customers. Of note, in 2018:

We added 15,000 annual carloads, or 12% of our 125,000-carload pipeline of projects through the diligent efforts of our marketing and industrial development teams;
We spent more than $44 million on various projects to focus on new business development to support customer growth and to enhance our operations, including the investment in two new train sets in Australia to support new contracts in New South Wales;
The Company’s 50% owned joint venture, CG Railways, LLC (“CG Rail”) entered into construction contracts with a Chinese shipyard to replace its two existing rail ferries. We expect the new vessels, once delivered in 2021, to provide greater capacity and generate operational efficiencies for our Mobile, AL to Coatzacoalcos, Mexico operation; and
The Company completed its minority investment in Cargomatic, Inc. (“Cargomatic”), a technology platform connecting truck carriers and shippers in the short-haul less than truckload (“LTL”) in drayage markets, with the goal of attaching the unique Cargomatic platform as a last-mile option at select Company operations globally. 

Through these and other initiatives, for the three-year period ending December 31, 2018, the Company delivered strong returns to our stockholders. For this period, our compounded annual total stockholder return (“TSR”) was 11%, which ranked at the 78th percentile of companies in our compensation and performance peer group. While our 2018 annual TSR was lower (-6%), our performance relative to the peer group remained strong and ranked at the 72nd percentile overall.
2018 Executive Compensation Highlights
At the beginning of 2018, the Compensation Committee approved a 3% increase in base salaries for the Executive Officers and an additional 1% base salary increase for Mr. Gallagher as described below. The Compensation Committee also approved financial and safety goals pertaining to the short- and long-term incentive plans. The Compensation Committee set GVA financial targets in the annual and long-term incentive plans at a level that would make it reasonably difficult to achieve when taking into account the business environment at the time the target was established. Safety targets pertaining only to the short-term incentive plan were also set to make it reasonably difficult to achieve when compared with the historical safety results of the Company and of Class I, Class II, and Class III railroads. In addition to financial and safety targets in the short-term incentive plan, our Executive Officers were also evaluated on the basis of individual performance and departmental or other goals.
In 2018, the Executive Officers realized 100% and 65% of their target annual financial and safety bonuses, respectively, and 100% of their target annual individual performance awards, with the exception of Mr. Brown, who realized 50% of his individual performance award. This resulted in a combined executive award between 87% and 95% of target annual cash bonuses under the GVA methodology for 2018. Under our long-term incentive plan, executives realized 100% of the target performance-based restricted stock unit award granted in 2018 based on GVA financial performance. Any performance-based restricted stock units earned under this award are also subject to service requirements.
In 2017, Echelon, the Compensation Committee’s independent compensation consultant, performed a review of the Company’s peer group, which resulted in the Compensation Committee’s approval of an updated peer group, as further described under “Determination of Total Compensation - 2017 Compensation Review and Benchmarking” below. As a result, the Compensation Committee refreshed its review of the compensation benchmark data during 2017 and early 2018 and approved increases in the target cash bonuses under the GVA methodology from 75% to 80% of annual base salary for Messrs. Brown, Gallagher and Walsh, increases in the target long-term incentive program equity awards to 400% of annual base salary for Mr. Hellmann and to 200% of annual base salary for Messrs. Gallagher, Brown and Walsh, increases to the Company’s annual contributions to the Deferred Compensation Plan (“DCP”) for our Executive Officers totaling $355,667, and an additional 1% increase in the base salary of Mr. Gallagher, resulting in an aggregate increase in base salary for Mr. Gallagher of 4% in 2018. The Compensation Committee also approved an increase in the term of the stock options granted under the Omnibus Plan from five years to seven years.

29








Participants in the Compensation Process
Role of the Compensation Committee
The Compensation Committee, which consists of five independent directors, is responsible for developing and administering our executive compensation program. The Compensation Committee works closely with its independent compensation consultant and meets regularly (six times in 2018) to make decisions on our executive compensation program and to discuss the compensation of our Executive Officers. The Compensation Committee reports its actions to the full Board at the Board meeting following each Compensation Committee meeting. A complete description of the Compensation Committee’s authority and responsibilities can be found in our Compensation Committee Charter. You may find links to current copies of our committee charters on our website at http://ir.gwrr.com/governance.
Role of the Independent Compensation Consultant
The Compensation Committee directly engages with Echelon as its independent compensation consultant and for support on ongoing executive compensation matters. Commencing in 2017 and continuing in 2018, Echelon performed a variety of services, beginning with an in-depth review of our peer group to ensure each peer company’s continued suitability in terms of industry, size and operating complexity (the “2017 Compensation Review”), which is further described below under “Determination of Total Compensation - 2017 Compensation Review” and Benchmarking. Echelon also assessed the Company’s executive compensation levels and program design relative to our peer group and general practices for comparably sized organizations, conducted an annual assessment of risk in our executive compensation program, provided periodic updates and guidance on regulatory and governance trends impacting compensation, and reviewed compensation-related proxy disclosures. Echelon recommended certain changes to our executive compensation program and practices based on its analyses. Neither Echelon nor any of its affiliates maintain other direct or indirect business relationships with the Company or any of its affiliates other than the services provided to the Compensation Committee. Echelon’s services are provided under the direction and authority of the Compensation Committee, and all work performed by Echelon is pre-approved by the Chairman of the Compensation Committee. In February 2019, the Compensation Committee evaluated whether any work provided by Echelon raised any conflicts of interest and determined that it did not.
Role of the Chief Executive Officer
In performing its duties, the Compensation Committee meets periodically with the CEO to review compensation policies and specific levels of compensation paid to the Executive Officers and certain other key personnel. The CEO assists the Compensation Committee in evaluating the performance of the Executive Officers other than himself, establishing business performance targets and objectives and recommending salary levels and incentive awards. The CEO also works with the Chairman of the Compensation Committee to establish the agenda for the Compensation Committee meetings, and management then prepares the information required for the meetings. This information typically includes reports, data and analyses with respect to current and proposed compensation, answers to inquiries from members of the Compensation Committee and documents related to our compensation program. The Compensation Committee may also request information be provided to it by its compensation consultant to supplement management materials. As necessary, the Compensation Committee meets in executive session, without the presence of management.
Determination of Total Compensation
Compensation Philosophy
Consistent with the Company’s performance-based culture and desire to attract and retain outstanding executives, the Compensation Committee endeavors to align the Company’s executive compensation program to target total compensation that is competitive (based on the peer group identified in the 2017 Compensation Review), with the opportunity for compensation to exceed the market median in the event of noteworthy performance as reflected in annual GVA cash bonus payments, through GVA-based performance equity awards, and through the impact of share price increases on other stock-based compensation. This approach seeks to more heavily weight executive compensation to reward the creation of long-term stockholder value, rather than toward short-term financial performance. Moreover, to encourage the stability of our leadership team, several elements of our executive compensation program include multi-year vesting provisions. In addition, our executive compensation program requires our Executive Officers to retain significant ownership of the Company’s stock to further align the interests of these individuals with the interests of our stockholders.

30








2017 Compensation Review and Benchmarking
During 2017, the Compensation Committee requested that Echelon perform a review of the Company’s executive compensation program to ensure that it was aligned with our objectives to attract, retain and reward executives who can contribute to the Company’s long-term success, and remains consistent with general market best practices. This review included an in-depth assessment of our compensation peer group to be used for fiscal 2018 compensation and performance benchmarking purposes, and a competitive evaluation of our Executive Officers’ target total direct compensation compared to the market median.
The results of the 2017 Compensation Review performed by Echelon formed the basis of the decisions related to the changes made to the Executive Officers’ compensation for fiscal year 2018.
To assess the continued comparability of companies within our compensation peer group, and to evaluate potential new additions to the peer group, the Compensation Committee directed Echelon to consider companies with:
Similar revenue and market capitalizations (with comparable valuations);
Financial performance and asset growth rates consistent with the Company’s recent performance;
International operations; and
Other relevant attributes such as companies in the transportation industry and companies that grow through acquisitions.
As a result of this assessment, and after considering Echelon’s recommendations, the Compensation Committee approved the removal from the Company’s compensation peer group of two companies (Bristow Group, Inc. and Hornbeck Offshore Services, Inc.) as these companies were determined to no longer satisfy our predetermined financial and strategic screening criteria, most notably revenue and asset growth, a comparable market valuation, and a focus on growth through acquisitions. At the same time, the Compensation Committee approved the addition of one company (Martin Marietta Materials, Inc.) due to its high revenue and asset growth rates, comparable market valuation and acquisitive growth strategy. Following these changes, the peer group consisted of the 12 companies below for 2018:
Atlas Air Worldwide Holdings, Inc.
 
Kirby Corporation
Buckeye Partners, L.P.
 
Magellan Midstream Partners LP
Canadian Pacific Railway Ltd.
 
Martin Marietta Materials, Inc.
GATX Corporation
 
Old Dominion Freight Line Inc.
JB Hunt Transport Services, Inc.
 
Trinity Industries Inc.
Kansas City Southern
 
Westinghouse Air Brake Technologies Corporation
In its assessment, Echelon also determined that the Company was positioned relative to the peer group as follows: at approximately the 22nd percentile, 66th percentile and 28th percentile in terms of revenue, asset size and market capitalization, respectively, and well above the 75th percentile in terms of three-year compound annual growth in revenue and assets, based on publicly available data as of the end of 2016.
In July 2017, the Compensation Committee commenced its review of the compensation benchmark data obtained from our updated peer group to evaluate our Executive Officers’ positioning versus the market median and to consider whether any changes in executive target compensation were warranted for fiscal 2018. The Compensation Committee concluded that the analysis indicated that, as a group, our Executive Officers’ target total direct compensation (“TDC”), representing the sum of base salary, target short-term incentives and target long-term incentives was approximately 12% below the market median, driven primarily by below median short- and long-term incentives. In addition to the peer group comparison, the Compensation Committee also considered other factors, including, but not limited to, additional job responsibilities for each Executive Officer not necessarily represented in the peer group counterparts and relative internal pay equity among the senior executive team. Finally, the Compensation Committee obtained performance reviews of each of the Executive Officers (other than the CEO) from the CEO, and also completed a formal review of the CEO’s performance (including input from the Board and selected members of management). In that the TDC was determined to be below the market median, and in consideration of our relatively strong performance relative to peer companies during 2017 and the fact that our Executive Officers did not receive an increase in short- or long-term target incentive opportunity for 2017, on February 1, 2018, the Compensation Committee approved increases in the target cash bonuses under the GVA methodology from 75% to 80% of annual base salary for Messrs. Brown, Gallagher and Walsh. The Compensation Committee also approved increases in the target long-term incentive program equity awards to 400% of annual base salary for Mr. Hellmann and to 200% of annual base salary for Messrs. Gallagher, Brown and Walsh, as well as a 1% increase in the base salary of Mr. Gallagher.

31








In addition to the above and in conjunction with the establishment of 2018 compensation, the Compensation Committee also reviewed the Defined Contribution Accounts under the DCP, and approved enhancements to the contributions whereby:
the annual contributions are derived from projected future compensation assuming a 5% growth rate;
contributions will extend from age 60 to age 65; and
the assumed earnings rate was decreased from 9% to a long-term market rate of 6%.
As a result, the Company’s 2018 annual contributions to the DCP for all Executive Officers in total increased by approximately $355,667.
The above changes to the compensation program are intended to (1) recalibrate the executive compensation program to the updated peer group market median, (2) enhance the retention features of the Company’s compensation program for a management team that the Board wishes to retain and motivate and (3) incorporate additional best practices into the Company’s compensation program.
Except as described above, in February 2018, the Compensation Committee elected to make no other changes to the target TDC levels of our Executive Officers, other than to approve a 3% annual merit base salary increase for each Executive Officer, other than Mr. Gallagher who, as described above, received an aggregate increase of 4% in base salary in 2018.
2018 Executive Compensation Overview
Key Components and Mix of Executive Compensation
In performing its duties with respect to the establishment of 2018 compensation for our Executive Officers, in late 2017 the Compensation Committee requested that Echelon perform an updated review of our executive compensation program design to ensure that it continued to align our Executive Officers’ compensation with the Company’s business objectives, with the goal of attracting, retaining and rewarding executives with the ability to contribute to the Company’s long-term success and increase stockholder returns. As part of its review of the compensation program, Echelon also conducted a quantitative and qualitative evaluation of the Company’s executive compensation program to determine if the program may contribute to excessive risk-taking. Echelon concluded that the compensation program’s long-term focus, balanced mix of performance metrics and aggressive yet reasonable goal-setting are consistent with sound practices and did not encourage undue risk-taking.
The following table illustrates the key elements of the Company’s 2018 executive compensation program:
Element
 
Form/Vehicle
 
Time Horizon
 
Primary Objectives & Link to Stockholder Value
Base Salary
 
Cash
 
Annual
 
Fixed and competitive cash component to attract and retain our Executive Officers
Short-Term Incentives
 
Cash Bonus under GVA methodology
 
Annual
 
Designed to focus and motivate our Executive Officers to meet and exceed their annual financial, safety and individual goals
Long-Term Incentives
 
Stock Options
 
3-year ratable vesting; 7-year option term
 
Provide incentive to increase the market value of our common stock
 
 
Time-Vested Restricted Stock
 
3-year ratable vesting
 
Promote long-term retention and support stock ownership and alignment with stockholders
 
 
Performance-Based Restricted Stock Units (“PBRSUs”)
 
3-year ratable vesting
 
Reward achievement of long-term GVA goals and creation of stockholder value
Deferred Compensation Plan
 
Cash
 
5-year vesting of contributions
 
Designed to provide a supplemental retirement benefit in lieu of a traditional pension plan to Executive Officers
Other Compensation
 
Other benefits
 
Not applicable
 
Limited personal benefits related to 401(k), auto, life insurance and long- term disability insurance that are consistent with our peer companies

32








The following graphs illustrate the allocation of the key compensation elements for our CEO and for our other Executive Officers’ target compensation in 2018.
chart-5e53e328a34a5534851.jpgchart-7310584f4c96589f855.jpg
*Contributions to Defined Contribution Accounts under Deferred Compensation Plan
2018 Annual Base Salary
As discussed in the sections above, we provide base salaries to recognize the scope of responsibilities, skills, competencies, experience and individual performance of each Executive Officer. The base salary paid to each Executive Officer serves as the foundation of the overall compensation program for the executive officer, and the payouts under the annual incentive compensation plan and long-term incentive compensation programs are generally tied to, or expressed as a percentage of, base salary. The Compensation Committee reviews the base salaries of each Executive Officer on an annual basis.
When determining base salaries in February 2018, the Compensation Committee recognized that except for a 3% increase for cost of living increases in 2017, the base salaries for the Executive Officers had not otherwise been increased based on the outcome of the Compensation Committee’s 2016 benchmarking analysis and in recognition of the then challenging operating environment. The Compensation Committee acknowledged the Company’s long-term growth in revenues and earnings and the continued efforts and demands upon the Executive Officers and determined that it was appropriate to increase all 2018 Executive Officer salaries by 3% to address cost of living increases in 2018, noting that 3% was a typical salary increase in our industry (both for Class I railroads and the general railroad industry). This increase was also consistent with the increase provided to the Company’s general employee population.
In addition, based on the Compensation Committee’s benchmark review of Mr. Gallagher’s base salary in comparison to the updated peer group and for retention purposes, the Compensation Committee adjusted Mr. Gallagher’s base salary by an additional 1% for fiscal year 2018.
The base salaries for 2018 are set forth in the following table:
Name
 
2018 Base Salary
 
2017 Base Salary
 
Percent Increase
John C. Hellmann
 
$
901,500

 
$
875,243

 
3
%
Timothy J. Gallagher
 
$
500,000

 
$
480,800

 
4
%
David A. Brown
 
$
530,450

 
$
515,000

 
3
%
Allison M. Fergus
 
$
464,409

 
$
450,883

 
3
%
Matthew O. Walsh
 
$
530,450

 
$
515,000

 
3
%

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2018 Annual Incentive Compensation Program
Cash Bonuses Under the GVA Methodology
We use our annual incentive compensation program as a tool to align our Executive Officers’ interests with stockholders’ interests and to support the Company’s strategic and operational objectives. In 2018, the Compensation Committee established cash bonuses targeted at 75% to 100% of Executive Officers’ annual base salary (the “total target annual cash bonus”), with such cash bonuses based upon several components, including Company-wide financial performance as measured under our GVA methodology, Company-wide safety performance and individual performance. Our annual incentive compensation program is designed so that when the Company performs well, based on financial or safety performance targets and/or the individual performance goals being met, as applicable, the Executive Officers receive greater cash bonuses. Conversely, in the event that financial or safety performance falls below established targets, and/or individual performance goals are not met, as applicable, the Executive Officers receive lower cash bonuses (or no cash bonus).
The financial performance targets for the Company are derived based on GVA. GVA is a measure of our after-tax operating profit less a capital charge. The capital charge is calculated by multiplying the Company’s assumed long-term weighted average cost of capital by the total capital invested in the business, a particularly relevant metric for our capital-intensive railroad operations. We believe evaluating financial performance based on GVA motivates our Executive Officers and other key employees to produce results that increase stockholder value and encourages individual and team behaviors that help the Company achieve both its short- and long-term corporate objectives. The financial performance component weight ranges from 35% to 70% of the total target annual cash bonus amount depending on the Executive Officer’s responsibility for the Company’s financial results.
The Company is committed to protecting the personal well-being of our employees and the communities in which we operate, and therefore safety performance is included as a component of our annual incentive compensation program with a component weight of 15% of the total target annual cash bonus amount. We believe safe operations make the Company a more attractive place to work, reduce employee turnover, minimize high-cost injuries and insurance-related expenses and translate into efficient and profitable railroads.
The safety performance targets for the Company have two components and are derived from the ratios of (1) the number of reportable injuries per 200,000 man-hours worked and (2) reportable derailments per 200,000 man-hours worked, in each case as defined by the FRA. FRA-reportable injuries represent a verifiable way of monitoring safety and benchmarking our safety results against other railroads. FRA-reportable derailments represent a meaningful way to track improvements in our derailment frequency year-over-year. Each metric is tracked separately and aggregated to arrive at the G&W Annual Safety Performance weighted by 80% of the FRA-reportable injury frequency ratio and 20% of the FRA-reportable derailment ratio frequency, with performance for each metric measured against a target level for the year.
Individual performance targets are also included in the calculation of the total target annual cash bonus to motivate the attainment of personal goals specific to their departmental functions and responsibilities. This individual component for our Executive Officers is weighted between 15% and 50% of each executive’s target annual incentive award value, and satisfaction of individual performance objectives is assessed by Mr. Hellmann. For our CEO, whose individual performance component was weighted at 15% in his calculation of total annual cash bonus, the Board assessed Mr. Hellmann’s individual performance targets in 2018 and determined that his individual component was fully satisfied.

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The following table illustrates the total target annual cash bonus amounts as a percentage of base salary established on February 1, 2018 (for fiscal year 2018) for each of our Executive Officers, the weighting assigned to each component measure and the range for the annual potential cash bonuses as a percentage of the total target annual cash bonus and as a percentage of base salary. The range for potential cash bonuses as a percentage of base salary is calculated as the product of the total target bonus amount as a percentage of base salary multiplied by the annual potential cash bonus at both zero and maximum achievement. Based on the updated peer group resulting from the 2017 Compensation Review and for retention purposes, the Compensation Committee approved increases in the target annual cash bonuses as a percentage of base salary in 2018 for Messrs. Brown, Gallagher and Walsh from 75% to 80% in order to align total target cash compensation of all Executive Officers in 2018 at approximately the 50th percentile of the updated peer group.
Name
 
Total
Target
Annual
Cash
Bonus
Amount
as a %
of Base
Salary
 
Financial Performance Component Weight
 
Safety Performance
Component
Weight
 
Individual
Performance
Component
Weight
 
Range of
Annual Cash Bonus
as a % of
Bonus Target
 
Range of
Annual Cash Bonus
as a % of
Base
Salary
% of
Total
Target
Annual
Cash
Bonus
 
Max
Achieve-
ment
as a % of
Base
Salary
 
% of
Total
Target
Annual
Cash
Bonus
 
Max
Achieve-
ment
as a % of
Base
Salary
 
% of
Total
Target
Annual
Cash
Bonus
 
Max
Achieve-ment
as a % of
Base
Salary
 
 
John C. Hellmann
 
100
%
 
70
%
 
140
%
 
15
%
 
30
%
 
15
%
 
15
%
 
0% - 185%
 
0% - 185%
Timothy J. Gallagher
 
80
%
 
70
%
 
112
%
 
15
%
 
24
%
 
15
%
 
12
%
 
0% - 185%
 
0% - 148%
David A. Brown
 
80
%
 
70
%
 
112
%
 
15
%
 
24
%
 
15
%
 
12
%
 
0% - 185%
 
0% - 148%
Allison M. Fergus
 
75
%
 
35
%
 
53
%
 
15
%
 
23
%
 
50
%
 
38
%
 
0% - 150%
 
0% - 113%
Matthew O. Walsh
 
80
%
 
70
%
 
112
%
 
15
%
 
24
%
 
15
%
 
12
%
 
0% - 185%
 
0% - 148%
The Company calculates the actual annual cash bonus earned independently for each of the financial, safety and individual performance components, with the amounts earned for each component added together. Effective February 3, 2016, the Compensation Committee terminated the carry-forward aspect of prior year bonuses, which previously had provided for positive and negative bonus amounts to be carried forward to subsequent years’ bonus calculations, and amortized over a three-year period. Safety and financial components are each capped at 200%, and individual components are capped at 100%. All components have a minimum of zero, and financial and safety bonus payouts are based on variance from GVA financial and safety target performance as set forth in the payout regime table below:
Payout Regime
Variance from GVA Target Performance
 
GVA Performance Factor
110% or greater
 
200%
Between 102.5% and 110%
 
interpolated
Between 100% and 102.5%
 
100%
100%
 
100%
Between 97.5% and 100%
 
100%
Between 80% and 97.5%
 
interpolated
80% and below
 
0%
For 2018, as was the case in the prior years, at the beginning of the year the Compensation Committee approved annual financial and safety performance targets.
The Compensation Committee set the GVA financial performance target at a level that would make it reasonably difficult to achieve when taking into account the business environment at the time the target was established. Under our GVA methodology, financial performance is assessed in relation to the Company’s annual operating budget and budgeted invested capital. In 2018, the Executive Officers realized 100% of their target bonus for financial performance.
The safety performance target was also set at a level that would make it reasonably difficult to achieve when compared with the historical safety results of Class I, Class II and Class III railroads and at a level that encourages year-over-year safety improvements, which reflects the Company’s commitment to continuous safety improvements.

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For 2018, the corporate safety targets for Executive Officers were as follows:
FRA-reportable injury performance target for the Company’s consolidated operations was set at 0.70 FRA reportable injuries per 200,000 man-hours worked (80% of the target safety bonus); and
FRA-reportable derailments performance target was set at 0.70 FRA reportable derailments per 200,000 man-hours worked (20% of the target safety bonus).
In 2018, the Company’s consolidated FRA reportable injury performance failed to meet our targets and resulted in a 53% payout for FRA reportable injuries for all Executive Officers. In 2018, FRA-reportable derailments performance was 0.68, which was not quite as favorable as 0.58 in 2017 but a positive performance relative to an aggressive target that yielded a 110% payout.
In the aggregate, in 2018, the Executive Officers realized 65% of their target bonus for safety performance based on the results for FRA reportable injuries and FRA reportable derailments.
In 2018, as a result of Mr. Brown’s reduced schedule and the transition of certain duties, Mr. Brown received 50% of his target individual performance bonus while all other Executive Officers received 100% of their target individual performance bonus based on, in the case of Mr. Hellmann, an assessment by the Board of Mr. Hellmann’s performance and, in the case of the other Executive Officers, Mr. Hellmann’s assessment of their personal performance objectives.
For each fiscal year from 2006 through 2018, actual total annual bonus payouts to Executive Officers have ranged from 14% to 200% of the targeted bonuses (excluding the impact of positive carry-forward bonus amounts that were permitted under the prior program structure). Actual corporate financial performance payouts for each fiscal year from 2006 through 2018 (13 years) met or exceeded the established targets only six times. Actual corporate safety performance payouts for each fiscal year from 2006 through 2018 (13 years) met or exceeded the established target eight times. The combined results for 2018 yielded an average aggregate bonus payout of 95% of the 2018 total target cash bonus amount for the Executive Officers, except Mr. Brown, whose aggregate bonus payout was 87% of the 2018 total target cash bonus. The Company’s 2018 performance resulted in approximately $11.8 million of annual cash bonuses for all participants in the annual incentive compensation program, with $2.3 million of such cash bonuses paid to our Executive Officers. For additional information on actual amounts of annual incentive compensation paid to Executive Officers, see the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” on page 43.
Special Bonuses
From time to time, the Compensation Committee also approves discretionary cash bonuses or equity awards to recognize extraordinary contributions by our Executive Officers or performance in a given year, as shown in the Bonus column of the “Summary Compensation Table” on page 43. In 2018, Ms. Fergus was awarded a special bonus in recognition of the successful resolution of outstanding litigation matters. Except for Ms. Fergus, no other Executive Officers received a special cash bonus or equity award during fiscal year 2018.
2018 Long-Term Incentive Compensation Program
We use our long-term incentive compensation program to provide equity awards that include a mix of performance-based and time-vested equity. The equity awards are delivered in the form of performance-based restricted stock units (“PBRSU”), stock options and restricted stock awards to our Executive Officers and other key personnel. Awards are granted to our Executive Officers at the discretion of the Compensation Committee and are based on each executive’s contribution and expected future contribution to our success, with input from the CEO with respect to Executive Officers other than himself.
Annual equity awards have provided an opportunity for Executive Officers to receive long-term incentive compensation valued at between 175% and 400% of annual base salary. These ranges were established to align long-term incentive compensation at or near the 50th percentile of the updated peer group. The actual amount of the annual equity award has been based on both individual and corporate financial performance as assessed by the CEO, with respect to Executive Officers other than himself, and based on guidance from the Compensation Committee’s independent compensation consultant. Additional considerations have included the amounts paid as annual incentive compensation, individual performance of the Executive Officers, share retention requirements and other factors that were deemed relevant by the Compensation Committee.
In accordance with the Company’s philosophy of aligning management and stockholder interests and considering the future contributions expected of our Executive Officers, and as a result of the benchmarking data based on our updated peer group, the Compensation Committee approved increases in the 2018 long-term incentive equity awards to 400% of annual base salary for Mr. Hellmann and to 200% of annual base salary for Messrs. Gallagher, Brown and Walsh. Ms. Fergus’s long-term incentive equity award was unchanged in 2018.

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The 2018 target long-term incentive program equity awards for each Executive Officer as a percentage of base salary are as follows:
Name
 
2018 Equity  Awards
as a Percentage of
Base Salary
John C. Hellmann
 
400
%
Timothy J. Gallagher
 
200
%
David A. Brown
 
200
%
Allison M. Fergus
 
175
%
Matthew O. Walsh
 
200
%
For 2018, the total dollar value of annual long-term incentive compensation equity awards was approved by the Compensation Committee on February 1, 2018, and the total dollar value was delivered through a single grant on February 28, 2018, consistent with the Company’s Stock-Based Award Policy.
Performance-Based Equity Awards - PBRSUs
For fiscal 2016, the Compensation Committee approved a new PBRSU component under the Company’s Long-Term Incentive Compensation Program, which had historically been composed of 50% stock options and 50% time-vesting restricted stock. In recognition of the transition to the new form of PBRSUs, for 2016, the Compensation Committee allocated 16.7% of the total target long-term equity award opportunity to the Executive Officers to such PBRSUs. PBRSUs are generally subject to performance-based vesting and the Company determines the number of underlying shares of Class A Common Stock earned under the PBRSUs based upon the satisfaction of pre-determined financial performance targets established under the Company’s GVA methodology and determined in accordance with the payout regime described above under “— Cash Bonuses Under the GVA Methodology.” PBRSUs are also subject to time-based vesting requirements.
In February 2017 and 2018, the Compensation Committee renewed its approval of the PBRSU component under the Company’s Long-Term Incentive Compensation Program and allocated 25% of the Company’s total Long-Term Incentive Compensation equity award opportunity to the PBRSUs. The GVA performance factor for the PBRSUs granted in February 2018 was 100% based on the Company’s 2018 financial results over the performance period. The PBRSUs vest in three equal installments upon the anniversary of the date of grant, beginning with the first time-based vesting on February 28, 2019.
Time-Vested Equity Awards - Stock Options and Restricted Stock Awards
The Compensation Committee views stock options as an important component of overall executive compensation because stock options emphasize our objective of increasing stockholder value. The Compensation Committee views restricted stock awards as providing compensation that promotes retention value and a long-term financial interest in the Company. Consistent with this philosophy, for 2018, stock options comprised 50% of the total target long-term incentive award opportunity for our Executive Officers, while restricted stock awards comprised 25% of the total target long-term incentive award opportunity and the PBRSU awards comprising the remaining 25%. Both stock options and restricted stock awards were eligible to vest in three equal installments upon the anniversary of the grant, beginning with the first anniversary. On February 1, 2018, the Compensation Committee approved an increase in the term of the stock options granted under the Company’s Fourth Amended and Rested Omnibus Plan (the “Omnibus Plan”) from five to seven years to better align their term with market standards based on our updated peer group. Award values for options were calculated based on the fair value per share using the Black-Scholes valuation model on the day of grant and for restricted stock were based on the closing share price of our stock on the NYSE on the day of grant. As noted above under “—Performance-Based Equity Awards - PBRSUs,” the 2018 PBRSU awards were also subject to time-based vesting, with the first of three equal installments vesting on February 28, 2019. For additional information on the value of the 2018 long-term equity incentive awards to our Executive Officers, see the Grant Date Fair Value of Stock and Option Awards column of the “2018 Grants of Plan-Based Awards” table on page 44.
The stock option awards, restricted stock awards and performance-based equity awards for our Executive Officers and other key personnel also include standard confidentiality and non-compete obligations, which if violated would result in a forfeiture of unexercised options and unvested restricted stock awards and disgorgement of any gains on option awards and restricted stock awards during the previous six months. The option awards, restricted stock awards and performance-based equity awards for our Executive Officers and other key personnel are also subject to acceleration of vesting upon a change of control, which the Compensation Committee believes allows our Executive Officers to focus on their responsibilities and provides security against unpredictable actions of successor corporations following a qualifying change of control of the Company. Beginning with the May 2014 equity grants, option awards and restricted stock awards are also subject to acceleration of vesting upon death or disability, in line with market practice.

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Performance-Based Equity Awards Outstanding from Prior Years - TSR RSU Awards
In 2014 and 2015, the Compensation Committee approved annual Total Shareholder Return Restricted Stock Units (“TSR RSUs”) awards under the TSR RSU Program. For the TSR RSU awards, participants had the opportunity to earn up to the maximum number of TSR RSUs at the end of a three-year performance period ending on February 1, 2017 and February 1, 2018, respectively, based upon the Company’s relative TSR against two pre-established benchmarks: the peer group and the S&P 500. The TSR RSU Program provided that participants would earn specified percentages of restricted stock units based upon the Company’s relative percentile achievement of TSR over the Performance Period. The threshold performance for any payout under the TSR RSU program was not attained, and based on the market criteria, no shares were paid out under this program. As a result, no amounts under the 2014 or 2015 TSR RSUs were earned in 2018.
As a result of the Compensation Committee’s 2016 modifications to the Long-Term Incentive Compensation Program, including the adoption of the new PBRSUs, effective February 3, 2016, the TSR RSU Program was discontinued, and no future awards will be granted under this program.
Deferred Compensation Plan
Starting in 2004, we began offering the DCP. The DCP allows senior employees, including our Executive Officers, to defer receipt of their salary and/or bonus payments into accounts that mirror the gains and/or losses of several different investment funds we have selected. The Company does not offer a traditional pension plan to our Executive Officers. However, the Company has established a supplemental executive retirement benefit in the form of a Defined Contribution Account under the DCP for certain Executive Officers who do not otherwise have a pension associated with prior employment. The Compensation Committee believes supplemental executive retirement plans such as the Defined Contribution Accounts are an important part of executive compensation and are utilized by many companies that compete with the Company for executive talent, and, depending on the circumstances, may be necessary to attract or retain talented executives. Absent other retirement income, retirement benefits can be an important factor in an executive’s decision to accept or reject a new position. Annual Company contributions to the Executive Officer’s account vest at the rate of 20% per year, subject to acceleration of vesting in the event of a change of control, death or disability, each as defined under the DCP. The Company reserves the right to change the annual Company contributions made to an Executive Officer’s account from time to time, in such amount as it may determine, as a result of changes in specified assumptions.
In 2018, the Company increased the annual contributions to the Executive Officers’ Defined Contribution Accounts, other than for Mr. Brown, who has legacy pension entitlements from a prior employer. The amount of the annual Company contributions for 2018 are set forth in the table below.
Name
 
2018 Defined Contribution Account Contributions
John C. Hellmann
 
$
239,258

Timothy J. Gallagher
 
$
187,470

David A. Brown
 
$

Allison M. Fergus
 
$
110,692

Matthew O. Walsh
 
$
123,457

Additional information regarding the Deferred Contribution Accounts is set forth in “2018 Nonqualified Deferred Compensation” below.

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Other Compensation Policies, Plans and Features
Share Ownership Guidelines
The Compensation Committee first adopted share retention guidelines for the Executive Officers and other key personnel in 2005 to further align the interests of these individuals with the interests of our stockholders. Under the guidelines, the Executive Officers are expected to maintain a significant ownership position in our Class A Common Stock. The current guidelines are set forth below:
Name
 
Share
Guideline
Amount
John C. Hellmann
 
10x Base Salary
Timothy J. Gallagher
 
5x Base Salary
David A. Brown
 
5x Base Salary
Allison M. Fergus
 
5x Base Salary
Matthew O. Walsh
 
5x Base Salary
Notwithstanding the guidelines, Executives Officers are permitted to sell shares to finance the exercise price of a stock option, if applicable, and to settle any tax obligations in connection with the exercise of a stock option or vesting of a Company equity award. Although the share ownership guideline amount is not required to be satisfied in any particular period of time, Executive Officers are required to retain 50% of any net shares that remain following the payment of exercise prices and tax obligations related to the exercise of stock options and the payment of tax obligations following the vesting of restricted stock awards until the share guideline is satisfied. Waivers of the guidelines can be granted by the CEO for Executive Officers (other than himself) and key employees and by the Compensation Committee for the CEO. Waivers are generally granted only for serious and unforeseen hardship circumstances. In determining whether our share ownership guidelines have been met, restricted stock, shares held by a spouse or minor child who resides with the Executive Officer or key employee and shares held by a trust established for estate or tax planning purposes that is revocable by the Executive Officer, key employee or his or her spouse are considered owned. With the exception of Mr. Brown, who joined the Company in 2012, all Executive Officers currently meet the share retention guideline amounts.
Hedging/Pledging Policy
In April 2014, the Compensation Committee adopted a Hedging/Pledging Policy that is incorporated into the share ownership guidelines. Our Hedging/Pledging Policy precludes Executive Officers, other key personnel and members of the Board from hedging or pledging that number of shares of Class A Common Stock that are held to satisfy the share ownership guidelines. Shares of Class A Common Stock held by Executive Officers, other key personnel and directors in excess of the amount required to satisfy the share retention guidelines can be hedged or pledged. Any of the shares of Class A Common Stock that are hedged or pledged will not count towards the number of shares held to satisfy the share retention guidelines. The Hedging/Pledging Policy provides for a five-year phase in period to allow those Executive Officers, key employees or directors who currently hedge or pledge shares of Class A Common Stock to comply with the policy. Our CEO complied with the Hedging/Pledging Policy immediately following its adoption. All other Executive Officers are in compliance with the Hedging/Pledging Policy as of April 2019.
Compensation Clawback Policy
In 2016, the Company adopted a clawback policy which enables us, if there is an accounting restatement of the Company’s financial statements after the adoption of the policy due to an error deemed material to the previously issued financial statements, to recover from the Executive Officers and certain other key employees that portion of the performance-based equity awards and annual cash bonuses under the financial component of the GVA methodology (“incentive-based compensation”) that should not have been paid following the recalculation of awards after taking into account the restatement. Further, in the case of fraud or other misconduct by the Executive Officers or other key employees subject to the policy, the Company can recover up to 100% of any incentive based compensation under the policy.
Other Compensation Plans & Benefits
401(k) Plan
Executive Officers and other employees are entitled to participate in our 401(k) plan, which provides retirement benefits to employees and provides for employer and employee contributions. For 2018, the Company matched 100% of employee contributions to the 401(k) plan, up to the lesser of 4% of the employee’s salary and $11,000.

39








Stock Purchase Plan
Executive Officers and other employees who have been employed for more than one year and customarily work more than 20 hours per week are entitled to participate in our Stock Purchase Plan. Our Stock Purchase Plan permits participants to purchase our Class A Common Stock at approximately 90% of the lower of the closing price of our Class A Common Stock on the first business day of the month and the closing price on the second-to-last business day of the month. Participants in the Stock Purchase Plan may not purchase stock with an aggregate fair market value in excess of $25,000 during any calendar year or make purchases that would cause such participant to own 5% or more of the Company’s then-outstanding shares of Class A Common Stock. Stock purchases under the Stock Purchase Plan are funded through payroll deductions of up to 10% of a participant’s regular earnings. The Stock Purchase Plan is intended to encourage ownership of our Class A Common Stock by our employees at all levels of employment and thereby provide them with the incentive created by stock ownership. The Stock Purchase Plan is also intended to provide a more efficient mechanism for our employees to acquire stock ownership.
Long-Term Disability Insurance
Executive Officers and certain other employees receive coverage under our long term-disability insurance program, which provides a monthly income in the event of the executive’s disability. The Compensation Committee believes that this benefit is a normal component of a competitive executive compensation program and that it is useful to the retention of talented executives. For 2018, this coverage provided a monthly benefit of 60% of the Executive Officer’s base salary and annual incentive compensation, up to a maximum payment of $15,000 per month.
Perquisites
We provide certain of our Executive Officers with limited perquisites and other personal benefits. The Compensation Committee has reviewed and approved each of the perquisites provided to Executive Officers. While the Compensation Committee does not consider these perquisites to be a significant component of executive compensation, it recognizes that such perquisites are a factor in attracting and retaining talented executives. The Compensation Committee considered such payments to be fair and equitable under the circumstances, as well as customary market practice. Additional information with respect to the perquisites paid to our Executive Officers is set forth in the “Summary Compensation Table” below.
Continuity Agreements
The Compensation Committee believes that continuity agreements, or change of control arrangements, are necessary to attract and retain the talent necessary for our long-term success. However, the Compensation Committee does not view the potential payments payable to our Executive Officers under the applicable continuity agreements as an additional element of compensation. Rather, the Compensation Committee believes that these commitments by the Company provide security to our executives should their employment be terminated following a qualifying change of control through no fault of their own, thus allowing our executives to focus on their responsibilities to the Company.
Currently, all of our Executive Officers are parties to continuity agreements with the Company. These agreements require the Company to provide compensation to the Executive Officers as described below under “Potential Payments Upon Termination, Change of Control and Other Events” in the event of a qualifying change of control of the Company followed by either termination of the executive without cause or resignation by the executive for good reason, each as defined in the agreements, within two years following a change in control. This double trigger approach results in payment under our change of control provisions only if the Executive Officer is terminated. The Company has no continuity agreements that provide for the payment of any excise taxes due under the IRC or any other comparable taxes or that provide any gross-up payments for any taxes payable by the executives in connection with a change of control. In consideration for the payments under the continuity agreements, each executive has agreed to restrictions on his or her ability to compete for a period of 12 months following termination.
We believe our continuity agreements are generally consistent with those in our prevailing marketplace and are important for attracting and retaining executives whose leadership is critical to our long-term success and competitiveness. The components of our continuity agreements recognize that a significant portion of participating executives’ total compensation may at any point in time consist of unvested stock options or restricted stock holdings and that some measure of protection against possible but unpredictable actions of successor corporations is desirable for both the executive and the Company. Additionally, the structures of our continuity agreements help ensure management retention during any change of control. The amount of compensation payable to each Executive Officer under the continuity agreements is set forth under “Potential Payments upon Termination, Change of Control and Other Events.”
The Company has not entered into agreements with Executive Officers that provide for severance payments related to voluntary termination, involuntary, not for cause termination unrelated to a change of control, or termination for cause.

40








Deductibility of Compensation
Section 162(m) of the IRC generally disallows public companies from claiming a tax deduction for compensation in excess of $1 million paid to their named executive officers. For compensation paid prior to 2018 and certain “grandfathered” arrangements in place prior to November 2, 2017, the statute exempts qualifying performance-based compensation from the $1 million limitation if specified requirements are met. However, the performance-based compensation exemption was repealed, effective for taxable years beginning after December 31, 2017, such that future compensation paid to our Executive Officers in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The tax impact of any compensation arrangement is one factor considered by the Compensation Committee in light of the Company’s overall compensation philosophy and objectives, along with competitive and market factors. The Company expects that a portion of the compensation paid to its Executive Officers in excess of $1 million per officer will be non-deductible.
Policy on Non-Public Information and Trading in Company Stock
The Company’s Non-Public Information and Company Stock Trading Policy permits directors, Executive Officers and other key employees to trade Company securities only during limited window periods following earnings releases and only after they have pre-cleared transactions with our legal department or pursuant to a Rule 10b5-1 plan entered into and pre-cleared during a window period.
Elements of Total Compensation - Risks and Mitigating Factors
The Compensation Committee believes that the structure of our executive compensation program provides a mix of cash and equity compensation that balances short- and long-term incentives. We believe that the different time horizons and metrics used in the annual and long-term elements of compensation provide incentives to build the Company’s business prudently and profitably over time, while encouraging retention of our top talent. In addition, each element of compensation has been designed and is administered in a manner intended to minimize potential risks to the Company. The result is a program that the Compensation Committee believes mitigates inappropriate risk taking and aligns the interests of Executive Officers with those of the Company’s stockholders. Moreover, the Compensation Committee has determined that any risks arising from the Company’s compensation policies and practices for all of its employees are not reasonably likely to have a material adverse effect on the Company.
Say-on-Pay
In 2018, stockholders supported our executive compensation programs, with approximately 95% of the votes cast for the approval of the non-binding, advisory vote on executive compensation “say-on-pay” proposal at our 2018 annual meeting of stockholders. The Compensation Committee believes this advisory vote affirms our stockholders’ continued support of the Company’s approach to executive compensation and did not make any specific changes to the program in light of the results.
2019 Compensation Program Updates
On February 26, 2019, the Compensation Committee approved a new performance-based restricted stock unit component under the Company’s Long-Term Incentive Compensation Program granted to its Executive Officers in an effort to support and enhance alignment of interests between the Company’s stockholders and its Executive Officers and to enhance the retention features of the Company’s compensation program for a management team that the Board wishes to retain and motivate.
Historically, the overall equity mix under the Company’s Long-Term Incentive Program has been composed of 50% stock options, 25% time-based vesting restricted stock awards and 25% PBRSUs that began vesting on the first anniversary of the grant date with the payout performance multiplier (ranging from 0% to 200%) tied to the Company’s GVA annual performance under its GVA methodology. Effective February 28, 2019, equity awards granted to the Executive Officers will be in the form of 50% time-based restricted stock awards vesting over three years, with one-third vesting on the anniversary of the grant date in each year, and 50% PBRSUs, with full vesting (100%) on the third anniversary of the grant date (ranging from 0% to 250%) based on the results of the Company’s financial performance over a three-year measurement period based on two performance measures, each weighted equally: Average Return on Invested Capital (measured within the GVA framework) and Cumulative Adjusted Free Cash Flow Per Share, subject to continued employment with the Company.


41








COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussions with management, we have recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Compensation Committee
Mark A. Scudder, Chairman
Richard H. Bott
Cynthia L. Hostetler
Joseph H. Pyne
Hunter C. Smith

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SUMMARY COMPENSATION TABLE
The following table and footnotes set forth information for the years ended December 31, 2018, 2017 and 2016 concerning compensation awarded to, earned by or paid to our Executive Officers.
Name and Principal Position
 
Year
 
Salary
(1)
 
Bonus
(2)
 
Stock
Awards
(3)
 
Option
Awards
(4)
 
Non-Equity
Incentive Plan
Compensation
(5)
 
All Other
Compensation
(6)
 
Total Compensation
John C. Hellmann
 
2018
 
$
901,500

 
$

 
$
1,803,052

 
$
1,802,951

 
$
853,720

 
$
279,072

 
$
5,640,295

Chairman and Chief Executive Officer
 
2017
 
$
875,243

 
$

 
$
4,039,369

 
$
1,597,294

 
$
724,324

 
$
167,873

 
$
7,404,103

2016
 
$
849,750

 
$

 
$
1,550,865

 
$
1,550,892

 
$
974,880

 
$
168,630

 
$
5,095,017

Timothy J. Gallagher
 
2018
 
$
500,000

 
$

 
$
500,060

 
$
499,981

 
$
378,800

 
$
231,740

 
$
2,110,581

Chief Financial Officer
 
2017
 
$
480,800

 
$

 
$
383,008

 
$
432,706

 
$
298,421

 
$
119,294

 
$
1,714,229

2016
 
$
466,796

 
$
125,000

 
$
887,131

 
$
420,137

 
$
401,650

 
$
119,230

 
$
2,419,944

David A. Brown
 
2018
 
$
530,450

 
$

 
$
530,514

 
$
530,437

 
$
370,042

 
$
26,645

 
$
1,988,088

Chief Operating Officer(7)
 
2017
 
$
515,000

 
$
490,000

 
$
330,887

 
$
373,843

 
$
319,649

 
$
70,816

 
$
2,100,195

 
2016
 
$
414,812

 
$
50,000

 
$
777,975

 
$
362,987

 
$
356,921

 
$
40,972

 
$
2,003,667

Allison M. Fergus
 
2018
 
$
464,409

 
$
250,000

 
$
406,403

 
$
406,348

 
$
329,846

 
$
134,050

 
$
1,991,056

General Counsel and Corporate Secretary
 
2017
 
$
450,883

 
$

 
$
349,200

 
$
394,507

 
$
306,673

 
$
73,292

 
$
1,574,555

2016
 
$
437,750

 
$
50,000

 
$
821,043

 
$
383,050

 
$
376,658

 
$
68,598

 
$
2,137,099

Matthew O. Walsh
 
2018
 
$
530,450

 
$

 
$
530,514

 
$
530,437

 
$
401,869

 
$
167,610

 
$
2,160,880

Executive Vice President, Global Corporate Development
 
2017
 
$
515,000

 
$

 
$
398,873

 
$
450,610

 
$
319,649

 
$
520,860

 
$
2,204,992

 
2016
 
$
500,000

 
$
250,000

 
$
937,567

 
$
437,526

 
$
430,220

 
$
889,611

 
$
3,444,924

   
(1)
Salary and bonuses are reported in the year in which the service being compensated was performed even if we paid the compensation in a subsequent year or if the executive elected to defer a portion of such compensation. In addition, due to an administrative error, a portion of the amount of the 2018 increase in base salary related to the period from January 2019 through mid-March will be paid in 2019.
(2)
Amounts reflect the discretionary bonus awarded to Ms. Fergus in 2018 in recognition of the successful resolution of outstanding litigation matters and the bonus paid to Mr. Brown in 2017 in recognition of the additional responsibilities taken on by Mr. Brown during his nine-month assignment in Australia in 2017 and for the Executive Officers, other than Mr. Hellmann, for their significant efforts in 2016 associated with the acquisitions of Providence and Worcester Railroad Company and GRail, as well as the associated public equity offering.
(3)
The amounts in the Stock Awards column reflect the aggregate grant date fair value for the PBRSUs and the aggregate grant date fair value for restricted stock granted by us in 2018, computed in accordance with ASC Topic 718. For a discussion of the assumptions made in the valuation of these awards, refer to Note 15 to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. With respect to the PBRSUs, the actual shares earned at December 31, 2018 were based upon the satisfaction of certain financial performance criteria using the GVA methodology, with a payout performance multiplier of 100%.
(4)
The amounts included in the Option Awards column reflect the aggregate grant date fair value for stock options granted by us in 2018, computed in accordance with ASC Topic 718. For a discussion of the assumptions made in the valuation of these options, refer to Note 15 to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
(5)
The amounts reflect the cash bonuses earned under the annual incentive compensation program based on targets that were established in early 2018 by the Compensation Committee and paid in February 2019. For a discussion of the annual incentive compensation program, see “Executive Compensation—Compensation Discussion and Analysis—2018 Annual Incentive Compensation Program–Cash Bonuses Under the GVA Methodology.”
(6)
The following table details each item of compensation of our Executive Officers for 2018 required to be included in the All Other Compensation column:
Name
 
Company
Contributions
to Defined
Contribution
Accounts
 
Company
Contributions
to 401(k) Plan (a)
 
Auto (b)
 
Other (c)
 
Total
John C. Hellmann
 
$
239,258

 
$
11,000

 
$
18,415

 
$
10,399

 
$
279,072

Timothy J. Gallagher
 
$
187,470

 
$
11,000

 
$
22,515

 
$
10,755

 
$
231,740

David A. Brown
 
$

 
$
11,000

 
$
9,600

 
$
6,045

 
$
26,645

Allison M. Fergus
 
$
110,692

 
$
5,249

 
$
13,877

 
$
4,232

 
$
134,050

Matthew O. Walsh
 
$
123,457

 
$
11,000

 
$
11,342

 
$
21,811

 
$
167,610

 
(a)
Amounts reflect the Company’s matching contributions to the 401(k) Plan.
(b)
Amounts reflect cash payments for all annual automobile expenses, whether personal or business related. Amounts for Messrs. Hellmann, Gallagher and Walsh and Ms. Fergus reflect car leases, fuel, insurance and repairs paid on their behalf. Mr. Brown receives a monthly cash car allowance.

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(c)
The amount for Mr. Hellmann represents premiums with respect to excess group life insurance, an additional term life policy and long-term disability insurance, personal travel expenses and company contributions under the executive matching plan. The amount for Mr. Gallagher represents the premiums with respect to excess group life insurance, an additional term life policy and long-term disability insurance and club dues. The amount for Mr. Brown represents premiums with respect to excess group life insurance and long-term disability insurance. The amount for Ms. Fergus represents the premiums with respect to excess group life insurance, long-term disability insurance, personal travel expenses and company contributions under the executive matching gift plan. The amount for Mr. Walsh represents $13,100 of tax preparation and professional services fees related to his temporary overseas assignment, as well as the premiums with respect to excess group life insurance and long-term disability insurance, personal travel expenses, and company contributions under the executive matching gift plan.
(7)
Mr. Brown is no longer serving as our COO effective February 8, 2019.
2018 GRANTS OF PLAN-BASED AWARDS
The following table provides information relating to estimated future payouts under non-equity incentive plan awards and grants of stock-based awards during the year ended December 31, 2018.
Name
 
Grant
Date
 
 
 
Estimated Future Payouts
Under Non-Equity Incentive Plan
Awards (1)
 
Estimated Future Payouts Under Equity Incentive Plan Awards (2)
 
All Other 
Stock
Awards:
Number 
of
Shares of 
Stock or Units
 (#) (3)
 
All Other
Option
Awards:
Number of
Securities
Underly-ing
Options
(#) (4)
 
Exercise
or Base
Price of
Option
Awards
($/Sh)
 
Grant 
Date
Fair Value
of Stock
and Option
Awards 
(5)
Date of Committee Action
 
Thres-hold
($)
 
Target
($)
 
Maximum
($)
 
Thres-hold
(#)
 
Target
(#)
 
Maximum
(#)
 
 
John C. Hellmann
 
 
 
 
 
$
0

 
$
901,500

 
$
1,667,775

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2/28/18
 
2/1/18
 
 
 
 
 
 
 
0

 
12,966

 
25,932

 
 
 
 
 
 
 
$
901,526

 
 
2/28/18
 
2/1/18
 
 
 
 
 
 
 
 
 
 
 
 
 
12,966

 
 
 
 
 
$
901,526

 
 
2/28/18
 
2/1/18