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

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 o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

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

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

FLUOR CORPORATION

(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):

ý

 

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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Title of each class of securities to which transaction applies:
        
 
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Fee paid previously with preliminary materials.

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

 

 

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LOGO

March 8, 2018

Dear Fellow Stockholders:

On behalf of the Board of Directors, I would like to thank you for your investment in Fluor Corporation. Our Board appreciates that it is elected by you, our stockholders, to oversee the management of our company for the long-term benefit of our stakeholders. As such, the Board seeks to ensure that it has the appropriate mix of skills, experience and background to provide effective oversight.

We remain accountable to stockholders through a variety of governance practices, including fully independent Board committees, the annual election of directors, a majority vote bylaw in uncontested director elections, and a robust Board evaluation process. More information about these practices, and others, can be found in this Proxy Statement.

I am pleased to invite you to join us at the Fluor Corporation 2018 annual meeting of stockholders to be held on Thursday, May 3, 2018 at 8:30 a.m., Central Daylight Time, at the Fluor headquarters located at 6700 Las Colinas Blvd., Irving, Texas 75039. At this year's meeting, we will vote on the election of twelve directors and the ratification of the selection of Ernst & Young LLP as Fluor's independent registered accounting firm. We will also hold non-binding advisory votes on the compensation of Fluor's named executive officers and a stockholder proposal. Members of management will report on the company's operations and respond to stockholder questions.

We hope that you will be able to attend the meeting. However, whether or not you plan to attend the meeting, we encourage you to review our proxy materials and promptly cast your vote over the Internet or by phone. Alternatively, if you receive a paper copy of the proxy materials by mail, you may vote by signing, dating and mailing the proxy card or voting instruction card in the envelope provided. Voting in one of these ways will ensure that your shares are represented at the meeting.

The Board remains committed to serving your interests in 2018 and greatly appreciates your continued support of our company. I look forward to seeing you on May 3rd.

Sincerely,

GRAPHIC

David T. Seaton
Chairman and Chief Executive Officer

       

       


GRAPHIC

 

"[T]hank you for your investment in Fluor Corporation. . . . The Board
remains committed to serving your interests in 2018 and greatly
appreciates your continued support of our company."

   

       

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LOGO

Notice of Annual Meeting of Stockholders


 

WHEN
Thursday, May 3, 2018
8:30 a.m. Central Daylight Time

WHERE
Fluor Corporation Headquarters
6700 Las Colinas Boulevard
Irving, Texas 75039

RECORD DATE
Close of business on March 5, 2018

  

  

  

  
 

ITEMS OF BUSINESS

1.

 

The election of the twelve directors named in the proxy statement to serve until the 2019 annual meeting of stockholders and until their respective successors are elected and qualified.

2.

 

An advisory vote to approve the company's executive compensation.

3.

 

The ratification of the appointment by our Audit Committee of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ending December 31, 2018.

4.

 

If properly presented at the annual meeting, a stockholder proposal requesting adoption of greenhouse gas emissions reduction goals.

 

 

Stockholders will also act on such other matters as may be properly presented at the meeting or any adjournment or postponement thereof.

 

 

 

All stockholders of record at the close of business on March 5, 2018 are entitled to receive notice of, and to vote at, the annual meeting. Stockholders are cordially invited to attend the meeting in person; however, regardless of whether you plan to attend the meeting in person, please cast your vote as instructed in the Notice of Internet Availability of Proxy Materials (the "Notice"), by either voting your shares over the Internet or by phone, as promptly as possible. Alternatively, if you wish to receive paper copies of your proxy materials, including the proxy card or voting instruction card, please follow the instructions in the Notice. Once you receive paper copies of your proxy materials, please complete, sign, date and promptly return the proxy card or voting instruction card in the postage-prepaid return envelope provided, or follow the instructions set forth on the proxy card or voting instruction card to authorize the voting of your shares over the Internet or by phone. Your prompt response is necessary to ensure that your shares are represented at the meeting.

    By Order of the Board of Directors,

 

 

GRAPHIC
March 8, 2018
Irving, Texas
  Carlos M. Hernandez
Executive Vice President, Chief Legal Officer
and Secretary

 

 
   
   
    Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on
May 3, 2018:

 
    This proxy statement and the company's 2017 Annual Report to Stockholders are available at www.proxyvote.com.    

 

 

Please take time to vote your shares!

 

 

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TABLE OF CONTENTS

 
  Page  

Proxy Summary

       

PROPOSAL 1 — ELECTION OF DIRECTORS

   
1
 

Biographical Information, including Experience, Qualifications, Attributes and Skills

    2  

Corporate Governance

    9  

Corporate Governance Highlights

    9  

Stockholder Engagement

    10  

Board Independence

    10  

Risk Management Oversight

    11  

Board Leadership

    12  

Lead Independent Director

    12  

Board of Directors Meetings and Committees

    12  

Consideration of Director Nominees

    17  

Certain Relationships and Related Transactions

    18  

Review and Approval of Transactions with Related Persons

    18  

Communications with the Board

    19  

Compensation Committee Interlocks and Insider Participation

    20  

PROPOSAL 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

   
21
 

Executive Compensation — Compensation Discussion and Analysis

    23  

Organization and Compensation Committee Report

    43  

Summary Compensation Table

    44  

All Other Compensation

    46  

Grants of Plan-Based Awards in 2017

    48  

Outstanding Equity Awards at 2017 Fiscal Year End

    51  

Option Exercises and Stock Vested in 2017

    53  

Nonqualified Deferred Compensation

    54  

Potential Payments Upon Termination or Change in Control

    56  

Pay Ratio

    61  

Director Compensation

    62  

PROPOSAL 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

   
65
 

Report of the Audit Committee

    67  

PROPOSAL 4 — STOCKHOLDER PROPOSAL

   
69
 

Stock Ownership and Stock-Based Holdings of Executive Officers and Directors

   
72
 

Stock Ownership of Certain Beneficial Owners

    73  

Section 16(a) Beneficial Ownership Reporting Compliance

    74  

Other Business

   
75
 

Additional Information

   
75
 

Questions and Answers About the Annual Meeting and Voting

   
78
 

Directions to the Fluor Corporation 2018 Annual Meeting of Stockholders

       

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PROXY SUMMARY

This is a summary only, and does not contain all of the information that you should consider in connection with this proxy statement. Please read the entire proxy statement carefully before voting.

ANNUAL MEETING OF STOCKHOLDERS

GRAPHIC

VOTING MATTERS

Stockholders are being asked to vote on the following matters:

GRAPHIC

Stockholders also will transact any other business that may properly come before the meeting.


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HOW TO VOTE

You are entitled to vote at the 2018 annual meeting of stockholders if you were a stockholder of record at the close of business on March 5, 2018, the record date for the meeting.

GRAPHIC


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ELECTION OF DIRECTORS

 

 

 

LOGO

Proxy Statement

March 8, 2018

This proxy statement is furnished in connection with the solicitation by the Board of Directors of Fluor Corporation (the "company" or "Fluor") of your proxy for use at the annual meeting of stockholders to be held at the Fluor Corporation Headquarters at 6700 Las Colinas Boulevard, Irving, Texas 75039, on Thursday, May 3, 2018, at 8:30 a.m. Central Daylight Time, or at any adjournment or postponement thereof. This proxy statement is first being mailed or made available to stockholders on or about March 8, 2018.

The current mailing address of the principal executive offices of Fluor Corporation is 6700 Las Colinas Boulevard, Irving, Texas 75039. Please direct any communications to this mailing address.

PROPOSAL 1 — ELECTION OF DIRECTORS

Each of Peter K. Barker, Alan M. Bennett, Rosemary T. Berkery, Peter J. Fluor, James T. Hackett, Samuel J. Locklear, Deborah D. McWhinney, Armando J. Olivera, Matthew K. Rose, David T. Seaton, Nader H. Sultan and Lynn C. Swann has been nominated for election at the annual meeting to serve a one-year term expiring at the annual meeting in 2019 and until his or her respective successor is elected and qualified. Mr. Prueher will not stand for re-election, as he has reached the mandatory retirement age and will be retiring from the Board as of the 2018 annual meeting. Accordingly, the Board has set the number of directors at twelve, effective May 3, 2018.

Each of the nominees listed above has agreed to serve as a director of the company if elected. The company knows of no reason why the nominees would not be available for election or, if elected, would not be able to serve. If any of the nominees decline or are unable to serve as a nominee at the time of the annual meeting, the persons named as proxies may vote either (1) for a substitute nominee designated by the Board to fill the vacancy or (2) just for the remaining nominees, leaving a vacancy. Alternatively, the Board may reduce the size of the Board.

Under the standard applicable to the company's director elections, a director must receive the affirmative vote of a majority of the votes cast; except that directors shall be elected by a plurality of the votes cast if as of the record date for such meeting, the number of director nominees exceeds the number of directors to be elected (a situation we do not anticipate). A majority of the votes cast means that the number of shares voted "for" a director nominee must exceed the number of shares voted "against" that director nominee. If an incumbent director is not re-elected, the Governance Committee will consider his or her contingent resignation given prior to the meeting and make a recommendation to the Board on whether to accept or reject the resignation. The Board will then publicly announce its decision regarding whether to accept the resignation and, if not, the reasons why.

FLUOR CORPORATION   |  2018 PROXY STATEMENT        1

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ELECTION OF DIRECTORS

Biographical Information, Including Experience, Qualifications, Attributes and Skills

The following biographical information is furnished with respect to each of the nominees for election at the annual meeting. The information presented includes information each director has given us about his or her age, all positions he or she holds with the company, his or her principal occupation and business experience for at least the past five years, and the names of other public companies of which he or she currently serves or has served as a director in the last five years. Mr. Peter J. Fluor is shown as serving from the date of his original election to the Board prior to the company's reverse spin-off transaction in November 2000.

As discussed further below under "Corporate Governance — Consideration of Director Nominees," the Governance Committee is responsible for reviewing with the Board, on an annual basis (and as needed), the appropriate skills and characteristics required of members of the Board in the context of the current make-up of the Board. The company's directors have experience with businesses that operate in industries in which the company operates, such as oil and gas, power and government contracting, and collectively have additional skills that are important to overseeing the company's business, such as knowledge of financial matters, risk oversight and compliance, and familiarity with non-U.S. markets. The following information highlights the specific experience, qualifications, attributes and skills that our individual directors possess which have led the Governance Committee to conclude that each such individual should continue to serve on the company's Board.

PETER K. BARKER

PHOTO
Age: 69

Director Since: 2007

Board Committees:
Audit (Chair),
Executive and Organization and Compensation

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE
Former California Chairman of JPMorgan Chase & Co., a global financial services firm, from September 2009 until his retirement in January 2013; former Partner at Goldman Sachs & Co., a global investment banking firm, until his retirement in May 2002; joined Goldman Sachs & Co. in November 1971.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Barker's vast experience in international financial and banking matters at JPMorgan Chase and Goldman Sachs makes him a valued member of our Board and Audit Committee. His more than 40 years of experience allow him to share insights with the Board on matters such as capital structure, mergers, acquisitions, financings and strategic planning as well as with regard to general business trends and accounting and financial matters.

OTHER BOARD SERVICE


Director, Avery Dennison Corporation (Pasadena, California)

Director, Franklin Resources, Inc. (San Mateo, California)

2        FLUOR CORPORATION   |  2018 PROXY STATEMENT

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ELECTION OF DIRECTORS

 

 

 

ALAN M. BENNETT

PHOTO
Age: 67

Director Since: 2011

Board Committees:
Audit, Executive and Governance (Chair)

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Former President and Chief Executive Officer of H&R Block, Inc., a publicly traded entity providing tax, banking and business and consulting services, from July 2010 until his retirement in May 2011; former Interim Chief Executive Officer of H&R Block, Inc. from November 2007 to August 2008; former Senior Vice President and Chief Financial Officer of Aetna, Inc., a provider of health care benefits, from September 2001 to February 2007.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Bennett brings to the Board a deep understanding of business operations, finance and sales and marketing, developed through his experience as a former Chief Executive Officer, Chief Financial Officer and Vice President of Sales and Marketing. His leadership roles at H&R Block and Aetna provide the Board with valuable public company insights into business strategy and financial planning. In addition, he brings almost 40 years of experience in accounting and financial matters to our Audit Committee.

OTHER BOARD SERVICE


Director, Halliburton Company (Houston, Texas)

Director, The TJX Companies, Inc. (Framingham, Massachusetts)

ROSEMARY T. BERKERY

PHOTO
Age: 64

Director Since: 2010

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Vice Chair of UBS Wealth Management Americas and Chair of UBS Bank USA, each a wealth management banking business, since March 2010; former Vice Chairman, Executive Vice President and General Counsel of Merrill Lynch & Co., Inc., a global securities and financial services business, from October 2001 to December 2008; joined Merrill Lynch & Co., Inc. in 1983.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Ms. Berkery's broad range of experience in financial, business and legal matters makes her a valued member of the company's Board. Her experience leading a $50 billion wealth management bank allows her to provide valued counsel on matters such as finance, banking arrangements, global business strategies, marketing and market risks. In addition, her 35 years in the legal field make her an excellent resource to the Board on legal and compliance matters.

FLUOR CORPORATION   |  2018 PROXY STATEMENT        3

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ELECTION OF DIRECTORS

 

 

 

PETER J. FLUOR

PHOTO
Lead Independent Director

Age: 70

Director Since: 1984

Board Committees:
Executive, Governance
and Organization and
Compensation (Chair)

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Chairman and Chief Executive Officer of Texas Crude Energy, LLC, an international oil and gas exploration and production company, since 2001; former President and Chief Executive Officer of Texas Crude Energy from 1980 to 2001; joined Texas Crude Energy in 1972.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Fluor has more than 45 years of experience in the energy industry, currently serving as Chairman and Chief Executive Officer of Texas Crude Energy, LLC. His vast knowledge of the global oil and gas industry and his experience managing international businesses allow him to provide trusted counsel to our Board. In addition, his unique heritage and understanding of our company's legacy, together with his extensive knowledge of our business operations, clients and executives, make him an invaluable asset to our Board.

OTHER BOARD SERVICE


Director, Anadarko Petroleum Corporation (The Woodlands, Texas)

Former director, Cameron International Corporation (Houston, Texas)

JAMES T. HACKETT

PHOTO
Age: 64

Director Since: 2016
(with previous service from March 2001 to April 2015)

Board Committees:
Governance and
Organization and
Compensation

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Executive Chairman of Alta Mesa Resources, Inc., an onshore oil and gas acquisition, exploitation and production company, and Chief Operating Officer of Kingfisher Midstream, a wholly owned affiliate of Alta Mesa, since February 2018. Partner of Riverstone Holdings LLC since June 2013. Former Executive Chairman of Anadarko Petroleum Corporation from May 2012 until his retirement in June 2013; former Chief Executive Officer of Anadarko from December 2003 to May 2012.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Hackett has extensive knowledge of the global oil and gas industry. His several decades of executive experience, as well as his experience serving on other public company boards and as Chairman of the Board of the Federal Reserve Bank of Dallas, enable him to provide respected guidance on business strategy and financial matters, as well as perspective about the oil and gas and power markets.

OTHER BOARD SERVICE


Director, Alta Mesa Resources, Inc. (Houston, Texas)

Director, Enterprise Products Holdings LLC (Houston, Texas)

Director, National Oilwell Varco, Inc. (Houston, Texas)

Former director, Anadarko Petroleum Corporation (The Woodlands, Texas)

Former director, Bunge Limited (White Plains, New York)

Former director, Cameron International Corporation (Houston, Texas)

4        FLUOR CORPORATION   |  2018 PROXY STATEMENT

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ELECTION OF DIRECTORS

SAMUEL J. LOCKLEAR III

GRAPHIC

Age: 63

Director Since: 2017

Board Committees:
Audit and Governance

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

President, SJL Global Insights LLC, a global consulting firm specializing in a wide range of security and defense issues and initiatives, since November 2015; Admiral, U.S. Navy (retired), with 39 years of service, including as Commander for the U.S. Pacific Command, Commander of the U.S. Naval Forces Europe and Africa, and Commander of NATO's Allied Joint Forces Command, until his retirement in 2015.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Admiral Locklear has 40 years of experience with military, security, foreign policy and global business matters. He brings to the Board an international, informed and seasoned set of perspectives, a knowledge of infrastructure and power through his experience with the U.S. government, and extensive insights on the Asia-Pacific region. In addition, his government background allows him to provide valuable guidance on contracting with the U.S. government.

DEBORAH D. MCWHINNEY

GRAPHIC

Age: 62

Director Since: 2014

Board Committees:
Governance and Organization and Compensation

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Former Chief Executive Officer (September 2013 to January 2014) and Chief Operating Officer (February 2011 to September 2013) of Global Enterprise Payments at Citigroup Inc., a global financial services company, until her retirement in January 2014; former President, Personal Banking and Wealth Management at Citigroup Inc. from May 2009 to February 2011; former President of Schwab Institutional, a division of Charles Schwab, Inc., from 2001 to 2007, and chair of the Global Risk Committee of Charles Schwab from 2004-2007.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Ms. McWhinney's leadership experience, with more than 35 years in the finance industry, makes her a valued member of our Board. Her skills as a former executive for Citi and other banking institutions provide our Board with special insight on matters relating to business strategy, finance, investments and treasury management. In addition, her prior roles on the risk committees at both Citi and Charles Schwab allow her to counsel our Board on risk-related matters.

OTHER BOARD SERVICE


Director, Fresenius Medical Care AG & Co. (Bad Homburg, Germany)

Director, IHS Markit Ltd. (London, England)

Director, Lloyds Banking Group (London, England)

FLUOR CORPORATION   |  2018 PROXY STATEMENT        5

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ELECTION OF DIRECTORS

 

 

 

ARMANDO J. OLIVERA

GRAPHIC

Age: 68

Director Since: 2012

Board Committees:
Governance and
Organization and
Compensation

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Senior Advisor, Ridge-Lane Limited Partners, a strategic advisory firm, since September 2017; former President (from June 2003) and Chief Executive Officer (from July 2008) of Florida Power & Light Company, an electric utility that is a subsidiary of a publicly traded energy company, until his retirement in May 2012; joined Florida Power & Light Company in 1972.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Olivera's tenure as the former President and Chief Executive Officer of one of the largest electric utilities in the United States provides him with extensive knowledge of financial and accounting matters, as well as a keen understanding of the power industry and its regulations. His experience in the power industry provides particularly valuable insight into our power business. Additionally, his role as a director of other public companies gives him the experience to provide valuable advice to our Board and its committees from a governance and risk perspective.

OTHER BOARD SERVICE


Director, Consolidated Edison, Inc. (New York, New York)

Director, Lennar Corporation (Miami, Florida)

Former director, AGL Resources, Inc. (Atlanta, Georgia)

MATTHEW K. ROSE

GRAPHIC

Age: 58

Director Since: 2014

Board Committees:
Audit and Organization
and Compensation

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Executive Chairman, Burlington Northern Santa Fe, LLC, a subsidiary of Berkshire Hathaway Inc. (and former public company) and one of the largest freight rail systems in North America ("BNSF"), since January 2014; former Chairman and Chief Executive Officer of BNSF from March 2002 to January 2014; joined BNSF in 1993.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Rose's qualifications to serve on the Board include his extensive leadership experience obtained from overseeing a large, complex and highly regulated organization, his considerable knowledge of operations management and business strategy and his deep understanding of public company oversight. In addition, his experience serving on other public company boards, as well as the board of the Federal Reserve Bank of Dallas, makes him a valuable member of our Board.

OTHER BOARD SERVICE


Director, AT&T Inc. (Dallas, Texas)

Former director, AMR Corporation (Fort Worth, Texas)

6        FLUOR CORPORATION   |  2018 PROXY STATEMENT

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ELECTION OF DIRECTORS

 

 

 

DAVID T. SEATON

GRAPHIC

Chairman of the Board

Age: 56

Director Since: 2011

Board Committee:
Executive (Chair)

Independent: No

  POSITION AND BUSINESS EXPERIENCE

Chairman (since February 2012) and Chief Executive Officer (since February 2011) of Fluor; Chief Operating Officer from November 2009 to February 2011; Senior Group President, Energy and Chemicals, Power and Government from March 2009 to November 2009; Group President, Energy & Chemicals from March 2007 to March 2009; joined Fluor in 1985.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Seaton, the company's Chief Executive Officer, brings to the Board extensive leadership experience with, and knowledge of, the company's business and strategy, particularly in the energy and chemicals markets. He has worked (and lived) in many Fluor locations, including the Middle East, and provides insight to the Board on the company's global operations. Additionally, his more than 30 years of service with the company provide the Board with a historical perspective on the company's growth and operations.

OTHER BOARD SERVICE


Director, The Mosaic Company (Plymouth, Minnesota)

NADER H. SULTAN

GRAPHIC

Age: 69

Director Since: 2009

Board Committees:
Audit and Governance

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Senior Partner of F&N Consulting Company, a firm specializing in high-level strategic advice related to the energy industry, since September 2004; former Chief Executive Officer of Kuwait Petroleum Corporation from September 1998 to September 2004.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Sultan brings great insight and high-level strategic contributions to the Board as a result of his more than 45 years of experience in the international energy business, including as a chief executive officer running a national oil company in the Middle East. He provides a valued perspective with regard to national oil companies and the Middle East in terms of business operations, politics and culture. His understanding of the Middle East region is important since it is an area in which we continue to expand our business presence and from which we derive revenue.

OTHER BOARD SERVICE


Non-executive chairman of Ikarus Petroleum Industries Company (Kuwait)

FLUOR CORPORATION   |  2018 PROXY STATEMENT        7

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ELECTION OF DIRECTORS

 

 

 

LYNN C. SWANN

GRAPHIC

Age: 66

Director Since: 2013

Board Committee:
Audit and Governance

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Athletic Director at The University of Southern California since July 2016; President, Swann, Inc., a marketing and consulting firm, since 1976; Founder and Managing Director of LS Group, a provider of financial advisory and brokerage services, since 2011; former sports broadcaster for ABC Sports from 1976 to 2006.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Swann's broad range of skills includes media and public relations experience, finance knowledge, a diverse business and political background, and management-level decision-making experience. Those skills, along with the experience he has gained as a director of other large public companies, allow him to contribute significantly to the Board and the committees on which he sits.

OTHER BOARD SERVICE


Former trustee, American Homes 4 Rent (Agoura Hills, California)

Former director, Caesars Entertainment Corporation (Las Vegas, Nevada)

Former director, H.J. Heinz Company (Pittsburgh, Pennsylvania)

GRAPHIC

8        FLUOR CORPORATION   |  2018 PROXY STATEMENT

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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

Corporate Governance Highlights

Fluor has long believed that good corporate governance practices promote the principles of fairness, transparency, accountability and responsibility and will help manage the company for the long-term benefit of its stockholders. During the past year, we continued to review our corporate governance policies and practices, compare them to those suggested by various commentators on corporate governance and the practices of other public companies and engage with our stockholders on corporate governance issues.

The following list highlights some of our core governance values and more recent corporate governance initiatives:

 
   
   
   

 

 

Proxy Access

 


 

Our proxy access bylaws give stockholders the ability to nominate and include director nominees in the company's proxy materials. Proxy access is available to a stockholder, or group of up to 20 stockholders, that have owned at least 3% of our outstanding shares of common stock for at least three years, and can be used to nominate up to two directors or 20% of the Board (whichever is greater), provided that the requirements of the bylaws are met.

 

 

 

 

 

 

 

 

 

Annual Director Elections

 


 

All directors stand for election on an annual basis.

 

 

 

 

 

 

 

 

 

Annual Board Evaluations

 


 

We conduct annual evaluations of the Board, its committees and all Board members.

 

 

 

 

 

 

 

 

 

Stockholder Right to Call a Special Meeting

 


 

Holders of at least 25% of our outstanding shares of common stock have the right to call a special meeting of stockholders.

 

 

 

 

 

 

 

 

 

Majority Voting Provisions

 


 

Our corporate governance documents contain majority (as opposed to supermajority) voting provisions.

 

 

 

 

 

 

 

 

 

Director Independence

 


 

All directors, with the exception of our Chairman and Chief Executive Officer, are independent. We also have a Lead Independent Director who presides over executive sessions of the independent directors of the Board and approves agendas and schedules for Board meetings.

 

 

 

 

 

 

 

During 2017, our Board reviewed all committee charters and updated the company's Governance Committee charter. In addition, the Board reviewed and updated the company's Corporate Governance Guidelines. You can access our current committee charters, Corporate Governance Guidelines, Code of Business Conduct and Ethics for Members of the Board of Directors, as well as other information regarding our corporate governance practices, on our website at www.fluor.com under "Sustainability" — "Governance" — "Corporate Governance Documents." Our Code of Business Conduct and Ethics for Fluor employees can be found on our website at www.fluor.com under "Sustainability" — "Ethics and Compliance" — "The Code."

FLUOR CORPORATION   |  2018 PROXY STATEMENT        9

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CORPORATE GOVERNANCE

 

 

 

Stockholder Engagement

Fluor has a long tradition of engaging with its stockholders and being responsive to their perspectives. In addition to our regular investor days organized by Investor Relations, we meet with stockholders on corporate governance and other topics of interest to them. Prior to adopting corporate governance initiatives, including those noted above, we consider the policies of our stockholders and solicit certain of their perspectives on potential courses of action.

Fluor has engaged in outreach to investors on a number of topics, including proxy access, disclosure of political contributions and greenhouse gas emissions reduction goals. After considering the feedback we received on proxy access, our Board amended our Bylaws to adopt the proxy access provisions summarized above. A copy of our Amended and Restated Bylaws is available on our website, www.fluor.com. Further, in response to stockholder feedback on a proposal requesting disclosure of political contributions, the Board approved an amendment to our political activities policy that, among other things, requires that corporate political contributions be disclosed on a semi-annual basis in reports posted on the company's website. The policy, as well as the semi-annual reports, are available on our website, www.fluor.com, in the "Sustainability — Governance" section. Finally, after taking into account our conversations with stockholders regarding greenhouse gas emissions reduction goals, our Board has determined to oppose the stockholder proposal discussed on pages 69-71.

Board Independence

In accordance with the New York Stock Exchange listing standards and our Corporate Governance Guidelines, our Board determines annually which directors are independent and, through the Governance Committee, oversees the independence of directors throughout the year. In addition to meeting the minimum standards of independence adopted by the New York Stock Exchange, a director qualifies as "independent" only if the Board affirmatively determines that the director has no material relationship with the company (either directly, or as a partner, stockholder or officer of an organization that has a relationship with the company). A relationship is "material" if, in the judgment of the Board, the relationship would interfere with the director's independent judgment.

Our Board has adopted director independence standards for assessing the independence of our directors. These criteria include restrictions on the nature and extent of any affiliations the directors and their immediate family members may have with us, our independent accountants, organizations with which we do business, other companies where our executive officers serve as compensation committee members and non-profit entities with which we have a relationship. Our independence standards are included in our Corporate Governance Guidelines, which are available on our website at www.fluor.com under the "Sustainability" — "Governance" section.

The Board, as recommended by the Governance Committee, has determined that each of the company's current directors and director nominees (other than Mr. Seaton) are independent of the company and its management under New York Stock Exchange listing standards and the standards set forth in our Corporate Governance Guidelines. The Board also determined that each of the members of the Audit, Governance and Organization and Compensation Committees has no material relationship with Fluor and is independent within the meaning of the New York Stock Exchange listing standards and Fluor's director independence standards for such committee.

In making its independence determination with regard to Ms. Berkery, the Board considered payments to PricewaterhouseCoopers ("PWC"), where Ms. Berkery's brother is a partner. With regard to PWC: (i) the fees paid to PWC in each of the last three years were less than .02% of such firm's revenues; (ii) Ms. Berkery's brother is one of over 11,000 partners and 236,000 employees at

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PWC; (iii) Ms. Berkery's brother does not personally provide services to the company or oversee others who provide such services; and (iv) the company hired PWC prior to Ms. Berkery joining the Board. In addition, it is important to note that Fluor, as a global corporation, and due to various securities regulations and requirements, utilizes multiple accounting firms for different kinds of services and, in fact, retained each of the four major public accounting firms to provide various services during 2017. The Board does not believe that the company's use of PWC raises any independence concerns with regard to Ms. Berkery. The Board determined that Mr. Seaton is not independent under the New York Stock Exchange listing standards and our Corporate Governance Guidelines because of his employment as the Chief Executive Officer of the company.

Finally, the Board reviewed charitable contributions made to non-profit organizations for which Board members (or their respective spouses) serve as an employee or on the board of directors. Specifically, the Board considered that certain directors and/or their family members (Mr. Barker, Mr. Bennett, Ms. Berkery, Mr. Hackett, Admiral Locklear, Ms. McWhinney, Mr. Olivera and Mr. Rose) are affiliated with non-profit organizations that received contributions from the company in 2017, 2016 and/or 2015. No organization received contributions in a single year in excess of $100,000; and therefore these contributions fell below the thresholds of the company's independence standards.

Risk Management Oversight

As part of its oversight function, the Board monitors how management operates the company. When granting authority to management, approving strategies and receiving management reports, the Board considers, among other things, the risks and vulnerabilities the company faces. In addition, the Board discusses risks related to the company's business strategy at the Board's annual strategic planning meeting. The Board also delegates responsibility for the oversight of certain risks to the Board's committees.

Under the Audit Committee charter, the Audit Committee is responsible for reviewing and discussing with management the company's most significant risks, methods of risk assessment, risk mitigation strategies, and the overall effectiveness of the company's guidelines, policies and systems with respect to risk assessment and management. In particular, the Audit Committee considers risk issues associated with our overall financial reporting, disclosure process, legal matters, regulatory compliance, cybersecurity and information technology, as well as accounting risk exposure and other operational and strategic risks. The Audit Committee is provided quarterly information on the geographic, operational and market risks facing our company. In carrying out its responsibilities related to risk oversight, the Audit Committee meets in executive sessions, at least quarterly, with the Chief Executive Officer, the Chief Financial Officer, the Chief Legal Officer, the Chief Compliance Officer, the head of internal audit and the independent registered public accounting firm to discuss particular risks facing the company.

The Organization and Compensation Committee is also tasked with certain elements of risk oversight. The Organization and Compensation Committee annually reviews the company's compensation policies and programs, as well as the mix and design of short-term and long-term compensation, to confirm that our compensation programs do not encourage unnecessary and excessive risk taking.

Finally, the Governance Committee is responsible for overseeing governance issues that may create governance risks, such as board composition, director selection and the other governance policies and practices that are critical to the success of the company. Each of the Audit, Governance and

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Organization and Compensation Committees report quarterly to the Board regarding the areas they oversee.

Board Leadership

The Chairman of the company's Board is elected by the Board on an annual basis. The Board, together with the Governance Committee, annually reviews the structure of the Board, and, as set forth in the company's Amended and Restated Bylaws and Corporate Governance Guidelines, the Board is empowered to choose any one of its members as Chairman of the Board. The Board has chosen Mr. Seaton, the company's Chief Executive Officer, to serve as the Chairman of the Board. The Board has determined that Mr. Seaton, the individual with primary responsibility for managing the company's day-to-day operations, is best positioned to chair regular Board meetings and to lead and facilitate discussions of key business and strategic issues. In his role as Chairman, Mr. Seaton presides over Board meetings, provides input on the agenda for each Board meeting and performs such other duties as the Board may request from time to time. However, the Board has also established a Lead Independent Director position, as it believes that the role of Lead Independent Director promotes effective governance when the company has a non-independent Chairman. As discussed below, the Lead Independent Director is elected every three years, and his or her duties are closely aligned with the role of an independent chairman. The Board believes that its current leadership structure provides independent Board leadership and engagement while also offering the benefits described above of having our Chief Executive Officer serve as Chairman.

In addition, each of the Audit, Governance and Organization and Compensation Committees is composed entirely of independent directors. Consequently, independent directors directly oversee critical matters such as the compensation policy for executive officers, succession planning, our methods of risk assessment and risk mitigation strategies, our policies and practices related to corporate governance, the director nominations process, our corporate finance strategies and initiatives, and the integrity of our financial statements and internal controls over financial reporting.

Lead Independent Director

To provide for independent leadership, the Board has appointed a Lead Independent Director, whose primary responsibility is to preside over and set the agenda for all executive sessions of the independent directors of the Board. The Lead Independent Director also approves agendas and schedules for meetings of the Board and information sent to the Board, chairs Board meetings in the Chairman's absence, acts as a liaison between the independent directors and the Chairman, provides guidance on the director orientation process for new Board members, consults and communicates with stockholders, as appropriate, and monitors communications to the Board from stockholders and other interested parties. The Lead Independent Director also has the authority to call executive sessions of the independent directors, as needed. In 2018, the independent members of the Board designated Mr. Peter J. Fluor to serve in this position for a three-year term that expires in February 2021.

Board of Directors Meetings and Committees

During 2017, the Board held six meetings, one of which was an extensive two-day strategic planning session. Each of the directors attended more than 75% of the aggregate number of meetings of the Board and of the Board committees on which he or she served and which were held during the period that each director served.

As discussed earlier, the Lead Independent Director presides over all executive sessions of the independent directors. Executive sessions of independent directors must take place at each regular

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Board meeting according to our Corporate Governance Guidelines. During 2017, five executive sessions of the independent directors were held.

The Board has a policy that directors attend the annual meeting of stockholders each year. All directors serving on the Board at that time attended the 2017 annual meeting of stockholders.

Our Board has four standing committees:

    Audit;

    Executive;

    Governance; and

    Organization and Compensation.

Each committee has a charter that has been approved by the Board. With the exception of the Executive Committee, each committee must review the appropriateness of its charter and perform a self-evaluation at least annually. Any recommended changes to the charters are then submitted to the Board for approval.

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AUDIT COMMITTEE

 
   
Members:

Peter K. Barker, Chair*

Alan M. Bennett*

Samuel J. Locklear

Matthew K. Rose*

Nader H. Sultan

Lynn C. Swann

  Each of the directors who serves on the Audit Committee is independent within the meaning set forth in the Securities and Exchange Commission regulations, New York Stock Exchange listing standards and our Corporate Governance Guidelines.

*Audit Committee Financial Expert, as determined by the Board.

Meetings During Fiscal 2017:

Five, including one to review the company's 2016 Annual Report, Form 10-K and proxy materials for the 2017 annual meeting. At the end of each of the four regular meetings of the committee, the members of the Audit Committee met privately with the company's independent registered public accounting firm, and also met with the company's head of internal audit and other members of management.

Key Responsibilities:

The responsibilities of the Audit Committee and its activities during 2017 are described in the "Report of the Audit Committee" section of this proxy statement on pages 67-68.

EXECUTIVE COMMITTEE

 
   
Members:

David T. Seaton, Chair

Peter K. Barker

Alan M. Bennett

  Each of the members of the Executive Committee is independent within the meaning set forth in the NYSE listing standards and our Corporate Governance Guidelines, other than Mr. Seaton.

Peter J. Fluor

   

Joseph W. Prueher

   

Meetings During Fiscal 2017:

One meeting to discuss director evaluations.

Key Responsibilities:

When the Board is not in session, the Executive Committee has all of the power and authority of the Board, subject to applicable laws, rules, regulations and listing standards of the New York Stock Exchange.

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GOVERNANCE COMMITTEE

 
   
Members:

Alan M. Bennett, Chair

Peter J. Fluor

James T. Hackett

Samuel J. Locklear

Deborah D. McWhinney

Armando J. Olivera

Joseph W. Prueher

Nader H. Sultan

Lynn C. Swann

  Each of the members of the Governance Committee is independent within the meaning set forth in the NYSE listing standards and our Corporate Governance Guidelines.

Meetings During Fiscal 2017:

Six.

Key Responsibilities:

The Governance Committee's primary responsibilities, which are discussed in detail within its charter, are to:

    engage in succession planning for the Board;

    identify qualified candidates to be nominated for election to the Board and directors qualified to serve on the Board's committees;

    develop, review and evaluate background information for any candidates for the Board, including those recommended by stockholders, and make recommendations to the Board regarding such candidates. For information relating to nominations of directors by our stockholders, see "— Consideration of Director Nominees" below;

    oversee the independence of directors;

    develop, implement, monitor and oversee policies and practices relating to corporate governance, including the company's Corporate Governance Guidelines and Code of Business Conduct and Ethics for Members of the Board of Directors; and

    oversee the annual evaluation of the Board, its committees and individual directors.

The Governance Committee has the authority, under its charter, to engage, retain and terminate the services of outside legal counsel, search firms and other advisors.

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ORGANIZATION AND COMPENSATION COMMITTEE

 
   
Members:

Peter J. Fluor, Chair

Peter K. Barker

James T. Hackett

Deborah D. McWhinney

Armando J. Olivera

Joseph W. Prueher

Matthew K. Rose

  Each of the members of the Organization and Compensation Committee is independent within the meaning set forth in the NYSE listing standards and our Corporate Governance Guidelines.

Meetings During Fiscal 2017:

Seven. Each of the four regular meetings included an executive session attended by the committee members and the committee's independent compensation advisor.

Key Responsibilities:

The Organization and Compensation Committee's primary responsibilities, which are discussed in detail within its charter, are to:

    review and monitor the company's top level organizational structure and senior management succession planning and recommend the appointment of executive officers and other corporate officers;

    review and approve corporate goals and objectives relevant to the Chief Executive Officer's compensation, evaluate (in consultation with the other independent directors) the achievement of these goals and recommend the Chief Executive Officer's compensation level to the independent directors;

    set the overall compensation policy for the executive officers (other than the Chief Executive Officer), including base salary, and annual and long term incentive awards, and approve compensation paid to such officers, considering the recommendations of the Chief Executive Officer; and

    review the compensation for non-management directors annually and recommend changes to the Board.

The responsibilities of our Organization and Compensation Committee and its activities during 2017 are further described in the "Compensation Discussion and Analysis" section of this proxy statement. The Organization and Compensation Committee has the authority under its charter to delegate any portion of its responsibilities to a subcommittee denominated by it when appropriate, but did not do so in 2017.

Compensation Consultant:

The Organization and Compensation Committee has the authority under its charter to engage, retain and terminate the services of outside legal counsel, compensation consultants and other advisors. In 2017, the Organization and Compensation Committee again engaged Frederic W. Cook & Co., Inc. to serve as its independent compensation consultant to advise the committee on all matters related to executive and director compensation. The compensation consultant conducts an annual review of the total compensation program for the Chief Executive Officer and other senior management reporting to him and, in doing so, completes a report benchmarking the senior executives against

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other executives with similar responsibilities in order to assist the Organization and Compensation Committee in making compensation decisions. The 2017 compensation review provided the committee with relevant market data and alternatives to consider when making compensation decisions in 2017 for the Chief Executive Officer and other senior management reporting to him.

In 2017, as part of the committee's oversight of certain aspects of risk, the compensation consultant conducted a broad-based review of the company's compensation programs and policies and discussed its findings with the committee, indicating that the company's compensation programs do not encourage behaviors that would create material risk for the company. Frederic W. Cook & Co., Inc. also provided written and verbal advice to the Organization and Compensation Committee at committee meetings, attended executive sessions of the committee to respond to questions, and had individual calls and meetings with the chair of the committee to provide advice and perspective on executive compensation issues. Frederic W. Cook & Co., Inc. was engaged by, and reports directly to, the committee and does not perform any other services for the company. None of the work of the compensation consultant has raised any conflicts of interest.

Consideration of Director Nominees

    Director Qualifications and Diversity

The Board of Directors believes that the Board, as a whole, should include individuals with a diverse range of backgrounds and experience to give the Board both depth and breadth in the mix of skills represented for the benefit of our stockholders. As provided in our Corporate Governance Guidelines, while all directors should possess business acumen and must exercise sound judgment in their oversight of our operations, the Board endeavors to include in its overall composition an array of targeted skills that complement one another rather than requiring each director to possess the same skills, perspective and interests. Accordingly, the Board and Governance Committee consider the qualifications of directors and director nominees both individually and in the broader context of the Board's overall composition and the company's current and future needs.   GRAPHIC

Our Corporate Governance Guidelines contain Board membership criteria that apply to current directors as well as nominees for director. The Governance Committee is responsible for reviewing with the Board on an annual basis (and as needed) the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. This annual review takes into consideration issues of diversity of thought and background (including gender, race, ethnicity and age), experience, qualifications, attributes and skills. Certain criteria that our Board looks for in a candidate include, among other things, an individual's business experience and skills, judgment, independence, integrity, reputation and international background, the individual's understanding of such areas as finance, marketing, information technology, regulation and public policy, whether the individual has the ability to commit sufficient time and attention to the activities of the Board, the fit of the individual's skills and personality with those of other directors in building a

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Board that is effective, collegial and responsive to the needs of the company, and the absence of any potential conflicts with the company's interests. The Board assesses its effectiveness in achieving these goals in the course of assessing director candidates, which is an ongoing process.

    Identifying and Evaluating Nominees for Director

The Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Governance Committee regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Governance Committee through various means, including current Board members, professional search firms, stockholders or other persons. Candidates are evaluated at meetings of the Governance Committee, and may be considered at any point during the year. The Governance Committee reviews a variety of information about candidates, including materials provided by professional search firms, if applicable, or other parties suggesting the candidate. In evaluating candidates, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board.

    Stockholder Recommendations

The policy of the Governance Committee is to consider properly submitted stockholder recommendations for candidates for membership on the Board as described above under "— Identifying and Evaluating Nominees for Director." If a stockholder properly recommends an individual to the Governance Committee to serve as a director, all recommendations are aggregated and considered by the Governance Committee at a meeting prior to the issuance of the proxy statement for our annual meeting. Any materials provided by a stockholder in connection with the recommendation of a director candidate are forwarded to the Governance Committee. In evaluating these recommendations, the Governance Committee assesses candidates in light of the membership criteria set forth under "— Director Qualifications and Diversity" above and the Board's existing composition. Any stockholder wishing to recommend a candidate for consideration by the Governance Committee should submit a recommendation in writing indicating the candidate's qualifications and other relevant biographical information and provide confirmation of the candidate's consent to serve as director. This information should be addressed to Carlos M. Hernandez, Chief Legal Officer and Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. Stockholders also have the ability to nominate directors for election in accordance with our Amended and Restated Bylaws. See "Additional Information — Advance Notice Procedures" and "— Proxy Access Procedures" on page 76 of this proxy statement, and Sections 2.04 and 2.10 of our Amended and Restated Bylaws, which are included on our website at www.fluor.com under "Sustainability" — "Governance."

Certain Relationships and Related Transactions

The company is not aware of any transactions with related persons that would be required to be disclosed.

Review and Approval of Transactions with Related Persons

The company has adopted a written policy for the approval of transactions to which the company is a party and the aggregate amount involved in the transaction will or may be expected to exceed $100,000 in any calendar year if any director, director nominee, executive officer, greater-than-5% beneficial owner or their respective immediate family members have or will have a direct or indirect

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material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).

The policy provides that the Governance Committee reviews certain transactions subject to the policy and determines whether or not to approve or ratify those transactions. In doing so, the committee takes into account, among other factors it deems appropriate, whether the transaction is on terms that are no less favorable to the company than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person's interest in the transaction. In addition, the Board has delegated authority to the chair of the Governance Committee to pre-approve or ratify transactions where the aggregate amount involved is expected to be less than $1 million. A summary of any new transactions pre-approved by the chair is provided to the full Governance Committee for its review in connection with each regularly scheduled Governance Committee meeting.

The Governance Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include, but are not limited to:

    employment of immediate family members of directors, director nominees, executive officers and greater-than-5% beneficial owners in non-executive positions with the company;

    business transactions with other companies at which a related person's only relationship is as an employee (other than an executive officer) if the amount of business falls below the thresholds in the New York Stock Exchange's listing standards and the company's director independence standards; and

    contributions to non-profit organizations at which a related person's only relationship is as an employee (other than an executive officer) or director if the aggregate amount involved does not exceed the lesser of $1 million or 2% of the organization's consolidated gross annual revenues.

Communications with the Board

Individuals may communicate with the Board and individual directors by writing directly to the Board of Directors c/o Carlos M. Hernandez, Chief Legal Officer and Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. Stockholders and other parties interested in communicating directly with the Lead Independent Director or with the independent directors as a group may do so by writing directly to the Lead Independent Director c/o the Chief Legal Officer and Secretary at the above address. The Lead Independent Director will, with the assistance of Fluor's internal legal counsel, be primarily responsible for monitoring any such communications from stockholders and other interested parties to the Board, individual directors, the Lead Independent Director or the independent directors as a group, and provide copies or summaries of such communications to the other directors as he considers appropriate.

Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Lead Independent Director considers to be important for the directors to know. The Board will give appropriate attention to written communications on issues that are submitted by stockholders and other interested parties, and will respond if and as appropriate.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2017, Mr. Fluor, Mr. Barker, Mr. Hackett, Ms. McWhinney, Mr. Olivera, Admiral Prueher and Mr. Rose served on the Organization and Compensation Committee. During 2017, there were no compensation committee interlocks between the company and other entities involving the company's executive officers and directors.

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PROPOSAL 2 — EXECUTIVE COMPENSATION

PROPOSAL 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

We are asking stockholders to vote on an advisory resolution to approve the company's executive compensation as reported in this proxy statement. As described below in the "Compensation Discussion and Analysis" section of this proxy statement, the Organization and Compensation Committee has structured our executive compensation program to achieve the following key objectives that contribute to the company's long-term success:

Key Objective

Achievement of the Objective
Align Interests of Named Executives with Stockholders  

Annual and long-term incentive programs reward named executives for achievement of short- and long-term goals that enhance stockholder value.

 

Between 55% and 73% of named executive target total direct compensation is equity-based.

 

Named executives are expected to hold company shares or units with a value between two and six times their base salary and are prohibited from hedging or pledging company securities.

     
Pay for Performance  

85% to 90% of the annual incentive for named executives is tied to company performance, including corporate measures such as net earnings, cash flow from operations and business segment performance.

 

Long-term incentive payouts under our 2017 Value Driver Incentive Program are tied to the company's new awards and return on assets employed, and also are directly related to the stock price.

     
Attract and Retain Top Talent  

Total compensation for named executives is targeted at the 50th percentile of the peer group.

We urge stockholders to read the "Compensation Discussion and Analysis" beginning on page 23, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative appearing on pages 44 through 60, which provide detailed information on the compensation of our named executives. The Organization and Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the "Compensation Discussion and Analysis" are effective in achieving our goals and that the compensation of our named executives reported in this proxy statement has supported and contributed to the company's success.

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PROPOSAL 2 — EXECUTIVE COMPENSATION

 

 

 

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the annual meeting:

    RESOLVED, that the stockholders of Fluor Corporation (the "Company") approve, on an advisory basis, the compensation of the Company's named executives as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company's 2018 annual meeting of stockholders.

This advisory resolution, commonly referred to as a "say on pay" resolution, is non-binding on the Board. Although non-binding, the Board and the Organization and Compensation Committee will review and consider the voting results when evaluating our executive compensation program. An advisory stockholder vote on the frequency of stockholder votes to approve executive compensation is required to be held at least once every six years. The company last held an advisory vote on frequency in 2017. After consideration of the vote of stockholders at the 2017 annual meeting of stockholders and other factors, the Board decided to hold advisory votes to approve executive compensation annually until the next advisory vote on frequency. Accordingly, the next advisory vote to approve executive compensation will be held at the 2019 annual meeting of stockholders.

GRAPHIC

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COMPENSATION DISCUSSION AND ANALYSIS

 

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the principles, objectives and features of the compensation program, as well as the decisions made under this program for 2017, for our named executive officers (referred to herein as the "named executives"). For 2017, our named executives were:

Name   Position
David T. Seaton   Chairman and Chief Executive Officer

Bruce A Stanski

 

Executive Vice President & Chief Financial Officer (effective August 4, 2017)

Biggs C. Porter

 

Former Executive Vice President & Chief Financial Officer (through August 3, 2017)

Carlos M. Hernandez

 

Executive Vice President, Chief Legal Officer & Secretary

Garry W. Flowers

 

Executive Vice President

Jose L. Bustamante

 

Executive Vice President, Business Development & Strategy

Executive Summary

Our executive compensation program is designed to motivate excellent performance and to create alignment with company performance. In 2017, many of our clients continued to evaluate their capital expenditure needs and remained selective in how they allocated capital. This resulted in fewer projects on which we could bid and win. We continued to generate positive cash flow and earnings but, due to the business environment and execution challenges on several projects, our performance did not meet our targets for the year. This is reflected in the payouts for the named executives' annual incentive awards, averaging 49% of target, and the 2015 Value Driver Incentive ("VDI") awards (for which the performance period ended on December 31, 2017), under which payouts were zero. This performance will also negatively impact future payments for the 2016 and 2017 VDI awards (which include fiscal year 2017 in the performance period) when payouts for those awards are determined at the end of the applicable three-year performance period. These actual and potential payouts, as well as our realizable pay analysis on pages 25-26 demonstrate our pay-for-performance alignment and commitment. We believe we have the right business strategy and incentive compensation programs to deliver better results for our stockholders.

    Overview of Fiscal 2017 Business Results

Over the past few years, clients reduced their capital expenditure budgets and were increasingly constrained in approving new projects as a reaction to low commodity prices, political uncertainties, currency devaluations and a challenging competitive environment. Through this difficult business environment, we remained focused on becoming the integrated solutions provider of choice for our clients and continued to prepare our company for an expected multi-year recovery in the energy and commodities markets and improvements in the other markets we serve.

New Awards and Backlog.    In 2017, we received $12.6 billion in new awards across the entire asset life cycle, from front-end engineering and design (FEED) to full engineering, procurement, fabrication and construction, as well as operations and maintenance services. We ended 2017 with a consolidated backlog of approximately $31.0 billion.

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Process Improvements.    More than ever, clients are demanding cost and schedule certainty and that facilities be designed and built for capital efficiency, allowing them to thrive in any commodity price environment. In 2017, we took significant steps to prepare our company for the future by making changes in our systems and processes to improve on project delivery. We also invested in a new data-centric execution platform that will use historical, standardized data to help us more accurately analyze and predict project outcomes. We believe these initiatives will help us drive execution excellence and the cost and schedule certainty required by our clients.

Safety.    Safety continued to be a major area of emphasis in 2017. Our total case incidence rate and health, safety and environmental scores improved over our 2016 performance, as we continue our uncompromising focus on safety and promoting a caring, preventive culture.

Cash Flow From Operations and Earnings.    In 2017, we remained focused on generating positive cash flow from operations and maintaining our strong balance sheet. At the end of 2017, we had $2.1 billion in cash and marketable securities, after returning $118 million in dividends to stockholders. Despite challenges throughout the year, net earnings attributable to Fluor from continuing operations were $191 million, or $1.36 per diluted share, in 2017. Earnings results include a charge of $37 million, or $0.27 per diluted share, related to the implementation of the recently enacted U.S. Tax Cuts and Jobs Act.

    Performance-Based Compensation

Our overriding objective is to pay for performance. As shown in the charts below, for 2017, 89% of our Chief Executive Officer's target total direct compensation ("TDC") and approximately 81% (on average) of the other named executives' target TDC was in the form of annual or long-term incentives, the value of which is variable (depending on either performance and/or the price of the company's stock).

For 2017, our long-term incentives included a mix of restricted stock units ("RSUs"), stock options and stock-based performance awards under our VDI program. The VDI awards are paid in stock and have performance targets calculated over a three-year period tied to average annual new award gross margin dollars and percentage, and average annual return on operating assets employed. The number of earned VDI units is further adjusted based on the company's total shareholder return relative to a select group of peers. These measures focus named executives on the creation of long-term company value for the benefit of our stockholders.

Our annual incentives are paid in cash and are based primarily on the achievement of pre-established financial and operational performance goals for each year.

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CEO Target TDC(1)   Other Named Executives' Average Target TDC(1)

GRAPHIC

 

GRAPHIC

(1)
Target TDC consists of actual base pay, target annual incentive and the value of all long-term incentives on the date of grant.

    Realizable Pay for our Chief Executive Officer

The chart below illustrates our Chief Executive Officer's "realizable" compensation as compared to his target TDC, averaged over the last three fiscal years. We believe that it is important to show realizable compensation because it provides valuable supplemental information to assist our stockholders in understanding our executive compensation program. Realizable compensation shows the value of the compensation our Chief Executive Officer actually earned or could expect to earn as of the end of 2017, while target TDC represents his target compensation opportunity at the time of grant.

While both target TDC and realizable compensation include actual base salaries, realizable compensation reflects both (i) actual performance against goals that impacts annual incentives and VDI awards and (ii) stock price. On average, over the last three years, our annual incentives have paid out below target as a result of our pay-for-performance alignment in a challenging business environment. In addition, the realizable value of our long-term incentives is significantly below the target opportunity due to a combination of both performance and stock price. As of December 31, 2017, none of the options granted to named executives in the last three years were in-the-money. Further, the three-year performance for the 2015 VDI (which performance period ended on December 31, 2017) was below the threshold performance target, resulting in a zero payout to named executives under such grants. As shown in the graph below, average realizable compensation for our Chief Executive Officer for the three-year period was 30% lower than his target TDC, which we believe demonstrates strong alignment between our named executive officer and stockholder interests and our commitment to pay for performance.

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CEO Target TDC and Realizable Pay
3-Year Average (2015 - 2017)

GRAPHIC


(1)
Target TDC consists of actual base salary, target annual incentive and the value of all long-term incentives on the date of grant.

(2)
Realizable pay includes: (i) actual base salary; (ii) actual annual incentive paid; (iii) the value of options on the date of exercise (if exercised), or on December 31, 2017 (if unexercised); and (iv) the value of other long-term incentive awards on the vesting date (if vested) or on December 31, 2017 (if unvested), as further discussed in the Outstanding Equity Awards at 2017 Fiscal Year End table on pages 51-52.

    Compensation Actions for 2017

In making decisions regarding the compensation opportunities for the named executives in 2017, the Committee took into account market conditions and performance, and also considered market data for our compensation peer group (as described on pages 39-40, the "Compensation Peer Group") and general industry peers. The Committee took the following specific actions with respect to named executive compensation for 2017 in order to motivate our named executives and align their interests with stockholders:

    Approved 2017 base salaries that were the same as 2016 base salaries (except with respect to Mr. Stanski whose salary was increased by 16.7% in 2017, primarily to reflect his promotion to Chief Financial Officer, and Mr. Bustamante whose salary was increased by 5.6% to bring his base salary closer to the median among those with similar positions in our Compensation Peer Group);

    Approved 2017 target bonus percentages that were the same as 2016 target bonus percentages (except with respect to Mr. Seaton whose bonus was increased by 5% to bring his target total direct compensation closer to the median among those with similar positions in our Compensation Peer Group), while maintaining the design of the annual incentive program;

    Set the long-term incentive award mix to include 50% performance-based VDI awards, 25% RSUs and 25% stock options;

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    For the 2017 VDI awards, changed the performance measures to return on operating assets employed, new awards gross margin dollars and new awards gross margin percentage, measures that the Committee believes drive long-term stockholder value; and

    Added a modifier to the 2017 VDI awards that is based on the company's three-year cumulative total shareholder return relative to the engineering and construction peers included in the Compensation Peer Group.

    Corporate Governance Highlights

Our executive compensation policies reflect our strong focus on sound corporate governance. As in prior years, the following practices and policies were in effect during 2017:

What we do   What we do not do

We maintain robust stock ownership guidelines, including a 6x base salary requirement for the Chief Executive Officer.

We maintain a clawback policy for performance-based compensation.

We design compensation programs that do not encourage behavior that could create material adverse risks to our business; and the Committee conducts an annual compensation risk assessment.

We engage an independent compensation consultant for our fully independent Committee.

We prohibit hedging, pledging and short-term trading of company stock.

 

We do not provide single trigger change in control agreements.

We do not have excise tax gross-ups for change in control agreements.

We do not allow repricing of stock options without stockholder approval.

We do not allow the payment of dividends or dividend equivalents on any unvested stock awards.

We do not have individual employment agreements for our executive officers.

How Named Executive Compensation is Tied to Performance

We use a balanced approach to compensation with a variety of pay elements to reward the achievement of both short-term and long-term goals, the majority of which are directly linked to performance as described in the table below:

Component
Primary Purpose
Linkage to Performance
Base Salaries   Provide a market competitive, stable level of income to attract and retain top talent  

Individual responsibility, performance and contributions to the company, overall salary movements in the Compensation Peer Group and the company's salary budget are considered by the Board or the Committee, as applicable, in determining an appropriate salary adjustment each year

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Component
Primary Purpose
Linkage to Performance

Annual Incentive Awards

  Provide annual cash compensation for achievement of performance goals that drive near-term objectives and support long-term company value:

Net earnings

Cash flow from operations

Safety







 

Annual forecasts of net earnings and other factors are made at the beginning of each fiscal year, and are used to set the target achievement levels for the annual incentive awards

The annual incentive awards are completely at-risk, depending on the level of performance against the criteria


Long-Term Incentives

 

Value Driver Incentive Performance Units

 

 

 

Provide a stock-based incentive and retention vehicle that is linked to performance measures that focus named executives on the creation of long-term company value

 

Forecasts for the performance measures are made at the beginning of each year, and performance units are earned to the extent those expectations are met, on average, over a three-year period, as modified based on the company's three-year cumulative total shareholder return relative to engineering and construction peers

     

VDI awards are earned and vest at the end of a three-year performance period, aligning the interests of executives with those of our stockholders by focusing the executives on the company's financial performance over a multi-year period

     

The units are completely at-risk, depending on our performance against the relevant measures (and our stock price)


 

 

Stock Options

 

 

 

Provide a long-term retention vehicle that is directly linked to stockholder value creation over time

 

Stock options vest in equal thirds over three years and have a ten-year term, aligning the interests of executives with those of our stockholders by focusing the executives on long-term stockholder value creation

 

 

The options are completely at-risk, attaining value only if our stock price grows over the initial grant price

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Component
Primary Purpose
Linkage to Performance

 

 

Restricted Stock Units

 

 

 

Provide a long-term equity ownership and retention vehicle that is directly linked to stockholder value creation over time

 

RSUs vest in equal thirds over three years, aligning the interests of executives with those of our stockholders by focusing the executives on the company's financial performance over a multi-year period

     

The value of the RSUs is at-risk, increasing or decreasing with our stock price over the vesting period

Components of 2017 Named Executive Compensation

    Base Salaries

The company provides named executives with base salaries that provide a competitive, stable level of income, since most other elements of their compensation are at-risk based on company performance. In determining base salaries for positions held by named executives, the Committee generally targets the 50th percentile (i.e., the median) for similar types of executives within the Compensation Peer Group. Base salaries may deviate from the median to attract key talent and for named executives with varying levels of experience or specialized duties or skill sets. The Committee reviews base salaries for named executives annually and upon a change in responsibilities.

In evaluating the Chief Executive Officer's base salary and his recommendations for the base salaries of the other named executives, the Committee considered the following factors during its 2017 annual review:

    the Compensation Peer Group data and other general industry survey data for comparable positions;

    individual level of responsibility, performance and contributions to the company;

    internal pay equity based on relative duties and responsibilities; and

    the company's 2017 salary budget.

The 2017 base salaries for the named executives did not change from 2016 (except with respect to Mr. Stanski whose salary was increased by 16.7% in 2017, primarily to reflect his promotion to Chief Financial Officer, and Mr. Bustamante whose salary was increased by 5.6% to bring his base salary closer to the median of those with similar positions in our Compensation Peer Group) and were as follows:

Named Executive


2017 Base
Salary
 

David T. Seaton

  $1,295,000  

Bruce A. Stanski

  $700,000  

Biggs C. Porter

  $841,300  

Carlos M. Hernandez

  $630,000  

Garry W. Flowers

  $530,000  

Jose L. Bustamante

  $475,000  

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For 2017, the base salaries for Messrs. Seaton, Stanski, Hernandez, Flowers and Bustamante approximated or were lower than the median of the Compensation Peer Group. Mr. Porter's base salary was in the top quartile of chief financial officers within the Compensation Peer Group, reflecting his years of experience in numerous finance positions (including chief financial officer) and the salary we originally offered to recruit him to the company.

    Annual Incentive Awards

Cash-based annual incentives are provided to motivate and reward named executives for achieving annual performance objectives. In 2017, each named executive participated in the Fluor Corporation Amended and Restated 2008 Executive Performance Incentive Plan (the "Performance Plan") and had a target annual incentive amount, established as a percentage of annual base salary. This percentage reflects each executive's respective organizational level, position and responsibility for achievement of the company's strategic goals, and aligns with market practice.

For 2017, target bonus percentages for Messrs. Seaton, Bustamante and Flowers approximated the median target bonus percentages for executives with similar job responsibilities within the Compensation Peer Group, while the target bonus percentages for Messrs. Stanski and Hernandez were below the median. For 2017, Mr. Seaton's target bonus percentage was increased from 145% to 150% in order to bring his target bonus percentage to the median.

The target annual incentives for 2017 for each named executive, other than Mr. Porter (who was no longer employed by the company at the time the annual incentives were paid), were as follows:

Named Executive


Percentage
of
Base Salary



Target Annual
Incentive
Amount
 

David T. Seaton

  150%   $1,943,000  

Bruce A. Stanski

  85%   $595,000  

Carlos M. Hernandez

  85%   $535,500  

Garry W. Flowers

  85%   $450,500  

Jose L. Bustamante

  85%   $403,800  

A named executive may receive from zero to 200% of the target annual incentive amount, depending on the extent to which the company and the named executive meet, fail to meet or exceed certain performance measures relating to overall company performance and the individual's own performance. The types of measures and relative weightings of those measures are determined by the Committee each year and are tailored to the named executive's position and organizational responsibility. The performance measures have remained fairly consistent over the past five years, but, in 2015, the Committee replaced return on operating assets employed with cash flow from operations in light of its determination to include return on operating assets employed as a performance measure under the VDI program. The Committee has also adjusted the relative weightings of each measure from time to time to reflect the Committee's emphasis on particular goals.

When determining the performance measures, the Committee considers the company's annual operating plan and strategic priorities for the upcoming year, as well as the company's performance in the previous year. The performance measures are all objective except for the individual performance measure, which is not tied to specific targets. The use of multiple financial goals prevents an overemphasis on any one financial metric and focuses the named executives on key

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areas of importance to the company. The measures, along with their respective weightings, for each named executive who received an annual incentive for 2017 were as follows:

2017 Measure


David T.
Seaton


Bruce A.
Stanski


Carlos M.
Hernandez


Garry W.
Flowers


Jose L.
Bustamante
 

Corporate Net Earnings

  60%   55%   55%   55%   55%  

Cash Flow from Operations

  20%   20%   20%   20%   20%  

Safety

                     

Days Away, Restricted and Transfer Incidence Rate

  3%   3%   3%   3%   3%  

Total Case Incidence Rate

  3%   3%   3%   3%   3%  

HSE Audit Score

  4%   4%   4%   4%   4%  

Individual Performance

  10%   15%   15%   15%   15%  

Performance Measures for 2017

The performance measures for the 2017 annual incentive awards for the named executives are described below.

Corporate net earnings.    Corporate net earnings is defined as the amount of net earnings attributable to Fluor from continuing operations set forth in our financial statements. When establishing corporate net earnings targets for 2017, the Committee determined that the following items would be excluded from net earnings for purposes of determining achievement of the target: expenses related to discontinued operations, the financial impact of any acquisition activity (including integration costs and other expenses), expenses associated with restructuring programs and unusual expenses outside the normal course of business. As a result, certain expenses associated with a discontinued business, integrating Stork Holding B.V. and company restructuring activities, as well as the impact from implementation of the recently enacted U.S. tax reform legislation have been excluded from the earnings calculation.

Cash Flow From Operations.    Cash flow from operations is defined as total segment profit plus the fiscal year change in the business unit project working capital accounts (accounts receivable, work in progress, advance billings and accounts payable).

Safety.    Safety consists of three distinct measures: (i) days away, restricted and transfer ("DART") incidence rate, (ii) total case incidence rate ("TCIR") and (iii) health, safety and environmental ("HSE") audit score. Fluor's DART incidence rate is defined as a work-related injury or illness that involves days away from work beyond the day of injury or onset of the illness or otherwise results in a work restriction or work transfer. Fluor's TCIR is defined as a work-related injury or illness that results in one or more of the following: days away from work, restricted work or transfer to another job, medical treatment beyond first aid, loss of consciousness, a significant injury or illness diagnosed by a physician or other licensed health care professional, or death. Incidence rates for both measures represent the number of recordable cases per 100 full-time workers (working 40 hours per week, 50 weeks per year), and are calculated using the following equation:

GRAPHIC

Fluor's HSE audit score measures our performance against approximately 60 leading indicators in the critical areas that drive performance and safety on our projects. Each indicator is given a score by the HSE corporate audit team based on project performance, with the overall score being the average of the scores for all indicators across a sampling of projects and joint ventures in all

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business lines. The company audits only those joint ventures for which the company has sole or joint HSE responsibilities for program development and work control.

Individual Performance.    For all named executives other than the Chief Executive Officer, the individual performance measure is given a rating based on subjective evaluations and recommendations by the Chief Executive Officer, although ultimately approved by the Committee. In the case of the Chief Executive Officer, individual performance is assessed by the independent directors of the Board after consideration of a recommendation from the Committee.

    2017 Annual Incentive Determination

The performance ranges for each of the measures applicable to our named executives, together with the actual achievement of the measures, are presented in the table below. Based on performance, annual incentive award cash payouts averaged 49% of target for named executives, which is lower than the 2016 payout percentage.

      2017 Performance Ranges (dollars in millions)

Measure


2017 Actual
Achievement


Min
Target
Max

      (.25 rating)(1)   (1.0 rating)   (2.0 rating)

Corporate Net Earnings

  $252.8(2)   $212.6   $361.3 - $488.9   $637.7

Cash Flow from Operations

  $505.1   $464.8   $790.1 - $1,068.9   $1,394.3

Safety

               

Days Away, Restricted and Transfer Incidence Rate

  .21   .19   .16   .07

Total Case Incidence Rate

  .42   .50   .40   .20

HSE Audit Scores

  86%   75%   85%   95%

(1)
The minimum rating level for each goal is required to be satisfied before there is any payout for that specific, performance measure.

(2)
The amount shown is for net earnings attributable to Fluor from continuing operations, excluding certain expenses associated with discontinued operations, the integration of Stork Holding B.V. and company restructuring activities, as well as the impact from implementation of the recently enacted U.S. tax reform legislation.

Achievement of the individual performance measure varied among the named executives because of the differences in responsibilities and individual accomplishments. The Committee determined the achievement of the individual performance measure for the named executives other than the Chief Executive Officer, after taking into account the Chief Executive Officer's recommendations with regard to those named executives, and also recommended to the Board the achievement level for the Chief Executive Officer. Qualitative evaluations made by the Chief Executive Officer were based on each named executive's leadership and group accomplishments. The individual performance measure was not a significant factor in determining compensation, and no named executive's aggregate compensation was materially affected by the level of achievement of this measure.

Once the level of achievement for each measure is determined, each named executive's overall performance rating is calculated by multiplying each measure's rating (which can range from 0.00 to 2.00) by its relative weighting, and then aggregating those amounts. The aggregate amount (the overall performance rating) is then multiplied by the individual's target annual incentive amount to determine the annual incentive payment for each named executive.

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The 2017 annual incentive amounts for each named executive, other than Mr. Porter (who retired from the company in January 2018 and was no longer employed by the company on the date annual incentives were paid), were determined as follows:

Named Executive


Target Annual
Incentive
Amount



X
Overall
Performance
Rating



=
Annual
Incentive
Amount
 

David T. Seaton

  $1,943,000   X   0.43   =   $836,000  

Bruce A. Stanski

  $595,000   X   0.49   =   $291,600  

Carlos M. Hernandez

  $535,500   X   0.52   =   $278,500  

Garry W. Flowers

  $450,500   X   0.54   =   $243,300  

Jose L. Bustamante

  $403,800   X   0.49   =   $197,900  

The 2017 annual incentive rating and payout for each named executive was lower than his 2016 rating and payout, primarily due to the lower achievement level of the cash flow from operations measure.

    Changes to Annual Incentives for 2018

Effective for 2018, the individual performance metric is being replaced with a strategic measure that will be weighted at 25% for all named executives. Specific strategic goals will be defined and approved for each named executive. The rating for the strategic metric will be capped at 125% of target if none of the financial performance measures achieve target performance. If at least one of the financial measures achieves target performance, the cap will be 200% of target. In addition, the Safety metric will be one qualitative metric rather than three stand-alone metrics. Safety performance will be assessed based on overall safety performance including, but not limited to, DART, TCIR and the HSE Audit Score. These changes were made to better allow the Committee to reward executives for strategic outcomes and to balance corporate and business line goals.

    2017 Long-Term Incentives

The stockholder-approved Performance Plan and its successor, the 2017 Performance Incentive Plan, allow the Committee to grant various forms of long-term equity incentives. The Committee's objectives in granting long-term equity awards are to motivate and reward the achievement of superior operating results and stock price appreciation, facilitate the attraction and retention of key management personnel and align the interests of management and stockholders through equity ownership.

As discussed earlier, our compensation program is designed to align pay with performance. Named executives receive long-term incentive grants that reflect potential pay, based on market considerations as well as individual contributions, experience, advancement potential and internal pay equity. For 2017, long-term incentive awards for our Chief Executive Officer approximated the 50th percentile of the Compensation Peer Group, while the value of such awards for other named executives (other than Mr. Porter) ranged from the 42nd percentile to the 67th percentile. In 2017, the Committee determined to maintain performance-based VDI awards as 50% of the long-term incentive grant to named executives, and to provide the remainder in equal proportions of options and RSUs. Shares issued under RSUs and VDI awards granted to named executives in 2017 are subject to a three-year post-vest holding period. During the post-vest holding period, named executives may not sell or otherwise transfer the underlying shares of company common stock (except in the case of death).

The Committee believes that the mix of long-term incentive components aligns the interests of named executives with those of stockholders by encouraging named executives to focus on

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long-term growth of the company, while also providing named executives with a balanced pay package similar to many of our peers. In determining the relevant allocations, VDI awards were valued at the target performance level (and converted into performance units based on the closing stock price on the date of grant); RSUs were valued at the fair market value (closing stock price) on the date of grant; and stock options were valued using the Black-Scholes option pricing model.

The Committee determines the dollar value of long-term incentive awards for named executives at the first regularly scheduled meeting of the Committee each year, which is typically held in January or February. The determinations are made at that time to coincide with the annual performance review (when prior year performance information is available). The equity awards are then granted on the third business day following the publication of our annual results, based on the closing stock price on that date. RSUs and stock options vest one-third per year in each of the years following the grant date.

    VDI Awards Granted in 2017

The VDI awards granted to the named executives in 2017 are subject to a three-year performance period, which started on January 1, 2017 and ends on December 31, 2019. The awards will be earned based upon actual performance over the three-year performance period and will vest (and be payable in shares) in March 2020. Upon vesting, the named executive will also receive additional shares equal to the amount of any accrued dividends paid by the company with respect to shares actually earned. The vested shares must be held for an additional three years beyond vesting, as described above.

The Committee established the following performance criteria and relative weightings for the 2017 VDI awards for named executives, which are all evaluated over a three-year period:

    40% of the total award is based on average annual new awards gross margin percentage ("NAGM %");

    30% of the total award is based on average annual new awards gross margin dollars ("NAGM $"); and

    30% of the total award is based on average annual return on operating assets employed ("ROAE").

Starting with the 2017 VDI awards, the number of earned shares is modified based on the company's three-year cumulative total shareholder return relative to the engineering and construction peers included in the Compensation Peer Group ("Relative TSR"). If the company's Relative TSR is in the bottom third of the group, the earned shares will be decreased by 25%. If the company's Relative TSR is in the top third of the group, the earned shares will be increased by 25%. No adjustment will be made if the company's Relative TSR is in the middle third. In no event will the earned shares exceed two times the target number of shares.

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The calculation of the target number of units, as well as the eventual determination of the payout of VDI awards, is illustrated below:

GRAPHIC

New awards gross margin dollars measures the total amount of project gross margin that the company expects to receive as a result of projects awarded within the performance period. New awards gross margin percentage is the total amount of gross margin the company expects to receive as a result of projects awarded within the performance period as a percentage of expected revenue from those projects. Return on operating assets employed is calculated by dividing full-year corporate net earnings (excluding the items noted above under "Annual Incentive Awards – Performance Measures for 2017" and after-tax interest expense) by net assets employed. Net assets employed is defined as total assets (excluding excess cash and current and non-current marketable securities) minus current liabilities (excluding non-recourse debt) and is calculated based on average net assets reported for the previous five quarters.

The Committee selected the new awards performance criteria because, although measured over a relatively short period, such metrics relate to contracts that typically will extend a number of years into the future and, thus, are expected to generate, and position the company for, increased future earnings. These measures are not reported in our financial statements or this proxy statement, as disclosure of the new awards gross margin targets would result in competitive harm to the company, but are set each year at levels intended to challenge our executives to achieve business goals established as part of the annual strategic plan. When determining whether the new awards performance goals have been met, the Committee takes into account any changes affecting project gross margin backlog (e.g., scope changes, adjustments or cancellations) that occurred during the year. The Committee believes the inclusion of the return on operating assets employed measure focuses management on value creation and asset utilization and rewards named executives for strategic investing and disciplined maintenance of working capital. The performance measures and relative weightings are determined based on the company's relative business priorities and may be changed for future year grants as determined necessary and appropriate to drive the company's achievement of its long-term objectives.

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In the first quarter of 2017, the Committee set minimum (paid at 25% of target), target (paid at 100% of target) and maximum (paid at 200% of target) levels for the portion of the 2017 VDI awards that were subject to the 2017 new awards gross margin percentage, new awards gross margin dollars and return on operating assets employed performance goals. This first tranche of the 2017 VDI awards represents one-third of the number of shares subject to those VDI awards. The second and third tranches of the 2017 VDI awards will be subject to performance goals for 2018 and 2019, respectively, which will be set in the first quarter of the respective year. The Committee believes that using three annual performance goals instead of a single three-year goal best orients executives to focus on long-term achievements, while avoiding disincentives or windfalls due to volatile economic factors such as commodity prices and currency rates that are difficult to forecast and impact our operating margins and growth. When setting these performance goals, the Committee considers the company's past performance, current business outlook and other corporate financial measures. The Committee also considers how likely it will be for the company to achieve the goals. We believe that the target goals have been established at levels that should be appropriately difficult to attain. Goals above target are stretch goals and will require an increasingly challenging level of performance in order to be achieved.

In the first quarter of the year following each of the three annual performance periods, the Committee determines the actual achievement of the performance measures for that year. At the end of the three-year period, the Committee will average the annual performance and determine the number of earned performance units by multiplying the number of performance units by the average of the three annual performance ratings (ranging from 0.00 to 2.00). The Committee will then apply the Relative TSR modifier, which may increase or decrease the number of earned shares; however, the final number of earned shares may not exceed two times the target number of shares. The final number of units earned and related dividends vest in full after such determination, approximately three-years from the date of grant, and are required to be held an additional three years. The three-year performance period and vesting are intended to facilitate retention of the participating executives and to link long-term value of the awards to stock price. A named executive's unvested award is subject to risk of forfeiture if, prior to settlement, the named executive's employment with the company is terminated for any reason other than retirement, death, disability or a qualifying termination within two years after a change in control of the company. The post-vest holding period lapses only upon the named executive's death.

    Achievement for VDI Awards Granted in 2015

VDI awards granted in 2015 had a three-year performance period, ending December 31, 2017. The performance rating for such awards was based in equal parts on three-year cumulative earnings per share and three-year average annual return on operating assets employed. The performance targets for the awards are set forth below. However, the company did not meet the minimum performance criteria for these awards, so no units were earned by any named executives. This performance is reflected in the Outstanding Equity Awards at 2017 Fiscal Year End table on page 51.

  Performance Ranges

Measure (dollars in millions)

  Min
Target
Max

2015 - 2017 Earnings per Share

  $14.60   $15.38   $16.47

Average Annual ROAE

  14.7%   20.0% - 22.1%   24.2%

    Changes to Long-Term Incentives for 2018

Effective for 2018, the Committee determined to maintain performance-based VDI awards as 50% of the long-term incentive grant to named executives, but to increase the allocation of RSUs from 25%

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to 50%. No options will be granted in 2018. The Committee will continue to review the effectiveness of our equity mix for future grants to ensure that we are incentivizing our executives appropriately. In addition, VDI awards and RSUs granted in 2018 will not be subject to a post-vest holding period.

Other Compensation Decisions

We pay hiring bonuses when necessary or appropriate to attract top executive talent from other companies. Executives we recruit must often forfeit unrealized value in the form of unvested equity and other forgone compensation opportunities provided by their former employers. We may provide hiring bonuses to compensate them for this lost opportunity; but we may also include service requirements for retention purposes. No hiring bonuses were made to named executives in 2017. We also periodically grant cash or equity retention awards to reflect competitive market situations, address specific project objectives or reinforce succession planning objectives. In 2017, Mr. Flowers received a cash retention award in order to retain his services for key projects; and Mr. Stanski received a relocation payment in connection with his relocation from Arlington, Virginia to our headquarters in Irving, Texas. For further details on these arrangements, see footnotes 8 and 9 of the Summary Compensation Table on page 46.

In addition, in August 2017, Mr. Porter stepped down as Chief Financial Officer. He remained employed by the company until January 2018. At that time, the company entered into an agreement with Mr. Porter, pursuant to which he received a lump sum payment of $1,591,300, which amount is in lieu of any 2017 bonus and other payments from the company to which he may have been entitled. Mr. Porter's previously awarded, but unvested, stock options and restricted stock units will become vested on the vesting dates set forth in the grant agreements; and unvested VDI awards will continue to vest based on the performance conditions and other terms of the grant agreements. The agreement also includes confidentiality covenants and a release of claims by Mr. Porter, as well as non-compete restrictions.

Other Elements of Named Executive Compensation

    Perquisites

In 2017, named executives were paid a taxable monthly allowance as set forth in the All Other Compensation table on page 46. The Committee believes that these allowances are reasonable costs, and are justified by the perceived value to the named executives. The allowances can be used to cover items such as automobile leasing, tax and financial planning, and club membership dues. When determining the allowance amounts, the Committee considered the value of perquisites provided to similarly situated executives in our Compensation Peer Group. In addition, named executives are required to have a physical examination each year that is paid for by the company. Named executives may have spousal travel paid for by the company only when it is for an approved business purpose, in which case a related tax gross-up is provided. In 2017, the company did not provide any tax gross-ups other than for spousal business travel. Named executives can make personal use of charter aircraft in conjunction with a business purpose, but the named executive is required to reimburse the company for the incremental operational cost. Our 2017 perquisite costs, which are relatively small in relation to total direct compensation, approximated the median of the Compensation Peer Group.

    Executive Deferred Compensation Program

The named executives are eligible to participate in Fluor's Executive Deferred Compensation Program. The company offers this program to provide retirement and tax planning flexibility and to remain competitive with other companies within our Compensation Peer Group and general industry.

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In addition, named executives may choose to defer RSUs and VDI awards granted in 2016 and 2017, which awards are subject to a post-vest holding period. Please refer to the discussion in the Nonqualified Deferred Compensation section on pages 54-55 for a more detailed discussion of these arrangements.

    Severance and Change in Control Benefits

The company provides each of the named executives with cash severance in the event of a termination of employment by the company without cause. The company believes its severance policy assists in attracting and retaining qualified executives. The level of any cash severance payment is based upon base salary and years of service at the time of separation. In addition, each named executive has a change in control agreement that provides additional payments and other benefits if the executive is terminated without cause or if the named executive terminates employment for good reason within two years following a change in control of the company. The change in control agreements are designed to reinforce and encourage the continued attention and dedication of the executives without distraction in the face of potentially disruptive circumstances arising from the possibility of a change in control and to serve as an incentive to their continued commitment to, and employment with, the company. None of the potential change in control payments are "single trigger," meaning a named executive must incur a qualifying termination of employment following a change in control in order to be eligible for these payments. In addition, if any excise taxes are triggered in connection with a change in control, our change in control agreements do not provide for a tax gross-up. The company will, instead, automatically reduce any payments under the agreement to the extent necessary to prevent payments from being subject to those excise taxes, but only if by reason of the reduction, the executive's after-tax benefit of the reduced payments exceeds the after-tax benefit if such reduction were not made.

Please refer to the discussion under "Potential Payments Upon Termination or Change in Control" below for a more detailed discussion of these arrangements. Severance and change in control benefits are provided to be competitive with the Compensation Peer Group.

Establishing Executive Compensation

    Compensation Philosophy, Objectives and Risk Assessment

The Committee has responsibility for establishing and implementing the company's executive compensation philosophy. The Committee reviews and determines all components of named executives' compensation (other than with respect to our Chief Executive Officer's compensation, which the Committee reviews and recommends for approval by our independent directors), including making individual compensation decisions and reviewing and revising the company's compensation plans, programs and other arrangements.

The Committee has established the following compensation philosophy and objectives for the company's named executives:

    Align the interests of named executives with those of the stockholders.  The Committee believes it is appropriate to tie a significant portion of executive compensation to the value of the company's stock in order to closely align the interests of named executives with the interests of our stockholders. The Committee also believes that executives should have a meaningful ownership interest in the company and as such maintains and regularly reviews executive stock ownership guidelines.

    Have a significant portion of pay that is performance-based.  Fluor expects superior performance. Our executive compensation programs are designed to reward executives

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      when performance results for the company and the executive meet or exceed stated objectives. The Committee believes that compensation paid to executives should be closely aligned with the performance of the company relative to these objectives.

    Provide competitive compensation.  The company's executive compensation programs are designed to attract, retain and motivate highly qualified executives critical to achieving Fluor's strategic objectives and building stockholder value.

The Committee reviews the company's compensation philosophy and objectives each year to determine if revisions are necessary in light of market conditions, the company's strategic goals or other relevant factors. In each of the last five years, the Committee determined that no revisions to the executive compensation philosophy and objectives were necessary, although the Committee has adjusted the specific elements of compensation used to implement its philosophy as compensation practices have evolved.

In addition, the Committee reviewed the incentive compensation we provide to our employees, including our named executives, and evaluated the mix of programs and performance criteria, the Committee's ability to exercise discretion over certain components of compensation and our risk management practices generally. Based on this review, the Committee believes that our compensation programs are designed to appropriately align compensation with our business strategy and not to encourage behavior that could create material adverse risks to our business.

    Peer Group Comparisons

In making compensation decisions, the Committee looks at the practices of our Compensation Peer Group. The Committee annually reviews with its independent compensation consultant the composition of the Compensation Peer Group and makes refinements if necessary based on objective criteria established by the Committee.

Since 2009, the Committee has applied a generally consistent process and set of criteria for selection of the Compensation Peer Group. Potential peer companies were identified by applying the following objective selection criteria:

    Standard & Poor's Global Industry Classification Standard (GICS) codes for the company, our direct competitors and key customers (2010 – capital goods, 101010 – energy equipment and services, and 101020 – oil, gas and consumable fuels);

    Companies commonly identified as peers of direct engineering and construction peers (based on disclosures in their most recent proxy statements);

    Companies with generally comparable pay models; and

    Companies with revenues, number of employees and market capitalization ranging from 0.25x to 4.0x on all three measures, subject to exception for direct competitors and other engineering and construction peers.

As part of its compensation review for 2017, the Committee reviewed the Compensation Peer Group and determined that the peer group and its selection criteria should remain unchanged. The

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companies comprising Fluor's Compensation Peer Group for purposes of establishing 2017 compensation were:

AECOM Technology Corporation*

 

Illinois Tool Works Inc.

Chicago Bridge & Iron Company*

 

Ingersoll-Rand Company Limited

Cummins Inc.

 

Jacobs Engineering Group Inc.*

Deere & Company

 

KBR,  Inc.*

Dover Corporation

 

L-3 Communications Corporation

Eaton Corporation

 

Northrop Grumman Corporation

EMCOR Group*

 

PACCAR Inc.

Emerson Electric Co.

 

Parker-Hannifin Corporation

General Dynamics Corporation

 

Quanta Services,  Inc.*

Halliburton Company

 

Raytheon Company

Hess Corporation

 

W.W. Grainger,  Inc.


*
Direct competitors and other engineering and construction peers.

For purposes of 2018 compensation, the peer group selection criteria remained the same, except the market capitalization guideline was changed slightly to include companies from 0.2x to 5.0x Fluor's size (versus 0.25x to 4.0x). The expanded guideline resulted in no changes to the Compensation Peer Group.

The Committee reviews benchmarking comparisons for each named executive against the Compensation Peer Group. All job titles that appear to contain similar responsibilities are included in the benchmarking comparisons for each of the named executives.

The Committee sets target compensation levels for the named executives as follows. Individuals vary from the target market positioning primarily based on performance, experience, advancement potential and internal pay equity.

    Base salary compensation is targeted at the 50th percentile for similar job titles, experience and tenure of executives within the Compensation Peer Group. The Committee believes targeting compensation at this level helps the company attract and retain executives. However, from time to time, the Committee may approve compensation at levels outside the 50th percentile depending on a number of factors, including the named executive's experience, skill sets, industry knowledge and other similar attributes.

    Base salary plus annual incentive (i.e., cash) compensation is similarly targeted at the 50th percentile of the Compensation Peer Group for attainment of target-level company and individual performance objectives applicable to annual incentive awards. Annual incentive payments may be made above the 50th percentile if above-target company and individual performance is attained. If company and individual objectives are not met, annual incentive compensation may be below the 50th percentile or not paid at all.

    Total direct compensation, or base salary plus annual and long-term incentive awards, is also targeted at the 50th percentile of the Compensation Peer Group for attainment of target-level company performance. Achievement of superior company performance and continued stock

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      price appreciation will result in growth of actual total direct compensation over time. Below-target company performance and stock price depreciation will decrease actual total direct compensation.

    Role of Company Management in Compensation Decisions

Before the Committee makes decisions on executive compensation, the Chief Executive Officer reviews compensation for the other named executives and makes recommendations to the Committee based on their individual and group performance. At the beginning of the year, the Chief Executive Officer proposes to the Committee base salary adjustments for the current year, annual incentive award payments for the previous year and current-year long-term incentive grants for each of the other named executives. The Committee reviews and approves the compensation actually paid to the named executives after consideration of the recommendations made by the Chief Executive Officer. The Committee may exercise discretion to modify named executives' compensation from that recommended by the Chief Executive Officer, but did not exercise that discretion for the named executives with respect to 2017 compensation.

Other Aspects of Our Executive Compensation Programs

    2017 "Say on Pay" Advisory Vote on Executive Compensation

We hold an annual "say on pay" advisory vote to approve our executive compensation. At our 2017 annual meeting of stockholders, stockholders approved the compensation of our named executives, with approximately 93% of the votes cast for approval of the company's executive compensation. The Committee evaluated the results of the 2017 advisory vote at its May meeting and then again in February 2018 when determining executive compensation. The Committee also considered many other factors in evaluating our executive compensation program, including the Committee's assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our program by the Committee's independent compensation consultant, including with respect to "best practices," and a review of data of our Compensation Peer Group. Taking all of this information into account, the Committee did not make any changes to our executive compensation program and policies as a result of the 2017 "say on pay" advisory vote. However, in response to an evaluation of market practices, the Committee approved changes to the company's annual incentive and VDI programs as discussed above.

    Clawback Policy

Pursuant to the company's clawback policy, if the Board determines that any key executive or employee, including any named executive, has engaged in fraud or willful misconduct that caused or otherwise contributed to a need for a material restatement of the company's financial results, the Board will review all performance-based compensation earned by that employee during the fiscal periods materially affected by the restatement. If the Board determines that any such compensation would have been lower if it had been based on the restated results, the Board will, to the extent permitted by applicable law, seek recoupment of such compensation as it deems appropriate. To date, the Board has not encountered a situation where a review of compensation pursuant to the policy was necessary.

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    Stock Ownership Guidelines

Executive officers are encouraged to hold Fluor common stock to align their financial interests with those of our stockholders. The company maintains stock ownership guidelines for named executives as follows:

Role


Value of Shares or Share
Units to be Owned

Chief Executive Officer

  6 times base salary

Chief Financial Officer and Chief Legal Officer

  3.5 times base salary

Executive Vice President

  2 times base salary

A named executive is required to settle VDI awards in stock and to retain all company common stock, including 100% of the net shares acquired from the exercise of stock options or the vesting of RSUs, to the extent he has not satisfied the guidelines. Unvested RSUs and earned but unvested VDI units are considered as owned by the named executive in determining whether the named executive has met his ownership guidelines. As of the date of this report, all named executives were in compliance with these stock ownership guidelines, except Mr. Stanski who was recently promoted to Chief Financial Officer and is expected to fulfill his stock ownership requirement in 2018.

    Restrictions on Certain Trading Activities

Our insider trading policy for executive officers and non-management directors prohibits transactions involving short-term or speculative trading in, or any hedging or monetization transactions involving, company securities. In addition, our policy prohibits pledging company securities or holding company securities in a margin account.

    Tax Implications

The Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code ("Section 162(m)"), which, for fiscal 2017, generally prohibited the company from deducting compensation in excess of $1,000,000 that was paid to named executives other than the Chief Financial Officer unless the compensation qualified as "performance based compensation" as defined under Section 162(m). In February 2017, the Committee set and approved performance hurdles designed to allow named executives' long-term incentive awards granted in fiscal 2017 to potentially qualify as "performance based compensation." Historically, stock option proceeds were intended to be deductible under the provisions of the stock plans and the structure of the related grant agreements. For fiscal 2017 and prior years, we have claimed a deduction for a significant percentage of our covered executives' taxable income. However, because there are uncertainties as to the application of regulations under Section 162(m), as with most tax matters, it is possible that our historical deductions may be challenged or disallowed. Accordingly, there is no certainty that elements of compensation discussed in this proxy statement will in fact be deductible by the company. In addition, the Committee historically has retained discretion to provide payments not intended to be deductible under Section 162(m).

The exemption from Section 162(m)'s deduction limit for performance based compensation has been repealed, effective for taxable years beginning after December 31, 2017. The $1,000,000 compensation limit was also expanded to apply to a public company's chief financial officer and to certain individuals who were covered employees in years other than the then-current taxable year. Thus, for fiscal 2018 and future years, compensation paid to covered employees in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain "grandfathered" arrangements in place as of November 2, 2017.

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ORGANIZATION AND COMPENSATION COMMITTEE REPORT

 

 

 

ORGANIZATION AND COMPENSATION COMMITTEE REPORT

Management of the company has prepared the Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K, and the Organization and Compensation Committee has reviewed and discussed it with management. Based on this review and discussion, the Committee recommended that the Compensation Discussion and Analysis be included in the proxy statement for the company's 2018 annual meeting of stockholders.

    The Organization and Compensation Committee

 

 

Peter J. Fluor, Chairman
Peter K. Barker
James T. Hackett
Deborah D. McWhinney
Armando J. Olivera
Joseph W. Prueher
Matthew K. Rose

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SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation earned by or granted to each of the 2017 named executives in the relevant years. The 2017 named executives are the principal executive officer, two executives who held the position of principal financial officer in 2017, and the three other highest paid executives. Effective August 4, 2017, Mr. Porter stepped down from his position as Chief Financial Officer and Mr. Stanski was appointed to the position. Mr. Porter remained employed by the company to assist with the transition until January 2018.

The grant date fair value of long-term incentive awards granted in 2017 (i.e., stock awards and option awards) increased over the grant date fair value of those awards in 2016 (which consisted only of stock awards) due primarily to the fact that the 2016 and 2017 VDI awards have three one-year performance goals that are averaged over the performance period. Under Securities and Exchange Commission reporting rules, the grant date fair value of equity awards is reported in the year in which performance goals are set. In 2016, only the first tranche of the 2016 VDI award was included in the Summary Compensation Table; however, in 2017, both the second tranche of the 2016 VDI award and the first tranche of the 2017 VDI award are included. Therefore, the value of 2017 long-term incentive awards and, correspondingly, total compensation (as required to be disclosed in this table), increased over 2016 awards and compensation, despite lower annual incentive payouts for 2017.



(a)




(b)



(c)



(d)



(e)



(f)



(g)



(h)



(i)



(j)


Name and
Principal Position


Year
Salary
($)(1)


Bonus
($)


Stock
Awards
($)(2)



Option
Awards
($)(3)



Non-Equity
Incentive
Plan
Compensation
($)(4)





Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)








All Other
Compensation
($)(5)



Total
($)(6)


David T. Seaton   2017   $1,295,029     $5,626,512   $2,200,021   $836,000     $296,225   $10,253,787 (7)

Chairman and

  2016   $1,295,029     $5,866,758     $1,150,000     $357,004   $8,668,791 (7)

Chief Executive Officer

  2015   $1,333,302     $5,896,024   $2,904,033   $1,900,000     $253,085   $12,286,444 (7)
Bruce A Stanski   2017   $647,111   $220,000 (8) $1,007,390   $401,257   $291,600     $106,183   $2,673,541  

Executive Vice President & Chief

  2016   $600,018     $1,010,108     $520,200     $87,067   $2,217,393  

Financial Officer (effective August 4,

  2015                  

2017)

                                     
Biggs C. Porter   2017   $841,318     $1,824,711   $746,290   (10)   $131,508   $3,543,827  

Executive Vice President & Chief

  2016   $841,318     $1,723,396     $450,600     $133,572   $3,148,886  

Financial Officer (through August 3,

  2015   $868,965     $1,340,081   $660,023   $751,000     $128,330   $3,748,399  

2017)

                                     
Carlos M. Hernandez   2017   $630,032     $1,588,728   $643,788   $278,500     $117,117   $3,258,165  

Executive Vice President,

  2016   $630,032     $1,533,437     $380,300     $120,558   $2,664,327  

Chief Legal Officer & Secretary

  2015   $650,724     $1,474,183   $726,046   $562,300     $116,370   $3,529,623  
Garry W. Flowers   2017   $530,026   $100,000 (9) $1,044,424   $411,290   $243,300     $108,113   $2,437,153  

Executive Vice President

  2016                  
    2015                  
Jose L. Bustamante   2017   $471,166     $1,120,181   $468,753   $197,900     $97,246   $2,355,246  

Executive Vice President,

  2016                  

Business Development & Strategy

  2015                  

(1)
The amounts in column (c) include salary paid, and any time off with pay utilized, during the year.

(2)
The amounts in column (e) represent the aggregate grant date fair value of the RSUs and VDI awards granted in each year, calculated based on the closing price of the company's common stock on the New York Stock Exchange on the date of grant in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC 718"). For 2017, this amount includes the value of the shares subject to the second tranche of the 2016

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    VDI award and the first tranche of the 2017 VDI award, for both of which the performance objectives were set in 2017. The performance objectives for the first tranche of the 2016 VDI award were set, and reported, in 2016. Under SEC rules, tranches for which performance objectives have not been set do not have a reportable grant date fair value under ASC 718 and, therefore, are not included in the table above. The performance objective for the third tranche of the 2016 VDI award will be established in 2018, and the performance objectives for the second and third tranches of the 2017 VDI award will be established in 2018 and 2019, respectively. Compensation for the remaining tranches of the 2016 and 2017 VDI awards will be reported in the Summary Compensation Table as compensation for the year in which the performance objectives are established.

    The grant date fair value of the RSU and VDI award tranches described above reflects a liquidity discount of 10.46%, as a result of the three-year post-vest transfer restrictions (the "Post-Vest Holding Period") imposed by the company on the common stock issued upon settlement of those awards. Beginning in 2017, the grant date fair value of the VDI awards was further adjusted upward by 7.64%, based on the Monte Carlo valuation method, to reflect the impact of the Relative TSR modifier on the VDI awards.

    The chart below details the grant date fair value of the RSUs granted in 2017, the second tranche of the 2016 VDI awards, and the first tranche of the 2017 VDI awards, based on target level performance and the assumptions described above:

  David T.
Seaton


Bruce A.
Stanski


Biggs C.
Porter


Carlos M.
Hernandez


Garry W.
Flowers


Jose L.
Bustamante

RSUs

  $2,200,036   $401,291   $746,380   $643,790   $411,252   $468,792

2016 VDI

  $1,847,731   $318,133   $542,782   $482,955   $338,058   $314,984

2017 VDI

  $1,578,745   $287,966   $535,549   $461,983   $295,114   $336,405

Total

  $5,626,512   $1,007,390   $1,824,711   $1,588,728   $1,044,424   $1,120,181

    The grant date fair value of the second tranche of the 2016 VDI awards, assuming the highest level of performance is achieved, is two times the grant date fair value that was determined on February 21, 2017, which was the date on which the performance objectives for that particular tranche of the 2016 award were approved by the Compensation Committee, or: $3,695,462 for Mr. Seaton; $636,266 for Mr. Stanski; $1,085,564 for Mr. Porter; $965,910 for Mr. Hernandez; $676,116 for Mr. Flowers; and $629,968 for Mr. Bustamante.

    The grant date fair value of the first tranche of the 2017 VDI awards, assuming the highest level of performance is achieved, is two times the grant date fair value reported in the Summary Compensation Table, or: $3,157,490 for Mr. Seaton; $575,932 for Mr. Stanski; $1,071,098 for Mr. Porter; $923,966 for Mr. Hernandez; $590,228 for Mr. Flowers; and $672,810 for Mr. Bustamante.

(3)
The amounts in column (f) represent the aggregate grant date fair value of options granted in each year. The fair value of these awards is based on the Black-Scholes option pricing model on the date of grant in accordance with ASC 718. Assumptions used in the calculation of these amounts are included in the "Stock-Based Plans" footnote to the company's audited financial statements for the fiscal years ended December 31, 2017 and 2015, included in the company's Annual Reports on Form 10-K filed with the Securities and Exchange Commission on February 20, 2018 and February 18, 2016, respectively.

(4)
The amounts in column (g) represent amounts earned as annual incentive in each year.

(5)
The amounts in column (i) are detailed in a separate All Other Compensation table below.

(6)
The amounts in column (j) represent the total of columns (c) through (i).

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(7)
Assuming the VDI awards granted in 2016 and 2017 had a cumulative three-year performance period similar to the one for 2015 VDI awards (as opposed to multiple performance periods requiring accounting for only certain tranches), and eliminating the other accounting adjustments discussed in the second paragraph of footnote 2 above, Mr. Seaton's compensation for the last three years would be as set forth in the table below:

  Salary
($)


Stock
Awards
($)



Option
Awards
($)



Non Equity
Incentive
Plan
Compensation
($)





All Other
Compensation
($)



Total
($)

2017

  $1,295,029       $6,600,107          $2,200,021          $836,000          $296,225          $11,227,382    

2016

  $1,295,029       $8,800,136          $0          $1,150,000          $357,004          $11,602,169    

2015

  $1,333,302       $5,896,024          $2,904,033          $1,900,000          $253,085          $12,286,444    
(8)
This amount represents a $220,000 relocation bonus paid to Mr. Stanski in connection with his transfer from Arlington, Virginia to the corporate headquarters in Irving, Texas in 2017. Annual incentive payments appear in column (g).

(9)
This amount represents $100,000 paid to Mr. Flowers in 2017 pursuant to a retention award. Under the terms and conditions of the retention agreement, an additional $250,000 was deposited in Mr. Flowers' deferred compensation account. The first $100,000 of that amount will vest if Mr. Flowers remains employed until March 31, 2018; and the remainder will vest if he remains employed until March 31, 2019 (or has an earlier, eligible retirement after March 31, 2018). Annual incentive payments appear in column (g).

(10)
Mr. Porter was not employed by the company on the date annual incentives were paid. For a description of the amounts paid in connection with Mr. Porter's retirement, see "Other Compensation Decisions" on page 37.


ALL OTHER COMPENSATION

The following table and related footnotes describe each component of the All Other Compensation column (i) of the Summary Compensation Table for 2017.

(a)


(b)
(c)
(d)
(e)
(f)

Name


Company
Contributions
to Qualified and
Nonqualified
Defined
Contribution Plans
($)(1)







Tax
Gross-up
($)(2)



Perquisite
Allowances
($)(3)



Other
Perquisites
($)(4)



Total All Other
Compensation
($)(5)

David T. Seaton

  $155,654            $24,199          $71,100          $45,272          $296,225       

Bruce A. Stanski

  $56,606            $64          $39,525          $9,988          $106,183       

Biggs C. Porter

  $75,969            $0          $49,500          $6,039          $131,508       

Carlos M. Hernandez

  $56,953            $2,751          $49,500          $7,913          $117,117       

Garry W. Flowers

  $63,852            $2,615          $32,400          $9,246          $108,113       

Jose L. Bustamante

  $50,181            $3,257          $32,400          $11,408          $97,246       

(1)
The amounts in column (b) represent amounts contributed by the company to each named executive's account in the 401(k) plan, pursuant to the company's 5% match, and amounts credited by the company into each named executive's account in the non-qualified deferred compensation plan for matching or

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    discretionary contributions that would have been credited to each named executive's account in the 401(k) plan for contributions in excess of Internal Revenue Code ("IRC") limitations.

(2)
The amounts in column (c) represent the tax gross-up provided for (i) business-related spousal travel and (ii) business-related spousal air charter usage.

(3)
The amounts in column (d) represent the aggregate annual perquisite allowance, which is paid monthly as a substitute for the company reimbursing or paying for perquisites such as an automobile allowance, tax and financial planning, and club membership dues. Not more than $25,000 of the allowance was used by any named executive for any single type of perquisite.

(4)
The amounts in column (e) represent the incremental cost for business-related spousal travel and business-related spousal air charter usage, the cost of business-related physical examinations, and, for Mr. Stanski, the cost associated with the sale of a home in connection with his relocation to Irving, Texas that was paid by the company, each of which was less than $25,000.

(5)
The amounts in column (f) represent the totals of columns (b) through (e).

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COMPENSATION TABLES

 

 

 

GRANTS OF PLAN-BASED AWARDS IN 2017

The table below provides information about equity and non-equity awards granted to the named executives in 2017.


(a)




(b)




(c)




(d)




(e)




(f)




(g)




(h)




(i)




(j)




(k)




(l)



             
Estimated Future
Payouts Under
Equity Incentive
Plan Awards(2)






Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards(3)





               

               
All Other
Stock
Awards:
Number of
Shares of
Stock or








All Other
Option
Awards:
Number of
Securities
Underlying








Exercise or
Base Price
of Option
Awards






Grant Date
Fair Value of
Stock and
Option





Name


Type of
Award(1)


Grant
Date


Approval
Date


Target
(#)


Maximum
(#)


Target
($)


Maximum
($)


Units
(#)(4)


Options
(#)(5)


Per Share
($/sh)(6)


Awards
($)


David T. Seaton

  2017 RSU   2/23/2017   2/2/2017           44,391       $2,200,036 (7)

  2017 SO   2/23/2017   2/2/2017             154,599   $55.35   $2,200,021 (8)

  2016 VDI   2/21/2017   2/21/2017   35,795   71,590             $1,847,731 (9)

  2017 VDI   2/23/2017   2/2/2017   29,594   59,188             $1,578,745 (10)

  2017 AI   N/A   N/A       $1,943,000   $3,886,000          

Bruce A. Stanski

  2017 RSU   2/23/2017   2/1/2017           8,097       $401,291 (7)

  2017 SO   2/23/2017   2/1/2017             28,197   $55.35   $401,257 (8)

  2016 VDI   2/21/2017   2/21/2017   6,163   12,326             $318,133 (9)

  2017 VDI   2/23/2017   2/1/2017   5,398   10,796             $287,966 (10)

  2017 AI   N/A   N/A       $595,000   $1,190,000          

Biggs C. Porter

  2017 RSU   2/23/2017   2/1/2017           15,060       $746,380 (7)

  2017 SO   2/23/2017   2/1/2017             52,443   $55.35   $746,290 (8)

  2016 VDI   2/21/2017   2/21/2017   10,515   21,030             $542,782 (9)

  2017 VDI   2/23/2017   2/1/2017   10,039   20,078             $535,549 (10)

  2017 AI   N/A   N/A       $715,200   $1,430,400          

Carlos M. Hernandez

  2017 RSU   2/23/2017   2/1/2017           12,990       $643,790 (7)

  2017 SO   2/23/2017   2/1/2017             45,240   $55.35   $643,788 (8)

  2016 VDI   2/21/2017   2/21/2017   9,356   18,712             $482,955 (9)

  2017 VDI   2/23/2017   2/1/2017   8,660   17,320             $461,983 (10)

  2017 AI   N/A   N/A       $535,500   $1,071,000          

Garry W. Flowers

  2017 RSU   2/23/2017   2/1/2017           8,298       $411,252 (7)

  2017 SO   2/23/2017   2/1/2017             28,902   $55.35   $411,290 (8)

  2016 VDI   2/21/2017   2/21/2017   6,549   13,098             $338,058 (9)

  2017 VDI   2/23/2017   2/1/2017   5,532   11,064             $295,114 (10)

  2017 AI   N/A   N/A       $450,500   $901,000          

Jose L. Bustamante

  2017 RSU   2/23/2017   2/1/2017           9,459       $468,792 (7)

  2017 SO   2/23/2017   2/1/2017             32,940   $55.35   $468,753 (8)

  2016 VDI   2/21/2017   2/21/2017   6,102   12,204             $314,984 (9)

  2017 VDI   2/23/2017   2/1/2017   6,306   12,612             $336,405 (10)

  2017 AI   N/A   N/A       $403,800   $807,600          

(1)
The types of awards reported in this table are as follows: Restricted Stock Units (RSU), Stock Options (SO), the second tranche of the 2016 Value Driver Incentive (VDI) Awards, the first tranche of the 2017 VDI Awards, and Annual Incentive (AI).

(2)
Columns (e) and (f) show the target and maximum number of units for each named executive under the second tranche of their 2016 VDI awards and the first tranche of their 2017 VDI awards. The Committee has established threshold levels for the 2017 performance goals for each award, but not for the overall award. All potential payouts are performance driven, and can be earned from 0 to 200% of target. The performance goals are described in the Compensation Discussion and Analysis on page 35. The third tranche of the 2016 VDI award will be presented in the table in 2018, and the second and third tranches of the 2017 VDI award will be presented in the table in 2018 and 2019, respectively. All three tranches of the 2016 and 2017 VDI award, if earned, will vest in full on March 6, 2019 and March 6, 2020, respectively.

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Table of Contents

COMPENSATION TABLES

 

(3)
Columns (g) and (h) show the target and maximum payouts for each named executive of their 2017 annual incentive award. The Committee has established threshold levels for each of the performance goals, but not for the overall award. All potential payouts are performance driven, and can be earned from 0 to 200% of target. The performance goals are described in the Compensation Discussion and Analysis on pages 31-32.

(4)
The amounts in column (i) represent the number of RSUs granted on February 23, 2017 as part of the 2017 long-term incentive awards. These RSUs vest one-third per year on March 6th in each of the three years following the grant date.

(5)
The amounts in column (j) represent the number of nonqualified stock options granted on February 23, 2017 as part of the 2017 long-term incentive awards. These options vest one-third per year on March 6th in each of the three years following the grant date.

(6)
The amounts in column (k) represent the exercise price of the nonqualified stock options, which was the closing price of the company's common stock on the New York Stock Exchange on the date of grant.

(7)
This amount represents the grant date fair value of the RSUs granted on February 23, 2017 as part of the 2017 long-term incentive awards. The value is computed in accordance with ASC 718, using the grant price of $55.35 per share, which was the closing price of the company's common stock on the New York Stock Exchange on the date of grant, less a liquidity discount of 10.46% related to the Post-Vest Holding Period on the common stock that may be earned under these awards.

(8)
This amount represents the grant date fair value of the nonqualified stock options granted on February 23, 2017 as part of the 2017 long-term incentive awards. The value is computed in accordance with ASC 718, using a Black Scholes option pricing model value of $14.23 per option.

(9)
This amount represents the grant date fair value of the target number of shares subject to the second tranche of the 2016 VDI awards granted on February 21, 2017, using the grant price of $57.65 per unit, which was the closing price of the company's common stock on the New York Stock Exchange on February 21, 2017, the date the 2017 performance goals were approved, less a liquidity discount of 10.46% related to the Post-Vest Holding Period on the common stock underlying these awards.

As described in footnote 2 of the Summary Compensation Table on pages 44-45, one-third of the shares subject to the 2016 VDI awards have a grant date fair value under applicable accounting standards in 2017 and, therefore, are reported as 2017 compensation in the Summary Compensation Table and this Grants of Plans Based Awards Table. The grant date fair value of the first tranche of the 2016 VDI award was presented in the tables in 2016; and the grant date fair value of the remaining tranche of the 2016 VDI award will be presented in the tables in 2018, based on the closing price of the company's common stock on the New York

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COMPENSATION TABLES

 

 

 

    Stock Exchange on the approval date of the performance goals. The total target value approved by the Committee for the 2016 VDI awards for each named executive is as follows:

Name


2016 VDI Award
Approved Target
Value

David T. Seaton

  $4,400,067

Bruce A. Stanski

  $757,581

Biggs C. Porter

  $1,292,547

Carlos M. Hernandez

  $1,150,077

Garry W. Flowers

  $805,030

Jose L. Bustamante

  $750,083
(10)
This amount represents the grant date fair value of the target number of shares subject to the first tranche of the 2017 VDI awards granted on February 23, 2017, using the grant price of $55.35 per unit, which was the closing price of the company's common stock on the New York Stock Exchange on the date of grant, less a liquidity discount of 10.46% related to the Post-Vest Holding Period on the common stock underlying these awards, plus an adjustment upward by 7.64% for the Relative TSR modifier derived using a Monte Carlo Simulation approach.

As noted above, only one-third of the shares subject to the 2017 VDI awards have a grant date fair value under applicable accounting standards in 2017 and, therefore, are reported as 2017 compensation in the Summary Compensation Table and this Grants of Plans Based Awards Table. The grant date fair value of the remaining two tranches of 2017 VDI award will be presented in the tables in 2018 and 2019, respectively, based on the closing price of the company's common stock on the New York Stock Exchange on the respective approval date of the performance goals. The total target value approved by the Committee for the 2017 VDI awards for each named executive is as follows:

Name


2017 VDI Award
Approved Target
Value

David T. Seaton

  $4,400,071

Bruce A. Stanski

  $802,581

Biggs C. Porter

  $1,492,611

Carlos M. Hernandez

  $1,287,579

Garry W. Flowers

  $822,504

Jose L. Bustamante

  $937,584

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COMPENSATION TABLES

 

 

 


OUTSTANDING EQUITY AWARDS AT
2017 FISCAL YEAR END

The following table provides information on the holdings of stock options, RSUs and VDI units by the named executives as of December 31, 2017.

(a)


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

 

Option Awards(1)



Stock Awards

Name


Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable








Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable








Option
Exercise
Price
($)





Option
Grant
Date




Option
Expiration
Date




Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2)(3)








Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)(4)








Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)(5)












Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(6)

David T. Seaton

  29,363   0   $70.76   02/28/2011   02/28/2021   132,374   $6,837,117   59,490   $3,072,659

  39,492   0   $62.50   02/27/2012   02/27/2022                

  105,784   0   $61.45   02/25/2013   02/25/2023                

  120,333   0   $79.19   02/21/2014   02/21/2024                

  115,770   57,885   $59.05   02/23/2015   02/23/2025                

  0   154,599   $55.35   02/23/2017   02/23/2027                

Bruce A. Stanski

  13,515   0   $70.76   02/28/2011   02/28/2021   23,125   $1,194,406   10,536   $544,184

  16,689   0   $62.50   02/27/2012   02/27/2022        

  23,706   0   $61.45   02/25/2013   02/25/2023        

  18,624   0   $79.19   02/21/2014   02/21/2024        

  19,076   9,538   $59.05   02/23/2015   02/23/2025        

  0   28,197   $55.35   02/23/2017   02/23/2027        

Biggs C. Porter

  36,891   0   $56.54   05/03/2012   05/03/2022   39,816   $2,056,496   18,781   $970,039

  42,573   0   $61.45   02/25/2013   02/25/2023                

  28,653   0   $79.19   02/21/2014   02/21/2024                

  26,312   13,156   $59.05   02/23/2015   02/23/2025                

  0   52,443   $55.35   02/23/2017   02/23/2027                

Carlos M. Hernandez

  13,608   0   $68.36   03/04/2008   03/04/2018   35,801   $1,849,122   16,446   $849,436

  17,067   0   $70.76   02/28/2011   02/28/2021        

  23,364   0   $62.50   02/27/2012   02/27/2022        

  29,028   0   $61.45   02/25/2013   02/25/2023        

  28,653   0   $79.19   02/21/2014   02/21/2024        

  28,944   14,472   $59.05   02/23/2015   02/23/2025        

  0   45,240   $55.35   02/23/2017   02/23/2027        

Garry W. Flowers

  4,536   0   $68.36   03/04/2008   03/04/2018   23,911   $1,235,003   10,998   $568,047

  5,640   0   $70.76   02/28/2011   02/28/2021                

  13,350   0   $62.50   02/27/2012   02/27/2022                

  20,319   0   $61.45   02/25/2013   02/25/2023                

  18,624   0   $79.19   02/21/2014   02/21/2024                

  17,760   8,880   $59.05   02/23/2015   02/23/2025                

  0   28,902   $55.35   02/23/2017   02/23/2027                

Jose L. Bustamante

  1,476   0   $68.36   03/04/2008   03/04/2018   23,526   $1,215,118   11,365   $587,002

  1,389   0   $70.76   02/28/2011   02/28/2021        

  2,508   0   $62.50   02/27/2012   02/27/2022        

  3,774   0   $61.45   02/25/2013   02/25/2023        

  2,823   0   $79.19   02/21/2014   02/21/2024        

  13,156   6,578   $59.05   02/23/2015   02/23/2025        

  0   32,940   $55.35   02/23/2017   02/23/2027        

(1)
All options expire ten years from the grant date and, if unvested, vest one-third per year on March 6th in each of the three years following the grant date.

(2)
The amounts in column (g) include RSUs that remain subject to vesting based on continued service. The RSUs vest one-third per year on March 6th in each of the three years following the grant date. This column does not include any shares attributable to the 2015 VDI awards (which

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COMPENSATION TABLES

 

 

 

    had a performance period ending on December 31, 2017) because the company did not meet the minimum performance criteria for these awards.

(3)
The following table provides the number of unvested RSUs by vesting date for each named executive as of December 31, 2017.

Vesting Date

  David T.
Seaton


Bruce A.
Stanski


Biggs C.
Porter


Carlos M.
Hernandez


Garry W.
Flowers


Jose L.
Bustamante

March 6, 2018

  66,985   11,564   19,261   17,785     11,830   11,118       

March 6, 2019

  50,592   8,862   15,535