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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:

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Preliminary Proxy Statement

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

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):

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No fee required.

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

 

 

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Table of Contents

LOGO

March 11, 2019

Dear Fellow Stockholders:

On behalf of your Board of Directors, thank you for your investment in Fluor. 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 is committed to ensuring 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, majority voting in uncontested director elections, and a robust Board evaluation process. More information about these practices, and others, can be found in this Proxy Statement. It is our belief that strong corporate governance practices such as these are critical to building long-term stockholder value.

I am pleased to invite you to join us at the Fluor Corporation 2019 annual meeting of stockholders to be held on Thursday, May 2, 2019 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 thirteen 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.

It is important that your shares be represented and voted at the annual meeting regardless of how many shares you own. 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 2019 and greatly appreciates your continued support of our Company. I look forward to seeing you on May 2nd.

Sincerely,

GRAPHIC

David T. Seaton
Chairman and Chief Executive Officer

       

 


GRAPHIC


"[T]hank you for your investment in Fluor. . . . The Board
remains committed to serving your interests in 2019 and greatly
appreciates your continued support of our Company."


 

 


 


 


 

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LOGO

Notice of Annual Meeting of Stockholders


 

WHEN
Thursday, May 2, 2019
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 4, 2019

  

  

 

 

ITEMS OF BUSINESS
1.   The election of the thirteen directors named in the proxy statement to serve until the 2020 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, 2019.
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 4, 2019 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 11, 2019
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 2, 2019:

 
    This proxy statement and the Company's 2018 Annual Report to Stockholders are available at
www.proxyvote.com.
   

 

 

Please take time to vote your shares!

 

 

Table of Contents

TABLE OF CONTENTS

 
  Page  

Proxy Summary

    i  

PROPOSAL 1 — ELECTION OF DIRECTORS

    1  

Director Nominees

    2  

Corporate Governance

    9  

Corporate Governance Highlights

    9  

Stockholder Engagement

    10  

Board Independence

    10  

Risk Management Oversight

    11  

Board Leadership

    12  

Board of Directors Meetings and Committees

    13  

Board and Committee Evaluations

    17  

Consideration of Director Nominees

    17  

Related Person Transactions

    19  

Communications with the Board

    20  

Compensation Committee Interlocks and Insider Participation

    20  

PROPOSAL 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

    21  

Compensation Discussion and Analysis

    23  

Organization and Compensation Committee Report

    45  

Summary Compensation Table

    46  

All Other Compensation

    49  

Grants of Plan-Based Awards in 2018

    50  

Outstanding Equity Awards at 2018 Fiscal Year End

    53  

Option Exercises and Stock Vested in 2018

    55  

Nonqualified Deferred Compensation

    55  

Potential Payments Upon Termination or Change in Control

    57  

Pay Ratio

    63  

Director Compensation

    64  

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

    68  

Report of the Audit Committee

    70  

PROPOSAL 4 — STOCKHOLDER PROPOSAL

    72  

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

    75  

Stock Ownership of Certain Beneficial Owners

    76  

Section 16(a) Beneficial Ownership Reporting Compliance

    77  

Other Business

    78  

Additional Information

    78  

Questions and Answers About the Annual Meeting and Voting

    81  

Directions to the Fluor Corporation 2019 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.

GOVERNANCE HIGHLIGHTS

Our commitment to strong governance practices is illustrated by the following:

    Annual director elections
    Majority voting for directors
    Director mandatory retirement age
    Annual board and committee self-evaluations
    Annual evaluations of individual directors
    Stockholder right to call special meetings
    100% independent Board committees
    12 out of 13 director nominees are independent
    Independent lead director
    Regular executive sessions of independent directors
    Proxy access right
    Executive compensation clawback policy
    Stock ownership guidelines for directors and executive officers
    Prohibition on hedging or pledging Company securities

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.

FLUOR CORPORATION   |  2019 PROXY STATEMENT        i

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HOW TO VOTE

You are entitled to vote at the 2019 annual meeting of stockholders if you were a stockholder of record at the close of business on March 4, 2019, the record date for the meeting.

GRAPHIC

ii        FLUOR CORPORATION   |  2019 PROXY STATEMENT


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ELECTION OF DIRECTORS

 

 

 

LOGO

Proxy Statement

March 11, 2019

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 2, 2019, 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 11, 2019.

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

The terms of each of the Company's current directors will expire at the 2019 annual meeting. Each of Peter K. Barker, Alan M. Bennett, Rosemary T. Berkery, Alan L. Boeckmann, Peter J. Fluor, James T. Hackett, Samuel J. Locklear III, 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 2020 and until his or her respective successor is elected and qualified. Mr. Alan L. Boeckmann has been elected to the Board, effective May 1, 2019. Accordingly, the Board has set the number of directors at thirteen, effective May 1, 2019.

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   |  2019 PROXY STATEMENT        1

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ELECTION OF DIRECTORS

Director Nominees

The following biographical information is furnished with respect to each of the nominees for election at the annual meeting. Mr. 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 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 and the Company's current and future needs. 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

GRAPHIC
Age: 70

Director Since: 2007

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

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE
California Chairman of JPMorgan Chase & Co., a multinational investment bank and financial services company, from 2009 until his retirement in 2013; Partner at Goldman Sachs & Co., a multinational investment bank and financial services company, until his retirement in 2002; joined Goldman Sachs in 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

Director, Franklin Resources, Inc.

2        FLUOR CORPORATION   |  2019 PROXY STATEMENT

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ELECTION OF DIRECTORS

 

 

 

ALAN M. BENNETT

GRAPHIC
Age: 68

Director Since: 2011

Board Committees:
Audit, Executive and
Governance (Chair)

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

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

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Bennett brings to the Board a deep understanding of business operations, finance, 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

Director, The TJX Companies, Inc.

ROSEMARY T. BERKERY

GRAPHIC
Age: 65

Director Since: 2010

Board Committees:
Governance and
Organization and
Compensation

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, from 2010 until her retirement in April 2018; Vice Chairman, Executive Vice President and General Counsel of Merrill Lynch & Co., Inc., a global securities and financial services business, from 2001 to 2008; joined Merrill Lynch 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 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.

OTHER BOARD SERVICE


Director, Mutual of America Life Insurance Company

Director, The TJX Companies, Inc.

FLUOR CORPORATION   |  2019 PROXY STATEMENT        3

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ELECTION OF DIRECTORS

 

 

 

ALAN L. BOECKMANN

GRAPHIC
Age: 70

Director Since: 2019 (with previous service from 2001 to 2012)

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Non-executive Chairman of Fluor Corporation from 2011 until his retirement in 2012; Chairman and Chief Executive Officer of Fluor Corporation from February 2002 until his retirement in 2011; joined Fluor in 1979 with previous service from 1974 to 1977.

KEY ATTRIBUTES, EXPERIENCE AND SKILLS


Mr. Boeckmann's experience as former Chairman and Chief Executive Officer of the Company, along with his 36 years of experience with the Company, give him a deep knowledge of the industries in which the Company operates as well as the Company's opportunities, challenges and operations. Additionally, his service as a director of other global public companies allows him to bring a diverse knowledge of strategy, finance and operations to our Board.

OTHER BOARD SERVICE


Director, BP p.l.c.

Director, Sempra Energy

Director, Archer-Daniels-Midland Company

PETER J. FLUOR

GRAPHIC
Lead Independent Director

Age: 71

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; 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. 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

Former director, Cameron International Corporation

4        FLUOR CORPORATION   |  2019 PROXY STATEMENT

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ELECTION OF DIRECTORS

JAMES T. HACKETT

GRAPHIC
Age: 65

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

Board Committees:
Governance and
Organization and
Compensation

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Executive Chairman (since February 2018) and Interim Chief Executive Officer (since December 2018) of Alta Mesa Resources, Inc., an onshore oil and gas acquisition, exploration and production company; Chief Executive Officer of Kingfisher Midstream, a wholly owned affiliate of Alta Mesa, since March 2018; Partner of Riverstone Holdings LLC, an energy and power focused private investment firm, from 2013 to 2018; Executive Chairman of Anadarko Petroleum Corporation from 2012 until his retirement in 2013; Chief Executive Officer of Anadarko from 2003 to 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 a former 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.

Director, Enterprise Products Holdings LLC

Director, National Oilwell Varco, Inc.

Former director, Bunge Limited

Former director, Cameron International Corporation

SAMUEL J. LOCKLEAR III

GRAPHIC

Age: 64

Director Since: 2017

Board Committees:
Audit and Governance

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

President of SJL Global Insights LLC, a global consulting firm specializing in a wide range of security and defense issues and initiatives, since 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, 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.

FLUOR CORPORATION   |  2019 PROXY STATEMENT        5

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ELECTION OF DIRECTORS

 

 

 

DEBORAH D. MCWHINNEY

GRAPHIC

Age: 63

Director Since: 2014

Board Committees:
Audit and Governance

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Chief Executive Officer (September 2013 to January 2014) and Chief Operating Officer (2011 to 2013) of Global Enterprise Payments at Citigroup Inc., a multinational investment bank and financial services company, until her retirement in 2014; President, Personal Banking and Wealth Management at Citigroup from 2009 to 2011; President of Schwab Institutional, a division of Charles Schwab & Co., Inc., a bank and brokerage firm, from 2001 to 2007, and chair of the Global Risk Committee of Charles Schwab from 2004 to 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 and current roles in cyber, IT and risk management allow her to counsel our Board on non-financial risk-related matters.

OTHER BOARD SERVICE


Director, BorgWarner Inc.

Director, Focus Financial Partners Inc.

Director, IHS Markit Ltd.

Former director, Fresenius Medical Care AG & Co.

Former director, Lloyds Banking Group

ARMANDO J. OLIVERA

GRAPHIC

Age: 69

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 2017 and Partner to the Ridge-Lane Sustainability Practice since 2018; President (from 2003) and Chief Executive Officer (from 2008) of Florida Power & Light Company, an electric utility that is a subsidiary of a publicly traded energy company, until his retirement in 2012; joined Florida Power & Light 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. Additionally, his experience as a consultant and 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, sustainability and risk perspective.

OTHER BOARD SERVICE


Director, Consolidated Edison, Inc.

Director, Lennar Corporation

Former director, AGL Resources, Inc.

6        FLUOR CORPORATION   |  2019 PROXY STATEMENT

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ELECTION OF DIRECTORS

 

 

 

MATTHEW K. ROSE

GRAPHIC

Age: 59

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 2014; Chairman and Chief Executive Officer of BNSF from 2002 to 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.

DAVID T. SEATON

GRAPHIC

Chairman of the Board

Age: 57

Director Since: 2011

Board Committee:
Executive (Chair)

Independent: No

  POSITION AND BUSINESS EXPERIENCE

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

FLUOR CORPORATION   |  2019 PROXY STATEMENT        7

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ELECTION OF DIRECTORS

 

 

 

NADER H. SULTAN

GRAPHIC

Age: 70

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 2004; Chief Executive Officer of Kuwait Petroleum Corporation from 1998 to 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)

LYNN C. SWANN

GRAPHIC

Age: 67

Director Since: 2013

Board Committees:
Audit and Governance

Independent: Yes

  POSITION AND BUSINESS EXPERIENCE

Athletic Director at The University of Southern California since 2016; President of 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; 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


Director, Evoqua Water Technologies Corp.

Former trustee, American Homes 4 Rent

Former director, Caesars Entertainment Corporation

GRAPHIC

8        FLUOR CORPORATION   |  2019 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:

 
   

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, 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 individual 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 2018, our Board reviewed all committee charters and 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."

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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 over the last several years, 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 Amended and Restated Bylaws (the "Bylaws") to adopt the proxy access provisions summarized above. Further, in response to stockholder feedback on a past 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, the Board has in the recent past taken into account our conversations with stockholders regarding greenhouse gas emissions reduction goals when responding to proposals on that topic, including when determining to oppose the stockholder proposal discussed beginning on page 72.

Board Independence

In accordance with New York Stock Exchange ("NYSE") 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 NYSE, 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 NYSE listing standards and the standards set forth in our Corporate Governance Guidelines. In addition, the Board previously determined that Admiral Joseph W. Prueher, who did not stand for re-election at the 2018 annual meeting, was independent. 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 NYSE listing standards and Fluor's director independence standards for such committee.

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In making its independence determination, the Board considered Mr. Boeckmann's former roles as the Company's Chairman and CEO (until 2011) and Non-Executive Chairman (until 2012) but noted that he has not provided services to the Company since then. With regard to Ms. Berkery, the Board noted her brother has retired from PricewaterhouseCoopers ("PWC"). Fees paid to PWC, where Ms. Berkery's brother was one of over 11,000 partners, in each of the last three years were less than .02% of the firm's revenues. As a result of his retirement, no further review of that relationship is warranted. The Board determined that Mr. Seaton is not independent under the NYSE 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, Mr. Rose and Mr. Swann) are affiliated with non-profit organizations that received contributions from the Company in 2018, 2017 and/or 2016. 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

 
   

The Board

 

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, each of which reports quarterly to the Board regarding the areas they oversee.

Audit Committee

 

Reviews and discusses 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.
     
  Considers risk issues associated with financial reporting, disclosure process, legal matters, regulatory compliance and information technology, as well as accounting risk exposure and other operational and strategic risks. The Audit Committee also receives periodic reports from management on cybersecurity measures and assessments.

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.

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Governance Committee

 

Responsible for overseeing 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.

Board Leadership

The Chairman of the 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 Bylaws and the 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 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.

To provide for independent leadership, 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. The Lead Independent Director is elected every three years, and his or her duties are closely aligned with the role of an independent chairman. In particular, the Lead Independent Director's 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.

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.

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Board of Directors Meetings and Committees

During 2018, the Board held seven 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 Board meeting according to our Corporate Governance Guidelines. During 2018, seven 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 2018 annual meeting of stockholders.

Our Board has four standing committees:

    Audit;
    Executive;
    Governance; and
    Organization and Compensation.

The table below shows the current chairs and membership of each committee, and the independence status of each director.

Director   Independence
Audit
Committee


Executive
Committee


Governance
Committee


Organization
and
Compensation
Committee
Peter K. Barker     C   ·       ·
Alan M. Bennett  
·   ·   C  
Rosemary T. Berkery             ·   ·
Alan L. Boeckmann  
     
Peter J. Fluor*         ·   ·   C
James T. Hackett  
    ·   ·
Samuel J. Locklear     ·       ·    
Deborah D. McWhinney  
·     ·  
Armando J. Olivera             ·   ·
Matthew K. Rose  
·       ·
David T. Seaton           C        
Nader H. Sultan  
·     ·  
Lynn C. Swann     ·       ·    

* Lead Independent Director  C Chair    ·    Member

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 III

Deborah D. McWhinney

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 Securities and Exchange Commission regulations, NYSE listing standards and our Corporate Governance Guidelines.

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

Meetings During Fiscal 2018:

Five, including one to review the Company's 2017 Annual Report, Form 10-K and the proxy materials for the 2018 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 2018 are described in the "Report of the Audit Committee" section of this proxy statement on pages 70 and 71. The Audit Committee also 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 Company's independent registered public accounting firm.

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 NYSE listing standards and our Corporate Governance Guidelines, other than Mr. Seaton.

Peter J. Fluor

   

Meetings During Fiscal 2018:

Two, including one to discuss individual 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 the listing standards of the NYSE.

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GOVERNANCE COMMITTEE

 
   
Members:

Alan M. Bennett, Chair

Rosemary T. Berkery

Peter J. Fluor

James T. Hackett

Samuel J. Locklear III

Deborah D. McWhinney

Armando J. Olivera

Nader H. Sultan

Lynn C. Swann

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

Meetings During Fiscal 2018:

Four.

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. For information relating to the annual evaluation process, see "— Board and Committee Evaluations" below.

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

Rosemary T. Berkery

James T. Hackett

Armando J. Olivera

Matthew K. Rose

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

Meetings During Fiscal 2018:

Six. 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 those 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 the Organization and Compensation Committee and its activities during 2018 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 2018.

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Board and Committee Evaluations

In order to monitor and improve their effectiveness, and to solicit and act upon feedback received, the Board and its committees engage in an annual formal self-evaluation process. As part of the self-evaluation process, directors consider various topics related to Board composition, structure, effectiveness and responsibilities. While the Board and each of its committees conduct the self-evaluations annually, the Board considers its performance and that of its committees continuously throughout the year and shares feedback with management. The self-evaluation process is conducted as follows:

GRAPHIC

Consideration of Director Nominees

      Diversity and Refreshment

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. One-third of our director nominees are women or ethnically diverse individuals. As provided in our Corporate Governance Guidelines, while all directors should possess business acumen and must exercise sound judgment in their oversight of

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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, perspectives 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.

The Board and Governance Committee also understand the importance of board refreshment and aim to strike a balance between the knowledge that comes from longer-term service on the board with the new experience, ideas and energy that can come from adding directors to the Board. To that end, our Corporate Governance Guidelines provide that non-management directors may not stand for re-election after the end of the year in which they reach the age of 75. In addition, the Board and Governance Committee view the consistent focus on Board membership criteria, Board composition and size, as well as the anticipation of vacancies, to be integral parts of board refreshment. Each of these items is further discussed below.

      Director Qualifications

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 and the Company's current and future needs. 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 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.

Mr. Boeckmann was recommended for nomination as a board member by one of the Board's independent directors.

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      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" 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 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 the Bylaws. See "Additional Information — Advance Notice Procedures" and "— Proxy Access Procedures" on page 79 of this proxy statement, and Sections 2.04 and 2.10 of our Bylaws, which are included on our website at www.fluor.com under "Sustainability" — "Governance."

Related Person Transactions

The Company has adopted a written policy for the approval of transactions to which the Company is a party and in which 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 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 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

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      thresholds in NYSE 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.

Alan L. Boeckmann, a member of our Board and the Company's former Chairman and CEO, receives distributions of deferred compensation and payments of supplemental benefits under arrangements that were previously disclosed and were approved by the Organization and Compensation Committee and the Board's independent directors at the time he served as an executive officer and for which he chose annuity payments instead of lump sum payment.

Communications with the Board

Individuals may communicate with the Board and individual directors by writing directly to the Board of Directors c/o 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, with the assistance of Fluor's internal legal counsel, is 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 provides 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.

Compensation Committee Interlocks and Insider Participation

During 2018, Mr. Fluor, Mr. Barker, Ms. Berkery, Mr. Hackett, Ms. McWhinney, Mr. Olivera, Admiral Prueher and Mr. Rose served on the Organization and Compensation Committee. During 2018, 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 plans reward named executives for achievement of short- and long-term goals that enhance stockholder value.

 

Between 60% and 74% 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  

The annual incentive for named executives is tied to Company performance, including corporate measures such as net earnings and cash flow from operations, as well as strategic and safety objectives.

 

Payouts under our 2018 Value Driver Incentive Plan are tied to the Company's new awards and return on assets employed, and are also directly related to our stock price.

Provide Competitive Compensation  

The Company's executive compensation program is designed to attract, retain and motivate highly qualified executives critical to achieving Fluor's strategic objectives and building stockholder value.

We urge stockholders to read the "Compensation Discussion and Analysis" beginning on page 23, which describes in more detail how our executive compensation program operates and is designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative appearing on pages 46 through 62, which provide detailed information on the compensation of our named executives. The Organization and Compensation Committee and the Board of Directors believe that the program described in the "Compensation Discussion and Analysis" is 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 2019 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 majority vote of stockholders at the 2017 annual meeting of stockholders in favor of an annual frequency 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 2020 annual meeting of stockholders.

LOGO

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the principles, objectives and features of our compensation program, as well as the decisions made under this program for 2018, for our named executive officers (referred to herein as the "named executives"). For 2018, our named executives were:

Name
Position
David T. Seaton   Chairman and Chief Executive Officer
Bruce A. Stanski   Executive Vice President and Chief Financial Officer
Carlos M. Hernandez   Executive Vice President, Chief Legal Officer and Secretary
Ray F. Barnard   Executive Vice President, Systems & Supply Chain
Jose L. Bustamante   Executive Vice President, Business Development & Strategy

In addition, Mr. Garry W. Flowers is considered a named executive officer as defined under SEC reporting rules because he served as an executive officer of Fluor during a portion of 2018 and his total compensation in 2018 (as required to be disclosed pursuant to SEC reporting rules) placed him among the year's three most highly compensated executive officers other than the CEO and CFO. However, Mr. Flowers did not serve as an executive officer at the time of determination of the compensation opportunities for the named executives in 2018 or at the end of the year, and therefore his compensation is discussed separately under "— Other Compensation Decisions."

Executive Summary

Our executive compensation program is designed to align the interests of named executives with those of our stockholders, motivate excellent performance and link pay with Company performance. In 2018, Fluor continued to transform itself to build long-term sustainable growth for the Company's stockholders, and focused on our long-term strategies. New awards in 2018 more than doubled compared to 2017 with significant awards in several of our key end markets. Year-end backlog also increased over 2017.

While we continued to generate positive cash flow and earnings, execution challenges on a few projects was a primary driver in our performance not meeting our targets for the year. This is reflected in the payouts for the named executives' annual incentive awards, which averaged 49% of target, and the 2016 Value Driver Incentive ("VDI") awards (for which the performance period ended on December 31, 2018), under which payouts were 22% of target. Consistent with our philosophy of aligning named executive and stockholder interests as well as linking pay with performance, performance in 2018 also will negatively impact future payments for the VDI awards granted in 2017 and 2018 (which include fiscal year 2018 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 beginning on page 25, demonstrate our pay-for-performance alignment and commitment.

    Overview of Fiscal 2018 Business Results

With client spending having been curtailed over the last five years, much of 2018 was focused on transforming the Company through investments in new systems and tools to further our long-term strategies, including becoming the integrated solutions provider of choice for our clients.

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Nonetheless, steady growth in the segments we serve as well as renewed strength in worldwide economies led to increases in new awards and backlog in 2018. We have also continued to reduce costs where possible.

New Awards and Backlog. In 2018, new awards more than doubled to $27.7 billion 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 2018 with a consolidated backlog of approximately $40.0 billion, an increase of 29% over backlog at the end of 2017.

Cash Flow From Operations and Earnings. In 2018, we remained focused on generating positive cash flow from operations and maintaining our strong balance sheet to present the financial strength necessary to compete in our businesses. At the end of 2018, we had $2.0 billion in cash and marketable securities after returning $119 million in dividends to stockholders and repurchasing $50 million of Fluor common stock. Net earnings attributable to Fluor were $225 million, or $1.59 per diluted share, in 2018, which was a 17% increase over 2017 results.

    Performance-Based Compensation

Our overriding objectives are to align the interests of named executives with those of our stockholders and to pay for performance. As shown in the charts below, for 2018, 90% of our CEO's target total direct compensation ("TDC") and an average of approximately 82% 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 performance and/or the price of the Company's stock).

For 2018, our long-term incentives included a mix of restricted stock units ("RSUs") and stock-based performance awards under our VDI plan, except that our CEO also received a modest stock option grant. 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 for the named executives is further adjusted based on the Company's total shareholder return ("TSR") 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.

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

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 CEO

The chart below illustrates our CEO's "realizable" compensation as compared to his target TDC, averaged over the last three fiscal years. Realizable compensation shows the value of the compensation our CEO actually earned or could expect to earn as of the end of 2018, 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) changes in stock price from the grant date. 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 below the target opportunity due to a combination of both performance and stock price. As of December 31, 2018, none of the options granted to named executives in the last three years were in-the-money and the value of each of the RSU awards granted to named executives in the last three years was below each of their grant date target values. Further, the three-year performance for the 2016 VDI (which performance period ended on December 31, 2018) was below the target performance level, resulting in a 22% payout to named executives under such grants. As shown in the graph below, average realizable compensation for our CEO for the three-year period was equal to 60% of his target TDC, which we believe demonstrates strong alignment between our named executive and stockholder interests and our commitment to pay for performance.

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CEO Target TDC and Realizable Pay
3-Year Average (2016 - 2018)

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, 2018 (if unexercised); and (iv) the value of other long-term incentive awards on the vesting date (if vested) or on December 31, 2018 (if unvested), as further discussed in the Outstanding Equity Awards at 2018 Fiscal Year End table on page 53. Unvested VDI awards do not reflect the impact of any modifiers that are to be applied at the end of the applicable performance period.

    Compensation Actions for 2018

In making decisions regarding the compensation opportunities for the named executives for 2018, the Organization and Compensation Committee (the "Committee") took into account market conditions and performance, and also considered market data for our compensation peer group (as described beginning on page 41, the "Compensation Peer Group") and general industry peers. The Committee took the following specific actions with respect to named executive compensation for 2018 in order to motivate and retain our named executives while continuing to align their compensation with stockholders' long-term interests:

    Increased base salaries, target annual incentive percentages and long-term incentive award values for several of the named executives to create better alignment with similar positions in our Compensation Peer Group and maintain the competitiveness of our overall compensation program;

    To better allow the Committee to reward executives for strategic outcomes that position the Company for future success and to balance corporate and business line or functional goals, replaced the individual performance metric in the annual incentive plan with a strategic component weighted at 25%, and replaced the three unique safety metrics with one overall qualitative safety metric;

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    Modified the long-term incentive award mix to 50% performance-based VDI awards and 50% RSUs, except with respect to our CEO, who also received a modest stock option grant; and

    Maintained the same design for the VDI awards as used in 2017.

The components of our named executive compensation program are described in further detail below under "— Components of 2018 Named Executive Compensation" beginning on page 29.

    Governance Highlights

Our executive compensation policies reflect our strong focus on sound governance. As in prior years, the following practices and policies were in effect during 2018:

What we do   What we do not do

Maintain robust stock ownership guidelines, including a 6x base salary requirement for the CEO

Maintain a clawback policy for performance-based compensation

Provide a balanced program design that does not encourage behavior that could create material adverse risks to our business; and conduct an annual compensation risk assessment

Engage an independent compensation consultant for our fully independent Committee

Prohibit hedging, pledging and short-term trading of Company stock

 

No single trigger change in control agreements

No excise tax gross-ups in change in control agreements

No repricing of stock options without stockholder approval

No payments of dividends or dividend equivalents on unvested stock awards

No individual employment agreements for our executive officers

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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 internal pay equity are considered by the Board or the Committee, as applicable, in determining appropriate salary adjustments each year

Annual Incentive Awards

 

Provide annual cash compensation for achievement of annual performance goals

 


Pays out based on Company achievement of near-term objectives that support long-term Company value creation, including net earnings, cash flow from operations and safety, as well as achievement of identified strategic goals

Completely at-risk, depending on the level of performance against the established 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 value

 


Units are earned based on performance against new awards and return on assets criteria, on average, over a three-year period, and modified based on the Company's three-year cumulative TSR relative to peers

Vest at the end of the performance period, aligning the interests of named executives with those of stockholders by focusing named executives on the Company's financial performance over a multi-year period

Completely at-risk, depending on performance against the relevant measures (and stock 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  

Vest in equal thirds over three years, aligning the interests of named executives with those of stockholders by focusing named executives on the Company's financial performance over a multi-year period

Value is at-risk, increasing or decreasing with the stock price over the vesting period

Stock Options (granted only to CEO in 2018)

 

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

 


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

Completely at-risk, attaining value only if the stock price grows over the initial grant price

Components of 2018 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 named executives, the Committee generally targets the 50th percentile (i.e., the median) for similar positions within the Compensation Peer Group. The Committee reviews base salaries for named executives annually and upon a change in responsibilities.

In evaluating the CEO's base salary and his recommendations for the base salaries of the other named executives, the Committee and, with respect to the CEO, the independent directors of the Board, considered the following factors during their 2018 annual review:

    Compensation Peer Group data and 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 2018 salary budget.

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The 2018 base salaries for the named executives were increased between 2.5% and 5.3% from 2017 to more closely align with the peer group median, and were as follows:

Named Executive

  2018 Base
Salary

David T. Seaton

  $1,334,000

Bruce A. Stanski

  $717,540

Carlos M. Hernandez

  $655,200

Ray F. Barnard

  $566,520

Jose L. Bustamante

  $500,000

For 2018, the base salary for each of the named executives approximated or was lower than the median of the Compensation Peer Group.

    Annual Incentive Awards

Cash-based annual incentives are provided to motivate and reward named executives for achieving annual performance objectives. In 2018, each named executive participated in the Fluor Corporation 2017 Performance Incentive Plan and had a target annual incentive amount, established as a percentage of annual base salary. This percentage reflects each named executive's respective organizational level, position and responsibility for achievement of the Company's strategic goals, and aligns with market practice.

For 2018, Mr. Seaton's target annual incentive percentage remained the same as in 2017. For the other named executives, target annual incentive percentages were increased from 85% to 100% for Messrs. Stanski and Hernandez and from 85% to 95% for Messrs. Barnard and Bustamante to maintain the competitiveness of our annual incentive plan compared to our peers for those positions.

A named executive could receive from zero to 200% of the target annual incentive amount, depending on the extent to which the Company and the named executive met, failed to meet or exceeded certain performance measures relating to overall Company performance and achievement of certain strategic goals. 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 four years, however the Committee has 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 and the target achievement levels, 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. For 2018, the performance measures were all objective financial targets, except for the strategic and safety performance measures, which were tied to goals established at the beginning of the year. The use of multiple financial and strategic goals prevents an overemphasis on any one financial metric and focuses the named executives on key areas of importance to the Company.

For 2018, the individual performance metric used in previous years was replaced with a strategic component weighted at 25% for each of the named executives. The rating for the strategic component was capped at 125% of target if none of the financial performance measures achieved target performance. If at least one of the financial measures achieved target performance, the cap on the strategic component would be 200% of target, which is the same maximum rating for each of

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the other performance measures. Also for 2018, the three unique safety metrics used in previous years were replaced with a single qualitative metric that assesses overall safety performance. These changes were made to better allow the Committee to reward executives for strategic outcomes that position the Company for future success, and which may not be reflected in current results, as well as to balance corporate and business line or functional goals.

The 2018 performance measures, along with their respective weightings, for the named executives were as follows:

2018 Measure

Weighting
Corporate Net Earnings     50 %
Cash Flow from Operations   15 %
Safety     10 %
Strategic Performance   25 %

    Performance Measures for 2018

The performance measures are defined below.

Corporate Net Earnings. Corporate net earnings is defined as the amount of net earnings attributable to Fluor excluding the following items which are not related to the Company's ongoing core business operations: expenses, taxes and tax adjustments related to discontinued operations; the financial impact of any acquisition activity (including integration costs and other expenses); expenses associated with reorganization and restructuring programs; and pension settlements. As a result, certain expenses associated with a discontinued business, integrating Stork Holding B.V., Company restructuring activities, and partial settlement of the Company's pension plan in the United Kingdom were 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 performance was assessed based on the Company's overall safety performance using both leading and lagging performance indicators.

Strategic Performance. Strategic performance was measured against qualitative strategic goals identified at the beginning of the year for each named executive, which are outlined below.

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    2018 Annual Incentive Determination

The performance ranges for the corporate net earnings and cash flow from operations measures, together with the actual achievement of the measures and the resulting performance ratings, are presented in the table below.

2018 Performance Ranges (in millions)

Measure


Min
Target
Max
2018 Actual
Achievement


Performance
Rating


Weighting

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

Corporate Net Earnings

  $234.0   $398.0 - $537.0   $700.0   $241.8(2)   0.27   50%

Cash Flow from Operations

  $435.0   $739.0 - $999.0   $1,303.0   $247.2(3)   0.00   15%

(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, excluding certain items discussed above under "— Performance Measures for 2018 — Corporate Net Earnings."

(3)
Cash Flow from Operations is defined above under "— Performance Measures for 2018 — Cash Flow from Operations."

The 2018 strategic objectives and key achievements for each named executive were as follows:

Named Executive
Strategic Goals
Key Achievements

David T. Seaton

 

Optimize implementation of integrated solutions through self-perform construction, supply chain, fabrication and maintenance

 

Integrated solutions embraced by both customers and the organization; positive progress in safety culture and keeping people safer

 

Position Fluor and each business segment for versatility, diversification and growth

 

Positive results for government, infrastructure and mining business lines; solid backlog growth and diversification

 

Drive improvements in the cost of doing business

 

Continued focus on cost overhead, with positive investments in future execution capability; broadened project governance platforms and implemented new execution tools

Bruce A. Stanski

 


Optimize implementation of integrated solutions through self-perform construction, supply chain, fabrication and maintenance


 


Collaborated across departments to develop solutions to project financing opportunities; guided business lines to deliver hedging programs, assess currency risk and support transfer pricing to readily workshare across the full spectrum of Fluor entities

 

Position Fluor and each business segment for versatility, diversification and growth

 

Developed innovative financing structures for standard and public-private partnership opportunities; successfully issued $600 million of new senior notes and retired $500 million of senior notes due in 2021

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Named Executive
Strategic Goals
Key Achievements
 

Drive improvements in the cost of doing business

 

Drove general and administrative expense reductions by implementing a new model to address cost savings; effectively shifted finance departments among offices to create cost savings

Carlos M. Hernandez

 


Optimize implementation of integrated solutions through self-perform construction, supply chain, fabrication and maintenance

 


Continued to develop contracts and revise policies to make integrated solutions a more practical and accessible approach for all business lines

 

Drive improvements in the cost of doing business

 

Restructured and centralized legal department to decrease cost and improve output; effectively managed claims and litigation

 

Strengthen customer confidence, talent development and succession planning

 

Provided significant hours of training to assist sales, operations and supply chain personnel, including through use of law webinars

Ray F. Barnard

 

Optimize implementation of integrated solutions through self-perform construction, supply chain, fabrication and maintenance

 

Coordinated efforts among departments under his supervision to produce a more advanced pricing model and additional negotiated cost savings on multiple projects

 

Strengthen customer confidence, talent development and succession planning

 

Completed a full-scale skills evaluation and training program for IT and supply chain to maximize efficiency and support talent development

 

Deliver global project execution success

 

Created new supply chain standards and oversaw implementation of data analytics platforms

Jose L. Bustamante

 


Optimize implementation of integrated solutions through self-perform construction, supply chain, fabrication and maintenance

 


Guided integration of efforts of Fluor entities across business lines to win the LNG Canada project

 

Position Fluor and each business segment for versatility, diversification and growth

 

Drove a sales coordination program to exceed the new award revenue sales plan

 

Drive improvements in the cost of doing business

 

Drove improvements within Business Development & Strategy to increase sales volume and quality and reduce overall costs

Achievement of the strategic performance measure varied among the named executives because of the differences in responsibilities and individual accomplishments. No named executive received a rating higher than 1.25 because none of the financial performance measures achieved target performance. The CEO's strategic performance achievement was determined to be below target.

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Each named executive's strategic performance rating, other than the CEO, was determined based on evaluations and recommendations by the CEO that were approved by the Committee. In the case of the CEO, strategic performance was assessed by the independent directors of the Board after consideration of a recommendation from the Committee.

Achievement of the safety performance measure was determined using management's assessment of the overall safety performance of the Company, which was reviewed and approved by the Committee. The safety 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 was determined, each named executive's overall performance rating was 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 overall performance rating was then multiplied by the individual's target annual incentive amount to determine the annual incentive payment for each named executive. Based on performance, annual incentive award cash payouts averaged 49% of target for the named executives.

The 2018 target annual incentive percentages and amounts for each named executive, as well as the actual annual incentive amounts to be paid, were as follows:

Named Executive


Percentage of
Base Salary


Target Annual
Incentive
Amount



X



Overall
Performance
Rating



=
Annual
Incentive
Amount

David T. Seaton

  150%   $2,001,000   X     0.46   =   $921,000

Bruce A. Stanski

  100%   $717,600   X   0.52   =   $373,200

Carlos M. Hernandez

  100%   $655,200   X     0.51   =   $334,200

Ray F. Barnard

  95%   $538,200   X   0.46   =   $247,600

Jose L. Bustamante

  95%   $475,000   X     0.52   =   $247,000

    Long-Term Incentives

The stockholder-approved 2017 Performance Incentive Plan allows 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 target long-term incentive grants that reflect potential pay, based on market considerations as well as individual contributions, experience, advancement potential and internal pay equity. In 2018, the Committee determined to maintain performance-based VDI awards as 50% of the long-term incentive grant to named executives, and to provide the remaining 50% as RSUs, except with respect to the CEO, who also received a modest stock option grant representing 5% of the total mix.

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 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 2018 grant date); 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.

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The 2018 target long-term incentive award values approved by the Committee were as follows:

Named Executive


VDI Award
Value


RSU Award
Value


Stock Option
Award Value


Total
Long-Term
Incentive
Award Value

David T. Seaton

  $4,400,000   $4,400,000   $500,000   $9,300,000

Bruce A. Stanski

  $1,300,000   $1,300,000     $2,600,000

Carlos M. Hernandez

  $1,425,000   $1,425,000     $2,850,000

Ray F. Barnard

  $850,000   $850,000     $1,700,000

Jose L. Bustamante

  $787,500   $787,500     $1,575,000

The total value of the long-term incentive awards for Messrs. Seaton, Barnard and Hernandez was increased from 2017 by between 5.7% and 10.7% in order to increase the retentive value of the long-term incentive awards to those named executives. The total value of the long-term incentive awards for Mr. Stanski was also increased due to his promotion to Chief Financial Officer in August 2017.

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 2018

The VDI awards granted to the named executives in 2018 are subject to a three-year performance period, which started on January 1, 2018 and ends on December 31, 2020. The awards will be earned based upon actual performance for each year during the three-year performance period and will vest and be payable in shares in March 2021. Upon vesting, additional shares will be issued equal to the amount of any accrued dividends paid by the Company with respect to shares actually earned.

The Committee established the following performance criteria and relative weightings for the 2018 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;

    30% of the total award is based on average annual new awards gross margin dollars; and

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

As with the 2017 VDI awards, the number of earned shares for all named executives will be modified based on the Company's three-year cumulative TSR 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

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25%. No adjustment will be made if the Company's Relative TSR is in the middle third. In no event will the number of earned shares exceed two times the target number of shares.

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. ROAE is calculated by dividing full-year corporate net earnings (excluding the items noted above under "Annual Incentive Awards – Corporate Net Earnings" and after-tax interest expense) by average net assets employed for the previous five quarters. 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).

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 named 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 ROAE 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 at the time of award determination and may be changed for future year grants as determined necessary and appropriate to drive the Company's achievement of its long-term objectives.

In the first quarter of 2018, the Committee set minimum (paid at 25% of target), target (paid at 100% of target), upper target (paid at 150% of target) and maximum (paid at 200% of target) performance levels for the portion of the 2018 VDI awards that were subject to the 2018 performance goals. Performance goals for 2019 and 2020 will be set in the first quarter of each 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, 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 the previous year. At the end of the three-year period, the Committee will average the performance from each year and determine the number of earned units by multiplying the number of target 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 units; however, the final number of earned units may not exceed two times the target number of units. The final number

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of units earned, and related dividend shares, vest in full approximately three years from the date of grant. 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 vesting, 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 eventual determination of the payout of 2018 VDI awards for the named executives is illustrated below:

GRAPHIC

    Achievement for VDI Awards Granted in 2016

In 2016, the Committee granted VDI awards to the named executives, which were subject to a three-year performance period. Payouts were based on the achievement of average annual earnings per share ("EPS") and average annual ROAE goals, each of which constituted 50% of the performance rating. The performance targets were set at the beginning of each year during the performance period. Following each year of the performance period, the Committee determined the actual achievement of the performance measures for the previous year. At the end of the three-year period, the Committee averaged the performance outcomes and determined the number of earned units by multiplying the number of target units granted in 2016 by the average of the three annual performance ratings (which could range from 0.00 to 2.00). When determining the achievement of the EPS performance targets, the Committee determined that the following items would be excluded: expenses related to discontinued operations, expenses associated with integrating Stork Holding B.V. and Company restructuring activities, and the impact from implementation of the U.S. tax reform legislation enacted in December 2017. ROAE was defined in the same manner as set forth above for the 2018 VDI awards.

Based on the Company's performance over the performance period, the named executives each earned 22% of their target VDI units granted in 2016, as reflected in the Outstanding Equity Awards

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at 2018 Fiscal Year End table on page 53. The earned units 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 performance targets for each year of the performance period, together with the actual achievement and performance ratings, are set forth below.

  Performance Ranges
     

Measure


Min
Target
Max
Actual
Achievement


Performance
Rating

 

(.25 rating)

 

(1.0 rating)

 

(2.0 rating)

       

FY 2016 Targets

                   

EPS

  $3.06   $3.63 - $4.01   $4.39   $2.70   0.00

ROAE

  12.0%   14.3% - 15.8%   17.3%   11.20%   0.00

FY 2017 Targets

                   

EPS

  $1.70   $2.75 - $3.25   $4.00   $1.79   0.28

ROAE

  6.26%   11.06%   15.65%   6.84%   0.29

FY 2018 Targets

                   

EPS

  $1.50   $2.55 - $3.45   $4.50   $1.71   0.32

ROAE

  5%   9%   16%   6.44%   0.43

Other Compensation Decisions

Because Mr. Flowers was not an executive officer of the Company when the compensation levels and opportunities for the named executives were established in 2018, he participated in different compensation arrangements than the named executives. For 2018, Mr. Flowers' base salary was $545,940 and his target annual incentive was $518,700, or 95% of his base salary. The performance measures for Mr. Flowers' annual incentive consisted of corporate net earnings (30%); cash flow from operations (10%); overhead spend (10%); new awards gross margin dollars (10%); days away, restricted and transfer incidence rate (3%); total case incidence rate (3%); health, safety and environmental audit score (4%); and individual performance (30%). Based on performance, Mr. Flowers' annual incentive award cash payout was 87% of his target. Mr. Flowers' total target 2018 long-term incentive award value was $1,575,000, with the awards delivered in the same mix as the named executives (other than the CEO). His 2018 VDI award is based on the same performance measures as the named executives, calculated over a one-year period with a three-year vesting period payable in cash. The performance criteria, relative weightings and 2018 performance targets for Mr. Flowers' VDI award were the same as that of the named executives, including being subject to adjustment using the Relative TSR modifier measured over the 2018 fiscal year. Based on the Company's 2018 performance, Mr. Flowers earned 59% of his target 2018 VDI award.

We periodically grant cash or equity retention awards to reflect competitive market situations, address specific project objectives or reinforce succession planning objectives. No cash or equity retention awards were granted to named executives in 2018. In 2017, Mr. Flowers received a cash retention award in order to retain his services for key projects. A portion of that award vested in 2018. For further detail, see footnote 7 to the Summary Compensation Table beginning on page 46.

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COMPENSATION DISCUSSION AND ANALYSIS

 

Other Elements of Named Executive Compensation

    Perquisites

In 2018, each of the named executives was paid a taxable monthly allowance as set forth in the All Other Compensation table on page 49. The Committee believes that these allowances are reasonable costs, and are justified by the perceived value to the named executives. The allowances are intended to provide convenience in light of the demands on the named executives and are considered an important part of a competitive compensation package. The allowances are to replace amounts paid to cover items such as automobile leasing, tax and financial planning, and club membership dues, which are items that are typically reimbursed or paid directly by our peers. 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 2018, 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 of such personal use. Our 2018 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. Please refer to the discussion in the Nonqualified Deferred Compensation section beginning on page 55 for a more detailed discussion of this program.

    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. All of the potential change in control payments are "double 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.

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COMPENSATION DISCUSSION AND ANALYSIS

 

Please refer to the discussion under "Potential Payments Upon Termination or Change in Control" beginning on page 57 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 CEO'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 program and practices.

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 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 plans 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 program is designed to appropriately align compensation with our business strategy and not to encourage behavior that could create material adverse risks to our business.

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COMPENSATION DISCUSSION AND ANALYSIS

    Role of Independent Compensation Consultant

The Committee has the authority under its charter to engage, retain and terminate the services of outside legal counsel, compensation consultants and other advisors. In 2018, the Committee again engaged Frederic W. Cook & Co., Inc. ("FW Cook") to serve as its independent compensation consultant to advise the Committee on all matters related to executive and non-management director compensation. The compensation consultant conducts an annual review of the total compensation program for the CEO and the other named executives.

In 2018, as part of the Committee's oversight of certain aspects of risk, FW Cook conducted a broad-based review of the Company's compensation program and discussed its findings with the Committee, indicating that the Company's compensation program does not encourage behaviors that would create material risk for the Company. FW Cook also provided written and verbal advice 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. FW Cook was engaged by, and reports directly to, the Committee and does not perform any other services for the Company. The Committee has determined that none of the work of FW Cook has raised any conflicts of interest.

    Peer Group Comparisons

In making compensation decisions, the Committee looks at the practices of our Compensation Peer Group. The Committee annually reviews with FW Cook 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 and number of employees ranging from 0.25x to 4.0x and market capitalization ranging from 0.2x to 5.0x, subject to exception for direct competitors and other engineering and construction peers.

For 2018, the Committee determined to slightly expand the market capitalization range to include companies from 0.2x to 5.0x Fluor's size (versus 0.25x to 4.0x) in order to promote year-over-year continuity due to market-related volatility. The peer group itself, however, remained unchanged.

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

The companies comprising Fluor's Compensation Peer Group for purposes of establishing 2018 compensation were:

AECOM Technology Corporation*

 

Illinois Tool Works Inc.

Chicago Bridge & Iron Company*(1)

 

Ingersoll-Rand Company Limited

Cummins Inc.

 

Jacobs Engineering Group Inc.*

Deere & Company

 

KBR,  Inc.*

Dover Corporation

 

L3 Technologies, Inc. (formerly 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.
(1)
Chicago Bridge & Iron Company merged with and into McDermott International, Inc. in May 2018.

The Committee reviews benchmarking comparisons prepared by its compensation consultant for each named executive against similar positions within the Compensation Peer Group. The Committee generally targets named executives' base salary, total cash (base salary plus target annual incentive) and total compensation between the 50th percentile (or median) and 75th percentile of the Compensation Peer Group. Individuals may vary from the target market positioning primarily based on individual contributions, experience, advancement potential and internal pay equity; and actual pay will ultimately depend on Company performance, individual performance and stock price. For 2018, total target compensation for each of the named executives fell within the targeted range.

    Role of Company Management in Compensation Decisions

Before the Committee makes decisions on executive compensation, the CEO 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 CEO proposes to the Committee base salary adjustments for the current year, annual incentive award target percentages for the current 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 CEO. The Committee has discretion to modify named executives' compensation from that recommended by the CEO, but did not exercise that discretion for the named executives with respect to 2018 compensation.

Management also works with its outside executive compensation consultant, Pay Governance LLC, in making recommendations that are consistent with the Company's philosophy and objectives. The Committee may review data and analyses provided by management and its consultant. Pay Governance does not work for the Committee or the Board in any capacity and does not perform any other services for the Company.

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COMPENSATION DISCUSSION AND ANALYSIS

 

Other Aspects of Our Executive Compensation Program

    2018 "Say on Pay" Advisory Vote

We hold an annual "say on pay" advisory vote to approve our named executive compensation. At our 2018 annual meeting of stockholders, the compensation of our named executives was approved by stockholders, with approximately 93% of the votes cast for approval. The Committee evaluated the results of the 2018 advisory vote at its May meeting. The Committee also considered many other factors in evaluating our executive compensation program, including the Committee's assessment of the interaction of our compensation plans 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 2018 "say on pay" advisory vote.

    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 may, 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.

    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 retain all Fluor common stock, including 100% of the net shares acquired from the exercise of stock options or the vesting of RSUs and VDI awards, 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.

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COMPENSATION DISCUSSION AND ANALYSIS

    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 has typically reviewed and considered the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code ("Section 162(m)"). However, compensation paid to covered executives subject to Section 162(m) in 2018 or future years in excess of $1,000,000 generally will not be deductible as a result of 2017 tax reform legislation unless it qualifies as "performance based compensation" (as defined under Section 162(m) prior to 2018) and qualifies for transition relief applicable to certain "grandfathered" arrangements in place as of November 2, 2017. In 2017 and prior years, the Committee set and approved performance hurdles designed to allow covered employees' long-term incentive awards granted in 2017 and prior years that vest or are payable in 2018 or future years to potentially qualify as "performance based compensation." The Committee historically has retained discretion to provide payments not intended to be deductible under Section 162(m) and expects that covered employee compensation for 2018 and future years will not be fully deductible. However, the Committee expects to continue to prioritize performance-based compensation arrangements for our executives, regardless of whether deductible under amended Section 162(m).

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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 2019 annual meeting of stockholders.

 
   
    The Organization and Compensation Committee

 

 

Peter J. Fluor, Chairman
Peter K. Barker
Rosemary T. Berkery
James T. Hackett
Armando J. Olivera
Matthew K. Rose

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COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation earned by or granted to each of the 2018 named executives in the relevant years. The 2018 named executives are the principal executive officer, the principal financial officer and the three other highest paid executive officers. In addition, Mr. Flowers, who served as an executive officer during a portion of 2018 but not as of December 31, 2018, is included in the tables below because his total compensation in 2018 would have placed him among the top five most highly compensated executive officers had he still been an executive officer as of December 31, 2018.

The grant date fair value of long-term incentive awards reported for 2018 (i.e., stock awards and for the CEO, option awards) is higher than the grant date fair value of awards reported for 2017 (which consisted of both stock awards and option awards) due primarily to the fact that beginning in 2016, VDI awards have three one-year performance goals that are averaged over the performance period. Under SEC 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 were included and, in 2018, the third tranche of the 2016 VDI award, the second tranche of the 2017 VDI award, and the first tranche of the 2018 VDI award are included. Thus, 2018 is the first year in which three separate tranches of the VDI awards are reported.

(a)


(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)  

Name and
Principal Position



Year


Salary
($)(2)



Bonus
($)



Stock
Awards
($)(3)




Option
Awards
($)(4)




Non-Equity
Incentive
Plan
Compensation
($)(5)






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









All Other
Compensation
($)(6)




Total
($)

 

David T. Seaton(1)

  2018   $1,328,029     $9,606,359   $500,016   $921,000     $318,197   $12,673,601  

Chairman and

  2017   $1,295,029     $5,626,512   $2,200,021   $836,000     $296,225   $10,253,787  

Chief Executive Officer

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

Bruce A. Stanski

  2018   $714,861     $2,419,791     $373,200     $110,713   $3,618,565  

Executive Vice President and Chief

  2017   $647,111   $220,000   $1,007,390   $401,257   $291,600     $106,183   $2,673,541  

Financial Officer

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

Carlos M. Hernandez

  2018   $651,346     $2,942,476     $334,200     $124,827   $4,052,849  

Executive Vice President,

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

Chief Legal Officer and Secretary

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

Ray F. Barnard

  2018   $564,006     $1,820,017     $247,600     $92,571   $2,724,194  

Executive Vice President,

                                     

Systems & Supply Chain

                                     

Jose L. Bustamante

  2018   $496,165     $1,760,302     $247,000     $96,059   $2,599,526  

Executive Vice President,

  2017   $471,166     $1,120,181   $468,753   $197,900     $97,246   $2,355,246  

Business Development & Strategy

                                     

Garry W. Flowers

  2018   $543,507   $100,000 (7) $1,440,420     $915,925     $103,131   $3,102,983  

Executive Vice President

  2017   $530,026   $100,000   $1,044,424   $411,290   $243,300     $108,113   $2,437,153  

(1)
Assuming the VDI awards granted in 2016, 2017 and 2018 were reportable in full in the year of grant, as opposed to each year's award being reported over multiple performance periods, and eliminating the accounting adjustment to reflect the impact of the Relative TSR modifier, as discussed in footnote 3 below, which only affects the number of units ultimately earned under the

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COMPENSATION TABLES

    2017 and 2018 VDI awards, 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
($)

2018

$1,328,029 $8,800,305 $500,016 $921,000 $318,197 $11,867,547

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
(2)
The amounts in column (c) include salary paid, and any time off with pay utilized, during the year.

(3)
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 (the "NYSE") on the date of grant in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC 718"). For 2018, this amount includes the value of the shares subject to the third tranche of the 2016 VDI awards, the second tranche of the 2017 VDI awards and the first tranche of the 2018 VDI awards, for each of which the performance objectives were set in 2018. The performance objectives for the first tranche of the 2016 VDI award were set and reported in 2016. The performance objectives for the second tranche of the 2016 VDI award and the first tranche of the 2017 VDI award were set and reported in 2017. 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 objectives for the third tranche of the 2017 VDI awards and the second tranche of the 2018 VDI awards will be established in 2019. The performance objectives for the third tranche of the 2018 VDI awards will be established in 2020. Compensation for the remaining tranches of the 2017 and 2018 VDI awards will be reported in future Summary Compensation Tables as compensation for the year in which the performance objectives are established.

    The grant date fair value of the 2016 and 2017 VDI award tranches reported as compensation for 2018 in the table reflect a liquidity discount of 10.05%, 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. In addition, the grant date fair value of the 2017 and 2018 VDI award tranches reported as compensation for 2018 reflect an upward adjustment by 7.64% and 14.16%, respectively, based on the Monte Carlo valuation method, due to the impact of the Relative TSR modifier on those VDI awards.

    The chart below details the grant date fair value of the (i) RSUs granted in 2018, (ii) third tranche of the 2016 VDI awards, (iii) second tranche of the 2017 VDI awards, and (iv) first tranche of the 2018 VDI awards, based on target level performance and the assumptions described above, all of which are reported in the table as 2018 compensation:

David T.
Seaton


Bruce A.
Stanski


Carlos M.
Hernandez


Ray F.
Barnard


Jose L.
Bustamante


Garry W.
Flowers

RSUs

$4,400,152 $1,300,001 $1,425,082 $850,095 $787,642 $787,642

2016 VDI

$1,868,750 $321,752 $488,449 $344,044 $318,567 $341,904

2017 VDI

$1,663,053 $303,344 $486,654 $302,389 $354,369 $310,874

2018 VDI

$1,674,404 $494,694 $542,291 $323,489 $299,724

Total

$9,606,359 $2,419,791 $2,942,476 $1,820,017 $1,760,302 $1,440,420

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COMPENSATION TABLES

 

 

 

    The chart below details the grant date fair value of the (i) third tranche of the 2016 VDI awards, (ii) second tranche of the 2017 VDI awards, and (iii) first tranche of the 2018 VDI awards, assuming the highest level of performance is achieved. In each case, the grant date fair value, assuming the highest level of performance is achieved, is equal to two times the grant date fair value that was determined as of February 19, 2018, which was the date on which the performance objectives for each such tranche were approved by the Committee.

David T.
Seaton


Bruce A.
Stanski


Carlos M.
Hernandez


Ray F.
Barnard


Jose L.
Bustamante


Garry W.
Flowers

2016 VDI

$3,737,500 $643,504 $976,898 $688,088 $637,134 $683,808

2017 VDI

$3,326,106 $606,688 $973,308 $604,778 $708,738 $621,748

2018 VDI

$3,348,808 $989,388 $1,084,582 $646,978 $599,448

    The 2018 amount in column (e) for Mr. Flowers does not include the grant date fair value of Mr. Flowers' 2018 VDI award, which is payable in cash and had a one-year performance period beginning January 1, 2018 and ending December 31, 2018. The earned amount of Mr. Flowers' 2018 VDI award is included in column (g) as described in footnote 4 below.

(4)
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 Consolidated Financial Statements of the Company, as included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

(5)
The amounts in column (g) represent amounts earned as annual incentive in each year. Mr. Flowers' 2018 amount also includes $464,625, which represents the earned amount of his 2018 VDI award, which is payable in cash and had a one-year performance period beginning January 1, 2018 and ending December 31, 2018.

(6)
The amounts in column (i) are detailed in a separate All Other Compensation table below.

(7)
This amount represents the portion of a retention award granted to Mr. Flowers in 2017 that vested on March 31, 2018. Under the terms and conditions of the retention agreement, $250,000 was deposited in Mr. Flowers' deferred compensation account in 2017. The first $100,000 of that amount vested on March 31, 2018 and is shown in the table above. The remainder will vest if Mr. Flowers remains employed until March 31, 2019 (or has an earlier, eligible retirement date). Annual incentive payments appear in column (g).

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COMPENSATION TABLES

 

ALL OTHER COMPENSATION

The following table and related footnotes describe each component of the All Other Compensation column (column (i)) of the Summary Compensation Table for 2018.

(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

  $157,053   $30,161   $71,100   $59,883   $318,197

Bruce A. Stanski

  $61,213     $49,500     $110,713

Carlos M. Hernandez

  $64,069   $2,070   $49,500   $9,188   $124,827

Ray F. Barnard

  $55,701   $63   $32,400   $4,407   $92,571

Jose L. Bustamante

  $52,597   $1,638   $32,400   $9,424   $96,059

Garry W. Flowers

  $64,001   $2,327   $32,400   $4,403   $103,131

(1)
The amounts in column (b) represent contributions made by the Company to each individual's account in the Company's 401(k) plan, and amounts credited by the Company into each individual's account in the Company's non-qualified deferred compensation plan for contributions that would have been credited to each individual's account in the 401(k) plan for contributions in excess of Internal Revenue Code ("IRC") limitations. Contributions to the 401(k) plan and amounts credited in the non-qualified deferred compensation plan by the Company were made or provided on the same basis as provided to all other salaried employees.

(2)
The amounts in column (c) represent the tax gross-up provided for business-related spousal travel.

(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. To the extent any of the allowance was used for a business purpose, the amount of the allowance shown here was not reduced. Not more than $25,000 of the allowance was used by any named executive officer for any single type of perquisite.

(4)
The amounts in column (e) represent the incremental cost for business-related spousal travel, the cost of business-related physical examinations and the cost of personal use of non-primary country clubs, each of which was less than $25,000 with the exception of Mr. Seaton, who had business-related spousal travel cost of $34,455.

(5)
The amounts in column (f) represent the totals of columns (b) through (e). Our 2018 perquisite costs approximated the median of the Compensation Peer Group.

FLUOR CORPORATION   |  2019 PROXY STATEMENT        49

Table of Contents

COMPENSATION TABLES

GRANTS OF PLAN-BASED AWARDS IN 2018

(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)




               

Name

  Type of
Award(1)


Grant
Date


Approval
Date


Target
(#)


Maximum
(#)


Target
($)


Maximum
($)


All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
Units
(#)(4)











All Other
Option
Awards:
Number of
Securities
Under-
lying
Options
(#)(5)









Exercise
or Base
Price of
Option
Awards
Per Share
($/sh)(6)







Grant Date
Fair Value of
Stock and
Option Awards
($)
 

David T. Seaton

  2018 RSU   2/23/2018   2/20/2018           75,669       $4,400,152 (7)

  2018 SO   2/23/2018   2/20/2018             33,615   $58.15   $500,016 (8)

  2016 VDI   2/20/2018   2/19/2018   35,795   71,590             $1,868,750 (9)

  2017 VDI   2/20/2018   2/19/2018   29,594   59,188             $1,663,053 (10)

  2018 VDI   2/23/2018   2/20/2018   25,223   50,446             $1,674,404 (11)

  2018 AI   N/A   N/A       $2,001,000   $4,002,000          

Bruce A. Stanski

  2018 RSU   2/23/2018   2/19/2018           22,356       $1,300,001 (7)

  2016 VDI   2/20/2018   2/19/2018   6,163   12,326             $321,752 (9)

  2017 VDI   2/20/2018   2/19/2018   5,398   10,796             $303,344 (10)

  2018 VDI   2/23/2018   2/19/2018   7,452   14,904             $494,694 (11)

  2018 AI   N/A   N/A       $717,600   $1,435,200          

Carlos M. Hernandez

  2018 RSU   2/23/2018   2/19/2018           24,507       $1,425,082 (7)

  2016 VDI   2/20/2018   2/19/2018   9,356   18,712             $488,449 (9)

  2017 VDI   2/20/2018   2/19/2018   8,660   17,320             $486,654 (10)

  2018 VDI   2/23/2018   2/19/2018   8,169   16,338             $542,291 (11)

  2018 AI   N/A   N/A       $655,200   $1,310,400          

Ray F. Barnard

  2018 RSU   2/23/2018   2/19/2018           14,619       $850,095 (7)

  2016 VDI   2/20/2018   2/19/2018   6,590   13,180             $344,044 (9)

  2017 VDI   2/20/2018   2/19/2018   5,381   10,762             $302,389 (10)

  2018 VDI   2/23/2018   2/19/2018   4,873   9,746             $323,489 (11)

  2018 AI   N/A   N/A       $538,200   $1,076,400          

Jose L. Bustamante

  2018 RSU   2/23/2018   2/19/2018           13,545       $787,642 (7)

  2016 VDI   2/20/2018   2/19/2018   6,102   12,204             $318,567 (9)

  2017 VDI   2/20/2018   2/19/2018   6,306   12,612             $354,369 (10)

  2018 VDI   2/23/2018   2/19/2018   4,515   9,030             $299,724 (11)

  2018 AI   N/A   N/A       $475,000   $950,000          

Garry W. Flowers

  2018 RSU   2/23/2018   2/19/2018           13,545       $787,642 (7)

  2016 VDI   2/20/2018   2/19/2018   6,549   13,098             $341,904 (9)

  2017 VDI   2/20/2018   2/19/2018   5,532   11,064             $310,874 (10)

  2018 Cash VDI (12) N/A   N/A       $787,500   $1,575,000          

  2018 AI   N/A   N/A       $518,700   $1,037,400          

(1)
The types of awards reported in this table are as follows: Restricted Stock Units (RSU), Stock Options (SO), the third tranche of the 2016 Value Driver Incentive (VDI) Awards, the second tranche of the 2017 VDI Awards, the first tranche of the 2018 VDI Awards, Mr. Flowers' 2018 cash VDI award, and Annual Incentive (AI).

(2)
Columns (e) and (f) show the target and maximum number of units for each individual under the third tranche of their 2016 VDI awards, the second tranche of their 2017 VDI awards, and the first tranche of their 2018 VDI awards (except with respect to Mr. Flowers whose 2018 VDI award is reflected in columns (g) and (h)). The Committee has established threshold levels for the 2018 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 beginning on page 35. The third tranche of the 2017 VDI award and the second tranche of the 2018 VDI award will be presented in the table in 2019. The third tranche of the 2018 VDI award will be presented in the table in 2020. All three tranches of the 2016, 2017 and 2018 VDI awards, if earned, will vest in full on March 6, 2019, March 6, 2020, and March 6, 2021, respectively.

50        FLUOR CORPORATION   |  2019 PROXY STATEMENT

Table of Contents

COMPENSATION TABLES

 

 

(3)
Columns (g) and (h) show the target and maximum payouts for each individual of their 2018 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 beginning on page 30.

(4)
The amounts in column (i) represent the number of RSUs granted on February 23, 2018 as part of the 2018 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, 2018 as part of Mr. Seaton's 2018 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 NYSE on the date of grant.

(7)
This amount represents the grant date fair value of the RSUs granted on February 23, 2018 as part of the 2018 long-term incentive awards. The value is computed in accordance with ASC 718, using the grant price of $58.15 per share, which was the closing price of the Company's common stock on the NYSE on the date of grant.

(8)
This amount represents the grant date fair value of the nonqualified stock options granted on February 23, 2018 as part of Mr. Seaton's 2018 long-term incentive awards. The value is computed in accordance with ASC 718, using a Black Scholes option pricing model value of $14.87 per option.

(9)
This amount represents the grant date fair value of the target number of shares subject to the third tranche of the 2016 VDI awards granted on February 20, 2018, using the grant price of $58.04 per unit, which was the closing price of the Company's common stock on the NYSE on February 20, 2018, the first trading day immediately following the date the 2018 performance goals were approved, which was not a trading day, less a liquidity discount of 10.05% related to the Post-Vest Holding Period on the common stock underlying these awards.

 As described in footnote 2 of the Summary Compensation Table beginning on page 46, one-third of the shares subject to the 2016 VDI awards have a 2018 grant date fair value under applicable accounting standards and, therefore, are reported as 2018 compensation in the Summary Compensation Table and this Grants of Plans Based Awards Table. The grant date fair value of the first and second tranches of the 2016 VDI award were presented in the tables in 2016 and 2017, respectively.

(10)
This amount represents the grant date fair value of the target number of shares subject to the second tranche of the 2017 VDI awards granted on February 20, 2018, using the grant price of $58.04 per unit, which was the closing price of the Company's common stock on the NYSE on February 20, 2018, the first trading day immediately following the date the 2018 performance goals were approved, which was not a trading day, less a liquidity discount of 10.05% 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.

FLUOR CORPORATION   |  2019 PROXY STATEMENT        51

Table of Contents

COMPENSATION TABLES

 

 

 

     As noted above, one-third of the shares subject to the 2017 VDI awards have a 2018 grant date fair value under applicable accounting standards and, therefore, are reported as 2018 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 2017 VDI award was presented in the tables in 2017; and the grant date fair value of the remaining tranche of the 2017 VDI award will be presented in the tables in 2019, based on the closing price of the Company's common stock on the NYSE on the approval date of the performance goals.

(11)
This amount represents the grant date fair value of the target number of shares subject to the first tranche of the 2018 VDI awards granted to the named executives on February 23, 2018, using the grant price of $58.15 per unit, which was the closing price of the Company's common stock on the NYSE on the date of grant, plus an adjustment upward by 14.16% for the Relative TSR modifier derived using a Monte Carlo Simulation approach.

 As noted above, only one-third of the shares subject to the 2018 VDI awards granted to the named executives have a 2018 grant date fair value under applicable accounting standards and, therefore, are reported as 2018 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 the 2018 VDI awards granted to the named executives will be presented in the tables in 2019 and 2020, respectively, based on the closing price of the Company's common stock on the NYSE on the respective approval dates of the performance goals.

(12)
Mr. Flowers' 2018 VDI award is payable in cash and had a one-year performance period beginning January 1, 2018 and ending December 31, 2018. Columns (g) and (h) show the target and maximum payouts for Mr. Flowers' 2018 VDI award. The payout is performance driven, and could be earned from 0 to 200% of target.

52        FLUOR CORPORATION   |  2019 PROXY STATEMENT


Table of Contents

COMPENSATION TABLES

OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR END

(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   2/28/2011   2/28/2021   164,683   $5,302,793   76,134   $2,451,515

  39,492   0   $62.50   2/27/2012   2/27/2022                

  105,784   0   $61.45   2/25/2013   2/25/2023                

  120,333   0   $79.19   2/21/2014   2/21/2024                

  173,655   0   $59.05   2/23/2015   2/23/2025                

  51,533   103,066   $55.35   2/23/2017   2/23/2027                

  0   33,615   $58.15   2/23/2018   2/23/2028                

Bruce A. Stanski

  13,515   0   $70.76   2/28/2011   2/28/2021   37,985   $1,223,117   16,538   $532,524

  16,689   0   $62.50   2/27/2012   2/27/2022        

  23,706   0   $61.45   2/25/2013   2/25/2023        

  18,624   0   $79.19   2/21/2014   2/21/2024        

  28,614   0   $59.05   2/23/2015   2/23/2025        

  9,399   18,798   $55.35   2/23/2017   2/23/2027        

Carlos M. Hernandez

  17,067   0   $70.76   2/28/2011   2/28/2021   48,698   $1,568,076   23,012   $740,986

  23,364   0   $62.50   2/27/2012   2/27/2022                

  29,028   0   $61.45   2/25/2013   2/25/2023                

  28,653   0   $79.19   2/21/2014   2/21/2024                

  43,416   0   $59.05   2/23/2015   2/23/2025                

  15,080   30,160   $55.35   2/23/2017   2/23/2027                

Ray F. Barnard

  7,515   0   $30.46   3/2/2009   3/2/2019   30,940   $996,268   14,110   $454,342

  13,797   0   $42.75   3/2/2010   3/1/2020        

  5,640   0   $70.76   2/28/2011   2/28/2021        

  13,350   0   $62.50   2/27/2012   2/27/2022        

  17,901   0   $61.45   2/25/2013   2/25/2023        

  18,624   0   $79.19   2/21/2014   2/21/2024        

  32,562   0   $59.05   2/23/2015   2/23/2025        

  9,370   18,740   $55.35   2/23/2017   2/23/2027        

Jose L. Bustamante

  1,389   0   $70.76   2/28/2011   2/28/2021   29,980   $965,356   15,424   $496,653

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

  3,774   0   $61.45   2/25/2013   2/25/2023