DEF 14A 1 lkbr2021_def14a.htm KBR, INC. - DEF 14A KBR_2021_Proxy_Statement_

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )

 

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KBR, INC.

 

(Name of Registrant as Specified In Its Charter)

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STUART J. B. BRADIE

President and Chief Executive Officer

April 5, 2021

 

Dear KBR, Inc.

Stockholders,

 

I’m proud to say that 2020 was a year of positive change and significant achievement at KBR. Our success is owed to our amazing people — our ONE KBR team of teams — and this year’s Proxy Statement is a testament to their resilience, perseverance and commitment.

 

When the pandemic struck, we stayed focused and accelerated our long-term business strategy to reimagine how we deliver. This has been a years-long strategic shift into a more forward-leaning, technology-driven, agile business that is highly differentiated in its capabilities and domain expertise and well positioned in attractive growing markets.

 

We responded rapidly and decisively to the threat of COVID-19 and seamlessly transitioned the company to remote working and virtual solution delivery to minimize interruptions for our customers. We substantially de-risked our business and built resilience by exiting commoditized services and investing in innovative, sustainable propriety technology and intellectual property (IP), particularly in our Sustainable Technology Solutions business.

 

We completed the acquisition of Centauri, the largest in company history, which has moved us into intelligence and military-space at scale. And we have successfully organized our business into five core areas that support organic growth in key megatrends, such as national security and defense priorities, climate change, near-peer threats, carbon emissions reduction, and digitalization and automation.

 

In short, we continued executing on our strategic vision and accelerated our evolution into a higher-end, solutions-oriented government services company with a leadingedge “green” technology IP arm. The result was another year of operational excellence and strong financial performance.

 

Revenues, adjusted EBITDA, adjusted EPS and operating cash flow all increased over the previous year. We reported a 95% recompete win rate in our Government Solutions (GS) US business and double-digit revenue growth in the Defense & Intel and Science & Space GS business units. Our book-to-bill gained momentum throughout the year, and we achieved 1.2x in GS and 1.4x in Technology Solutions. And I’m proud to say there’s work in the pipeline.

 

But all of that is just a glimpse of what KBR achieved in 2020. The larger story is one of a broad and significant cultural shift we’ve experienced, with people and our commitment to sustainability at the center.

 

At KBR, people are the heart of everything we do. Every day, our people are doing great things, and those things — the solutions we deliver and the expertise we provide — matter to the rest of the world. That’s why it’s important to be a company that is people-focused.

 

Last year, we were pleased to welcome Jenni Myles to KBR as our Chief People Officer and member of our executive leadership team. In relatively short time, Jenni’s commitment to our people-centric vision has made a substantial impact. We’ve experienced organic cultural growth across the company, including the founding of new employee resource groups, such as Pride & Allies, an employee-driven group that supports the LGBTQ+ community.

 

   Continued executing on our strategic vision and accelerated our evolution into a higher-end, solutions-oriented government services company with a leadingedge “green” technology IP arm;

 

   Worked to protect the safety and welfare of our people and those we serve;

 

   Finalized our comprehensive sustainability agenda and broadened our industry-leading Zero Harm safety culture to include our social and environment sustainability efforts;

 

   Increased revenues, adjusted EPS and operating cash flow compared to 2020;

 

   Achieved a 95% recompete win rate in our Government Solutions (GS) US business and double-digit revenue growth in the Defense & Intel and Science & Space GS business units;

 

   Gained momentum in our bookto- bill, with 1.2x in GS and 1.4x in Technology Solutions, and entered 2021 with a strong pipeline

 

 

We enhanced our employee support program, which provides KBR employees and their families with a suite of resources for proactively taking charge of overall health and well-being. Across the company, mental well-being and fitness have become a central focus and we launched the Well-being Ambassadors program — individuals trained to provide confidential support and guidance to colleagues — with plans for expansion in 2021. This is all part of an extensive, data-driven people strategy we’ve developed that will help ensure we are always becoming a more inclusive, diverse and supportive company that attracts and nurtures the world’s best talent, while also helping us accomplish our business objectives and meet our sustainability goals.

 

 

www.kbr.com 2021 Proxy Statement   2  

 


 

 

Sustainability permeates everything we do at KBR. Climate change, energy transition, circular economies — these are the complexities of our time, and KBR is positioned to take the lead internationally through our IP, our domain expertise and our strong commitment to sustainability.

 

We also finalized our comprehensive sustainability agenda — based on firm environmental, social and governance (ESG) goals — and broadened our industry-leading Zero Harm safety culture to include our social and environmental sustainability efforts. This commitment means doing what’s right for our planet, our people and our communities. But ESG means more than just being a good corporate citizen. We’re developing technologies that help our customers meet their sustainability goals as well. These include groundbreaking plastics recycling technology that keeps plastics out of oceans and landfills, converts them to oil and other usable products, and promotes a true circular economy. And through our decades of expertise in decarbonization, we’re helping governments and companies around the world build roadmaps to new, clean forms of energy and more sustainable futures for their people.

 

I’m proud to say that we’re also walking our talk and leading by example internally. We’ve reduced emissions and increased energy efficiency in our operations. Despite global events, we’ve still been making a positive difference in our communities through philanthropic giving and active engagement. And we announced carbon neutrality in 2019 and our longer-term plans for net-zero emissions by 2030.

 

All of this would have been a giant leap forward for any company in a normal year. To think that we accomplished all this during a global crisis is staggering. This year, our Investor Relations event was themed Future Forward. After reading this, I hope you can see why. Our performance reflects KBR’s strong strategic vision, excellence of execution and the company’s movement further into attractive, growing markets. And it reflects the dedication of our employees.

 

I would like to thank Jim Blackwell for his invaluable service as a member of our Board of Directors for almost seven years. Jim has served on every Board committee since his appointment in August 2014, and he currently serves as the Chairman of our Nominating and Corporate Governance Committee. I am grateful for Jim’s contributions to KBR during his tenure and wish him all the best in his retirement.

 

Finally, we believe that open and transparent communication with our stockholders and other stakeholders is vital to our corporate governance practices. We value your views and encourage you to vote. You may do so promptly via telephone or internet, or you may mail your completed and signed voting card. On behalf of the KBR Board of Directors, I thank you for being a KBR stockholder and for your continued support.

 

Sincerely,

 

 


 

 

  2021 Proxy Statement   3  

 


Notice of Annual Meeting of Stockholders

We invite you to attend KBR’s virtual annual stockholders’

meeting and act upon the following matters:

 

1.

Elect as directors the eight nominees named in the attached proxy statement.

2.

Consider and act upon an advisory vote to approve the named executive officer compensation as described in the Compensation Discussion and Analysis.

3.

Ratify the appointment of KPMG LLP as the independent registered public accounting firm to audit KBR’s consolidated financial statements for the year ending December 31, 2021.

4.

Approve the Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan.

5.

Transact any other business that properly comes before the meeting or any adjournment or postponements of the meeting.

 

The Proxy Statement that follows describes these items.

Place

The Annual Meeting will be completely virtual and only conducted via live webcast at virtualshareholdermeeting.com/KBR2021. There will be no physical meeting location.

When

Wednesday

May 19, 2021

Time

9:00 a.m.

Central Daylight Time

By Order of the Board of Directors, April 5, 2021

Adam Kramer

Vice President, Corporate Secretary & Sustainability

 

 

Record Date

Friday, March 26, 2021, at the close of business, is the record date for determination of stockholders entitled to cast votes for the virtual Annual Meeting and at any adjournment or postponement of the meeting.

How to Vote

Via the Internet at

proxyvote.com(1)

 

Call toll-free (US/Canada) at

1-800-690-6903(1)

 

CHECK OUT OUR 2021 NOTICE OF ANNUAL STOCKHOLDER MEETING, ONLINE PROXY STATEMENT, ANNUAL REPORT AND SUSTAINABILITY REPORT AT:

 

proxyvote.com

 

kbr.com/proxy

 

kbr.com/annualreport

 

kbr.com/

sustainabilityreport

Mail your signed

proxy card no later than May 11,2021.

 

Virtually at the Annual Meeting through virtualshareholdermeeting.com

/KBR2021. See page 92 for instructions.

 

  

 

(1)

If you hold your shares through a broker or bank (as opposed to directly with KBR), check with your broker or bank to see if telephone or Internet voting is available to you. Voting via the Internet or toll-free call can be done until 11:59 p.m. EDT the day before the meeting date.

 

 

www.kbr.com 2021 Proxy Statement   4  

 


 

 

  2021 Proxy Statement   5  

 


Back to Contents

This summary highlights information in this proxy statement. For more information about these topics, we encourage you to review the complete proxy statement before you vote.

Proposals Requiring Your Vote

Election of Directors to the Board

Board
Recommends

FOR

EACH NOMINEE

       

Advisory Vote to Approve the Named Executive Officer Compensation

Board
Recommends

FOR

       

Ratify KPMG LLP as the Independent Registered Public Accounting Firm

Board
Recommends

FOR

       

Approve the Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

Board
Recommends

FOR

 

About KBR

Our Vision

We bring together the best and brightest to deliver technology and solutions that help our customers accomplish their most critical missions and objectives. Indoing so, we strive to create a better, safer and more sustainable world.

29,000

$5.8B

EMPLOYEES WORLDWIDE

Excluding joint ventures as of December 31, 2020

2020 REVENUE

 

 

www.kbr.com 2021 Proxy Statement   6  

 


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Business Highlights

Stuart Bradie, President and CEO of KBR, said, 2020 was a year of significant achievement for KBR, as we successfully advanced our long-term vision. We accelerated growth into attractive markets with the Centauri acquisition, strategically focused our commercial portfolio toward clean, sustainable solutions, and significantly advanced our corporate ESG and sustainability strategy.

Completed Strategic Centauri Acquisition

COVID-19
RESPONSE

LARGEST ACQUISITION IN COMPANY HISTORY.

ACCELERATED KBR INTO NATIONAL SECURITY MISSIONS

AT SCALE IN GROWING AREAS INCLUDING MILITARY SPACE, INTELLIGENCE, CYBER ANALYTICS AND EMERGING TECHNOLOGIES SUCH AS DIRECTED ENERGY AND MISSILE DEFENSE.

SEAMLESSLY TRANSITIONED KBR TO REMOTE WORKING AND VIRTUAL SOLUTION DELIVERY

TO MINIMIZE INTERRUPTIONS

FOR OUR CUSTOMERS

95%

23%

12%

RECOMPETE WIN RATE IN OUR

GOVERNMENT SOLUTIONS US BUSINESS

REVENUE GROWTH IN OUR DEFENSE & INTEL BUSINESS

REVENUE GROWTH IN OUR SCIENCE & SPACE BUSINESS

Advanced Our
Sustainability Focus

1.2x

1.4x

LINKED ACHIEVEMENT OF ESG GOALS TO EXECUTIVE COMPENSATION.

POSITIONED SUSTAINABLE TECHNOLOGY SOLUTIONS
FOR GROWTH IN ATTRACTIVE AREAS SUCH AS

ENERGY TRANSITION, DIGITAL OPERATING SOLUTIONS

AND CIRCULAR ECONOMY TECHNOLOGIES.

BOOK-TO-BILL

IN OUR GOVERNMENT SOLUTIONS BUSINESS SEGMENT

BOOK-TO-BILL

IN OUR TECHNOLOGY SOLUTIONS BUSINESS SEGMENT

 

 

 

  2021 Proxy Statement   7  

 


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Financial Highlights

Revenues, adjusted EBITDA, adjusted EPS and operating cash flow all increased over the previous year, explained Mr.Bradie.

Mr. Bradie remarked, Our strong financial performance tells only part of a larger story. To accomplish what we did in 2020 would have been remarkable in a normal year. To know that we did it all in the midst of a global pandemic is staggering. At no point did we let world events slow us down. In fact, we leaned in, moved fast and used the situation to accelerate our long-term business strategy. And that is thanks to the focus, determination and excellence of our people.

 

 

 

1-YEAR TSR RANKING AMONG TSR PEER GROUP

2018

2019

2020

2ND

2ND

9TH


 

 

 

 

 

www.kbr.com 2021 Proxy Statement   8  

 


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Sustainability Highlights

In 2020, we widened our sustainability themes to cover ten pillars, five across social impact and five across environmental. Our approach to growing a prosperous business and governing with purpose is underpinned by these pillars. As members of the UN Global Compact, we have aligned the business strategy and these ten pillars with the Sustainable Development Goals, based on the Global Compact’s principles-based approach.

KBR significantly increased its client offerings in 2020 by providing innovative solutions and opportunities around sustainable solutions. We worked, for example, with large-scale clients and policymakers across the globe to develop roadmaps for low-carbon economies. We restructured the business to allow more focus on sustainability technology solutions such as carbon capture, green ammonia technology, digitalization, and operational efficiencies across our client base.

KBR's Ten Sustainability Pillars have been specifically designed to help us respond to rapid changes in key markets, such as energy transition, and build resiliency for responding to global crises, such as the pandemic; the physical risks that climate change will bring about; and geopolitical instability in the areas where we operate. The objective is to remain agile and resilient and to build a stable business that can withstand and persevere through these crises over the long term, thereby creating a ‘sustainable’ business.

More information on our sustainability focus is provided on page 34.

 

Net-Zero Carbon Emissions by 2030

Launched K-GreeNTM Green Ammonia Process

Key Pandemic Protocols Developed and Deployed Globally

 

 

ACHIEVED CARBON NEUTRALITY IN 2019 AND COMMITTED TO MAINTAIN CARBON NEUTRALITY UNTIL WE ACHIEVE NET-ZERO CARBON EMISSIONS NO LATER THAN 2030

 

 

AN END-TO-END GREEN AMMONIA SOLUTION TO ENABLE NEAR-TERM ENERGY TRANSITION AND A LONG-TERM HYDROGEN FUTURE

 

 

KEY BEHAVIORS WERE BASED ON BEST PRACTICE WITH ADVICE FROM THE CENTERS FOR DISEASE CONTROL AND PREVENTION, EUROPEAN CENTRE FOR DISEASE PREVENTION AND CONTROL, AND WORLD HEALTH ORGANIZATION

Mura Technology Alliance Agreement

Reporting Aligned with SASB, TCFD and GRI Frameworks

Global Mental Health and Wellbeing Committee

 

 

TO BE THE EXCLUSIVE LICENSING PARTNER FOR MURA’S INNOVATIVE ADVANCED PLASTIC RECYCLING PROCESS

 

 

OUR 2019 SUSTAINABILITY & CORPORATE RESPONSIBILITY REPORT APPLIED THE SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB), TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURE (TCFD) AND THE GLOBAL REPORTING INITIATIVE (GRI) STANDARDS

 

 

ROLLED OUT WELLBEING AMBASSADOR PROGRAMS, BEGINNING IN THE UK AND AUSTRALIA

 

 

  2021 Proxy Statement   9  

 


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30%

Online Global One Ocean Program

TRIR IMPROVEMENT FROM 2019

TOOK OUR GLOBAL ONE OCEAN PROGRAM ONLINE TO REACH SCHOOLS REMOTELY AND PARTNERED WITH ENVIRONMENTAL ORGANIZATIONS TO TEACH OVER 1,000 STUDENTS

 

 

 

www.kbr.com 2021 Proxy Statement   10  

 


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Information About the Board of Directors

The KBR Board of Directors is currently composed of nine directors with an extensive variety of skills, expertise and experience who guide and support our strategy to create long-term value for our stockholders and other stakeholders. All of our directors are independent except Mr.Bradie, our CEO.

 

 

 

  2021 Proxy Statement   11  

 


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Committee

Meeting

Attendance

Rate

Other

Public

Company

Boards

Age

Director

Since

Audit

Committee

Compensation

Committee

Nominating

and Corporate

Governance

Committee

Sustainability

and Corporate

Responsibility

Committee

Mark E. Baldwin

100%

2

67

2014

 

 

James R. Blackwell

100%

0

62

2014

 

 

Stuart J. B. Bradie

100%

0

54

2014

 

 

 

 

Lynn A. Dugle

95%

3

61

2020

 

 

Lester L. Lyles

98%

0

74

2007

 

 

Wendy M. Masiello

100%

0

62

2017

 

 

Jack B. Moore

95%

2

67

2012

 

 

Ann D. Pickard

93%

2

65

2015

 

 

Umberto della Sala

100%

0

72

2015

 

 

Number of Meetings

 

 

 

 

10

8

4

2

Aggregate Attendance

 

 

 

 

97%

97%

100%

100%

Chairman of the Board

Chairperson

Member

Audit Committee Financial Expert

 

 

 

 

 

www.kbr.com 2021 Proxy Statement   12  

 


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Governance Highlights

Our Board of Directors believes that good corporate governance and transparent communication with our stockholders and other stakeholders are essential for KBR’s long-term success.

Focus on Accountability

|

Annual director elections with majority voting standards

l

Annual Board governance review including investor reviews and feedback

l

Periodic independent director meetings with investors

l

Downward discretion applied to the safety performance metric payouts of the 2017 and 2018 short-term incentive (“STI”) plans

l

Downward discretion applied to the 2019 STI plan payouts of certain of our Named Executive Officers (“NEOs”) responsible for internal controls over financial reporting

l

Downward discretion applied to the 2020 STI plan payouts of all of our NEOs to take a One KBR approach to align their payout percentage with that of all other employees

l

Responsive action taken after disappointing “say-on-pay” vote at the 2019 Annual Meeting and subsequent stockholder outreach, resulting in a significantly improved say-on-pay vote at the 2020 Annual Meeting

l

Increased Environmental, Social and Governance (“ESG”) focus and enhanced disclosures in KBR’s Corporate Sustainability Report

l

Linked 10% of NEOs’ 2021 STI plan payout opportunity to ESG performance

Independent and Engaged Board

l

Significant knowledge of KBR’s industries and markets

l

Annual Board visits to KBR businesses or project sites

l

Annual assessment of Board leadership structure


 

 

 

  2021 Proxy Statement   13  

 


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Compensation Highlights

Our compensation program links pay to performance to align our senior executives’ interests with those of our stockholders. Consistent with our business strategy, our senior executives’ individual Key Performance Indicators (“KPIs”) are focused on growth and expansion, reducing costs, and increasing efficiencies and cash flow performance. The Compensation Committee set rigorous targets for 2020 for both the short-term incentive (“STI”) and long-term incentive (“LTI”) plans.

To emphasize the link between pay and Company performance, our Compensation Committee made changes in 2020 to the metrics of our STI plan. These metrics remained a strong reflection of our pay-for-performance strategy this year. The changes were to:

|

Increase the EPS metric weighting from 40% to 45%.

|

Increase the Operating Cash Flow metric weighting from 20% to 25%.

|

Decrease the individual KPIs weighting from 30% to 20%.

In response to our stockholders’ comments, our Compensation Committee:

|

Amended our 2020 Cash Performance Awards payable under the KBR Stock and Incentive Plan with respect to our senior executives to settle in stock rather than in cash for the 50% portion that is based on relative total stockholder return (“TSR”). The increase in stock-settled awards ensures executives have a large stake in the long-term financial success of the Company that is aligned with stockholder interests.

Due to a challenging year during which KBR implemented reductions in force and pay sacrifices, our Compensation Committee:

l

Applied downward discretion to reduce the 2020 STI payout percentage of our NEOs by 63.9 percentage points to 90% (approximately 60.2 percentage points to 93.7% for Mr. Ibrahim) to align their 2020 STI payout percentages with those of all other employees. The downward discretion, which was supported by our senior executive management, was applied uniformly to all 2020 STI payout awardees, with a few exceptions, to reinforce the One KBR value that “We Are a Team of Teams.” Mr. Ibrahim received a slightly higher 2020 STI payout percentage in recognition of his exceptional performance as well as the positive outcome with respect to restructuring KBR's Technology and Energy businesses into the Sustainable Technology Solutions business segment.

Aligned with our rigorous Executive Compensation program, our CEO’s base salary has increased only three times since he was appointed in 2014 to reward him for his demonstrated success at:

l

Positioning KBR for long-term growth by aligning and expanding our businesses.

l

Increasing Company performance and stockholder value.

l

Driving cultural change to emphasize the importance of our people, their safety and inclusion in advancing KBR.

 

 

 

www.kbr.com 2021 Proxy Statement   14  

 


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Corporate Governance

 

 

Proposal No. 1 Election of Directors

16

Our Board

16

Nominees for Director

17

The Following Director with a Term Ending in 2021 is Retiring and Elected Not to Stand for Re-Election

21

Board and Governance Structure

22

Role of the Board of Directors

22

Our Board Leadership Structure

22

Director Independence

24

Committees of the Board

24

Enterprise Risk Management

26

ERM Framework

26

ERM Program

27

Board Oversight of ERM

28

Management Succession Planning

29

Board and Committee Evaluations

29

Board Refreshment

30

Process for Selecting New Directors

30

Director Qualifications

31

Stockholder Engagement

31

Director Orientation and Education

32

Board Practices and Procedures

32

Attendance at Meetings

32

Mandatory Retirement

32

Service on Other Boards

33

Anti-Hedging Policy

33

Corporate Governance Materials

33

How to Contact the Board

33

Our Sustainability Focus

34

Key Developments

35

Security Ownership of Certain Beneficial Owners and Management

37

Executive Officers

38


 

 

  2021 Proxy Statement   15  

 


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Proposal No. 1 Election of Directors

At our 2021 Annual Meeting of Stockholders, eight directors are to be elected to hold office until the 2022 Annual Meeting of Stockholders. All directors are elected annually, with each nominee standing for election to a one-year term. The members of our Board of Directors hold office until their successors are elected and qualified or until their earlier resignation or removal. Mr. James R. Blackwell has elected to retire and is not standing for re-election.

Each nominee has indicated a willingness to serve, if elected. If any nominee declines to serve or becomes unavailable for any reason, or if a vacancy occurs before the election, the proxies may be voted for such substitute nominee as the Board of Directors may designate. We have no reason to believe that any of the nominees will be unable to serve if elected. Directors are elected by a majority of votes cast (the number of shares voted “For” a candidate must exceed the number of shares voted “Against” the candidate). Shares present but not voting on the election of directors will be disregarded, except for quorum purposes, and will have no effect on the outcome of the vote.

Our Board

A top priority of our Board and Nominating and Corporate Governance Committee is ensuring that our Board of Directors is composed of directors who:

|

bring a variety of skills relevant to our business,

|

provide expertise that is useful to KBR and complementary to the background and experience of other Board members, and

|

effectively represent the long-term interests of our stockholders.

 

As shown below, the incumbent directors have a wide range of skills and experience that enable the Board to effectively oversee management and the business of KBR.

FINANCIAL EXPERIENCE

LEADERSHIP

RISK MANAGEMENT

An understanding of finance, financial statements and financial reporting processes is an important skillset enabling our directors to better understand what drives KBR’s performance and foresee the likely strategic outcomes of board decisions.

Experience in significant executive leadership positions is essential to guide and direct our leaders and strategically help move KBR forward.

Experience with risk management is critical to foster an environment where risk management is an integral component of our strategy, culture and business operations and to ensure that policies and procedures are designed and implemented that are consistent with our risk appetite.

INDUSTRY EXPERIENCE

GOVERNMENT

GLOBAL EXPERIENCE

Having significant industry experience is essential in understanding KBR’s risks and opportunities, regulatory environment and key industry players in order to effectively shape and advance our strategy.

Directors with government contracting and operational experience play a significant role in supporting our strategic shift to diversify and expand our government business.

Diverse global experience is critical to enable KBR to strategically leverage our global footprint and respond quickly to changes in global markets.

 

 

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The Board of Directors recommends that you vote FOR the election of all the director nominees listed below. Properly dated and signed proxies, and proxies properly submitted over the Internet and by telephone, will be so voted unless stockholders specify otherwise.

 

The following biographical information about the director nominees is correct as of March 26, 2021.

Nominees for Director

MARK E. BALDWIN

Age: 67 | Director since: 2014

Board Committees: Audit Committee (Chair) and Sustainability and Corporate Responsibility Committee

Other Public Company Boards: Nine Energy Service, Inc. (Audit Chair) and TETRA Technologies, Inc. (Audit Chair)

                   

Key Qualifications and Skills:

  

                   

Prior Business Experience

Education

|

Executive Vice President and Chief Financial Officer of Dresser-Rand Group, Inc.

|

Executive Vice President, Chief Financial Officer, and Treasurer of Veritas DGC Inc.

|

Operating Partner at First Reserve Corporation

|

Executive Vice President and Chief Financial Officer for NextiraOne

|

Chairman of the Board and Chief Executive Officer for Pentacon Inc.

|

Variety of finance and operations positions with Keystone International Inc., including Treasurer, Chief Financial Officer, and President of the Industrial Valves and Controls Group

|

B.S. (Mechanical Engineering), Duke University

|

M.B.A., Tulane University

|

Graduate of the Stanford Executive Program

 

STUART J. B. BRADIE

Age: 54 | Director since: 2014

Board Committees: None

Other Public Company Boards: None

 

Key Qualifications and Skills:

   

                   

Prior Business Experience

Education

|

President and Chief Executive Officer, KBR, Inc. (since 2014)

|

Group Managing Director — Operations and Delivery for WorleyParsons

|

Managing Director across Europe, Africa, Asia and the Middle East for WorleyParsons

|

Managing Director for PT Kvaerner Indonesia

|

Country Manager for Kvaerner Philippines

|

Global experience across over 40 countries in the hydrocarbons, mining and chemicals, power and infrastructure sectors

|

B.S. (Mechanical Engineering), Aberdeen University

|

M.B.A., Edinburgh Business School, Heriot-Watt University

 

 

 

 

 

Finance 

Leadership 

Risk Management

Industry /Market

Government 

Global 

 

 

  2021 Proxy Statement   17  

 


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LYNN A. DUGLE

Age: 61 | Director since: 2020

Board Committees: Audit Committee and Nominating and Corporate Governance Committee

 

Other Public Company Boards: Micron Technology, Inc. (Finance); State Street Corporation (Technology and Operations Member, Examining and Audit Member, and Executive Member); and TE Connectivity Ltd. (Audit)

Current Affiliations: Avantus Federal (Member), The Board on Army Research and Development of the National Academy of Sciences (Member), and ZOE Empowers (Member)

 

Previous Affiliations: The B2B Project (Member) and Intelligence and National Security Alliance (Member)

                   

Key Qualifications and Skills:

  

                   

Prior Business Experience

Education

|

Chairman, President and Chief Executive Officer at Engility Holdings Inc.

|

Corporate Vice President and President of Intelligence, Information and Services at Raytheon Company

|

Vice President, Engineering, Technology and Quality, Network Centric Systems at Raytheon Company

|

Vice President and General Manager, Product, Systems Software Division at ADC Telecommunications, Inc.

|

General Manager, Cable Systems Division at ADC Telecommunications, Inc.

|

Vice President, Support Engineering and Quality for the Defense Systems and Electronics Group at Texas Instruments, Inc.

|

B.A. (Spanish), Purdue University

|

B.S. (Technical Management), Purdue University

|

M.B.A., University of Texas at Dallas

 

GENERAL LESTER L. LYLES, USAF (RET.)

Age: 74 | Director since: 2007 | Chairman of the Board since: 2019

Board Committees: Compensation Committee and Nominating and Corporate Governance Committee

Current Affiliations: Frontier Technology Inc. (Director); National Space Council Users’ Advisory Group administered by NASA (Chairman); JobsOhio (Director); and National Academy of Engineering (Inducted Member)

Other Public Company Boards: None

Previous Affiliations: Battelle Memorial Institute (Director); Defense Science Board in the Pentagon (Member); General Dynamics Corporation (Director); International Security Advisory Board at the U.S. Department of State (Member); Precision Castparts Corp. (Director); President’s Intelligence Advisory Board in the White House (Member); and United Services Automobile Association (Chair)

                   

Key Qualifications and Skills:

  

                   

Prior Business Experience

Education

|

Independent Consultant (since 2003)

|

Retired Four-Star General of the U.S. Air Force

|

Commander of the U.S. Air Force Materiel Command

|

Vice Chief of Staff of the Headquarters of the U.S. Air Force

|

Director of the Ballistic Missile Defense Organization

|

Commander of the Space and Missile Systems Center

|

B.S. (Mechanical Engineering), Howard University

|

M.S. (Mechanical and Nuclear Engineering), Air Force Institute of Technology Program, New Mexico State University

|

Defense Systems Management College, Fort Belvoir, Virginia

|

Armed Forces Staff College, Norfolk, Virginia

|

National War College, Fort Lesley J. McNair, Washington, D.C.

|

National and International Security Management Course at Harvard University

|

Honorary Doctor of Laws degrees from New Mexico State University and Urbana University

 

Finance 

Leadership 

Risk Management

Industry /Market

Government 

Global 

 

 

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LT. GENERAL WENDY M. MASIELLO, USAF (RET.)

Age: 62 | Director since: 2017

Board Committees: Audit Committee and Sustainability and Corporate Responsibility Committee

Current Affiliations: Acquisition Innovation and Research Center Advisory Panel to the Office of the Under Secretary of Defense for Acquisition and Sustainment (Advisor); AirForce Studies Board of the National Academy of Sciences (Member); EURPAC Services, Inc. (Director); National Contract Management Association (Director); Procurement Round Table (Director); Public Spend Forum (Advisory Council); Rawls College, Texas Tech University (Advisory Council Chair); and StandardAero (Director)

Other Public Company Boards: None

                   

Key Qualifications and Skills:   

                   

Prior Business Experience

Education

|

Independent Consultant (since 2017)

|

Retired Three-Star General of the U.S. Air Force

|

Director of the Defense Contract Management Agency

|

Deputy Assistant Secretary (Contracting), Office of the Assistant Secretary of the
Air Force for Acquisition

|

Program Executive Officer for the Air Force’s $65 billion Service Acquisition portfolio

|

Deployment to Iraq to lead contracting support for military forces in Iraq and Afghanistan

|

B.B.A. (Marketing), Texas Tech University

|

M.S. (Logistics Management), Air Force Institute of Technology

|

Defense Systems Management College, Fort Belvoir, Virginia

|

M.S. (National Resource Strategy), Industrial College of the Armed Forces, Fort Lesley J. McNair, Washington, D.C.

|

Senior Acquisition Course, Industrial College of the Armed Forces, Fort Lesley J. McNair, Washington, D.C.

|

Joint and Combined Warfighting School, Joint Forces Staff College, Norfolk, Virginia

|

Harvard Kennedy School’s Senior Managers in Government

 

JACK B. MOORE

Age: 67 | Director since: 2012

Board Committees: Compensation Committee (Chair) and Nominating and Corporate Governance Committee

Current Affiliations: American Heart Association (Member); MAM (Memorial Assistance Ministries) (Director); and University of Houston System Board of Regents (Member)

Other Public Company Boards: Occidental Petroleum Corporation (Independent Vice Chairman; Executive Compensation Chair; Advisory Member; and Corporate Governance and Nominating Member) and ProPetro Holding Corp. (Nominating and Corporate Governance Chair; Audit Member; and Compensation Member)

Previous Affiliations: American Petroleum Institute (Director); Cameron International Corporation (Chair); Rowan Companies plc (Director); United Way of Greater Houston (Executive Committee); and University of Houston’s Board of Visitors (Director)

                   

Key Qualifications and Skills:  

                   

Prior Business Experience

Education

|

Chairman, President and Chief Executive Officer for Cameron International Corporation

|

President and Chief Operating Officer for Cameron International Corporation

|

President, Western Hemisphere of Drilling & Production Systems group for Cameron International Corporation

|

Vice President and General Manager, Western Hemisphere of Drilling & Production Systems group for Cameron International Corporation

|

Various management positions at Baker Hughes Incorporated

|

B.B.A., University of Houston

|

Graduate of the Advanced Management Program at Harvard Business School

 

 

Finance 

Leadership 

Risk Management

Industry /Market

Government 

Global 

 

 

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ANN D. PICKARD

Age: 65 | Director since: 2015

Board Committees: Sustainability and Corporate Responsibility Committee (Chair) and Audit Committee

Current Affiliations: The University of Wyoming Foundation (Budget/Audit) and Chief Executive Women (Member)

Other Public Company Boards: Noble Corporation plc (Sustainability Chair and Audit Member) and Woodside Petroleum Ltd. (Sustainability Chair)

Previous Affiliations: Advisory Council of the Eurasia Foundation (Member); Catalyst (Board of Advisors); Global Agenda Council on the Arctic for the World Economic Forum (Member); and Westpac Banking Corporation (Director)

                   

Key Qualifications and Skills:  

                   

Prior Business Experience

Education

|

Executive Vice President, Arctic for Royal Dutch Shell plc

|

Executive Vice President and Country Chair, Australia, for Royal Dutch Shell plc

|

Regional Executive Vice President, Sub Saharan Africa, for Royal Dutch Shell plc

|

Director, Global Businesses and Strategy and a member of the Shell Gas & Power Executive Committee for Royal Dutch Shell plc

|

11-year tenure with Mobil prior to its merger with Exxon

|

Significant business experience throughout South America, Australia, the countries of the former Soviet Union, the Middle East, and Africa

|

B.A., University of California San Diego

|

M.A., University of Pennsylvania

 

UMBERTO DELLA SALA

Age: 72 | Director since: 2015

Board Committees: Compensation Committee and Sustainability and Corporate Responsibility Committee

Current Affiliations: FSI SpA (Chair)

Other Public Company Boards: None

Previous Affiliations: Ansaldo Energia SpA (Chair and Director); Foster Wheeler AG (Director); Kedrion SpA (Director); Stork Technical Services (Supervisory Board); and Trevi Finanziaria Industriale SpA (Director)

                   

Key Qualifications and Skills:  

                   

Prior Business Experience

Education

|

President and Chief Operating Officer for Foster Wheeler AG

|

Interim Chief Executive Officer for Foster Wheeler AG

|

Various positions of increasing responsibility following start of career as a process engineer in Foster Wheeler’s environmental division

|

Laurea in Chemical Engineering from Politecnico di Milano

 

Finance 

Leadership 

Risk Management

Industry /Market

Government 

Global 

 

 

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The Following Director with a Term Ending in 2021 is Retiring and Elected Not to Stand for Re-Election

JAMES R. BLACKWELL

Age: 62 | Director since: 2014

Board Committees: Nominating and Corporate Governance Committee (Chair) and Compensation Committee

Previous Affiliations: Center for Strategic and International Studies (“CSIS”) U.S.-Association of Southeast Asian Nations Strategy Commission (Commissioner); CSIS U.S.-China Policy Advisory Roundtable (Member); National Action Council for Minorities in Engineering, Inc. (Director); National Bureau of Asian Research (Director); and Saint Mary’s College of California (Trustee)

Other Public Company Boards: None

Current Affiliations: Forager Energy (Co-founder/Manager); Harbour Energy Ltd. (Director); and Maverick Natural Resources (Director)

                   

Key Qualifications and Skills:  

                   

Prior Business Experience

Education

|

Executive Vice President, Technology and Services for Chevron

|

President, Chevron Asia Pacific Exploration and Production Company

|

Various positions of increasing responsibility following start of career as an offshore roustabout for Gulf Oil

|

B.S. (Biology and Environmental Technology), University of Southern Mississippi

|

M.S. (Petroleum Engineering), Tulane University

|

Graduate of the Columbia Senior Executive Program

 

 

 

Finance 

Leadership 

Risk Management

Industry /Market

Government 

Global 

 

 

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Board and Governance Structure

We are committed to good corporate governance and to effective communication with our stockholders. This section describes our governance policies and practices, and the roles, duties and responsibilities of the Board of Directors and each of its committees. See the section titled “Corporate Governance Materials” if you want to know how to find our policies, practices, and committee charters.

Role of the Board of Directors

The Board of Directors represents the interests of our stockholders in maintaining a successful business. Specifically, the Board of Directors oversees the effectiveness of management’s policies and decisions, including the execution of its strategies, with a commitment to enhancing stockholder value over the long term. To this end, Board members are expected to act in the best interests of all stockholders, to be knowledgeable about our businesses, to exercise informed and independent judgment, and to understand general economic trends and conditions, as well as trends in corporate governance.

Our Board Leadership Structure

Our Board is led by a Chairman who is recommended by the Nominating and Corporate Governance Committee and appointed by the full Board. KBR’s Corporate Governance Guidelines provide for the Chairman, if that individual is independent, to perform a strong role in Board leadership. In particular, an independent (or non-executive) Chairman of the Board is responsible for:

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presiding at executive sessions of the non-executive directors at each regular Board meeting and setting the agenda for these sessions;

|

approving meeting agendas for each regular Board and committee meeting and approving the information to be sent to the directors with respect to each meeting;

|

presiding at the executive session of the Board to evaluate the performance of our CEO; and

|

communicating to the CEO, after approval by our Compensation Committee, the CEO’s evaluation and compensation for the next full year and the results of the Board’s review and approval of management succession plans and development programs.

If the Chairman of the Board is not independent, the Board elects an Independent Lead Director.

General Lester Lyles has served as non-executive Chairman of the Board since May15,2019. General Lyles has significant board experience, both at KBR and at other public companies. He has served on every one of our standing Board committees and has in-depth knowledge of KBR’s history and current business. During General Lyles’s service on the Board, KBR has undergone significant changes, including reorganizing into more strategically-aligned business groups and evolving from a wholly-owned subsidiary with significant support from its former parent company into an independent operating company. The Board believes that General Lyles is well positioned to facilitate communications between the Board of Directors and KBR stockholders.

Our CEO is responsible for the overall management and functioning of the Company. KBR’s Corporate Governance Guidelines provide for two important checks on the CEO’s authority:

|

The CEO may not serve on any Board committees, and

|

The CEO’s performance evaluation includes a review of how well he keeps the Board informed on matters affecting the Company and its operating units.

KBR’s Board of Directors has determined that its current leadership structure is appropriate at this time.

 

 

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Director Independence

Our Corporate Governance Guidelines provide that at least two-thirds of the Board must be independent directors. Directors are considered independent if they are not involved in any material relationships with KBR, either directly or indirectly. Our Corporate Governance Guidelines set forth specific independence standards that are consistent with the requirements of the SEC and the NYSE.

The Nominating and Corporate Governance Committee periodically reviews KBR’s definition of independence and the Board’s compliance with our independence standards.

All directors complete independence questionnaires at least annually. Our Board determines the independence of its members generally, as well as the independence of members of our Audit Committee under the heightened requirements prescribed by the NYSE and the SEC. The Board has determined that all of our current directors are independent except Mr. Bradie, our President and Chief Executive Officer.

Our Board believes that its membership should include no more than two directors who are also employees of KBR, though this number is not an absolute limitation. We believe the Chief Executive Officer should at all times be a member of the Board, and in practice, our CEO has been the only executive director since KBR became an independent public company.

Committees of the Board

A substantial portion of the analysis and work of KBR’s Board is done by its four standing committees: the Audit Committee; the Compensation Committee; the Sustainability and Corporate Responsibility Committee; and the Nominating and Corporate Governance Committee. Each of the standing committees is composed entirely of independent directors.

The Board of Directors has approved charters for each of the standing committees that set forth the committees’ respective duties and responsibilities and govern the committees’ actions. These charters are available on KBR’s website, kbr.com, by choosing “Our Company” under the “About Us” menu, then selecting “Corporate Governance” and “Board Committees.” Each committee reviews its charter annually and recommends changes, as necessary, to the Board.

 

The composition, purpose, duties, and responsibilities of each committee are summarized below.

AUDIT COMMITTEE

 

Members:

Mr. Baldwin (Chair)

Ms.Dugle

Lt.General Masiello

Ms. Pickard

 

Meetings in 2020: ten

 

Attendance: 97%

 

Audit Committee Report:

Page 80

The Audit Committee:

|

reviews and reports to the Board of Directors the scope and results of audits by our principal independent public accountants and our internal auditors;

|

reviews with the principal independent public accountants the effectiveness of our system of internal controls as well as critical audit matters;

|

reviews transactions between us and our directors and officers, our policies regarding those transactions, and compliance with our Code of Business Conduct;

|

engages our principal independent registered public accounting firm each year;

|

reviews the audit and other professional services rendered by our principal independent registered public accounting firm;

|

periodically reviews the independence of our principal independent registered public accounting firm;

|

prepares and publishes an annual Audit Committee report, which is included in this proxy statement; and

|

reviews with management the status of information technology systems and KBR’s risks relating to information technology, including a review of the state of KBR’s cybersecurity, emerging cybersecurity developments and threats, and KBR’s strategy to mitigate cybersecurity risks.

 

Our Board has determined that each member of the Audit Committee is financially literate and qualifies as an “audit committee financial expert,” as defined in U.S. Securities and Exchange Commission (“SEC”) rules. In addition, each member of the Audit Committee is “independent” under the heightened standards prescribed for audit committee members by NYSE and SEC rules.

 

 

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COMPENSATION COMMITTEE

 

Members:

Mr. Moore (Chair)

Mr. Blackwell

General Lyles

Mr. della Sala

 

Meetings in 2020: eight

 

Attendance: 97%

 

Compensation Committee Report:

Page 63

The Compensation Committee:

|

evaluates and advises the Board regarding the compensation policies applicable to our executive officers, including the specific relationship between corporate performance and executive compensation;

|

reviews and recommends to the Board the corporate goals and objectives relevant to compensation for the CEO, the CEO’s performance in light of these established goals and objectives, and the CEO’s compensation package;

|

reviews the CEO’s recommendations with respect to, and approves, the compensation to be paid to KBR’s other executive officers consistent with the general compensation policies established by the Board;

|

reviews and makes recommendations to the Board with respect to incentive compensation and other stock-based plans;

|

administers KBR’s incentive compensation and other stock-based plans;

|

reviews and discusses with management the “Compensation Discussion and Analysis” and determines whether to recommend to the Board that it be included in KBR’s annual proxy statement or annual report on Form 10-K;

|

prepares and publishes an annual executive compensation report, which is included in this proxy statement;

|

reviews the risk assessment of KBR’s compensation plans to ensure that the programs do not create risks that are reasonably likely to have a material adverse effect on KBR;

|

periodically reviews the compensation paid to non-executive directors and makes recommendations to the Board regarding any adjustments; and

|

selects an independent compensation consultant or other adviser to assist the committee in its work.

The Board has determined that each member of our Compensation Committee is a “non-employee director” as defined in SEC rules and an “outside director” as defined in IRS rules.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

Members:

Mr.Blackwell (Chair)

Ms. Dugle

General Lyles

Mr. Moore

 

Meetings in 2020: four

 

Attendance: 100%

The Nominating and Corporate Governance Committee:

|

develops, implements and periodically reviews KBR’s corporate governance guidelines;

|

develops and implements a process to assess Board and committee effectiveness;

|

identifies and evaluates individuals qualified to become Board members, consistent with Board-approved criteria, NYSE listing standards, and other applicable requirements;

|

annually evaluates our independent directors;

|

determines the composition of the Board and its committees, including selection of the director nominees for the next annual meeting of stockholders and changes to the size and composition of the Board or any of its committees; and

|

reviews succession plans and management development programs for members of executive management and the CEO, and provides regular reports on the progress of the succession planning and management development to the Board.

The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent as defined in NYSE listing standards.

SUSTAINABILITY AND CORPORATE RESPONSIBILITY COMMITTEE

 

Members:

Ms. Pickard (Chair)

Mr. Baldwin

Lt. General Masiello

Mr. della Sala

 

Meetings in 2020: two

 

Attendance: 100%

The Sustainability and Corporate Responsibility Committee:

|

reviews policies and goals relating to health, safety, security, the environment, and social responsibility (“HSSE&SR”), including processes to ensure compliance with applicable laws and regulations;

|

reviews and provides feedback on the management of current and emerging HSSE&SR issues;

|

oversees KBR’s activities in managing its major HSSE&SR risk exposures including climate change;

|

oversees and receives presentations at least annually from KBR’s Chief HSSE Officer;

|

reviews KBR’s political and charitable contributions and social responsibility activities;

|

reviews KBR’s sustainability strategy, including carbon dioxide emission neutrality and other sustainability goals;

|

reviews KBR’s public sustainability report; and

|

ensures KBR has policies and procedures to protect our culture and values, ensure fundamental human and workplace rights, prohibit all forms of forced labor and human trafficking, ensure we operate transparently and with integrity, and build a safe and resilient business that considers climate change and other sustainability issues.

 

 

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Enterprise Risk Management

ERM Framework

We have a fully integrated, enterprise-wide enterprise risk management (“ERM”) framework. The framework, facilitated by our ERM Lead who reports to the General Counsel, enhances business resilience by encouraging uncertainty anticipation and resolution at all levels, from project to enterprise, across all business units, globally, in real time, and enables risk-based strategy decisions and value adding communications to stakeholders.

 

 

This inter-connected top-down and bottom-up approach is a consistent, scalable, and auditable means for the identification and management of existing and emerging risks and opportunities, both internal and external, to KBR’s current and future operations, at project, business unit, corporate function, and enterprise levels.The KBR ERM Framework comprises six phases: Identification, Assessment, Analysis, Mitigation, Monitoring, and Evaluation. This approach delivers visibility of KBR’s changing risk profile and enables informed strategy decisions and adjustments, better communications to stakeholders, and a common focus based on consistent and reliable data.

 

 

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ERM Program

Risk Management, as one of KBR’s Ten Sustainability Pillars (pictured below and described in the section titled “Our Sustainability Focus”), is key to driving KBR to sustainable business growth. Our resilience, success, and continued evolution depends on our ability to anticipate and respond to the constantly changing risks in our existing and future operating environments, and by entrenching ERM principles and practices in our culture and across our operations, we can consistently visualize the entire risk landscape, mitigate threats, capitalize on opportunities, and create value and predictable outcomes.

Every employee is empowered to identify risks and opportunities, and KBR’s ERM Policy mandates that every risk and opportunity has an owner assigned and accountable for the ongoing management, including the development and implementation of mitigation plans, each with individual owners accountable for action implementation through to successful conclusion.

The identification and assessment of risks and opportunities is consistent at project, business unit, and enterprise level:

|

Stakeholder and multi-disciplinary Subject Matter Experts identify risks and opportunities, and their owners.

|

Owners develop detailed description, risk window, and applicability. Risks are categorized within the two-tier Risk Breakdown Structure (taxonomy).

|

Owners assess (score), using a global scoring matrix for probability, commercial impact, schedule impact, reputational impact, and manageability, in three circumstances: Original (unmitigated risk), Current (mitigated with existing controls and actions), and Target (acceptable position).

|

Owners develop a response, i.e., action plans, including due date and action owner.

|

Owners and project/business unit/enterprise ERM focal points regularly review risk/opportunity status, current score, and effectiveness or otherwise of action plans.

All risks and opportunities are managed on our cloud-based platform, which drives a consistent approach at all levels across the entire global business and provides a single source of truth with reporting and data analytics, including ranking and trending available in real time.

KBR’s Executive Leadership Team (“ELT”) convenes for dedicated risk and opportunity reviews at least three times per year. The outputs are reported to our Board of Directors twice per year, and to individual business units and projects on a regular basis to facilitate their management of risks and opportunities, on an ongoing basis, using the ERM process and tool to provide real time risk-based data.

The ELT review of enterprise risks and opportunities is carried out in the context of the changing risk and opportunity landscape and KBR’s strategy, which is embedded in the process such that strategy and the interconnected risks and opportunities are aligned.

 

 

 

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Board Oversight of ERM

Risk oversight is an integral part of KBR’s Board of Directors’ role, and discussions regarding risks faced by KBR are deliberated throughout the year.

The outputs from the ERM Program are formally presented to our Board twice per year. The ERM report includes strategic, operational, HSSE, information technology and cybersecurity, financial, geo-political, and ESG risks and opportunities, as well as management’s assessment of their likelihood and impact, the perceived trend for each (whether increasing, decreasing, or stable), and the measures being taken to monitor and manage those risks and opportunities.

While our Board has overall oversight responsibility for KBR’s ERM Program, various committees of the Board also have the following responsibilities for risk oversight:

 

 

 

 

 

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Management Succession Planning

Our Corporate Governance Guidelines provide that the Board’s obligation to ensure effective governance includes reviewing executive succession plans and management development programs. To that end, the Board of Directors, with input from the Nominating and Corporate Governance Committee, the Chairman of the Board, and the CEO, regularly reviews KBR’s succession plan and management development programs for all senior management positions. One of the elements that the CEO is evaluated on each year is the robustness of the executive succession plan, including assessment and development of internal candidates for the CEO and top-level executive positions.

Issues relating to CEO succession planning are addressed regularly, and no less than annually, by the entire Board, facilitated by the non-executive Chairman of the Board. While the Nominating and Corporate Governance Committee performs the initial review of KBR’s succession plans and makes recommendations to the Board as necessary, the entire Board has primary responsibility for CEO succession planning, and develops both long-term and contingency plans for this purpose. This process necessarily involves developing and reviewing criteria for the CEO position that reflect KBR’s business strategy, and identifying and developing internal candidates or recognizing the need for external candidates, as appropriate.

Board and Committee Evaluations

At the direction of our Nominating and Corporate Governance Committee, our non-executive directors complete annual self-assessment questionnaires regarding the performance of our Board of Directors as a group. Similarly, annual self-assessment questionnaires regarding the performance of each of our Board’s standing committees are completed by the applicable members. The Nominating and Corporate Governance Committee presents the results of the questionnaires, which are compiled anonymously, to our Board at regularly scheduled meetings. These annual performance reviews are intended to enhance the overall effectiveness of our Board and its standing committees.

 

 

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Board Refreshment

Process for Selecting New Directors

The Board has delegated to the Nominating and Corporate Governance Committee the duty of selecting and recommending prospective nominees to the Board for approval. The Nominating and Corporate Governance Committee considers suggestions of candidates made by current committee and Board members, KBR management, and stockholders. The Committee also may retain an independent executive search firm to identify candidates for consideration. Finally, stockholders may suggest candidates for nomination by contacting the Nominating and Corporate Governance Committee in the manner provided below under “Contact the Board.”

 

 

1 The Committee considers suggestions of candidates made by current committee and Board members, KBR management, and stockholders.

IDENTIFY CANDIDATE

2 The Committee reviews information provided by the person recommending the candidate and the committee’s (and other Board members’) knowledge of the candidate to determine whether to carry out a full evaluation. This preliminary determination is based on the need for additional Board members (or for directors with particular skills or experience) and the likelihood that the candidate will meet the Board membership criteria listed below.

PRELIMINARY REVIEW CANDIDATE INFORMATION

3 If a candidate warrants additional consideration, the Nominating and Corporate Governance Committee may request an independent executive search firm to gather information about the candidate’s background, experience, and reputation, and to report its findings to the committee. After reviewing that report, the committee then determines whether to interview the candidate.

EXTERNAL REPORT BY EXECUTIVE SEARCH FIRM

4 Interviews are carried out by one or more members of the committee and others as appropriate.

INTERVIEW WITH CANDIDATE

5 Once the evaluation and interview are completed, the committee provides feedback and recommendations to the Board. The Board makes a determination of nominees after reviewing that input.

COMMITTEE RECOMMENDATION

 

 

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Director Qualifications

Candidates nominated for election or re-election to the Board of Directors should possess the following qualifications:

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the highest personal and professional ethics, integrity and values;

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an inquiring and independent mind;

|

practical wisdom and mature judgment;

|

broad training and experience at the policy-making level in business, government, or technology;

|

expertise that is useful to KBR and complementary to the background and experience of other Board members;

|

willingness to devote the required amount of time to carrying out the duties and responsibilities of Board membership;

|

commitment to serve on the Board for several years to develop knowledge about KBR’s principal operations;

|

willingness to represent the best interests of all stockholders and objectively appraise management performance; and

|

involvement only in activities or interests that do not create a conflict with a director’s responsibilities to KBR and our stockholders.

The Nominating and Corporate Governance Committee is responsible for assessing the appropriate mix of skills and characteristics required of Board members in the context of the needs of the Board at a given point in time. These criteria are periodically reviewed and updated. The Nominating and Corporate Governance Committee may consider diversity in personal background, race, gender, age and nationality when evaluating individual candidates, but KBR does not have a formal policy with regard to any particular aspect of diversity.

Stockholder Engagement

We actively engage with our investors throughout the year. Senior executives met virtually with analysts and investors at our annual Investor Day in June 2020, and our Corporate Secretary reaches out to our largest 25 investors bi-annually.

 

 

 

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Director Orientation and Education

During director orientation, our new directors typically meet with members of our Board and senior executives before attending their first Board and committee meetings. This ensures that our new directors are well-informed about KBR’s current matters in addition to the broad scope of our businesses. Our new directors also visit project sites and attend townhall meetings to gain more in-depth knowledge of our business practices, including Zero Harm.

Continuing education for our directors is both important and necessary due to the fast pace at which business and technology are evolving. Generally every quarter our Board is presented with an education topic. Recent examples include cybersecurity, data protection, data privacy, digitalization, internal controls, governance, sustainability, and workplace culture. In addition, our directors participate in continuing education outside of KBR covering a wide range of topics, such as audit matters, board effectiveness, cybersecurity board governance, finance, and strategy and innovation.

Board Practices and Procedures

Attendance at Meetings

Board members are expected to make every effort to attend the meetings of the Board and the committees of the Board on which they serve, as well as annual stockholder meetings. All of KBR’s directors attended 98% of the aggregate of all meetings of the Board and the applicable committees during 2020. All of our directors attended our 2020 Annual Meeting of Stockholders.

The Board of Directors meets each year immediately following the Annual Meeting of Stockholders and at least four other times per year. Additional regular meetings are scheduled as needed, and special meetings may be called by the Chairman of the Board, the Chief Executive Officer, the President, the Corporate Secretary, or a majority of the directors in office. KBR’s Bylaws permit action to be taken without a meeting if all members of the Board consent to such action in writing or by electronic transmission. During 2020, the Board of Directors held thirteen regular meetings and four ad hoc meetings, fifteen of which were conducted virtually. The Chairman of the Board presides at all Board meetings.

During each regular Board meeting, KBR’s independent non-executive directors meet in scheduled executive sessions, presided over by our non-executive Chairman of the Board. During 2020, the non-executive directors met without management six times.

Mandatory Retirement

Non-management directors may not seek re-election once they reach the age of 75; however, this mandatory retirement age may be extended under special circumstances if the Board deems it to be in the best interest of KBR. In 2020, the Board approved the recommendation of the Nominating and Corporate Governance Committee to grant a 12-month extension to the mandatory retirement age for General Lester Lyles, our non-executive Chairman of the Board, who will turn 75 on April 20, 2021. With the 12-month extension, General Lyles’s retirement from the Board will be effective immediately prior to the KBR annual meeting of stockholders following his 76th birthday; provided, however, that if agreed to by mutual consent, General Lyles may continue to serve on the Board for an additional extended period of time past KBR’s 2022 annual meeting of stockholders. The Board determined it was in the best interest of KBR to delay General Lyles’s mandatory retirement due to the volatile times created by COVID-19, which caused a global health crisis, severely disrupted the economy, and compounded the downturn of the energy market. In addition, the Board believed it was crucial to maintain General Lyles’s leadership and benefit from his incredible knowledge, skills and industry experience in the government and space fields following KBR’s October 2020 acquisition of Centauri, LLC, a leading independent provider of space, directed energy, and other advanced technology solutions to the United States intelligence community and Department of Defense.

Management directors must retire from the Board at the same time they retire from employment with KBR unless the Board approves continued service as a director.

 

 

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Service on Other Boards

KBR directors may not serve on the boards of directors of more than four other publicly held companies or investment companies. In addition, directors serving on the KBR Audit Committee may not serve on the audit committee of more than two other public companies. Directors must advise the chairman of the Nominating and Corporate Governance Committee before accepting an invitation to serve on another board.

Anti-Hedging Policy

Our anti-hedging policy prohibits all directors, employees, and agents from speculative trading in our securities; engaging in hedging transactions using our securities; “short selling” our securities; and trading derivative securities, such as put options, call options, swaps, or collars related to our securities.

Corporate Governance Materials

To ensure that our stockholders have access to our governing documents, we provide copies of our Code of Business Conduct, Corporate Governance Guidelines, and the charters of each of our standing Board committees on our website at kbr.com. Copies will be provided to any stockholder who requests them by writing to our Investor Relations Department at: 601 Jefferson Street, Suite 3400, Houston, Texas 77002.

Our Code of Business Conduct applies to all directors, officers, and employees of KBR, and all employees of KBR’s agents. KBR intends to satisfy SEC disclosure requirements regarding amendments to, or waivers from, any provision of the Code of Business Conduct by posting such information on our website.

How to Contact the Board

To foster better communication with our stockholders, KBR has established a process for stockholders and other interested parties to communicate with the Audit Committee and the Board of Directors. Concerns may be reported anonymously or confidentially.

You may communicate with our Board of Directors, the non-executive directors, or any Board committee by mail (Board of Directors c/o Director of Business Conduct, KBR, Inc., P.O. Box 3406, Houston, Texas 77253-3406), telephone (1-855-231-7512, toll-free from the U.S. or Canada, or 1-503-619-1884, calling collect from any other country), or e-mail (fhoukbrbod@kbr.com).

Our Director of Business Conduct reviews all communications directed to the Audit Committee and the Board of Directors. The Chairman of the Audit Committee is promptly notified of any significant communication involving accounting, internal controls, auditing matters, or similar issues. Communications addressed to a named director are promptly sent to the director. Communications directed to the non-executive directors are promptly sent to the non-executive Chairman of the Board. A report summarizing the significant communications is sent to each director quarterly, and copies of communications are available for review by any director, except that those items addressed to the non-executive directors are not available to executive directors.

 

 

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Our Sustainability Focus

In 2020, COVID-19 changed the way we live, work and interact. It forced us to pause, reconsider our behaviors, embrace change and think differently. Despite the challenges COVID-19 presented, it did not prevent us from investing time and resources into our commitment towards sustainable development. On the contrary, this year we made several significant developments to promote Zero Harm and positive contributions to the environment and society.

Our commitment to sustainability is embedded in our Zero Harm philosophy, enhanced by our Ten Sustainability Pillars. These pillars are designed to deeply embed sustainability into the heart of KBR’s culture and become an inherent part of the KBR Way.

 

 

Our core values inspire the way we work. Every action we take as a company is aligned with our vision and values, providing the framework for who we are and how we operate. Alongside our core values are our commitments to people, planet and prosperity. These pillars are underpinned by our Global Sustainability Policy, which sets out commitments for each of the ten environmental and social pillars.

 

 

 

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Our sustainability oversight starts at Board level; the Sustainability and Corporate Responsibility Committee of our Board of Directors reviews all sustainability matters, including ensuring KBR has policies and procedures in place to build a safe and resilient business that takes into consideration climate change, social impact, environmental impact, governance and business stability issues. The Sustainability and Corporate Responsibility Committee also contributes to the direction of and reviews our annual Sustainability and Corporate Responsibility Report, which is available on our website at kbr.com/sustainability report. All members of this committee are independent directors.

 

 

Key Developments

Over the course of the last year we commissioned a third-party consultant to calculate our corporate carbon footprint to provide an overview of the CO2 emissions generated by our business activities across our 101 sites. This included heating, cooling, and vehicles (Scope 1), electricity (Scope 2), and business travel (air and train travel – category 6 of Scope 3). In 2019, KBR’s business activities generated a total of 114,714.60 tons of CO2, nearly 4% of which were Scope 1 emissions, 30% Scope 2 emissions, and 66% Scope 3 emissions. Business travel, air travel in particular, was the most emission-intensive activity and represents the largest share of KBR’s carbon footprint. We included a safety margin of 20% (10% is typical) to account for any discrepancies that might have resulted from assumptions and estimates taken.

Emission Source

Emission

[t CO2]

 

 

Share, %

Scope 1

4,324.3

 

 

3.77

Heating

3,134.2

 

 

2.73

Cooling

389.4

 

 

0.34

Vehicles

800.7

 

 

0.70

Scope 2

34,577.9

 

 

30.14

Electricity

34,577.9

 

 

30.14

Scope 3

75,812.4

 

 

66.09

Air travel

75,794.3

 

 

66.07

Train travel

18.1

 

 

0.02

TOTAL

114,714.60

 

 

100.00

TOTAL INCL. 20% SAFETY MARGIN

137,657.52

 

 

 

 

 

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By purchasing carbon credits from wind farms in India and contributing to projects run by the Plastic Bank across the globe, we achieved carbon neutrality for our Scope 1 and Scope 2 greenhouse gas emissions. These 2019 calculations form our baseline from which we will widen Scope 3, set science-based targets, and commit to net zero emissions for 2030.

2020 saw the continued growth of KBR One Ocean, the bedrock of our sustainability commitment. This global collaboration between KBR employees, local schools, youth and international environmental organizations links hundreds of school students across the globe and inspires them to create their own innovative solutions to environmental issues.

It is also designed to develop professional skills and core competencies in KBR’s new talent while inspiring and attracting young students to STEAM (Science, Technology, Engineering, Arts and Mathematics) fields and careers, thus creating a robust and diverse talent pipeline.

We appointed a new Chief People Officer in May 2020 with the following areas of priority:

|

building our reputation as a great place to work;

|

capitalizing on the tremendous talent within KBR;

|

creating the conditions for people to flourish; and

|

helping realize the potential of One KBR.

One of the first programs to support the “conditions for people to flourish” priority was the launch of our Well-being Ambassador Program. This program started in the UK and Australia and has now been implemented in sites across the US, Singapore, and Saudi Arabia. By 2021, the Well-being Ambassador Program will be running in all KBR regions throughout the globe. Well-being Ambassadors are trained to promote mental fitness and a healthy and positive workplace. They provide a first point of contact for any employee in need of emotional support and guidance to support resources.

In March 2020, in response to the pandemic, our HSSE unit rapidly developed our Key Pandemic Behaviors throughout all corporate and project sites across the globe. These key behaviors were based on best practice with advice from the Centers for Disease Control and Prevention (CDC), European Centre for Disease Prevention and Control (ECDC), and the World Health Organization (WHO) for how to deal with a pandemic. Employees were urged to follow them consistently to mitigate risk to the pandemic to as low as possible.

Towards the end of 2020, we finalized a license agreement with Mura Technology Limited for an innovative advanced plastics recycling process. This technology recycles end-of-life plastic to produce building blocks for virgin-quality polymers and chemicals. This aligns with KBR’s commitment to sustainability by reducing lifecycle greenhouse gas emissions and the volume of waste that enters landfills and the environment, while contributing to the growth of the plastic circular economy.

2020 was also the year we announced KBR’s green ammonia process K-GreeNTM. K-GreeNTM achieves low or zero greenhouse gas emissions by combining ammonia synthesis plant reliability with lower energy consumption at lower capital cost (due to lower equipment count) with electrolysis and air separation sections.

 

 

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Security Ownership of Certain Beneficial Owners and Management

The table below sets forth certain information, as of March 13, 2021, regarding the beneficial ownership of KBR’s common stock by persons known by KBR to beneficially own more than five percent of its outstanding common stock, each director or nominee, each of the named executive officers referenced in the Summary Compensation Table contained in this proxy statement, and all directors and executive officers as a group. Information regarding five percent stockholders in the table and footnotes is based on the most recent Statement on Schedule 13G or 13D or amendment thereto filed by each such person with the SEC, except as otherwise known to KBR. To our knowledge, except as otherwise noted in the footnotes to this table or as provided by applicable community property laws, each individual has sole voting and investment power with respect to the shares of common stock listed in the second column below as beneficially owned by the individual.

Name and Address of Beneficial Owner(1)

Shares of KBR Common Stock Beneficially Owned

Number of Shares(2)

 

Percentage of Class

BlackRock, Inc.(3)

55 East 52nd Street, New York City, New York 10055

16,482,379

 

11.6

%

The Vanguard Group(4)

100 Vanguard Boulevard, Malvern, Pennsylvania 19355

13,165,995

 

9.24

%

Massachusetts Financial Services Company(5)

111 Huntington Avenue, Boston, Massachusetts 02199

7,874,087

 

5.5

%

Eileen G. Akerson(6)(7)

86,808

 

*

 

Stuart J. B. Bradie(6)(7)

552,655

 

*

 

W. Byron Bright, Jr.(6)(7)

41,843

 

*

 

J. Jay Ibrahim(6)(7)

84,050

 

*

 

Mark W. Sopp(6)(7)

77,880

 

*

 

Mark E. Baldwin(6)(7)

50,398

 

*

 

James R. Blackwell(6)(7)

50,136

 

*

 

Lynn A. Dugle(6)(7)

5,463

 

*

 

Lester L. Lyles(6)(7)

65,880

 

*

 

Wendy M. Masiello(6)(7)

27,656

 

*

 

Jack B. Moore(6)(7)

56,112

 

*

 

Ann D. Pickard(6)(7)

42,879

 

*

 

Umberto della Sala(6)(7)

44,620

 

*

 

ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (18 PERSONS)(6)(7)(8)

1,280,544

 

*

 

*

Less than one percent (1%).

(1)

The address of each of the named executive officers and directors is c/o KBR, Inc., 601 Jefferson Street, Suite 3400, Houston, Texas 77002.

(2)

Beneficial ownership means the sole or shared power to vote, or to direct the voting of, shares of KBR common stock, or investment power with respect to KBR common stock, or any combination of the foregoing. Each director and executive officer and the directors and executive officers as a group beneficially own less than 1% of the outstanding shares of KBR common stock.

(3)

Based solely on a Schedule 13G filed February 5, 2021, BlackRock, Inc. is deemed to be the beneficial owner of 16,482,379 shares as a result of being a parent holding company or control person in accordance with §240.13d-1(b)(1)(ii)(G).

(4)

Based solely on a Schedule 13G filed February 10, 2021, The Vanguard Group is deemed to be the beneficial owner of 13,165,995 shares as a result of being an investment adviser in accordance with §240.13d-1(b)(1)(ii)(E).

(5)

Based solely on a Schedule 13G filed February 11, 2021, Massachusetts Financial Services Company is deemed to be the beneficial owner of 7,874,087 shares as a result of being an investment advisor in accordance with §240.13d-1(b)(1)(ii)(E).

(6)

Includes the following shares of restricted stock and/or restricted stock units that have vested or will vest on or before May 12, 2021: Ms. Akerson, 64,495; Mr. Bradie, 429,479; Mr. Bright, 34,522; Mr. Ibrahim, 61,860; Mr. Sopp, 54,355; Mr. Baldwin, 50,398; Mr. Blackwell, 50,136 (13,382 of which were deferred into the nonqualified elective deferral plan for non-executive directors); Ms. Dugle, 5,463; General Lyles, 65,880 (26,550 of which were deferred into the nonqualified elective deferral plan for non-executive directors); Lt. General Masiello, 27,656; Mr. Moore, 56,112; Ms. Pickard, 42,879; Mr. della Sala, 44,620; and all executive officers as a group, 288,911. Includes the following shares that may be acquired upon the exercise of options that are exercisable or will become exercisable on or before May 12, 2021: Ms. Akerson, 22,313; Mr. Bradie, 123,176; Mr. Bright, 7,321; Mr. Ibrahim, 22,190; and all executive officers as a group, 66,539. Includes 23,525 shares of common stock purchased by Mr. Sopp in March 2017, February 2020, and March 2020. Includes 5,770 shares of common stock purchased by Mr. Evans, one of our executive officers, in March 2020.

(7)

Does not include the following shares of restricted stock units as to which the holder has no voting power and no investment power, but which convert to common stock on a 1-to-1 ratio upon vesting, which for some restricted stock units requires that certain performance measures be met: Ms. Akerson, 21,187; Mr. Bradie, 150,478; Mr. Bright, 25,047; Mr. Ibrahim, 23,459; Mr. Sopp, 35,049; and all executive officers and directors as a group, 412,603.

(8)

All directors and executive officers as a group refers to the current 9 directors (Ms. Dugle, Lt. General Masiello, Ms. Pickard, General Lyles, and Messrs. Baldwin, Blackwell, Bradie, Moore, and della Sala) and the current 9 executive officers, excluding Mr. Bradie (Ms. Akerson, Ms. Myles, and Messrs. Barrie, Bright, Conlon, Evans, Ibrahim, Kelly, and Sopp).

 

 

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Executive Officers

The following biographical information with respect to each of KBR’s executive officers is current as of March 26, 2021.

EILEEN G. AKERSON

Age: 55 | Joined KBR in: 1999 | Executive Vice President and General Counsel

Current Position since: November 2014

Prior Business Experience

Education

|

KBR Senior Vice President, Commercial responsible for project commercial management and oversight of the review and approval process for significant transactions and joint venture relationships

|

KBR Vice President — Legal & Chief Counsel responsible for managing legal functions for the Hydrocarbons Business Group

|

KBR advisor and counselor to senior management on company policies affecting ethics and compliance matters

|

Attorney for Spriggs & Hollingsworth in Washington D.C.

|

B.A., Catholic University of America

|

J.D., Catholic University of America Columbus School of Law

|

Member of the bars of Texas, Connecticut and the District of Columbia

 

ANDREW J. BARRIE

Age: 53 | Joined KBR in: 1990 | President, Government Solutions EMEA

Current Position since: May 2019

Prior Business Experience

Education

|

KBR Senior Vice President, Business Acquisition

|

KBR Vice President, Commercial

|

Has over 30 years of experience in business development, commercial management and leadership across the government, infrastructure and energy markets.

|

B.A. (Business), Kingston University London

|

Diploma in Company Direction from the Institute of Directors

 

W. BYRON BRIGHT, JR.

Age: 47 | Joined KBR in: 2010 | President, Government Solutions

Current Position since: June 2020

Prior Business Experience

Education

|

KBR President, Government Solutions – U.S.

|

KBR President, KBRwyle

|

KBR Senior Vice President of Operations for U.S. Government Services

|

KBR Vice President of Business Development for U.S. Government Services

|

Supported the government services business at Jacobs Engineering Group Inc.

|

Officer in the U.S. Air Force primarily working in the Developmental Test and Engineering career field supporting weapons development and rotary wing aircraft flight testing

|

B.S. (Engineering and Mechanics), distinguished graduate, U.S. Air Force Academy

|

M.S. (Mechanical Engineering), Georgia Institute of Technology

|

Graduated from the U.S. Air Force Test Pilot School and has flown in over 25 different aircraft as a Flight Test Engineer

 

 

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GREGORY S. CONLON

Age: 52 | Joined KBR in: 2016 | Chief Digital and Development Officer

Current Position since: January 2019

Prior Business Experience

Education

|

KBR Executive Vice President and Chief Development Officer responsible for Strategy, Global Business Development, Marketing, and Mergers & Acquisitions

|

KBR President, Asia-Pacific (“APAC”) responsible for Engineering & Construction (“E&C”) and Government Services (“GS”) in this region

|

KBR President, E&C APAC

|

Executive Vice President leading business development globally for the WorleyParsons Services business line, the largest business within WorleyParsons

|

Has over 25 years of experience in the E&C business, with global experience across a range of subsectors from hydrocarbons to specialist infrastructure.

|

Various positions in the energy and resources sectors in Australia, Canada, China, Indonesia, Singapore, Thailand, and the United Kingdom.

|

B.S. (Mechanical Engineering), Royal Melbourne Institute of Technology

 

SHAD E. EVANS

Age: 43 | Joined KBR in: 2018 | Senior Vice President of Finance Operations and Interim Chief Accounting Officer

Current Position since: August 2020 (Interim CAO since October 30, 2020)

Prior Business Experience

Education

|

KBR Chief Financial Officer of Technology Solutions

|

Vice President, Finance and Business Operations Security Detection and Automation at Leidos Holdings, Inc.

|

B.S. (Accounting), San Diego State University-California State University

|

M.B.A. (Finance), University of San Diego

 

J. JAY IBRAHIM

Age: 60 | Joined KBR in: 2015 | President, Sustainable Technology Solutions

Current Position since: June 2020

Prior Business Experience

Education

|

KBR President, Energy Solutions – Services

|

KBR President, Europe, Middle East and Africa (“EMEA”) and APAC responsible for
E&C and GS in these regions

|

KBR President, EMEA responsible for E&C and GS in this region

|

KBR President, E&C EMEA

|

Has over 25 years of E&C and GS experience across the globe, having served in a variety of engineering, project management, business development, and business management roles for Parsons E&C/WorleyParsons.

|

Has a wealth of senior project and construction management experience within the hydrocarbon, infrastructure, and government services sectors as well as broad experience in complex contract negotiations, business analysis, and long-range strategic planning in both domestic and international markets.

|

B.S. (Mechanical Engineering), Wichita State University

|

M.S. (Mechanical Engineering), Wichita State University

|

Diploma in Advanced Management, Harvard University

 

 

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DOUGLAS N. KELLY

Age: 57 | Joined KBR in: 2010 | President, Technology

Current Position since: September 2019

Prior Business Experience

Education

|

KBR Senior Vice President, Business Development and Marketing Technology
Solutions

|

KBR Vice President, Refining Technology Solutions

|

Chief Operating Officer at ZEEP

|

Vice President at Invensys (now AVEVA)

|

Vice President at Aspen Technology

|

B.S. (Chemical Engineering), University of Oklahoma

|

Licensed Professional Engineer (Texas)

 

JENNI C. MYLES

Age: 53 | Joined KBR in: 2020 | Executive Vice President, Chief People Officer

Current Position since: May 2020

Prior Business Experience

Education

|

Group HR Director and core member of the Group Executive Committee at G4S

|

Chief HR Officer, Americas Region at G4S

|

Director of HR & Employee Engagement at G4S

|

Various employee relations and human resources management roles at KPMG, Northern Foods, and Ford Motor Company

|

L.L.B. (Hons), University of Glasgow

|

Fellow of the Chartered Institute of Personnel & Development

 

MARK W. SOPP

Age: 55 | Joined KBR in: 2017 | Executive Vice President and Chief Financial Officer

Current Position since: February 2017

Prior Business Experience

Education

|

Chief Financial Officer and Executive Vice President for Leidos Holdings, Inc.,
previously Science Applications International Corporation, one of the largest publicly-traded government contractors in the U.S. with significant technically-focused commercial professional services operations, including
serving energy markets

|

Various executive positions with Titan Corporation, also involved in government contracting and commercial business areas

|

B.S. (Accounting), New Mexico State University

|

Completed the Executive Program at UCLA Anderson School

 

 

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Proposal No. 2 Advisory Vote to Approve Named Executive Officer Compensation

The Board of Directors recommends that you vote FOR the advisory vote to approve our NEOs’ compensation as disclosed in this proxy statement. Properly dated and signed proxies, and proxies properly submitted over the Internet and by telephone, will be so voted unless stockholders specify otherwise.

 

The Board of Directors is providing our stockholders with the opportunity to cast a non-binding advisory vote to approve the compensation of our Named Executive Officers (“NEOs”) as disclosed in this proxy statement.

Executive Compensation

Our Compensation Committee establishes, recommends, and governs all the compensation and benefits policies and actions for KBR’s NEOs, as discussed in the “Compensation Discussion and Analysis” section of this proxy statement. Consistent with our compensation philosophy, our executive compensation program has been designed to achieve the following primary objectives:

l

provide a clear and direct relationship between executive pay and Company (and business segment, as applicable) performance, both on a short- and long-term basis;

l

emphasize operating performance measures;

l

link executive pay to measures of stockholder value;

l

support our business strategies and management processes in order to motivate our executives; and

l

generally target base salary, short-term incentives, long-term incentives, and total compensation levels near the 50th percentile of the competitive market for good performance, and above the 50th percentile of the competitive market for consistent, outstanding performance, taking into consideration factors like differences in our NEOs’ responsibilities compared to their counterparts at our peers, experience, retention risk, and internal equity.

In light of these objectives, KBR provides pay that is highly dependent on performance, both short- and long-term. We continually review best practices in governance and executive compensation. Consistent with such best practices, KBR:

l

does not maintain employment agreements with the NEOs;

l

does not provide excise tax gross-ups;

l

has incentive plans that discourage undue risk and align executive rewards with short- and long-term company performance; and

l

requires executives to satisfy stock ownership requirements.

For the reasons discussed above, the Board of Directors unanimously recommends that stockholders vote in favor of the following resolution:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

While the resolution is non-binding, the Board of Directors values your opinion and will consider the outcome of the vote when making future compensation decisions.

 

 

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Compensation Discussion and Analysis

Executive Summary

NAMED EXECUTIVE OFFICERS

This Compensation Discussion and Analysis provides a detailed description of our compensation philosophy, objectives, policies, and practices in place during 2020 and explains the factors considered by our Compensation Committee in making compensation decisions during 2020. This Compensation Discussion and Analysis focuses on the compensation of the following Named Executive Officers, or “NEOs”:

Name

Title

Stuart Bradie

President and Chief Executive Officer

Mark Sopp

Executive Vice President and Chief Financial Officer

Jay Ibrahim

President, Sustainable Technology Solutions

Byron Bright

President, Government Solutions

Eileen Akerson

Executive Vice President and General Counsel

These NEOs, together with the other members of our executive management team whose compensation is determined by our Compensation Committee and our Board of Directors, are referred to as our “Senior Executive Management.”

 

COMPENSATION HIGHLIGHTS

Changes Made in 2020 to KBR’s Compensation Program

In 2020, our Compensation Committee made several changes to KBR’s compensation program. To help offset the financial impact of the COVID-19 pandemic, KBR implemented temporary reductions to employee base salaries and non-executive director cash retainers, as disclosed on pages 51 and 76, respectively. Unrelated to the COVID-19 pandemic, our Compensation Committee made changes to our short-term incentive (“STI”) plan to further emphasize the link between pay and Company performance and long-term incentive (“LTI”) plan to respond to our stockholders’ feedback, as disclosed on pages 52 and 56, respectively.

l

Base Salary – COVID-19 Pay Sacrifices

l

STI Plan – Increased Weightings of Financial Performance Metrics

l

LTI Plan – Increased Percentage of Stock-based and Settled Awards

Our Compensation Committee believes all of our compensation programs strongly reflect our pay-for-performance strategy. Changes made to our 2021 Compensation Program are disclosed on pages 55 and 60.

Advisory Vote on Compensation and Stockholder Engagement

We believe we have a well-designed executive compensation program. Our most recent Say-on-Pay Proposal was presented to our stockholders during the Company’s 2020 annual meeting, and garnered the support of approximately 98% of the votes cast (in person and by proxy). The Compensation Committee was gratified by this result, which came after we revised our long-term incentive program in response to stockholder feedback. We will continue to consider the outcome of our Say-on-Pay Proposal and other stockholder feedback when determining future compensation policies and decisions for our NEOs.

Pay for Performance in 2020

Our CEO’s strategic actions positioned KBR for long-term growth, and 2020 was the fourth consecutive year that we saw these actions deliver strong results and improved stockholder value. Our adjusted EPS(1) increased by 2.4% from 2019, and our net income to cash flow conversion was 146%, an increase of 15% from 2019.

 

 

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The alignment of our CEO’s compensation with company performance and stockholder value during his six-year tenure is provided in the charts below and on the next page.

 

 

 

 

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Overview of Executive Compensation Philosophy, Policies and Practices

KEY CONSIDERATIONS IN DETERMINING EXECUTIVE COMPENSATION

Our Compensation Committee regularly reviews the elements of the individual compensation packages for our CEO and Senior Executive Management. In determining executive compensation, our Compensation Committee strives to ensure that:

l

Pay packages align executives’ interests with our stockholders’ interests;

l

Performance metrics are sufficiently challenging;

l

Target pay packages reflect an appropriate mix of short-term and long-term incentives; and

l

Total compensation, as well as each individual compensation element, is targeted near the 50th percentile of the competitive market for good performance and above the 50th percentile of the competitive market for consistent, outstanding performance, taking into consideration factors like differences in our NEOs’ respective responsibilities compared to responsibilities ascribed to their counterparts at our peers, as well as experience, retention risk, and internal equity.

Our executive compensation program is regularly reviewed to ensure that it remains consistent with these objectives and is administered in accordance with established compensation policies.

POLICIES AND PRACTICES

Below is a summary of our compensation policies and practices in place during 2020:

 

 

Clawbacks

l

If our Compensation Committee determines that an officer or employee has been paid incentive compensation (either cash or equity) based on financial results that are later restated, the Company may seek recovery of any overpayments.

Stock Ownership Guidelines

l

We require our NEOs to own a significant amount of KBR stock to align their interests with our stockholders’ interests.

No Pledging

l

Officers may not pledge KBR stock.

No Hedging

l

Officers may not hedge KBR stock.

Market Comparison

l

Our Compensation Committee strives to set base salary, short-term incentives, long-term incentives, and total compensation levels near the median of our peer companies for good performance, and above the 50th percentile of the competitive market for consistent, outstanding performance.

Performance-Based Compensation

l

A majority of our NEOs’ compensation is performance-based and varies depending on the achievement of absolute and relative performance goals.

Double-Trigger

l

Our severance and change-in-control agreements require a double-trigger for a change-in-control termination (i.e., the occurrence of both a change in control and a termination of employment within two years thereafter) in order for an executive to receive change-in-control benefits.

No Employment Agreements

l

Our NEOs do not have employment agreements.

No Tax Gross-Ups

l

We do not provide excise tax gross-up agreements.

No Option Repricing

l

We prohibit the repricing of KBR stock options.

 

ROLE OF THE CEO

During 2020, our CEO made recommendations to our Compensation Committee regarding the compensation and incentives for our Senior Executive Management other than himself. Our CEO also:

l

recommended performance measures, target goals and award schedules for short-term and long-term incentive awards, and reviewed performance goals for consistency with our projected business plan;

l

reviewed competitive market data for Senior Executive Management positions; and

l

developed specific recommendations regarding the amount and form of equity compensation to be awarded to our Senior Executive Management.

ROLE OF THE BOARD AND THE COMPENSATION COMMITTEE

Each December our non-executive directors meet in executive session to evaluate the performance of our Chief Executive Officer. In evaluating our CEO, the non-executive directors consider qualitative and quantitative elements of the CEO’s performance, including:

l

leadership and vision;

l

integrity;

l

keeping the Board informed on matters affecting KBR and its operating units;

l

performance of the business, including such measurements as total stockholder return (“TSR”) and achievement of financial objectives and goals;

 

 

 

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l

development and implementation of initiatives to provide long-term economic benefit to KBR;

l

accomplishment of strategic objectives; and

l

development of management.

Based on the CEO’s recommendations and in concert with him, our Compensation Committee annually reviews and approves the compensation and incentive awards for our Senior Executive Management.

The CEO’s evaluation and compensation for the next full year, including an evaluation of whether the CEO has created adequate management succession and development programs, are communicated to the CEO by the non-executive Chairman of the Board after review and approval by our Compensation Committee and the full Board of Directors (other than the CEO).

THIRD-PARTY CONSULTANTS

Under its charter, our Compensation Committee is authorized to retain a compensation consultant and has the sole authority to approve the consultant’s fees and other retention terms. While we believe that retaining third-party consultants is an efficient way to keep current regarding competitive compensation practices, our Compensation Committee does not accord undue weight to the advice of outside professional advisors. Instead, we design and adjust our compensation program to address the program’s intended objectives.

In 2020, our Compensation Committee used the services of one compensation consulting firm, Meridian Compensation Partners, LLC (“Meridian”). Our Compensation Committee engaged and managed its relationship with Meridian directly, and Meridian reported directly to our Compensation Committee.

Meridian’s work for KBR included advising our Compensation Committee, as requested, with respect to all executive compensation matters and various director compensation matters. In particular, Meridian was engaged to provide the following:

l

A review of our short-term incentive program;

l

A review of CEO pay considerations for 2020;

l

A review of our short-term incentive design for 2020;

l

A 2020 proxy update;

l

A review of the peer groups used to assess the competitiveness of our executive compensation programs for the 2020-2021 compensation cycle;

l

Regular updates on notable legislative and regulatory activities;

l

Regular updates on the valuation of our long-term performance awards;

l

A competitive market study of executive compensation for Senior Executive Management;

l

A competitive market study of non-executive director compensation;

l

A review of the risk profile of the proposed long-term incentive performance metrics for 2021;

l

A realizable pay analysis;

l

A review of the CEO’s 2021 executive compensation recommendations for Senior Executive Management; and

l

A review of the CEO’s compensation for 2021.

Outside of providing executive and director advisory services to our Compensation Committee, Meridian provided no other services to us or our affiliates. In May 2020, our Compensation Committee reviewed the independence factors approved by the SEC (as well as other factors identified by the NYSE) as affecting the independence of a consultant or adviser, including the following:

l

Whether Meridian provides other services to KBR;

l

The amount of fees Meridian received from KBR as a percentage of that firm’s total revenue;

l

Meridian’s policies and procedures that are designed to prevent conflicts of interest;

l

Whether there is any business or personal relationship between an individual Meridian compensation consultant or other adviser and a member of our Compensation Committee;

l

Whether there is any business or personal relationship of the compensation consultant or other advisor or the compensation consultant’s or other advisor’s employer with any of the executive officers of KBR;

l

Whether Meridian or any of its principals or employees owns any stock of KBR; and

l

Whether Meridian or any of its principals or employees has a business or personal relationship with an executive officer of KBR.

Based on the results of this review, our Compensation Committee confirmed Meridian’s independence and lack of a conflict of interest in 2020, and approved the continued retention of Meridian.

 

 

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PEER GROUPS

In the design and administration of our 2020 executive compensation programs for our Named Executive Officers, our Compensation Committee considered competitive market data from two distinct peer groups: our “Core Peer Group” and our “Diversified Peer Group.” As discussed below under “Elements of Compensation—KBR Long-Term Performance Cash and Stock Awards,” the Compensation Committee also refers to a “TSR Peer Group” for limited purposes related to the NEOs’ long-term incentive awards.

The Core Peer Group is composed of thirteen companies whose primary operations involve providing highly technical and professional services to the U.S. government and the engineering, construction, and services industry. We believe these are the companies against which KBR most competes for employees and business. The Core Peer Group used for 2020 compensation decisions consisted of the following companies:

Company

(Data in billions as of 12/31/2019)

Revenues

 

Assets

Market Cap

AECOM Technology Corporation(1)

$

20.173

 

$

14.462

$

6.775

Booz Allen Hamilton Holding Corporation(2)

$

6.704

 

$

3.832

$

9.985

CACI International Inc(3)

$

4.986

 

$

5.087

$

6.260

EMCOR Group, Inc.

$

9.175

 

$

4.830

$

4.846

Fluor Corporation

$

14.348

 

$

7.967

$

2.646

Jacobs Solutions Inc.(4)

$

12.738

 

$

11.463

$

11.970

Leidos Holdings, Inc.

$

11.094

 

$

9.367

$

13.858

ManTech International Corporation

$

2.223

 

$

2.108

$

2.150

McDermott International, Inc.

$

8.431

 

$

8.737

$

0.123

Quanta Services, Inc.

$

12.112

 

$

8.332

$

5.793

Science Applications International Corporation(5)

$

4.659

 

$

4.563

$

5.150

TechnipFMC plc

$

13.409

 

$

23.519

$

9.585

Vectrus, Inc.

$

1.383

 

$

0.636

$

0.590

MEDIAN (INCLUDING KBR)

$

8.803

 

$

6.665

$

5.472

KBR, INC.

$

5.639

(6) 

$

5.364

$

4.322

(1)

AECOM Technology Corporation’s Revenues and Assets are as of 9/30/2019 and Market Cap is as of 12/31/2019.

(2)

Booz Allen Hamilton Holding Corporation’s Revenues and Assets are as of 3/31/2019 and Market Cap is as of 12/31/2019.

(3)

CACI International Inc.’s Revenues and Assets are as of 6/30/2019 and Market Cap is as of 12/31/2019.

(4)

Jacobs Solutions Inc.’s Revenues and Assets are as of 9/30/2019 and Market Cap is as of 12/31/2019.

(5)

Science Applications International Corporation’s Revenues and Assets are as of 1/31/2019 and Market Cap is as of 12/31/2019.

(6)

KBR’s revenue does not include our share of revenue from our unconsolidated joint ventures, which was approximately $1.3 billion in 2019.

The compensation data for our Core Peer Group was obtained from publicly available sources, including proxy statements and Form 4 and 8-K disclosures, and was not adjusted.

In addition to reviewing publicly available data for the Core Peer Group, our Compensation Committee also assesses the competitiveness and reasonableness of the compensation programs for our Named Executive Officers against data from a supplemental group of companies that crosses multiple industries and includes companies of similar size and scope as KBR. For 2020 compensation decisions, the Diversified Peer Group consisted of 22 companies that were participants in the Equilar Executive Compensation Survey (which Meridian used to analyze peer company compensation data that was not publicly available). The companies in the Diversified Peer Group were generally selected based on revenue, size, complexity, performance, and the nature of their principal business operations, with specific emphasis on engineering and construction, heavy industrial, manufacturing, and government services. Our Compensation Committee believes the Diversified Peer Group appropriately represents both the local Houston and the broader market for key management and technical talent.

 

 

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The Diversified Peer Group used for 2020 compensation decisions consisted of the following companies:

 

 

 

AECOM Technology Corporation

Huntington Ingalls Industries, Inc.

Science Applications International Corporation

Boise Cascade Company

Jacobs Solutions Inc.

Teradata Corporation

Booz Allen Hamilton Holding Corporation

L3Harris Technologies, Inc.

Tetra Tech, Inc.

Dover Corporation

Leidos Holdings Inc.

Timken Corporation

EMCOR Group, Inc.

Lennox International Inc.

Unisys Corporation

Flowserve Corporation

McDermott International, Inc.

Visteon Corporation

Fluor Corporation

Meritor Inc.

 

Hubbell Inc.

Quanta Services, Inc.

 

 

During 2020, our Compensation Committee asked Meridian to review the appropriateness of the Core and Diversified Peer Groups for assessing the competitiveness of our executive compensation programs considering the Company’s latest business restructuring to reshape and focus its portfolio around two segments – Government Solutions and Sustainable Technology Solutions. The review considered several factors relating to the constituent companies, including an analysis of certain financial metrics (such as, revenue, net assets, market capitalization, enterprise value, and number of employees) drawn from the Equilar Executive Compensation Survey, business strategies, the effects of corporate transactions, and the availability of market data. As a result of this review, our Compensation Committee updated our Core Peer Group for 2021 compensation decisions by removing six companies (five with energy and other traditional engineering, procurement, and construction business models and one that was too small from a revenue standpoint) and adding three companies with business models focused on government services and technology. Specifically, AECOM Technology Corporation, EMCOR Group, Inc., McDermott International, Inc., Quanta Services, Inc., TechnipFMC plc, and Vectrus, Inc. were removed and Parsons Corporation, Perspecta Inc., and Unisys Corporation were added. Our Compensation Committee also made changes to our Diversified Peer Group by removing nine companies due to industry mismatch or lack of participation in the Equilar Executive Compensation Survey and adding five companies. Specifically, AECOM Technology Corporation, Boise Cascade Company, EMCOR Group, Inc., Jacobs Solutions Inc., Lennox International Inc., McDermott International, Inc., Meritor Inc., Quanta Services, Inc., and Visteon Corporation were removed and BAE Systems plc, Conduent Incorporated, Gartner, Inc., ManTech International Corporation, and Textron Inc. were added.

Regardless of the outcome of our Say-on-Pay Proposal, our Corporate Secretary reaches out to our largest investors bi-annually to maintain an open dialogue about our compensation policies, practices, and structure, and to receive feedback on elements that could be changed to better align with stockholders’ interests. In 2020, we reached out to our largest 25 investors in April for comment on our 2020 proxy. Our Corporate Secretary had calls with or heard from investors representing approximately 29% of our outstanding stock. A majority of the investors we spoke with did not mention any major concerns. We did hear from several investors a preference that a majority of our long-term incentives should be in stock rather than cash. We made changes in response to this feedback by denominating the TSR portion of our Long-Term Cash Performance Awards in stock.

 

 

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Summary of 2020 Target Compensation of Named Executive Officers

The table below reflects target annual compensation and is not intended to replace the more detailed information provided in the Summary Compensation Table. The target dollar amounts for restricted stock units are rounded to the next whole share upon grant.

 

 

 2020 Base

Salary

Target 2020

Short-Term

Incentive

Target 2020 Long-Term Performance
Incentives

Total Target

Amount

Time-Based

Restricted Stock

Units Target

Dollar Amount

Performance Cash

and Stock Award

Target Dollar

Amount

Mr. Bradie $ 1,135,000 $ 1,475,500 $ 2,083,333 $ 4,166,667 $ 8,860,500
Mr. Sopp $ 652,800 $ 587,520 $ 500,000 $ 1,000,000 $ 2,740,320
Mr. Ibrahim $ 570,000 $ 513,000 $ 333,333 $ 666,667 $ 2,083,000
Mr. Bright $ 570,000 $ 513,000 $ 333,333 $ 666,667 $ 2,083,000
Ms. Akerson $ 475,000 $ 427,500 $ 283,333 $ 566,667 $ 1,752,500

 

Elements of Compensation

Our executive compensation program has been designed to ensure that KBR can attract and retain talented executives who are motivated to pursue KBR’s strategies, focus employees’ efforts, help achieve business success, and align with stockholders’ interests. There is no pre-established formula for the allocation between cash and non-cash compensation or between short-term and long-term compensation. Instead, each year our Compensation Committee determines, in its discretion and business judgment, the appropriate level and mix of compensation to reward our NEOs for near-term superior performance and to encourage commitment to our long-range strategic business goals. When making these decisions, our Compensation Committee is always mindful of our philosophy that the majority of Named Executive Officer compensation should vary with Company performance.

As shown below, a significant portion of our NEOs’ target annual compensation in 2020 was performance-based.

 

 

 

 

 

 

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Our 2020 executive compensation program consisted of three core elements of direct compensation: base salary, short-term (annual) incentives, and long-term incentives. Each of these elements is described below.

BASE SALARY

We pay our NEOs market-competitive base salaries for the skills and experience they bring to their respective roles. Our Compensation Committee then uses its discretion to adjust market-based amounts to reflect:

l

Leadership and individual performance;

l

Internal pay equity;

l

Level of responsibility;

l

Experience in current role and equitable compensation relationships among our executives; and

l

External factors involving general economic conditions and marketplace compensation trends.

 

COVID-19 Pay Sacrifices in 2020

In response to the impact of the COVID-19 pandemic, which severely disrupted the economy and compounded the downturn of the energy market, our Compensation Committee and, with respect to the CEO and non-executive directors, our Board approved pay sacrifices during 2020 as a measure to reduce Company costs. Specifically, our CEO’s base salary and non-executive directors’ cash retainers were reduced by 15% for the five-month period beginning April 1 and ending August 31. Our NEOs’ base salaries were reduced by 10% for the same five-month period except that Mr. Ibrahim elected to continue his pay sacrifice until December 31, 2020, due to the strategic reorganization and reduction in size of his business segment. The five-month, 10% base salary reduction also applied to any employee with a base salary of at least $100,000 (or the equivalent in local currency) except for employees who were supporting a U.S. government contract. The 10% base salary reduction applied to employees in Mr. Ibrahim’s business segment continued until December 31, 2020.

The base salary reductions did not impact the target 2020 STI award opportunities for our NEOs (or any employee eligible to receive a 2020 STI award) because a participant's target STI award opportunity is calculated based on their annual base salary as determined on the first day of January during the applicable calendar year (or the first day an employee becomes eligible to participate in the STI plan if such day occurs after the first day of January).

 

The table below shows the base salaries for our Named Executive Officers, effective January1,2020, and the amount of their COVID-19 pay sacrifices in 2020:

Name

Increase

(% of 2019 Base Salary)

2020 Base Salary

COVID-19 Pay Sacrifice

(% of 2020 Base Salary)

Basis for 2020 Base Salary Decision

Mr. Bradie

$

35,000

(3.2%)

$

1,135,000

$

71,375

(6.3%)

Core Peer Group data and strong performance.

Mr. Sopp

$

0

(0%)

$

652,800

$

27,368

(4.2%)

Core Peer Group data.

Mr. Ibrahim

$

10,000

(1.8%)

$

570,000

$

42,092

(7.4%)

Core Peer Group data and internal equity.

Mr. Bright

$

70,000

(14%)

$

570,000

$

24,116

(4.2%)

Core Peer Group data and internal equity.

Ms. Akerson

$

25,000

(5.6%)

$

475,000

$

19,914

(4.2%)

Core Peer Group data.

 

 

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SHORT-TERM INCENTIVES (ANNUAL)

Our Compensation Committee established the KBR Senior Executive Performance Pay Plan (the “Performance Pay Plan”) to reward Senior Executive Management for improving financial results for our stockholders and to provide a means to link cash compensation to KBR’s short-term performance compared to annual goals. The Performance Pay Plan was created under the stockholder-approved KBR Stock and Incentive Plan, which is described in more detail below.

Incentive Award Opportunities

In December 2019, our Compensation Committee met to determine the 2020 target awards for our Named Executive Officers under the Performance Pay Plan. These STI awards, which are expressed as percentages of base salary, were generally set to be consistent with the median target awards for those in similar positions within our Core and Diversified Peer Groups. The STI award opportunities for 2020 are shown below:

Executive

Threshold

(% of Base Salary)

Target

(% of Base Salary)

Maximum

(% of Base Salary)

Increase to Target Award

from 2019

Mr. Bradie

32.5%

130%

260%

5%

Messrs. Ibrahim, Bright, and Sopp and Ms. Akerson

22.5%

90%

180%

5%

2020 STI Performance Metrics

The performance metrics we used for 2020 STI awards focus our NEOs on the key measures of success in connection with the execution of our strategic plan. In 2020, our Compensation Committee made changes to our STI plan to further emphasize the link between pay and Company performance. The company-wide EPS and Operating Cash Flow metric weightings were increased from 40% to 45% and 20% to 25%, respectively, while the individual KPIs metric weighting decreased from 30% to 20%. These shifts in weightings made the two financial metrics more important than individual KPIs. Our Compensation Committee updated the targets for each metric to ensure they remained challenging and competitive. The table below summarizes the 2020 performance metrics and weightings for our CEO and other NEOs.

Performance Metric

Weighting

 

Rationale

KBR Adjusted EPS

Measures net income divided by the weighted average number of fully diluted Company shares outstanding.

45%

 

This metric helps to align our NEOs with the interests of our stockholders because strong EPS generally increases the value of our stock. We consider buybacks when reviewing EPS achievement to provide for an accurate comparison against the pre-established target.

KBR Adjusted Consolidated Operating Cash Flow (“OCF”)

KBR OCF measures the amount of cash generated by KBR’s operations.

25%

 

Our OCF target is based on KBR’s 2020 budgeted Cash Flow from Operations and is aligned with our capital deployment strategy. This metric ensures that our NEOs focus on cash management.

KPIs

KPIs are individual performance metrics typically specific to each NEO. However, due to the unusual nature of 2020, the CEO’s KPIs applied to the other NEOs. The KPIs are described on page 54.

20%

 

KPIs allow us to reward individual contributions to KBR’s key strategy focus areas.

KBR Consolidated Safety

Safety measures the total recordable incident rate (“TRIR”), which is calculated as the number of recordable incidents for every 200,000 work-hours, for consolidated KBR.

5%

 

Emphasizing this historic metric promotes the safety of all employees of the Company and its affiliates. Safety incentives also help reduce costs for the Company.

Response to COVID-19 Crisis

Measures the health, safety, and wellbeing of employees during the pandemic.

5%

 

This metric helped ensure: effective management of employees working from home and a safe office environment for employees unable to do so; revised office layouts for employees’ return to work and implementation of COVID-19 guidelines and policy; and strong leadership through crisis, including communications and education regarding the pandemic.

We believe the above metrics are most important for measuring our NEOs’ efforts to drive KBR’s growth and create value for our stockholders.

 

 

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Target Award Levels

When establishing target levels for the STI awards for 2020, our Compensation Committee considered, among other things, projected Company performance, strategic business objectives, and forecast general business and industry conditions. At the time the target levels are established, the outcome is intended to be substantially uncertain but achievable, and to require better than expected performance from our NEOs. Our Compensation Committee adopted target levels for our STI award schedule that maintained the same rigor as the performance targets from the prior year, especially in light of our strategic goal to position KBR for long-term growth.

For KBR Adjusted EPS, our Compensation Committee set the threshold and maximum level at the bottom and top of our adjusted EPS guidance of $1.50 to $1.80, which was included in Exhibit 99.1 to our Form 8-K filed on April29,2020. KBR's 2020 adjusted EPS was $1.73 (see reconciliation under the section titled “Non-GAAP Reconciliation: Adjusted EBITDA, Adjusted EPS and Adjusted Operating Cash Flow” at the end of this proxy statement).

For KBR’s Adjusted Consolidated Operating Cash Flow (“OCF”), our Compensation Committee set the threshold and maximum level at the bottom and top of our adjusted OCF guidance of $175MM to $225MM, which was included in Exhibit 99.1 to our Form 8-K filed on April29,2020.

The 2020 target level for the Consolidated Safety TRIR performance metric was set at 0.189, which was the top quartile TRIR measured by the Construction Industry Institute.

Our Compensation Committee established the 2020 target award levels shown below, with metric results and actual payouts certified in February 2021.

2020 SHORT-TERM INCENTIVES TABLE

 

Weight

Performance Metric

Threshold

Target

Maximum

Metric Result

Metric Payout

45%

KBR Adjusted EPS(1)

$1.50

$1.65

$1.80

$1.73

68.9%

25%

KBR Adjusted Consolidated OCF(2)

$175MM

$200MM

$225MM

$289.3MM

50.0%

5%

Response to COVID-19 Crisis(3)

ME

SE

EE

SE

5.0%

5%

KBR Consolidated Safety (TRIR)(4)

0.202

0.189

0.176

0.088

10.0%

20%

KPIs(5)

ME

SE

EE

SE

20.0%

TOTAL FORMULAIC RESULT

 

 

 

153.9%

NEGATIVE DISCRETION FOR ONE KBR(6)

 

 

 

(63.9%)

ACTUAL PAYOUT

 

 

 

90.0%

(1)

The 2020 EPS metric result of $1.73 relates to the achieved adjusted EPS for the year. A reconciliation of EPS to adjusted EPS is provided at the end of this proxy statement.

(2)

The 2020 OCF metric result of $289.3MM relates to the achieved adjusted consolidated OCF for the year. A reconciliation of OCF to adjusted OCF is provided at the end of this proxy statement.

(3)

The Response to COVID-19 performance metric was related to the health, safety and wellbeing of KBR employees including, but not limited to: (i) the management of staff working from home and creating a safe office environment for those unable to do so; (ii) setting up offices for employees’ return to work, including implementing guidelines and policy to ensure a safe environment; and (iii) leadership through crisis, including communications and education regarding the pandemic. The Threshold, Target and Maximum performance goals of ME, SE, and EE, respectively, are a discretionary rating system similar to what is used in employee performance reviews. ME = Meets Expectations; SE= Surpasses Expectations; EE= Exceeds Expectations.

(4)

The KBR Consolidated Safety (TRIR) metric excluded COVID-19.

(5)

The CEO’s KPIs applied to the other NEOs for the 2020 plan year. The CEO’s KPIs are detailed in the section titled "KPIs for All NEOs."

(6)

The negative discretion applied for One KBR is detailed below.

 

Negative Discretion for One KBR

With support from Senior Executive Management, our Compensation Committee exercised negative discretion to reduce the 2020 STI payout percentage of our NEOs to 90% (93.7% for Mr.Ibrahim) to align their 2020 STI payout percentages with those of all other employees. While we met or exceeded target and, in two cases, exceeded maximum for the safety and financial goals we set in our 2020 STI Plan, our Senior Executive Management and Compensation Committee believed it was important to reduce the 2020 STI payouts because 2020 was a challenging year during which KBR implemented reductions in force and pay sacrifices. The negative discretion was applied uniformly to all 2020 STI payout awardees, with a few exceptions, to reinforce the One KBR value that “We Are a Team of Teams.” Specifically, the 2020 STI payout percentage of our NEOs was reduced by 63.9 percentage points, except for Mr. Ibrahim, who received a discretionary reduction of approximately 60.2 percentage points, to align their 2020 STI payout percentages, 90% and 93.7%, respectively, with the 2020 STI payout percentages, generally 90%, of all other employees who received a 2020 STI payout. Mr. Ibrahim received a slightly higher 2020 STI payout percentage in recognition of his exceptional performance as well as the positive outcome with respect to restructuring KBR's Technology and Energy businesses into the Sustainable Technology Solutions business segment.

 

 

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KPIs for All NEOs

Generally, our Compensation Committee and, with respect to the CEO, our Board approve the NEOs’ individual, strategic performance metrics that will comprise their KPIs for the STI plan year. Approving KPIs that are specific to each NEO incentivizes individual contributions to KBR’s key strategy focus areas. However, due to the unprecedented events of 2020 that necessitated the NEOs’ unified focus on several, company-wide matters, our Compensation Committee decided that Mr. Bradie’s KPIs should apply to the other NEOs. As a result, Mr. Bradie and the other NEOs earned the same KPI payout of 20% as provided below.

 

Weight

KPI

Threshold

Target

Maximum

KPI Result

KPI Payout

6 %

Manage through energy market downturn and pandemic crisis:

l

Transition to working from home;

l

Stand up IT infrastructure and digital communication tools;

l

Robust return to work plan and implementation;

l

Simplification and restructuring where required to manage cost;

l

Communications response both internal and external;

l

Use the success of working from home to “Reimagine how we deliver” and advance sustainability agenda; and

l

Effectively managing liquidity and strategic options.

ME

SE

EE

SE

6 %

6 %

Succession planning and leadership development, including inclusion and diversity.

ME

SE

EE

SE

6 %

6 %

No material weakness as we transition to working from home and roll out Costpoint(1)
2.0 and OnBase(2).

 

No Material Weakness

 

No Material Weakness

6 %

TOTAL KPI PAYOUT

 

 

 

 

20%

(1)

Costpoint is an enterprise resource planning and management solution software for government contractors. KBR implemented Costpoint in 2019 in certain locations to standardize processes across the globe.

(2)

OnBase is a single enterprise information platform designed to manage content, processes, and cases. KBR implemented OnBase in 2020 as the new global e-commerce procure to pay solution.

STI Payout for Mr. Bradie

CEO and Target

 

STI Payout per

Formulaic Metrics

Results

(excluding KPIs)

Negative Discretion for

One KBR

 

KPI Payout

 

Actual Payout

Mr. Bradie

Target 130%

 

$1,975,694.50

133.9% of target

 

$(942,844.50)

(63.9%)

 

$295,100

20%

 

$1,327,950

90% of target

STI Payout for Mr. Sopp

NEO and Target

 

STI Payout per

Formulaic Metrics

Results

(excluding KPIs)

Negative Discretion for

One KBR

 

KPI Payout

 

Actual Payout

Mr. Sopp

Target 90%

 

$786,689.28

133.9% of target

 

$(375,425.28)

(63.9%)

 

$117,504

20%

 

$528,768

90% of target

 

 

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STI Payout for Mr. Ibrahim

NEO and Target

 

STI Payout per

Formulaic Metrics

Results

(excluding KPIs)

Negative Discretion for

One KBR

 

KPI Payout

 

Actual Payout

Mr. Ibrahim

Target 90%

 

$686,907

133.9% of target

 

$(308,807)

(60.2%)

 

$102,600

20%

 

$480,700

93.7% of target

 

Mr. Ibrahim received a slightly higher 2020 STI payout percentage in recognition of his exceptional performance as well as the positive outcome with respect to restructuring KBR's Technology and Energy businesses into the Sustainable Technology Solutions business segment.

STI Payout for Mr. Bright

NEO and Target

 

STI Payout per

Formulaic Metrics

Results

(excluding KPIs)

 

Negative Discretion for

One KBR

 

KPI Payout

 

Actual Payout

Mr. Bright

Target 90%

 

$686,907

133.9% of target

 

$(327,807)

(63.9%)

 

$102,600

20%

 

$461,700

90% of target

STI Payout for Ms. Akerson

NEO and Target

 

STI Payout per

Formulaic Metrics

Results

(excluding KPIs)

 

Negative Discretion for

One KBR

 

KPI Payout

 

Actual Payout

Ms. Akerson

Target 90%

 

$572,422.50

133.9% of target

 

$(273,172.50)

(63.9%)

 

$85,500

20%

 

$384,750

90% of target

 

 

Changes Made to KBR’s 2021 STI Plan

In 2021, our Compensation Committee decided to replace the two safety performance metrics of the 2020 STI plan, which were each weighted 5%, with one sustainability performance metric, which is weighted 10%, for the 2021 STI plan. This change reflects KBR’s continued focus on sustainability. No other changes were made in 2021 because the changes made to the other performance metrics in 2020 (increasing the EPS performance metric weighting from 40% to 45%, increasing the Operating Cash Flow performance metric from 20% to 25%, and decreasing the KPI metric weighting from 30% to 20%) were still considered to be aligned with the interests of the Company and our stockholders and the goals are set at rigorous levels.

 

Additional 5% Short-Term Incentive Payout for No Control Deficiency

In 2019, our Compensation Committee exercised a 10% negative discretion on the 2019 STI payout of our NEOs involved with internal controls over financial reporting and responsible for corporate operations. The negative discretion was applied due to a control deficiency in our internal controls within a newly implemented enterprise resource planning (“ERP”) system in our Government Solutions business segment during the second quarter of the year. Messrs. Bradie, Sopp and Bright, who are involved with internal controls over financial reporting and responsible for corporate operations, were negatively affected. To incentivize these executives to ensure no control deficiencies in 2020 related to our ERP system, our Compensation Committee elected to provide a 5% STI payout based on their 2019 salary if there was no control deficiency in 2020. The Compensation Committee certified that there was no control deficiency in 2020 related to the ERP system, and each of the affected NEOs received a 5% STI payout. In February 2021, Mr.Bradie received $68,750, Mr.Sopp received $27,744, and Mr.Bright received $21,250.

LONG-TERM PERFORMANCE INCENTIVES

Under the KBR Stock and Incentive Plan, our Compensation Committee made grants to our Named Executive Officers in 2020 in the form of KBR Long-Term Performance Cash and Stock Awards and KBR Restricted Stock Units. The KBR Stock and Incentive Plan, the methodology used by our Compensation Committee to determine the mix of awards to grant, and the actual 2020 grants to the NEOs are described on the next page.

Stock awards approved by our Compensation Committee are generally effective on the date of the meeting at which the approval occurs. Stock option grants, when approved by our Compensation Committee, are never issued with an exercise price below the fair market value of our common stock on the date of grant.

 

 

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KBR Stock and Incentive Plan

We use long-term performance incentives to achieve the following objectives:

l

reward consistent value creation and achievement of operating performance goals;

l

align management’s interests with stockholders’ interests; and

l

encourage long-term perspectives and commitment.

Long-term incentives represent the largest component of the total executive compensation opportunity for our executives. We believe this is appropriate given our belief that executive pay should be closely tied to stockholders’ long-term interests.

The KBR Stock and Incentive Plan provides for a variety of cash and stock-based awards, including nonqualified and incentive stock options, restricted stock/units, performance shares/units, stock appreciation rights, and stock value equivalents, also known as phantom stock. The KBR Stock and Incentive Plan allows our Compensation Committee the discretion to select from among these types of awards to establish individual long-term incentive awards.

Our Compensation Committee met in December 2019 to review the number of shares available under the KBR Stock and Incentive Plan for future stock-based awards and to review the CEO’s recommendations on the value of the long-term incentive awards to our Senior Executive Management. In addition, our Committee met in February 2020 to review and approve the amount and appropriate mix of long-term incentive awards to be granted to our Named Executive Officers.

Target Award Levels

For purposes of establishing the target dollar value of the long-term incentive awards, our Compensation Committee engaged Meridian to review our Named Executive Officers’ long-term incentive compensation.

Based on this review and related information about our peer groups, our Compensation Committee elected to increase the long-term incentive target dollar values for our Named Executive Officers except for Ms. Akerson, as outlined in the below table:

 

Name

2020 Long-Term Incentive

Target Dollar Value of

Award

Increase (% of Target 2019 Long-Term

Incentive Award)

 

Basis for Decision

 

Mr. Bradie

$

6,250,000

$

250,000 (4%)

 

Core Peer Group data and strong performance.

Mr. Sopp

$

1,500,000

$

250,000 (20%)

 

Core Peer Group data.

Mr. Ibrahim

$

1,000,000

$

150,000 (18%)

 

Core Peer Group data and internal equity.

Mr. Bright

$

1,000,000

$

150,000 (18%)

 

Core Peer Group data and internal equity.

Ms. Akerson

$

850,000

$

0

 

Core Peer Group data.

Using the long-term incentive target dollar values listed above, our Compensation Committee granted our Named Executive Officers a mix of 66⅔% KBR Long-Term Performance Cash and Stock Awards (based on target value) and 33⅓% KBR Restricted Stock Units. Our Compensation Committee concluded that this mix of performance cash/stock awards and restricted stock units was consistent with the Company’s pay-for-performance objectives. Our Compensation Committee reviewed the mix of equity awards granted by the companies in our Core Peer Group and Diversified Peer Group. KBR awarded a much higher percentage of performance cash and stock awards (66⅔%) than the companies in either of our peer groups because our Compensation Committee believes that emphasizing the two performance metrics for these awards — job income sold (“JIS”) and sustained TSR — is more likely than other forms of incentive to promote a sustained increase in stockholder value

KBR LONG-TERM PERFORMANCE CASH AND STOCK AWARDS

The KBR Long-Term Performance Cash and Stock Awards are designed to provide selected executives with incentive opportunities that are contingent on the level of achievement of pre-established corporate performance objectives. For the awards granted to our Named Executive Officers in February 2020, our Compensation Committee selected the same performance metrics as were used for the KBR Long-Term Performance Cash Awards granted in 2019: relative TSR and JIS, each weighted 50%. However, in response to our stockholders’ feedback to make our compensation program more heavily weighted in stock than in cash, our Compensation Committee amended our 2020 KBR Long-Term Performance Awards payable under the KBR Stock and Incentive Plan with respect to our Senior Executive Management to consist of restricted stock units that are settled in stock rather than in cash for the 50% portion that is based on relative TSR. The increase in stock-based and settled awards ensures executives have a large stake in the long-term financial success of the Company that is aligned with stockholder interests. The terms and importance of the TSR and JIS metrics to KBR are described on the next page.

 

 

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For the 2020 grants, TSR and JIS will be measured over a three-year performance period beginning January 1, 2020, and ending December31,2022. Our Compensation Committee believes that a three-year performance award cycle encourages retention and aligns with long-term stockholder returns.

When establishing target levels for these two performance metrics, our Compensation Committee considered, among other things, projected Company performance, KBR’s strategic business objectives, and forecast general business and industry conditions. At the time the target levels were established, the outcomes were intended to be substantially uncertain, but achievable.

Our Compensation Committee determined the number of KBR Long-Term Performance Cash and Stock Awards for each Named Executive Officer by multiplying the total long-term incentive target value by 66⅔%, one-half of which was allocated to each of the JIS portion and the TSR portion of the award. These type of awards granted prior to 2020 were settled entirely in cash and the number of units granted was based on a $1.00 target value for each unit. For 2020, the Compensation Committee decided that the JIS portion of the award would continue to be based on a $1.00 target value for each unit. The actual value of each unit under the JIS portion of a KBR Long-Term Performance Cash and Stock Award may increase to a maximum of 200% of $1.00, or $2.00, or decrease to below threshold to 0% of $1.00, or $0.00, depending on KBR’s performance with respect to the JIS performance goal. Our Compensation Committee changed the manner in which the TSR portion of the performance award works for 2020 so that it would be a stock-based and settled award. Rather than assign a $1.00 target value to each unit under the TSR portion of the award, the Compensation Committee granted a target number of units that each represent the right to receive one share of our common stock, with the number of such units initially determined by dividing the target value of the TSR portion of the award by $27.46, the closing price of a share of our common stock on the date of grant (rounded up to the next whole unit). The number of such units (and, accordingly, the number of shares of our common stock delivered in settlement of the units) under the TSR portion of a KBR Long-Term Performance Cash and Stock Award may increase to a maximum of 200% of the original number of units granted, or decrease to 0% of the original number of units granted, in each case depending on the level of achievement of the TSR performance objective.

TSR Metric

TSR is measured based on a sustained approach rather than a cumulative (point-to-point) approach. Our Compensation Committee believes that measuring TSR just from the beginning of the three-year performance period to the end would not adequately capture stockholder value. To measure sustained performance, we calculate the TSR of each company in the TSR Peer Group (measured using a 20-trading-day average price) every quarter during the three-year performance period. We then calculate the average TSR for each peer company for the three-year performance period by dividing the sum of each company’s quarterly TSRs by 12 (the number of calendar quarters in three years). Then we rank KBR’s average quarterly TSR against those results. Our Compensation Committee believes this sustained measurement approach is better because, instead of emphasizing a single ending point, this approach considers how investors fare at different times during the three-year performance period.

The TSR percentage is calculated by subtracting KBR’s TSR ranking as compared to the TSR Peer Group from the total number of companies in the TSR Peer Group (including KBR), dividing the difference by the number of companies (excluding KBR), and multiplying the quotient by 100%. Assuming a TSR Peer Group of 13 companies (including KBR), the TSR rankings and corresponding payout percentages are shown in the table on the next page.

 

 

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At the end of each three-year performance award cycle, our Compensation Committee will determine KBR’s TSR ranking, and the payout attributable to the TSR performance measure will be computed for each NEO in accordance with the table that follows.

 

TSR Payout

Performance Level

3-YR TSR Ranking

Percentile

Payout

 

1

100.0%

200.0%

Maximum

2

91.7%

200.0%

 

3

83.3%

183.3%

 

4

75.0%

162.5%

 

5

66.7%

141.8%

 

6

58.3%

120.8%

Target

7

50.0%

100.0%

 

8

41.7%

79.3%

 

9

33.3%

58.3%

Threshold

10

25.0%

37.5%

 

11

16.7%

0.0%

 

12

8.3%

0.0%

 

13

0.0%

0.0%

JIS Metric

The remaining 50% of the KBR Long-Term Performance Cash and Stock Awards will be determined based on JIS over the same three-year performance period. JIS is appropriately measured over three years because our projects are long-term in nature and often involve amendments and scope adjustments that might distort a shorter performance period. We believe using three-year JIS as a performance metric incentivizes the NEOs to win the right work, which is one of our key strategic priorities and a means to create long-term growth and position KBR for a strong and stable future amidst economic volatility. The 2020 performance goals and associated payouts for JIS are shown below.

 

Threshold

Target

Maximum

Performance Goal

$550MM

$600MM

$650MM

Payout %*

25%

100%

200%

*

For a result between threshold and target and target and maximum, the payout is determined by linear interpolation.

 

For the second and third years in the performance period, our Compensation Committee will set the JIS target at a level that remains rigorous. Our Compensation Committee decided to establish the JIS target one year at a time because it is difficult to forecast JIS beyond one year in the challenging hydrocarbons market. The final award for the JIS metric will be calculated at the end of the three-year performance period as the average of the JIS percentages achieved during each year.

Possible Negative Discretion

In addition to the TSR and JIS performance measures, 20% of the total KBR Long-Term Performance Cash and Stock Awards payout was subject to forfeiture on December 31, 2020, if our Compensation Committee determined, in its sole discretion, that 2020 was not a successful year for us. The possible 20% reduction would be applied only in 2020 if our Compensation Committee decided that 2020 was not a successful year on or before March 31, 2021, and the amount forfeited could not be earned back during the second and third years of the three-year performance period. There was no upside to this discretion; our Compensation Committee was not authorized to increase payouts, even if 2020 was a particularly strong year. On February 19, 2021, our Compensation Committee determined that 2020 was a successful year for KBR and, accordingly, it did not exercise its discretion to cause a forfeiture of 20% of the KBR Long-Term Performance Cash and Stock Awards payout.

Similarly, the KBR Long-Term Performance Cash and Stock Awards that were granted to our NEOs in 2020 provide our Compensation Committee with the discretion to reduce, but not increase, by any amount (including a reduction resulting in no payout) the payments that would otherwise be made with respect to such awards. This negative discretion may be exercised by our Compensation Committee at any time before payment is made with respect to these awards, but it may not be exercised following the occurrence of a corporate change (as defined in the KBR Stock and Incentive Plan).

Results and Payouts for Awards for the 2018-2020 Performance Period

In February 2021, our Compensation Committee certified the results for the KBR Long-Term Performance Cash Awards that were granted on February 27, 2018, based on the same TSR and JIS performance measures. The table on the next page shows those results and the amounts actually paid to each of our Named Executive Officers.

 

 

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Long-Term Incentive Plan Payout

Our average three-year TSR from January1,2018, until December31,2020, was 9.9%, and ranked third among our Peer Group applicable to the long-term performance cash award for that period (the members of which are listed in the table below), which resulted in a 76.8% payout.

Company

3-YR TSR Rank

Average 3-YR TSR

Jacobs Solutions Inc.

1

14.2%

Quanta Services

2

10.1%

KBR

3

9.9%

AECOM Technology Corp.

4

3.5%

EMCOR Group, Inc.

5

0.9%

Chiyoda Corp.

6

(3.6%)

TechnipFMC

7

(16.4%)

Fluor Corp

8

(18.9%)

Our 2020 JIS was $842MM, exceeding the maximum goal of $650MM. Our average three-year JIS from January1,2018, to December31,2020, earned a payout of 92.5%.

Payout Table for 2018-2020 KBR Long-Term Performance Cash Award Period

 

2018 Long-Term Performance Cash Award

 

 

Average Total Stockholder Return 2018-2020

 

 

Job Income Sold 2018-2020

Named

Executive

Officer

Target

($)

Maximum

($)

Actual

Payout

($)

 

Avg