Table of Contents
Significant Recent Executive Compensation Design
management and directors of the Company frequently engage directly with stockholders to help inform our continuous evaluation of our compensation plans. Engagement is focused on strengthening
the link between pay and performance, and aligning management and stockholder interests.
response to this engagement and direct stockholder feedback, the Compensation/Organization Committee ("Compensation Committee") made significant design improvements to fiscal year 2019 compensation
plans to best align our incentive programs with our long-term strategy and the feedback gathered from stockholder engagement. Furthermore, when setting goals and reviewing performance, the
Compensation Committee considered numerous factors including how best to align pay with achieving our long-term strategic objectives
and five-year financial plan that includes specific revenue, EBITDA, earnings per share ("EPS") and free cash flow objectives, as well as a continued emphasis on incentivizing industry-leading cash
highlights the key changes adopted by the Compensation Committee that will be implemented in fiscal year 2019 in response to stockholder feedback and ongoing plan design evaluation:
Added ROIC as a performance metric to our long-term incentive performance equity
Compensation Committee selected Return on Invested Capital ("ROIC") as a performance metric to incentivize management to deliver long-term profitability consistent with the Company's five-year
financial plan, and because of existing evidence that ROIC is recognized as highly correlated with long-term stock price performance.
All performance metrics for our long-term incentive performance equity awards are now
on three-year cumulative performance
Compensation Committee believes that Named Executive Officers ("NEOs") should be incentivized to create sustained long-term value, and that cumulative metrics best measure long-term performance.
Commencing with fiscal year 2019 awards, all long-term equity incentive award metrics are measured based on three-year cumulative performance. The Compensation Committee replaced the prior design that
included three, annual performance periods with one, three-year performance period in response to stockholder feedback that metrics measured on a cumulative basis best align compensation with our
stockholders interests for long-term value creation.
Eliminated duplicative metrics between the short- and long-term incentive plans
Compensation Committee eliminated duplicative metrics by removing the adjusted EPS metric in long-term performance equity awards. As a result, our incentive plans no longer contain any duplicative
Increased the rigor of the cash flow goals to continue to reward industry-leading cash
part of our objective to continue to deliver industry-leading cash flow performance, the Compensation Committee reviewed cash flow conversion rates (i.e., the rate at which adjusted earnings
convert to free cash flow), and subsequently increased the rigor of our NEOs cash flow goal beginning in fiscal year 2019. The Compensation Committee believes rewarding industry-leading cash flow
conversion is critical to long-term stockholder value creation. Incentivizing the conversion of earnings to cash flow places a strong emphasis on risk management and underlying project execution,
which are of particularly greater importance in the Engineering and Construction ("E&C") industry. Target performance now requires 100% conversion of adjusted net income to free cash flow, versus 90%
in fiscal year 2018, and exceeds the three-year median performance of the E&C industry (81%).