Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May ~~6, 2011.~~

10, 2012.

The proxy statement and annual report are available on the Internet at www.proxyvote.com.

The following information applicable to the Annual Meeting may be found in the proxy statement and accompanying proxy card:

The date, time and location of the meeting;

A list of the matters intended to be acted on and our recommendations regarding those matters;


	•	~~The date, time and location of the meeting;~~

	•	~~A list of the matters intended to be acted on and our recommendations regarding those matters;~~

	•	~~Any control/identification numbers that you need to access your proxy card; and~~

	•	Any control/identification numbers that you need to access your proxy card; and Information about attending the meeting and voting in person.

McDERMOTT INTERNATIONAL, INC.
757 N. Eldridge Pkwy.
Houston, Texas 77079

NOTICEOF 2012 ANNUAL MEETINGOF STOCKHOLDERS

~~Notice of 2011 Annual Meeting of Stockholders~~

The 2011 Annual Meeting of the Stockholders of McDermott International, Inc., a Panamanian corporation, will be held at the Intercontinental Miramar Hotel, Miramar Plaza, Balboa Avenue, Panama City, Panama, on Friday, May 6, 2011, at 3:00 p.m. local time, in order to:

~~(1) elect eight members to our Board of Directors, each for a term of one year;~~

~~(2) hold an advisory vote on executive compensation;~~

~~(3) hold an advisory vote to determine the frequency with which to hold advisory votes on executive compensation;~~

~~(4) approve our Executive Incentive Compensation Plan for tax deductibility reasons;~~

~~(5) ratify our Audit Committee’s appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2011; and~~

~~(6) transact such other business as may properly come before the meeting or any adjournment thereof.~~

~~If you were a stockholder as of the close of business on March 7, 2011, you are entitled to vote at the meeting and at any adjournment thereof.~~

Instead of mailing a printed copy of our proxy materials, including our Annual Report, to each stockholder of record, we are providing access to these materials via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all stockholders. Accordingly, on March 25, 2011, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to all stockholders of record as of March 7, 2011, and posted our proxy materials on the Web site referenced in the Notice (~~www.proxyvote.com~~). As more fully described in the Notice, all stockholders may choose to access our proxy materials on the Web site referred to in the Notice or may request a printed set of our proxy materials. In addition, the Notice and Web site provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

~~If you received a printed copy of the materials, we have enclosed a copy of our 2010 Annual Report to Stockholders with this notice and proxy statement.~~

Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the annual meeting. You can vote by Internet, by telephone, or by requesting a printed copy of the proxy materials and using the enclosed proxy card.

Time and Date

10:00 a.m. local time on Thursday, May 10, 2012

Place

757 N. Eldridge Parkway

14^th Floor

Houston, Texas 77079

Items of Business

To elect eight members to our Board of Directors, each for a term of one year.

To conduct an advisory vote to approve named executive officer compensation.

To ratify our Audit Committee’s appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2012.

To transact such other business that properly comes before the meeting or any adjournment thereof.

Record Date

You are entitled to vote if you were a stockholder of record at the close of business on March 12, 2012.

Notice and Access

Instead of mailing a printed copy of our proxy materials, including our Annual Report, to each stockholder of record, we are providing access to these materials via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all stockholders. Accordingly, on March 30, 2012, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to all stockholders of record as of March 12, 2012, and posted our proxy materials on the Web site referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all stockholders may choose to access our proxy materials on the Web site referred to in the Notice and/or may request a printed set of our proxy materials. In addition, the Notice and Web site provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

Proxy Voting

Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the Annual Meeting. You can vote by Internet, by telephone, or by requesting a printed copy of the proxy materials and using the proxy card enclosed with the printed materials.

By Order of the Board of Directors,

LOGO

LIANE K. HINRICHS

Secretary

~~Dated:~~

March ~~25, 2011~~30, 2012

PROXY STATEMENTFOR 2012 ANNUAL MEETINGOF STOCKHOLDERS

TABLEOF CONTENTS

~~Proxy Statement for 2011 Annual Meeting of Stockholders~~

~~Table of Contents~~


	Page

~~General Information~~Questions and Answers about the Annual Meeting of Stockholders and Voting	2	1
~~Voting Information~~	2
~~Record Date and Who May Vote~~	2
~~How to Vote~~	2
~~How to Change Your Vote~~	3
~~Quorum~~	3
~~Proposals to Be Voted on; Vote Required; and How Votes Are Counted~~	3
~~Confidential Voting~~	4
Election of Directors (Item 1)		5
Corporate Governance		10
Director Independence		10
Executive Sessions	10
and Communications With the Board		10
Board of Directors and Its Committees		11
Compensation Policies and Practices and ~~Risks~~Risk	12
~~Compensation Committee Interlocks and Insider Participation~~	14
Director Nomination Process	14
~~Compensation of Directors~~	15
Compensation of Directors		17
Director Compensation Table	15
~~Named Executives Profiles~~	17
~~Executive Officers~~Named Executives Profiles	23	18
Executive Officers		24
Compensation Discussion and Analysis	24	25
~~2010 Peer Groups~~Compensation Committee Report	46	43
~~Compensation Committee Report~~	47
Compensation of Executive Officers	48	44
Summary Compensation Table	48	44
Grants of Plan-Based Awards	52	46
Outstanding Equity Awards at Fiscal Year-End	56	48
Option Exercises and Stock Vested	58	50
Pension Benefits	60	51
Nonqualified Deferred Compensation	63	54
Potential Payments Upon Termination or Change in Control	65	55
Advisory Vote onto Approve Named Executive Officer Compensation (Item 2)	72	60
~~Advisory Vote on the Frequency of Advisory Votes on Executive Compensation (Item 3)~~Audit Committee Report	74	64
~~Approval of the Company’s Executive Incentive Compensation Plan (Item 4)~~	75
~~Audit Committee Report~~	77
Ratification of Appointment of Independent Registered Public Accounting Firm for Year Ending December 31, ~~2011~~2012 (Item 5)3)	78	65
Security Ownership of Directors and Executive Officers	80	67
Security Ownership of Certain Beneficial Owners	81	68
Certain Relationships and Related Transactions	82	69
Section 16(a) Beneficial Ownership Compliance	83	70
Stockholders’ Proposals	83	70

QUESTIONSAND ANSWERSABOUTTHE ANNUAL MEETINGOF STOCKHOLDERSAND VOTING

What is the purpose of these proxy materials?

~~General Information~~

As more fully described in the Notice, the Board of Directors of McDermott International, Inc. (“McDermott” ~~or “MII”~~) has made these materials available to you ~~over the Internet or, upon your request, has mailed you printed versions of these materials~~ in connection with our ~~2011~~2012 Annual Meeting of Stockholders, which will take place on May ~~6, 2011.~~10, 2012 at 10:00 a.m. local time (the “Annual Meeting” or “Meeting”). We mailed the Notice to our stockholders beginning March ~~25, 2011,~~30, 2012, and our proxy materials were posted on the ~~website~~Web site referenced in the Notice on that same date.

McDermott, on behalf of its Board of Directors, is soliciting your proxy to vote your shares at the ~~2011~~2012 Annual Meeting of Stockholders. We solicit proxies to give all stockholders of record an opportunity to vote on matters that will be presented at the ~~annual meeting.~~Annual Meeting. In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

Who will pay for the cost of this proxy solicitation?

We will bear all expenses incurred in connection with this proxy solicitation, which we expect to conduct primarily by mail. We have engaged The Proxy Advisory Group, LLC to assist in the solicitation for a fee that will not exceed $12,500, plusout-of-pocket expenses. In addition, our officers and regular employees may solicit your proxy by telephone, by facsimile transmission or in person, for which they will not be separately compensated. If your shares are held through a broker or other nominee (~~i.e.~~i.e., in “street name”) and you have requested printed versions of these materials, we have requested that your broker or nominee forward this proxy statement to you and obtain your voting instructions, for which we will reimburse them for reasonableout-of-pocket expenses. If your shares are held through the McDermott Thrift Plan and you have requested printed versions of these materials, the trustee of that plan has sent you this proxy statement and you can instruct the trustee on how to vote your plan shares.

~~Voting Information~~

~~Record Date and~~ Who ~~May Vote~~is entitled to vote at the Annual Meeting?

Our Board of Directors selected March ~~7, 2011~~12, 2012 as the record date (the “Record Date”) for determining stockholders entitled to vote at the Annual Meeting. This means that if you owned McDermott common

stock on the Record Date, you may vote your shares on

the matters to be considered by our stockholders at the Annual Meeting.

There were ~~233,914,181~~235,564,418 shares of our common stock outstanding on the Record Date. Each outstanding share of common stock entitles its holder to one vote on each matter to be acted on at the meeting.

What is the difference between holding shares as a stockholder of record and as a beneficial owner through a brokerage account or other arrangement with a holder of record?
If your shares are registered in your name with McDermott’s transfer agent and registrar, Computershare Trust Company, N.A., you are the “stockholder of record” of those shares. The Notice and the proxy materials have been provided or made available directly to you by McDermott.
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” but not the holder of record of those shares, and the Notice and the proxy materials have been forwarded to you by your broker, bank or other holder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record how to vote your shares by using the voting instruction card or by following their instructions for voting by telephone or on the Internet.

How ~~to Vote~~do I cast my vote?

Most stockholders can vote by proxy in three ways:


•		by Internet atwww.proxyvote.com;

•	~~by telephone; or~~

•	~~by mail.~~

by telephone; or

by mail.

If you are a stockholder of record, ~~i.e. a stockholder registered with our transfer agent and registrar, Computershare Trust Company, N.A., on the Record Date,~~ you can vote your shares in person at the Annual Meeting or vote now by giving us your proxy. You may give us your proxy by following the instructions included in the Notice or, if you received a printed version of these proxy materials, in the enclosed proxy card. If you want to vote by mail but have not received a printed version of these proxy materials, you may request a full packet of proxy materials through the instructions in the Notice. If you vote using either telephone or the Internet, you will save us mailing expense.

By giving us your proxy, you will be directing us how to vote your shares at the meeting. Even if you plan on attending the meeting, we urge you to vote now by giving us your proxy. This will ensure that your vote is represented at the meeting. If you do attend the meeting, you can change your vote at that time, if you then desire to do so.

If ~~your~~you are the beneficial owner but not the holder of record, of shares ~~are held in street name~~, ~~i.e. through a broker or nominee,~~ you should refer to the instructions provided by your broker or nominee for further information. The broker or nominee that holds your shares has the authority to vote them, absent your approval, only as to matters for which they have discretionary authority under the applicable New York Stock Exchange rules. ~~The~~Neither the election of directors ~~is not considered a routine matter. Additionally, stockholder actions on executive compensation matters (including advisory votes on executive compensation, the frequency with which to hold~~nor the advisory vote onto approve named executive officer compensation ~~and the approval of our Executive Incentive Compensation Plan (the “EICP”))~~ are ~~not~~ considered routine matters. That means that brokers

may not vote your shares with respect to those matters if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker.

If you received a printed version of these proxy materials, you should have received a voting instruction form from your broker or nominee that holds your shares. For shares ~~held in street name,~~of which you are the beneficial owner but not the holder of record, follow the instructions contained in the Notice or voting instruction form to vote by Internet, telephone or mail. If you want to vote by mail but have not received a printed version of these proxy materials, you may request a full packet of proxy materials as instructed by the Notice. If you want to vote your shares in person at the Annual Meeting, you must obtain a valid proxy from your broker or nominee. You should contact your broker or nominee or refer to the instructions provided by your broker or nominee for further information. Additionally, the availability of telephone or Internet voting depends on the voting process used by the broker or nominee that holds your shares.

Why did I receive more than one Notice or proxy statement and proxy card or voting instruction form?

You may receive more than one Notice or proxy statement and proxy card or voting instruction form if your shares are held through more than one account (e.g., through different brokers or nominees). Each proxy card or voting instruction form only covers those shares of common stock held in the applicable account. If you hold shares in more than one account,

you will have to provide voting instructions as to all your accounts to vote all your shares.

~~How to Change Your Vote~~What can I do if I change my mind after I vote?

If you are a stockholder of record, you may change your vote by written notice to our Corporate Secretary, by granting a new proxy before the Annual Meeting or by voting in person at the Annual Meeting. Unless you attend the meeting and vote your shares in person, you should change your vote before the meeting using the same method (by telephone, Internet or mail) that you first used to vote your shares. That way, the inspectors of election for the meeting will be able to verify your latest vote.

If ~~your~~you are the beneficial owner, but not the holder of record, of shares ~~are held in street name~~, you should follow the instructions in the information provided by your broker or nominee to change your ~~vote.~~vote before the meeting. If you want to change your vote as to shares ~~held in street name~~of which you are the beneficial owner by voting in person at the Annual Meeting, you must obtain a valid proxy from the broker or nominee that holds those shares for you.

What is a broker non-vote?

~~Quorum~~

If you are a beneficial owner whose shares are held of record by a broker or other holder of record, you must instruct the broker or other holder of record how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker or other holder of record can include your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).

With respect to this Annual Meeting, if you are a beneficial owner whose shares are held by a broker or other holder of record, your broker or other holder of record has discretionary voting authority under NYSE rules to vote your shares on the ratification of Deloitte & Touche LLP (“Deloitte”), even if it has not received voting instructions from you. However, such holder does not have discretionary authority to vote on the election of directors or the advisory vote to approve named executive officer compensation without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on those matters.

What is the quorum for the Annual Meeting?

The Annual Meeting will be held only if a quorum exists. The presence at the meeting, in person or by proxy, of holders of a majority of our outstanding shares of common stock as of the Record Date will constitute a quorum. If you attend the meeting or vote your shares by Internet, telephone or mail, your shares will be counted toward a quorum, even if you abstain from voting on a particular matter. ~~Shares held by brokers and other nominees~~Broker non-votes will be treated as ~~to which they have not received voting instructions from~~present for the ~~beneficial owners and lack~~purpose of determining a quorum.

Which items will be voted on at the ~~discretionary authority to vote on a particular matter are called “broker non-votes” and will count for quorum purposes.~~

~~Proposals to Be Voted On; Vote Required; and How Votes are Counted~~Annual Meeting?

At the Annual Meeting, we are asking you to vote on the following:

the election of John F. Bookout, III, Roger A. Brown, Stephen G. Hanks, Stephen M. Johnson, D. Bradley McWilliams, Thomas C. Schievelbein, Mary L. Shafer-Malicki and David A. Trice to our Board of Directors, each for a term of one year;

the advisory vote to approve named executive officer compensation; and

the ratification of our Audit Committee’s appointment of Deloitte as our independent registered public accounting firm for the year ending December 31, 2012.

We are not aware of any other matters that may be presented or acted on at the Annual Meeting. If you vote by signing and returning the enclosed proxy card or using the telephone or Internet voting procedures, the individuals named as proxies on the card may vote your shares, in their discretion, on any other matter requiring a stockholder vote that comes before the meeting.

What are the Board’s voting recommendations?

For the reasons set forth in more detail later in this proxy statement, our Board recommends a vote:

FOR the election of each director nominee;

FOR the advisory vote to approve named executive officer compensation; and

FOR the ratification of our Audit Committee’s appointment of Deloitte as our independent registered public accounting firm for the year ending December 31, 2012.


	•	the election of John F. Bookout, III, Roger A. Brown, Stephen G. Hanks, Stephen M. Johnson, D. Bradley McWilliams, Thomas C. Schievelbein, Mary Shafer-Malicki and David A. Trice to our Board of Directors, each for a term of one year;

	•	~~the advisory vote on executive compensation;~~

	•	~~the advisory vote to determine the frequency with which to hold an advisory vote on executive compensation;~~

	•	~~the approval of our EICP; and~~

	•	~~the ratification of our Audit Committee’s appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the year ending December 31, 2011.~~

What are the voting requirements to elect the Directors and to approve each of the proposals discussed in this proxy statement?

Our By-Laws provide that, in all matters arising at a stockholders’ meeting, a majority of the voting power of our outstanding shares present in person or represented by proxy at the meeting and entitled to vote and actually voting on the matter shall be necessary and sufficient for approval, except where some larger percentage is required by applicable law or our ~~articles~~Articles of ~~incorporation.~~Incorporation. No such larger percentage is applicable to any of the items we are asking you to vote on at the ~~meeting.~~Annual Meeting. Because abstentions are not actual votes with respect to a proposal, they will have no effect on the outcome of the vote on a proposal. ~~If none of the alternatives in the advisory vote to determine the frequency of the advisory vote on executive~~

~~compensation receives a majority vote, we will consider the alternative with the highest number of votes cast by stockholders to be the alternative that has been selected by stockholders.~~

In the election of directors, you may vote “FOR” all director nominees or withhold your vote for any one or more of the director nominees. For the advisory vote to determine the frequency with which to hold an advisory vote on executive compensation, you may vote to hold the advisory vote every “1 year”, “2 years”, or “3 years” or abstain from voting. For each other proposal, you may vote “FOR” or “AGAINST” or abstain from voting.

Our Corporate Governance Guidelines provide that, in an uncontested election of directors, the Board expects any incumbent director nominee who does not receive a “FOR” vote by a majority of shares present in person or by proxy and entitled to vote and actually voting on the matter to promptly tender his or her resignation to the Governance Committee, subject to acceptance by our Board. ~~Pursuant to our Corporate Governance Guidelines, the~~The Governance Committee will then make a recommendation to the Board with respect to the director nominee’s resignation and the Board will consider the recommendation and take appropriate action within 120 days from the date of the certification of the election results.

~~If you submit~~

What happens if I do not specify a ~~signed~~choice for a proposal when returning a proxy or do not cast my vote?

You should specify your choice for each proposal on your proxy card ~~without specifying your vote, your shares~~or voting instruction form. Shares represented by proxies will be voted “FOR” the election of all director nominees, the advisory vote on executive compensation, the approval of our EICP and the ratification of our Audit Committee’s appointment of Deloitte as our independent registered public accounting firm for the year ending December 31, 2011. If you submit a signed proxy card without specifying your vote on the frequency of the advisory vote on executive compensation, your shares will be voted to require the advisory vote every year, in accordance with the ~~recommendation of our Board of Directors.~~

~~If your shares are held in street name~~~~and you do not instruct your broker or nominee how to vote those shares, they may vote your shares as they decide as to matters for which they have discretionary authority under~~instructions given by the ~~applicable New York Stock Exchange rules. Your broker will be entitled to vote your shares in its discretion, absent instructions from you, on the~~

stockholders.

ratification of the appointment of the independent registered public accounting firm. Your broker will not be entitled to vote your shares in its discretion in the election of directors or on the advisory vote on executive compensation, the advisory vote on the frequency with which to hold an advisory vote on executive compensation and the approval of our EICP. If you hold your shares in street name and you do not instruct your broker how to vote on these proposals, no votes will be cast on your behalf on that matter. Broker non-votes are not considered a vote “FOR” or “AGAINST” a proposal (or with respect to the advisory vote on the frequency with which to hold an advisory vote on executive compensation, a vote for “1 year,” “2 years” or “3 years”) and therefore will have no effect on the vote on the election of directors, the advisory vote on executive compensation, the advisory vote on the frequency with which to hold an advisory vote on executive compensation or the approval of our EICP.

If you are a stockholder of recordand your proxy card is signed and returned without voting instructions, it will be voted according to the recommendations of our Board. If you do not return your proxy card or cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting.

~~We are not aware of any other matters that may be presented or acted on at the meeting.~~

If you ~~vote by signing~~are the beneficial owner, but not the holder of record, of shares and ~~returning the enclosed proxy card~~fail to provide voting instructions, your broker or ~~using the telephone or Internet voting procedures, the individuals named as proxies on the card may~~other holder of record is permitted to vote your shares ~~in their discretion,~~ on ~~any other matter requiring a stockholder vote that comes before~~ the ~~meeting.~~

~~Confidential Voting~~ratification of Deloitte as our independent registered public

accounting firm. However, absent instructions from you, your broker or other holder of record may not vote on the election of directors or the advisory vote to approve named executive officer compensation, and no votes will be cast on your behalf for those matters.

Is my vote confidential?

All voted proxies and ballots will be handled in a manner intended to protect your voting privacy as a stockholder. Your vote will not be disclosed except:

to meet any legal requirements;

in limited circumstances such as a proxy contest in opposition to our Board of Directors;

to permit independent inspectors of election to tabulate and certify your vote; or

to adequately respond to your written comments on your proxy card.


	•	~~to meet any legal requirements;~~

	•	~~in limited circumstances such as a proxy contest in opposition to our Board of Directors;~~

	•	~~to permit independent inspectors of election to tabulate and certify your vote; or~~

	•	~~to adequately respond to your written comments on your proxy card.~~

ELECTIONOF DIRECTORS

~~Election of Directors~~

(ITEM 1)

~~In 2010, pursuant to a previously approved amendment to our~~

Our Articles of Incorporation ~~our Board ceased to be classified and~~provide that, at each annual meeting of stockholders, all directors ~~became subject to~~shall be elected annually for a term expiring at the next succeeding annual ~~election.~~

~~Our~~meeting of stockholders or until their respective successors are duly elected and qualified. Accordingly, our Board has nominated the following eight persons for ~~election~~reelection as directors at this year’s Annual ~~Meeting. Stephen M. Johnson, our President and Chief Executive Officer, was appointed as~~Meeting for a ~~director in July 2010 in connection with the spin-off~~term of our former subsidiary, The Babcock & Wilcox Company (“B&W”), which we completed through a distribution of the common stock of B&W to our stockholders effective as of July 30, 2010 (the “Spin-off”). Mary Shafer-Malicki was appointed as a director on February 17, 2011.

~~On the nomination of our Board,~~one year: John F. Bookout, III, Roger A. Brown, Stephen G. Hanks, Stephen M. Johnson, D. Bradley McWilliams, Thomas C. Schievelbein, Mary L. Shafer-Malicki and David A. ~~Trice will stand for reelection as directors, and Stephen M. Johnson and Mary Shafer-Malicki will stand for election as a director, at this year’s Annual Meeting for a term of one year.~~

Trice.

Our By-Laws provide that (1) a person shall not be nominated for election or reelection to our Board of Directors if such person shall have attained the age of 72 prior to the date of election or reelection, and (2) any director who attains the age of 72 during his or her term shall be deemed to have resigned and retired at the first Annual Meeting following his or her attainment of the age of 72. Accordingly, a director nominee

may stand for election if he or she has

not attained the age of 72 prior to the date of election or reelection. Pursuant to these By-Law requirements, Ronald C. Cambre, our Chairman of the Board, will retire from our Board after 11 years of service, effective at this year’s Annual Meeting. It is anticipated that our Board will appoint a new Chairman or a lead director at the Board meeting held in connection with the Annual Meeting.

Unless otherwise directed, the persons named as proxies on the enclosed proxy card intend to vote “FOR” the election of each of the nominees. If any nominee should become unavailable for election, the shares will be voted for such substitute nominee as may be proposed by our Board of Directors. However, we are not aware of any circumstances that would prevent any of the nominees from serving.

In nominating individuals to become members of the Board of Directors, the Governance Committee considers the experience, qualifications, and skills of each potential member. Each nominee brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence and experience in a wide variety of areas. The Governance Committee and the Board of Directors considered the following information, including the specific experience, qualifications, attributes or skills, in concluding each individual was an appropriate nominee to serve as a member of our Board for the term commencing at this year’s Annual Meeting (ages are as of May ~~6, 2011)~~10, 2012).

Our Board recommends that stockholders vote “FOR” each of the nominees named below.


John F. Bookout, III		Director Since 2006
~~Age — 57~~

~~Finance Committee — Member~~
~~Governance Committee — Member~~

Age — 58

Finance Committee — Member

Governance Committee — Member

Mr. Bookout has served as a Managing Director of Kohlberg Kravis Roberts & Co., a private equity firm, since March 2008. Previously, he served as Senior Advisor to First Reserve Corporation, a private equity firm specializing in the energy industry, from 2006 to March 2008. Until 2006, he was a director of McKinsey & Company, a global management consulting firm, which he joined in 1978. Mr. Bookout previously served as a director of Tesoro Corporation from2006-2010. The Board of Directors is nominating Mr. Bookout in consideration of his:

global experience with the petroleum refining and marketing industry and oil and gas exploration and development industry;

expertise in private equity and finance; and

experience as a board member of public companies, including McDermott.


	•	~~global experience with the petroleum refining and marketing industry and oil and gas exploration and development industry;~~

	•	~~expertise in private equity and finance; and~~

	•	~~experience as a board member for public companies, including McDermott.~~

Roger A. Brown
~~Roger A. Brown~~		Director Since 2005
~~Age — 66~~

~~Compensation Committee — Member~~
~~Governance Committee — Chairman~~

Age — 67

Compensation Committee — Member

Governance Committee — Chairman

From 2005 until his retirement in 2007, Mr. Brown was Vice President, Strategic Initiatives of Smith International, Inc., a supplier of goods and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets. Mr. Brown was President of Smith Technologies (a business unit of Smith International, Inc.) from 1998 until 2005. Mr. Brown has also served as a director of Ultra Petroleum Corp. since 2007 and Boart Longyear Limited since 2010. The Board of Directors is nominating Mr. Brown in consideration of his:

executive leadership experience in the oil and gas exploration and production industry;

knowledge of corporate governance issues; and

experience as a board member of public companies, including McDermott.

•     ~~executive leadership experience in the oil and gas exploration and production industry;~~
•     ~~knowledge of corporate governance issues; and~~
•     ~~experience as a board member for public companies, including McDermott.~~

Stephen G. Hanks
~~Stephen G. Hanks~~		Director Since 2009
~~Age — 60~~

~~Audit Committee — Member~~
~~Finance Committee — Member~~

Age — 61

Audit Committee — Member

Finance Committee — Member

From November 2007 until his retirement in January 2008, Mr. Hanks was President of the Washington Division of URS Corporation, an engineering, construction and technical services company, and he also served as a member of URS Corporation’s Board of Directors during that time. Previously, from June 2001 to November 2007 he was President and CEO of Washington Group International, Inc. (“Washington Group”), an integrated engineering, construction and management services company which was acquired by URS Corporation in 2007, and also served on its Board of Directors. Mr. Hanks has also served as a director of Lincoln Electric Holdings, Inc. since 2006 and as a director of The Babcock & Wilcox Company since 2010. The Board of Directors is nominating Mr. Hanks in consideration of his:

experience in executive leadership, including his position as the Chief Executive Officer of Washington Group;

background and knowledge in the areas of accounting, auditing and financial reporting, having previously served as a Chief Financial Officer;

experience in the engineering and construction industry; and

experience as a board member of public companies, including McDermott.


	•	~~experience in executive leadership, including his position as the Chief Executive Officer of Washington Group;~~

	•	~~background and knowledge in the areas of accounting, auditing and financial reporting, having previously served as a Chief Financial Officer;~~

	•	~~experience in the engineering and construction industry; and~~

	•	~~experience as a board member for public companies, including McDermott.~~

Stephen M. Johnson
~~Stephen M. Johnson~~		Director Since 2010
~~Age — 59~~

~~President and Chief Executive Officer~~

Age — 60

Chairman of the Board, President and Chief Executive Officer

Mr. Johnson has been President and Chief Executive Officer of McDermott and a member of our Board since July ~~2010.~~2010, and has served as Chairman of our Board since May 2011. Previously, he served as President and Chief Executive Officer of J. Ray McDermott, S.A., one of our subsidiaries, from January 2010 to July ~~2010;~~2010, and President and Chief Operating Officer of McDermott from April 2009 to December ~~2009, and from~~2009. From 2001 to 2008, asMr. Johnson was Senior Executive Vice President and Member, Office of the Chairman, at Washington Group and at URS Corporation, which acquired Washington Group in 2007. Prior to joining Washington Group, Mr. Johnson held various management positions within Fluor Corporation, an engineering, procurement, construction and maintenance services company, from 1973 through 2001. The Board of Directors is nominating Mr. Johnson in consideration of his:

position as our Chairman, President and Chief Executive Officer;

experience in executive leadership for public companies in the engineering and construction industry, encompassing global experience, technical knowledge and complex business and financial structuring, as well as experience in the oil & gas, chemical processing, power generation, transportation, mining and government businesses;

operational and financial expertise in the engineering and construction industry, both in the United States and in international markets, including having resided, worked or led complex business transactions in the United States, Europe, Africa, the Middle East and Asia Pacific regions;

experience as a recognized leader in the area of risk management within the engineering and construction industry, having participated in the founding of the Engineering & Construction Risk Institute, a global organization focused on developing best practices in risk management, of which he served as Chairman; and

broad knowledge of the demands and expectations of our core customers.

•     ~~position as our President and Chief Executive Officer;~~
•     experience in executive leadership for public companies in the engineering and construction industry, encompassing global experience, technical knowledge and complex business and financial structuring, as well as experience in the oil & gas, chemical processing, power generation, transportation, mining and government businesses;
•     operational and financial expertise in the engineering and construction industry, both in the United States and in international markets, including having resided, worked or led complex business transactions in the United States, Europe, the Middle East and Asia Pacific regions;
•     recognized leader in the area of risk management within the engineering and construction industry, having participated in the founding of the Engineering & Construction Risk Institute, a global organization focused on developing best practices in risk management, of which he is now Chairman; and
•     ~~broad knowledge of the demands and expectations of our core customers.~~

D. Bradley McWilliams
~~D. Bradley McWilliams~~		Director Since 2003
~~Age — 69~~

~~Audit Committee — Member~~
~~Finance Committee — Chairman~~

Age — 70

Lead Director

Audit Committee — Member

Finance Committee — Chairman

Mr. McWilliams has served as our Lead Director since May 2011. From April 1995 until his retirement in April 2003, Mr. McWilliams was Senior Vice President and Chief Financial Officer of Cooper Industries Ltd., a worldwide manufacturer of electrical products, tools and hardware. He was Vice President of Cooper Industries from 1982 until April 1995. Mr. McWilliams has served as a director and Lead Director of The Babcock & Wilcox Company since 2010 and previously served as a director of Kronos Incorporated from 1993 to 2005. The Board of Directors is nominating Mr. McWilliams in consideration of his:

background in public accounting;

background and knowledge in the areas of accounting, auditing and financial reporting, having served as a Chief Financial Officer of a public company; and

experience as a board member and lead director of public companies, including McDermott.


	•	~~background in public accounting;~~

	•	~~background and knowledge in the areas of accounting, auditing and financial reporting, having served as a Chief Financial Officer of a public company; and~~

	•	~~experience as a board member for public companies, including McDermott.~~

Thomas C. Schievelbein
~~Thomas C. Schievelbein~~		Director Since 2004
~~Age — 57~~

~~Compensation Committee — Chairman~~
~~Governance Committee — Member~~

~~From November 2001 until his retirement in November 2004,~~

Age — 58

Compensation Committee — Chairman

Governance Committee — Member

Mr. Schievelbein ~~was~~has served as interim President and Chief Executive Officer of The Brinks Company, a secure transportation, cash handling and security-related services company, since December 2011. Previously, Mr. Schievelbein served as President of Northrop Grumman Newport News, a subsidiary of the Northrop Grumman Corporation, a global defense ~~company. From October 1995 to October~~company, from November 2001 ~~he served~~until his retirement in November 2004; and as Executive Vice President and Chief Operating Officer of Newport News Shipbuilding, Inc. from October 1995 to October 2001. Mr. Schievelbein has also served as a director of Huntington Ingalls Industries, Inc. since 2011, The Brinks Company since 2009, including as interim Chairman of the Board from November to December 2011, and New York Life Insurance Company since 2006. The Board of Directors is nominating Mr. Schievelbein in consideration of his:

operational, business technology development and risk mitigation and control experience gained through executive leadership;

experience with the oversight of compensation strategies and plans; and

experience as a board member of public companies, including McDermott.

•     ~~operational, business technology development and risk mitigation and control experience gained through previous executive leadership;~~
•     ~~experience with the oversight of compensation strategies and plans; and~~
•     ~~experience as a board member for public companies, including McDermott.~~

Mary L. Shafer-Malicki
~~Mary Shafer-Malicki~~		Director Since 2011
~~Age — 50~~

~~Compensation Committee — Member~~
~~Finance Committee — Member~~

Age — 51

Compensation Committee — Member

Finance Committee — Member

From July 2007 until her retirement in March 2009, Ms. Shafer-Malicki was Senior Vice President and Chief Executive Officer of BP Angola, a subsidiary of BP p.l.c., an oil and natural gas exploration, production, refining and marketing company. Previously, Ms. Shafer-Malicki served as Chief Operating Officer of BP Angola from January 2006 to June ~~2007,~~2007; and various other international engineering and managerial positions ~~within~~with BP p.l.c. Ms. Shafer-Malicki has also served as a director of Ausenco Limited since January 2011. The Board of Directors is nominating Ms. Shafer-Malicki in consideration of her:

experience in the upstream energy and supporting infrastructure businesses;

knowledge of and experience with our core customers;

executive experience and business leadership skills, including operations, strategy, commercial, safety and supply chain management; and

significant international experience, having executive or management experience in Europe, Asia Pacific and Africa.


	•	~~experience in the upstream energy and supporting infrastructure businesses;~~

	•	~~knowledge of and experience with our core customers;~~

	•	~~executive experience and business leadership skills, including operations, strategy, commercial, safety and supply chain management; and~~

	•	~~significant international experience, having resided in and executive or management experience in Europe, Asia Pacific and Africa.~~

David A. Trice
~~David A. Trice~~		Director Since 2009
~~Age — 63~~

~~Audit Committee — Chairman~~
~~Compensation Committee — Member~~

Age — 64

Audit Committee — Chairman

Compensation Committee — Member

From February 2000 until his retirement in May 2009, Mr. Trice was Chief Executive Officer of Newfield Exploration Company, an oil and natural gas exploration and production company, and served as Chairman of its board from September 2004 to May 2010. Mr. Trice has served as a director of New Jersey Resources Corporation since ~~2004.~~2004 and QEP Resources, Inc. since 2011. Mr. Trice previously served as a director of Grant PrideCo, Inc. from 2003 to 2008 and Hornbeck Offshore Services, Inc. from 2002 to 2011. The Board of Directors is nominating Mr. Trice in consideration of his:


	•	executive experience as a Chief Executive Officer ~~of a public company;~~

	•	~~experience in the oil and gas exploration and production business;~~

	•	~~background and knowledge in the areas of accounting, auditing and financial reporting; and~~

	•	~~experience as a board member for public companies, including as a chairman of a public company.~~

~~Our Board recommends that stockholders vote “FOR” each~~ of a public company;

experience in the ~~nominees named above.~~oil and gas exploration and production business;

background and knowledge in the areas of accounting, auditing and financial reporting; and

experience as a board member of public companies, including as a chairman of a public company.

~~Corporate Governance~~CORPORATE GOVERNANCE

We maintain a corporate governance section on our Web site which contains copies of our principal governance documents. The corporate governance section may be found atwww.mcdermott.comat ~~“Corporate~~“About Us — Leadership & Corporate Governance — Corporate Governance” and “About Us — Leadership & Corporate Governance — Board ~~Committees” and “Corporate Governance — Governance Policies.~~Committees.” The corporate governance section contains the following documents:

~~Amended and Restated Articles of Incorporation~~

By-Laws

Corporate Governance Guidelines

Code of Ethics for CEO and Senior Financial Officers

Board of Directors Conflicts of Interest Policies and Procedures

Audit Committee Charter

Compensation Committee Charter

Finance Committee Charter

Governance Committee Charter

In addition, our Code of Business Conduct may be found on our Web site atwww.mcdermott.comat ~~“Corporate Governance~~“About Us — ~~Code of Conduct.~~Leadership & Corporate Governance.”

Director Independence

The New York Stock Exchange listing standards require our Board of Directors to be comprised of at least a majority of independent directors. For a director to be considered independent, our Board must determine that the director does not have any direct or indirect material relationship with us. To assist it in determining director independence, and as permitted by New York Stock Exchange rules then in effect, the Board previously established categorical standards which conform to, or are more exacting than, the independence requirements in the New York Stock Exchange listing standards. These standards are contained in the Corporate Governance Guidelines, which can be found on our Web site atwww.mcdermott.comunder, ~~“Corporate~~“About Us — Leadership & Corporate Governance — ~~Governance Policies.~~Corporate Governance.”

Based on these independence standards, our Board of Directors has affirmatively determined that the following directors are independent and meet our categorical standards:


John F. Bookout, III		~~D. Bradley McWilliams~~
~~Roger A. Brown~~		Thomas C. Schievelbein
~~Ronald C. Cambre~~ Roger A. Brown		Mary L. Shafer-Malicki
Stephen G. Hanks		David A. Trice
D. Bradley McWilliams

In addition, our ~~board~~Board also determined, prior to ~~their resignations,~~his retirement in May 2011, that ~~the following directors who served during 2010 prior to the completion of the Spin-off were~~Mr. Ronald C. Cambre was independent and met our categorical ~~standards: Robert W. Goldman, Oliver D. Kingsley, Jr. and Richard W. Mies.~~

standards.

In determining the independence of the directors, our Board considered ordinary course transactions between us and other entities with which the directors are associated, none of which were determined to constitute a material relationship with us. Messrs. ~~Cambre,~~Brown, Schievelbein and Trice have no relationship with McDermott, except as a director and stockholder. ~~Messrs. Brown and~~Mr. Hanks and Ms. Shafer-Malicki are directors of entities with which we transact business in the ordinary course. Mr. Bookout is an outside consultant for an affiliate of an entity with which we transact business in the ordinary course. Messrs. Hanks and McWilliams are directors of The Babcock & Wilcox Company (“B~~&W,~~&W”), which pursuant to the transition services agreements entered into by McDermott and B&W prior to the ~~Spin-off,~~spin-off of B&W (the “Spin-off”), McDermott has transacted with following the Spin-off. Our Board also considered unsolicited contributions by us to charitable organizations with which the directors were associated. Additionally, no director is related to any executive or significant shareholder of McDermott, nor is any director, with the exception of Mr. ~~Hanks serves as~~Johnson, a ~~director~~current or former employee of ~~a charitable organization to which we made unsolicited contributions between 2008 and 2009. The charitable contribution was in the usual course of our annual giving programs.~~

McDermott.

Executive Sessions

Our independent directors meet in executive session without management on a regular basis. Currently, ~~Ronald C. Cambre,~~Mr. D. Bradley McWilliams, our ~~non-executive Chairman of the Board,~~Lead Director, serves as the presiding director for these executive sessions.

Communications ~~With~~with the Board

Stockholders or other interested persons may send written communications to the independent members of our Board, addressed to Board of Directors (independent members),c/o McDermott International, Inc., Corporate Secretary’s Office, 757 N. Eldridge Pkwy., Houston, Texas 77079. Information regarding this process is posted on our Web site atwww.mcdermott.comunder ~~“Corporate~~“About Us — Leadership & Corporate Governance — ~~Board Committees.~~Independent Director Access Information.”

Board of Directors and Its Committees

Our Board met 13nine times during ~~2010.~~2011. All directors attended 75% or more of the meetings of the Board and of the committees on which they served during ~~2010.~~2011. In addition, as reflected in our Corporate Governance Guidelines, we have adopted a policy that each member of our Board must make reasonable efforts to attend our Annual Meeting. All directors then serving on the Board attended our ~~2010~~2011 Annual ~~Meeting.~~

~~Our~~Meeting, with the exception of Ms. Shafer-Malicki, who was unable to attend due to a pre-existing conflict prior to joining our Board ~~currently separates~~in February 2011.

Board Leadership Structure

Commencing on May 6, 2011, Mr. Johnson has served as Chairman of the ~~positions of~~Board in addition to his service as Chief Executive ~~Officer and~~Officer. Prior to that date, Mr. Cambre served as Chairman of the Board. In connection with Mr. ~~Johnson serves as~~Cambre’s retirement, our Board reevaluated whether the positions of Chairman of the Board and Chief Executive Officer should be separate or occupied by the same individual, and determined that Mr. ~~Cambre serves~~Johnson should serve as Chairman of the Board in addition to Chief Executive Officer. As the individual with primary responsibility for managing our ~~non-executive Chairman. Our Board believes~~day-to-day operations, Mr. Johnson is most familiar with our business and the complex challenges faced by McDermott. As a result, we believe that ~~this leadership structure~~he is ~~appropriate for McDermott~~best positioned at this time ~~because it allows Mr. Johnson, who was appointed~~to identify strategic priorities and lead Board discussions and decision-making processes regarding key business and strategic issues, as well as to oversee the execution of important strategic initiatives. As Chief Executive Officer, Mr. Johnson is in ~~July 2010,~~an optimal position to ~~set our strategic direction~~facilitate the flow of information between management and ~~manage ourday-to-day~~ ~~operations~~the Board and ~~performance, while our non-executive Chairman~~ is able to ~~lead~~ensure that McDermott presents its message and strategy to stockholders, employees, customers and other stakeholders with a unified voice.

McDermott has adopted a governance structure that includes:

a designated independent Lead Director;

a Board composed entirely of independent directors, with the exception of Mr. Johnson;

annual election of directors; and

committees composed entirely of independent directors.

The independent Lead Director, Mr. McWilliams, acts as an intermediary between the Board ~~in its responsibilities while also monitoring~~ and ~~objectively evaluating Mr. Johnson’s performance~~management and is responsible for presiding at executive sessions of the independent directors and serving as a liaison on Board-wide issues between the independent directors and the Chief Executive ~~Officer.~~

Officer, as needed.

Board’s Role in Risk Oversight

As part of its oversight function, the Board ~~monitors various risks that McDermott faces.~~is actively involved in overseeing risk management through our Enterprise Risk Management (“ERM”) program. Our Chief Risk Officer administers our ~~Enterprise Risk Program, or ERP,~~ERM program, and presents ~~information~~ to senior management and the Board on matters relating to ~~the ERP.~~risk management on at least an annual basis. In connection with the ~~ERP,~~ERM program, the Board ~~reviewed~~exercises its oversight responsibility with respect to key external, strategic, operational and financial risks and ~~discussed~~discusses the effectiveness of current efforts to mitigate certain focus ~~risks. Our~~risks as identified by senior management and the Board through anonymous risk surveys.

Although the Board is ultimately responsible for risk oversight, the Board has delegated risk oversight responsibility to ~~each of~~ the Audit, Compensation, Finance and Governance Committees ~~oversight of risks~~ for each committee’s areas of oversight, ~~areas,~~ as set forth in their respective ~~charters,~~charters. Each committee oversees risks, including but not limited to, those set forth below, and ~~has directed that each committee~~ periodically ~~report~~reports to the Board on those ~~risks.~~risks:

the Audit Committee oversees risks with respect to financial reports and other financial information provided by us to our stockholders;

the Compensation Committee oversees risks with respect to our compensation policies and practices with respect to executives and directors as well as employees generally, employee benefit plans and the administration of equity plans;

the Finance Committee oversees risks with respect to our policies and processes relating to capital structure, capital expenditures, financing, mergers and acquisitions and capital expenditures; and

the Governance Committee oversees risks with respect to the review and recommendation of Board member candidates, the annual evaluation of the performance of the Board and its members, review of compensation for our nonemployee directors and director and officer insurance coverage.

At their respective August 2011 meetings, each committee undertook an in-depth assessment of those areas of risk oversight that were delegated to it, and provided a report to the Board. Also, at its August 2011 meeting, the Board received an ERM report from the Chief Risk Officer, and performed an

assessment and review of the risks described in that report that were not delegated to the committees.

Board Committees

Our Board currently has, and appoints the members of, standing Audit, Compensation, Finance and Governance Committees. Each of those committees is comprised entirely of independent ~~non-management~~nonemployee directors and has a written charter approved by the Board. The current charter for each standing Board committee is posted on our Web site atwww.mcdermott.comunder ~~“Corporate~~“About Us — Leadership & Corporate Governance — Board Committees.” Additionally, in January 2010 our Board established a special Restructuring Committee in connection with the Spin-off. Following the completion of the Spin-off, that committee was dissolved in August 2010.

~~The current members of the committees are identified below.~~ Attendance at committee meetings is open to every director, regardless of whetherhe/she is a member of the committee. The following table shows the current membership, the principal functions and the number of meetings held in 2011 for each committee:

~~Audit Committee:~~

~~Mr. Trice (Chairman)~~
~~Mr. Hanks~~
~~Mr. McWilliams~~

During the year ended December 31, 2010, the Audit Committee met four times. The Audit Committee’s role is financial oversight. Our management is responsible for preparing financial statements, and our independent registered public accounting firm is responsible for auditing those financial statements. The Audit Committee is not providing any expert or special assurance as to our financial statements or any professional certification as to the independent registered public accounting firm’s work.

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of McDermott’s independent registered public accounting firm. The committee, among other things, also reviews and discusses McDermott’s audited financial statements with management and the independent registered public accounting firm.

Our Board has determined that Messrs. Trice, Hanks and McWilliams each qualify as an “audit committee financial expert” within the definition established by the Securities and Exchange Commission (“SEC”). For more information on the backgrounds of these directors, see their biographical information under “Election of Directors” above.

~~Compensation Committee:~~

~~Mr. Schievelbein (Chairman)~~
~~Mr. Brown~~
~~Ms. Shafer-Malicki~~
~~Mr. Trice~~

During the year ended December 31, 2010, the Compensation Committee met seven times. The Compensation Committee has overall responsibility for our officer compensation plans, policies and programs and has the authority to engage and terminate any compensation consultant or other advisors to assist the committee in the discharge of its responsibilities.

~~In November 2010, after a selection process, the Compensation Committee selected Pay Governance, LLC as its compensation consultant, and Pay~~

Committees and

Current Members

Principal Functions and Additional Information

Meetings
Held in 2011

AUDIT

Mr. Trice (Chair)

Mr. Hanks

Mr. McWilliams

• Serves as an independent and objective party to monitor our financial reporting process and internal control system.

• Oversees the integrity of our financial statements.

• Monitors our compliance with legal and regulatory financial requirements, including our compliance with the applicable reporting requirements established by the Securities and Exchange Commission (the “SEC”).

• Evaluates the independence, qualifications, performance and compensation of our independent registered public accounting firm.

• Oversees the performance of our internal audit function.

• Oversees certain aspects of our Compliance and Ethics Program relating to financial matters, books and records and accounting and as required by applicable statutes, rules and regulations.

• Provides an open avenue of communication among our independent registered public accounting firm, financial and senior management, the internal audit department and the Board.

Our Board has determined that Messrs. Trice, Hanks and McWilliams each qualify as an “audit committee financial expert” within the definition established by the SEC. For more information on the backgrounds of those directors, see their biographical information under “Election of Directors” above.

7 Meetings

in 2011

COMPENSATION
Mr. Schievelbein (Chair)
Mr. Brown
Ms. Shafer-Malicki
Mr. Trice
•    Evaluates our officer and director compensation plans, policies and programs and our employee benefit plans.
•    Approves and/or recommends to the Board for approval such officer and director compensation plans, policies and programs.
•    Oversees our disclosures relating to compensation plans, policies and programs, including overseeing the preparation of the Compensation Discussion and Analysis included in this proxy statement.
•    Acts in its sole discretion to retain or terminate any compensation consultant to be used to assist the Compensation Committee in the discharge of its responsibilities. For additional information on the role of compensation consultants, please see “Compensation Discussion and Analysis — Role of Compensation Committee, Compensation Consultant and Management” below.
•    For 2011, the Compensation Committee authorized our Chief Executive Officer, in consultation with his direct reports, to establish individual goals under our Executive Incentive Compensation Plan (“EICP”), for our other executive officers who participate in the EICP.
•    Under both our 2001 Directors and Officers Long-Term Incentive Plan (the “2001 D&O Plan”) and our 2009 McDermott International, Inc. Long-Term Incentive Plan (the “2009 LTIP”), our Compensation Committee may delegate some of its duties to our Chief Executive Officer or other senior officers.
•    Under our McDermott International, Inc. Director and Executive Deferred Compensation Plan, which we refer to as the “Deferred Compensation Plan,” the Compensation Committee may delegate any of its powers or responsibilities to one or more members of the Committee or any other person or entity.
7 Meetings
in 2011
FINANCE
Mr. McWilliams (Chair)
Mr. Bookout
Mr. Hanks
Ms. Shafer-Malicki
•    Reviews and oversees financial policies and strategies, mergers, acquisitions, financings, liabilities, investment performance of our pension plans and our capital structure.
•    Recommends any change in dividend policies or stock repurchase programs.
•    Oversees capital expenditures and capital allocation strategies.
•    Oversees our tax structure and monitors any developments relating to changes in tax legislation.
•    Generally has responsibility over such matters up to $50 million, and for activities involving amounts over $50 million, reviews the activity and makes a recommendation to the Board.
5 Meetings
in 2011

GOVERNANCE
Mr. Brown (Chair)
Mr. Bookout
Mr. Schievelbein
•    Identifies individuals qualified to become Board members and recommends to the Board each year the director nominees for the next annual meeting of stockholders.
•    Develops, reviews and recommends to the Board any changes the Governance Committee deems appropriate to our Corporate Governance Guidelines.
•    Leads the Board in its annual review of the Board’s performance and, in conjunction with the Compensation Committee, oversees the annual evaluation of our Chief Executive Officer.
•    Reviews our executive management succession plan on at least an annual basis.
•    Recommends to the Board the directors to serve on each Board committee.
•    Recommends to the Board the compensation of nonemployee directors.
•    Serves as the primary committee overseeing our Compliance and Ethics Program, excluding certain oversight responsibilities assigned to the Audit Committee.
•    Oversees our director and officer insurance program.
6 Meetings
in 2011

Governance has been advising the Compensation Committee on the matters described above since that time. From February 2010 to November 2010, Meridian Compensation Partners LLC, or Meridian, which spun-off from Hewitt Associates LLC in February 2010, served as the consultant to the Compensation Committee. Prior to its spin-off of Meridian, Hewitt Associates LLC served as the consultant to the Compensation Committee since October 2007. The Compensation Committee considers recommendations from our Chief Executive Officer regarding the compensation of our executive officers. Please see the “Compensation Discussion and Analysis” and “Compensation of Executive Officers” sections of this proxy statement for information about our 2010 executive officer compensation, including a discussion of the role of the Compensation Committee’s compensation consultant.

The Compensation Committee administers our Executive Incentive Compensation Plan, or EICP, under which it awards annual cash-based incentive compensation to our officers based on the attainment of annual performance goals. The Compensation Committee approves, among other things, target EICP compensation for each officer, expressed as a percentage of the officer’s base salary for that year, and financial goals applicable to EICP compensation. For 2010, the Compensation Committee authorized our Chief Executive Officer to establish individual goals for our other executive officers applicable to EICP compensation and, in coordination with his direct reports, to select such other officers and key employees to participate in the EICP and establish appropriate individual performance goals for them. Under both our 2001 Directors and Officers Long-Term Incentive Plan, which we refer to as the 2001 D&O Plan, and our 2009 McDermott International, Inc. Long-Term Incentive Plan, which we refer to as the 2009 LTIP, our Compensation Committee may delegate some of its duties to our Chief Executive Officer or other senior officers.

~~Finance Committee:~~

~~Mr. McWilliams (Chairman)~~
~~Mr. Bookout~~
~~Mr. Hanks~~
~~Ms. Shafer-Malicki~~

During the year ended December 31, 2010, the Finance Committee met six times. The Finance Committee has the overall responsibility of reviewing and overseeing financial policies (including any dividend recommendations and stock repurchase programs) and

financial strategies, mergers, acquisitions, financings, liabilities, investment performance of our pension plans and the capital structures of McDermott and its subsidiaries. Generally, the Finance Committee has responsibility over such matters up to $50 million, and for such activities involving amounts over $50 million, the Finance Committee will review the activity and make a recommendation to the Board.

~~Governance Committee:~~

~~Mr. Brown (Chairman)~~
~~Mr. Bookout~~
~~Mr. Schievelbein~~

During the year ended December 31, 2010, the Governance Committee met six times. This committee, in addition to other matters, recommends to our Board of Directors: (1) the qualifications, term limits and nomination and election procedures relating to our directors; (2) nominees for election to our Board of Directors; and (3) compensation of non-management directors. This committee will consider individuals recommended by stockholders for nomination as directors in accordance with the procedures described under “Stockholders’ Proposals.” Our Governance Committee has primary oversight responsibility for our compliance and ethics program, excluding certain oversight responsibilities assigned to the Audit Committee, and our director and officer insurance program. In conjunction with the Compensation Committee, the Governance Committee oversees the annual evaluation of our Chief Executive Officer. Additionally, the Governance Committee reviews our executive management succession planning on at least an annual basis.

In May 2010, at the request of the Chairman of the Governance Committee, Meridian performed a market analysis of nonemployee director compensation using our Custom Peer Group (as defined in “Compensation Discussion and Analysis”) and made recommendations regarding nonemployee director compensation to the Governance Committee. Based on those recommendations, the Governance Committee recommended no changes in the form and amounts of non-management director compensation for 2010. Our management is not substantively involved in Meridian’s market analysis or recommendation regarding non-management director compensation.

Compensation Policies and Practices and Risk

The Compensation Committee has concluded that risks arising from McDermott’s compensation

policies and practices for McDermott employees are not reasonably likely to have a materially adverse effect on McDermott. In reaching this conclusion, the Compensation Committee considered the policies and practices in the following paragraph.

The Compensation Committee regularly reviews the design of our significant compensation programs with the assistance of its compensation consultant. We believe our compensation programs motivate and retain our executive officer employees while allowing for appropriate levels of business risk through some of the following features:


	•		Reasonable Compensation Programs — Using the elements of total direct compensation, the Compensation Committee seeks to provide compensation opportunities for employees targeted at or near the median compensation of comparable positions in our market. As a result, we believe the total direct compensation of executive officer employees provides a reasonable and appropriate mix of cash and equity, annual and longer-term incentives, and performance metrics.

	•		Emphasize Long-Term Incentive Compensation Over Annual IncentiveCompensation — Long-term incentive compensation typically makes up a larger percentage of an executive officer employee’s total direct compensation than annual incentive compensation. Incentive compensation helps drive performance and align the interests of those employees with those of stockholders. ~~However,~~In addition, tying a significant portion of an employee’s total direct compensation to long-term incentives (which typically vest over a period of three or more years) helps to promote longer-term perspectives regarding ~~company~~our company’s performance.

	•		Clawback Policy — The Compensation Committee has adopted a policy under which McDermott shall seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank ~~Wall-Street~~Wall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

•

Long-Term Incentive Compensation Subject to Forfeiture — The Compensation


		Committee may terminate any outstanding

stock award if the recipient, while employed by McDermott or performing services on behalf of McDermott under any consulting agreement: (1) is convicted of a misdemeanor involving fraud, dishonesty or moral turpitude or a ~~felony,~~felony; or (2) engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, the business reputation or economic interests of the Company.

	•		Annual Incentive Compensation Subject to Threshold Performance and Linear and Capped ~~Incentive Compensation~~ Payouts — The Compensation Committee establishes financial performance goals which are used to plot a linear payout formula for annual incentive compensation, eliminating payout “cliffs” between the established performance goals. Threshold levels of performance required to earn short-term incentives are tied to, among other components, achievement of financial results that correlate to the Company’s weighted average cost of capital. The maximum payout for the annual incentive compensation is capped at 200% ~~percent~~ of target.

	•		Use of Multiple and Appropriate Performance Metrics — Utilizing diversified performance measures helps prevent compensation opportunities from being overly weighted toward the performance result of a single measure. In general, our incentive programs are historically based on a mix of financial and individual goals. In recent years our primary financial performance metric has been operating income. Compared to other financial metrics, operating income is a measure of the profitability of our business which helps drive accountability at our operating segments thereby reducing risks related to incentive compensation by putting the focus on quality of revenues not quantity. Additionally, commencing in 2011, the Compensation Committee utilized relative total shareholder return and return on invested capital as additional performance measures.

•

Stock Ownership Guidelines — Our executive officers and directors are subject to share ownership guidelines, which also

helps promote longer-term perspectives and align the interests of our executive officers and directors with those of our stockholders. In 2010, we increased the stock ownership requirements for both our executive officers and ~~non-management~~nonemployee directors to further emphasize this alignment of interests.

Compensation Committee Interlocks and Insider Participation

All members of our Compensation Committee are independent in accordance with ~~the New York Stock Exchange~~NYSE listing standards. No member of the Compensation Committee (1) was, during the year ended December 31, ~~2010,~~2011, or had previously been, an officer or employee of McDermott or any of its subsidiaries, or (2) had any material interest in a transaction of McDermott or a business relationship with, or any indebtedness to, McDermott. No interlocking relationship existed during the year ended December 31, ~~2010~~2011 between any member of the Board of Directors or the Compensation Committee and an executive officer of McDermott.

Director Nomination Process

Our Governance Committee has determined that a candidate for election to our Board of Directors must meet specific minimum qualifications. Each candidate should:

have a record of integrity and ethics in his/her personal and professional life;

have a record of professional accomplishment in his/her field;

be prepared to represent the best interests of our stockholders;

not have a material personal, financial or professional interest in any competitor of ours; and

be prepared to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and active participation in, meetings of the Board and the committee(s) of which he or she is a member, and not have other personal or professional commitments that would, in the Governance Committee’s sole judgment, interfere with or limit his or her ability to do so.


	•	~~have a record of integrity and ethics inhis/her~~ ~~personal and professional life;~~

	•	~~have a record of professional accomplishment inhis/her~~ ~~field;~~

	•	~~be prepared to represent the best interests of our stockholders;~~

	•	~~not have a material personal, financial or professional interest in any competitor of ours; and~~

	•	be prepared to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and active participation in, meetings of the Board and the committee(s) of which he or she is a member, and not have other personal or professional commitments that would, in the Governance Committee’s sole judgment, interfere with or limit his or her ability to do so.

In addition, the Governance Committee also considers it desirable that candidates possess the following qualities or skills:


	•	~~each candidate should contribute positively to the collaborative culture among Board members; and~~

each candidate should contribute positively to the collaborative culture among Board members; and


	•	~~each candidate should possess professional and personal experiences and expertise relevant to our businesses and industries.~~

each candidate should possess professional and personal experiences and expertise relevant to our businesses and industries.

While McDermott does not have a specific policy addressing board diversity, the Board recognizes the benefits of a diversified board and believes that any search for potential director candidates should consider diversity as to gender, ethnic background and personal and professional experiences. The Governance Committee solicits ideas for possible candidates from a number of sources — including independent director candidate search firms, members of the Board and our senior level executives.

In 2010, our Governance Committee engaged Russell Reynolds Associates (“Russell Reynolds”), an independent director search firm, in order to assist in selecting director candidates. After review and consideration of approximately 25 prospective candidates identified by Russell Reynolds,

Ms. Shafer-Malicki was appointed to the Board on February 17, 2011 in consideration of her extensive experience in our industry and other qualifications.

Any stockholder may nominate one or more persons for election as one of our directors at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our By-Laws. See “Stockholders’ Proposals” in this proxy statement and our By-Laws, which may be found on our Web site atwww.mcdermott.comat ~~“Corporate~~“About Us — Leadership & Corporate Governance — ~~Governance Policies.~~Corporate Governance.”

The Governance Committee will consider candidates identified through the processes described above and will evaluate each of them, including incumbents, based on the same criteria. The Governance Committee also takes into account the contributions of incumbent directors as Board members and the benefits to us arising from their experience on the Board. Although the Governance Committee will consider candidates identified by stockholders, the Governance Committee has sole discretion whether to recommend those candidates to the Board. None of the director nominees for the ~~2011~~2012 Annual Meeting are standing for election for the first ~~time, with~~time.

COMPENSATIONOF DIRECTORS

In May 2011, at the ~~exception~~request of ~~Mr. Johnson~~the Governance Committee, Pay Governance LLC performed a market analysis of nonemployee director compensation and ~~Ms. Shafer-Malicki, who were appointed~~made recommendations regarding nonemployee director compensation to the Governance Committee. Based upon those recommendations, the Governance Committee recommended revisions to our 2011 nonemployee director compensation program, which were approved by the Board.

Beginning May 7, 2011, under our 2011 nonemployee director compensation program, cash compensation for nonemployee directors consisted of retainers (paid monthly and prorated for partial terms) and meeting fees as follows:

annual Board member retainer: $75,000;

additional retainer for the chair of each of the Audit Committee and Compensation Committee: $20,000;

additional retainer for the chair of each of the Finance Committee and Governance Committee: $10,000;

additional retainer for the Lead Director: $20,000; and

meeting fees of $2,500 for each meeting of the Board or a Committee (of which the nonemployee director is a member) attended, in ~~July 2010~~person or by telephone, in excess of the eighth Board or Committee meeting per calendar year. Previously, meeting fees of $2,500 were paid for each Board meeting personally attended by a nonemployee director, $1,750 for each meeting of a Committee personally attended by a nonemployee director who was a member of the Committee, and ~~February~~$1,000 for each Board meeting and meeting of a Committee attended telephonically by a nonemployee director who was a member of the Board or Committee.

No changes were made under our 2011 ~~respectively.~~nonemployee director compensation program with respect to equity awards.

~~Compensation of Directors~~

The table below summarizes the compensation earned by or paid to our nonemployee directors during the year ended December 31, ~~2010. In connection with the Spin-off, Messrs. Goldman and Kingsley and Admiral Mies resigned as members~~2011. Mr. Ronald C. Cambre, our former Chairman of the Board, ~~of Directors on July 30, 2010.~~

retired from our Board effective May 6, 2011.

~~Director Compensation Table~~DIRECTOR COMPENSATION TABLE

Fees Earned or
Stock

Name Paid in Cash⁽¹⁾ Awards⁽²⁾ Total
John F. Bookout, III $ 95,000 $ 109,979 $ 204,979
Roger A. Brown $ 106,750 $ 109,979 $ 216,729
Ronald C. Cambre $ 247,500 $ 109,979 $ 357,479
Robert W. Goldman $ 68,000 $ 109,979 $ 177,979
Stephen G. Hanks $ 91,750 $ 109,979 $ 201,729
Oliver D. Kingsley Jr. $ 57,250 $ 109,979 $ 167,229
D. Bradley McWilliams $ 108,250 $ 109,979 $ 218,229
Richard W. Mies $ 57,250 $ 109,979 $ 167,229
Thomas C. Schievelbein $ 107,750 $ 109,979 $ 217,729
David A. Trice $ 105,750 $ 109,979 $ 215,729


Name	Fees Earned or Paid in Cash		Stock Awards⁽¹⁾		Total
John F. Bookout, III	$	74,500	$	119,995	$	194,495
Roger A. Brown	$	85,417	$	119,995	$	205,412
Ronald C. Cambre	$	65,750		—	$	65,750
Stephen G. Hanks	$	75,500	$	119,995	$	195,495
D. Bradley McWilliams	$	98,000	$	119,995	$	217,995
Thomas C. Schievelbein	$	93,333	$	119,995	$	213,328
Mary L. Shafer-Malicki	$	69,250	$	143,789	$	213,039
David A. Trice	$	95,583	$	119,995	$	215,578


(1)		~~See “Fees Earned or Paid in Cash” below for a discussion of the amounts reported in this column.~~

~~(2)~~		~~See “Stock and Option Awards” below for a discussion of the amounts reported in this column.~~

~~The compensation for nonemployee directors for 2010 was comprised of cash and~~Under our 2011 director compensation program, equity compensation earned by directors in connection with their service as directors. The cash compensation consisted of retainers and meeting fees described in more detail below. The equity compensation consisted of restricted stock awards issued under our 2009 LTIP. Employee directors do not receive any compensation for their service as directors.

~~Fees Earned or Paid in Cash.~~ ~~Under our 2010 director compensation program, cash~~ compensation for nonemployee directors consisted ~~of the following:~~


	•	~~an annual retainer of $45,000 (prorated for partial terms);~~

	•	~~a fee of $2,500 for each Board meeting personally attended, $1,750 for each meeting~~ of a ~~committee of which they are a member personally attended and $1,000 for each Board meeting and meeting of a committee of which they are a member attended by telephone.~~

The Non-Executive Chairman receives a fee of $1,750 for any committee meeting personally attended and $1,000 for any committee meeting attended by telephone. Until its dissolution in August 2010, any director who attended a meeting of the Restructuring

~~Committee received a fee of $1,750 for each meeting personally attended and $1,000 for each meeting attended by telephone.~~

~~The chairs of Board committees and the Non-Executive Chairman receive additional annual retainers as follows (pro-rated for partial terms):~~


	•	~~the chair of the Audit Committee: $20,000;~~

	•	~~the chair of the Compensation Committee: $15,000;~~

	•	~~the chair of~~discretionary annual stock grant. On May 13, 2011, each of the ~~Finance Committee~~nonemployee directors then serving as a director received a grant of 5,862 shares of restricted stock or restricted stock units valued at $119,995, which were settled in 2011 in unrestricted shares of McDermott common stock. In addition to the annual stock grant, Ms. Shafer-Malicki received a grant of 928 shares of restricted stock on March 4, 2011 valued at $23,794, following her appointment to our Board, which reflected Ms. Shafer-Malicki’s partial-year service and ~~the Governance Committee: $10,000; and~~which were settled in unrestricted shares in 2011.

•The amounts reported represent the aggregate grant date fair value of the restricted stock or restricted stock units computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, using the closing market price of McDermott common stock on the date of grant ($20.47 on May 13, 2011 and $25.64 on March 4, 2011). Under the terms of each award, the restricted stock and restricted stock units vested immediately on the grant date.

As of December 31, 2011, the ~~Non-Executive Chairman: $150,000.~~nonemployee directors had aggregate outstanding stock option awards as follows: Mr. Bookout — 6,105 stock options; Mr. Brown — 38,085 stock options; Mr. McWilliams — 37,876 stock options; and Mr. Schievelbein — 72,538 stock options.

~~The chair of the Restructuring Committee also received a retainer of $15,000 in 2010.~~

~~Since May 2009, all director annual retainers are paid in quarterly installments.~~

~~Stock and Option Awards.~~ ~~In addition to the fees provided to our directors described above, we granted equity awards to our directors in 2010 under the 2009 LTIP.~~

~~Under the 2009 LTIP, nonemployee directors may be granted stock options, restricted stock, performance units, restricted stock units and performance share~~

NAMED EXECUTIVES PROFILES

awards, in such amounts and on such terms as the Compensation Committee or the Board may determine from time to time. In 2010, each of our nonemployee directors received 4,243 shares of restricted stock. Under the terms of each award, the restricted stock vested immediately on the grant date.

The amounts reported in the “Stock Awards” column represent the grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. Under FASB ASC Topic 718, the

fair value of restricted stock is determined on the date of grant and is not remeasured. Grant date fair values are determined using the closing price of our common stock on the date of grant for restricted stock.

The following table reflects the number of shares and grant date fair value, computed in accordance with FASB ASC Topic 718, with respect to each restricted stock award granted to nonemployee directors in 2010 and the restricted stock and stock option awards each nonemployee director had outstanding as of December 31, 2010.

~~Equity Awards Granted to Directors in 2010 and~~
~~Outstanding at December 31, 2010~~

Equity Awards

Granted in 2010
Shares of
Equity Awards Outstanding at
Restricted
Grant Date
December 31, 2010
Name Grant Date Stock Fair Value Stock Awards Option Awards
John F. Bookout, III May 13, 2010 4,243 $ 109,979 0 6,105
Roger A. Brown May 13, 2010 4,243 $ 109,979 0 38,085
Ronald C. Cambre May 13, 2010 4,243 $ 109,979 0 0
Robert W. Goldman May 13, 2010 4,243 $ 109,979 0 0
Stephen G. Hanks May 13, 2010 4,243 $ 109,979 0 0
Oliver D. Kingsley, Jr. May 13, 2010 4,243 $ 109,979 0 0
D. Bradley McWilliams May 13, 2010 4,243 $ 109,979 0 37,876
Richard W. Mies May 13, 2010 4,243 $ 109,979 0 0
Thomas C. Schievelbein May 13, 2010 4,243 $ 109,979 0 72,538
David A. Trice May 13, 2010 4,243 $ 109,979 0 0

~~Named Executives Profiles~~

The following profiles provide summary information regarding the experience and ~~2010~~2011 compensation of our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers, who were employed by McDermott as of December 31, ~~2010,~~2011, whom we refer to as our “Continuing Named Executives.” The Continuing Named Executives and Mr. John T. Nesser, our former Executive Vice President, Chief ~~Executive~~Operating Officer, ~~Mr. John A. Fees,~~ who became Chairman of the Board of Directors of B&W following the Spin-off, our former Chief Financial Officer, Mr. Michael S. Taff, who became Chief Financial Officer of B&W following the Spin-off, and Mr. Brandon C. Bethards, who became the Chief Executive Officer of B&W following the Spin-off, and would have been one of our three other most highly compensated executive officers had he been employed by McDermott as of December 31, ~~2010,~~2011, are collectively referred to as our “Named Executives.” Information on ~~Messrs. Fees, Taff and Bethards~~Mr. Nesser is provided in the

Compensation Discussion and Analysis (“CD&A”) and the

compensation-related tables included in this proxy statement.

The Continuing Named Executive profiles provide biographical information, including age as of May ~~6, 2011,~~10, 2012, and summarize the compensation disclosures that are provided in the ~~Compensation Discussion and Analysis~~CD&A and executive compensation tables in this proxy statement. These profiles are supplemental, and are being provided in addition to, and not in substitution for, the detailed compensation tables required by the ~~Securities Exchange Commission~~SEC that follow the ~~Compensation Discussion and Analysis.~~CD&A. Please consult the more detailed compensation tables and the accompanying footnotes following the ~~Compensation Discussion and Analysis~~CD&A for an explanation of how the compensation information is calculated.

STEPHEN M. JOHNSON

CHAIRMANOFTHE BOARD, PRESIDENTAND CHIEF EXECUTIVE OFFICER

~~Stephen M. Johnson~~

~~President & Chief Executive Officer & Director~~

~~Age: 59~~

~~Tenure with McDermott: 2 years~~

Mr. Johnson has served as our President and Chief Executive Officer since July 2010. Previously, he served as: President and Chief Executive Officer of J. Ray McDermott, S.A., one of our subsidiaries, from January 2010 to July 2010; our President and Chief Operating Officer from April 2009 to December 2009; and from 2001 to 2008 as Senior Executive Vice President and Member, Office of the Chairman, at Washington Group International, Inc. (“Washington Group”) and at URS Corporation, which acquired Washington Group in 2007. Prior to joining Washington Group, Mr. Johnson held various management positions within Fluor Corporation, an engineering, procurement, construction and maintenance services company, from 1973 through 2001.

~~2010 Compensation~~

Annual Base Salary

Base Salary Earned $ 827,083

Annual Incentive Compensation

Executive Incentive Compensation Plan $ 1,218,863

Long-Term Incentive Compensation

Restricted Stock Units⁽¹⁾
$ 1,249,956
Stock Options⁽¹⁾
$ 865,313

Retention Agreement Grant

Restricted Stock⁽¹⁾
$ 1,422,186

Pension Plan

Annual Change in Present Value of Accumulated Pension Benefit N/A

Other Compensation

Deferred Compensation Plan Contribution $ 69,375
Thrift Match $ 7,095
Service-Based Thrift Contribution $ 7,350
TaxGross-Ups
$ 21,025
Perquisites and Personal Benefits $ 58,838

~~2010 Total Compensation~~

~~Equity Awarded in 2010~~

Age: 60

Tenure with McDermott: 3 years

Mr. Johnson has served as our President and Chief Executive Officer since July 2010. Previously, he served as: President and Chief Executive Officer of J. Ray McDermott, S.A., one of our subsidiaries, from January 2010 to July 2010 and our President and Chief Operating Officer from April 2009 to December 2009. From 2001 to 2008, Mr. Johnson was Senior Executive Vice President and Member, Office of the Chairman, at Washington Group International, Inc. (“Washington Group”) and at URS Corporation, which acquired Washington Group in 2007.

2011 COMPENSATION

Annual Base Salary

Base Salary Earned

$ 942,500

Annual Incentive Compensation

Executive Incentive Compensation Plan

$ 0

Long-Term Incentive Compensation⁽¹⁾

Restricted Stock Units

$ 999,960

Stock Options

$ 944,089

Performance Shares

$2,382,132

Pension Plan⁽²⁾

Annual Change in Present Value of Accumulated Pension Benefit

N/A

Other Compensation

Deferred Compensation Plan Contribution

$ 97,932

Thrift Match

$ 6,817

Service-Based Thrift Contribution

$ 7,350

Tax Gross-Ups

$ 0

Perquisites

$ 20,000

Other

$ 0

2011 TOTAL COMPENSATION

LOGO

~~March 4, 2010~~

~~Stock Options~~

~~141,597 shares~~⁽²⁾

EQUITY AWARDEDIN 2011

March 4, ~~2010~~2011

Restricted Stock Units

~~95,493~~

39,000 units⁽²⁾

~~August 2, 2010~~

~~Restricted Stock~~

~~113,412~~

March 4, 2011

Stock Options

98,133 shares

March 4, 2011

Performance Shares

56,529 shares

~~(1)~~

~~All~~

(1) Each equity ~~grants are~~grant is disclosed at the grant date fair value of the award.

(2) Mr. Johnson does not participate in our qualified defined benefit plan due to commencing his employment with the Company after the plan was closed to new participants in 2006.

PERRY L. ELDERS

SENIOR VICE PRESIDENTAND CHIEF FINANCIAL OFFICER

Age: 50

Tenure with McDermott: 2 years

Mr. Elders has served as our Senior Vice President and Chief Financial Officer since July 2010, and served in that capacity at our subsidiary J. Ray McDermott, S.A. from April 2010 to July 2010. Previously, he served as: Executive Vice President and Chief Financial Officer from February 2006 to April 2009, and Senior Financial Advisor from November 2005 to February 2006, of Bristow Group, Inc., a worldwide provider of helicopter services; Director, Financial Consulting of Sirius Solutions, an independent business consulting firm, from July 2005 to February 2006; and Vice President and Chief Accounting Officer of Vetco International, Ltd., a provider of upstream oil and gas production facilities, process systems, technology and products, from August 2004 to May 2005. Mr. Elders spent 20 years (1983-2003) in public accounting firms where he became an audit partner specializing in multi-national energy service companies. Mr. Elders is a Certified Public Accountant.

2011 COMPENSATION

~~(2)~~

~~As adjusted pursuant to the equity conversion~~

Annual Base Salary

Base Salary Earned

$481,250

Annual Incentive Compensation

Executive Incentive Compensation Plan

$ 0

Long-Term Incentive Compensation⁽¹⁾

Restricted Stock Units

$249,990

Stock Options

$236,000

Performance Shares

$595,438

Pension Plan⁽²⁾

Annual Change in ~~connection with the Spin-off.~~Present Value of Accumulated Pension Benefit

N/A

~~Perry L. Elders~~

~~Senior Vice President, Chief Financial Officer~~

~~Age: 49~~

~~Tenure with McDermott: 1 year~~

Mr. Elders has served as our Senior Vice President and Chief Financial Officer since July 2010, and served in that capacity at our subsidiary J. Ray McDermott, S.A. from April 2010 to July 2010. Previously, he served as: Executive Vice President and Chief Financial Officer from February 2006 to April 2009, and Senior Financial Advisor from November 2005 to February 2006, of Bristow Group, Inc., a worldwide provider of helicopter services; Director, Financial Consulting of Sirius Solutions, an independent business consulting firm, from July 2005 to February 2006; and Vice President and Chief Accounting Officer of Vetco International, Ltd., a provider of upstream oil and gas production facilities, process systems, technology and products, from August 2004 to May 2005. Mr. Elders spent 20 years~~(1983-2003)~~ ~~in public accounting firms where he became an audit partner specializing in multi-national energy service companies. Mr. Elders is a Certified Public Accountant.~~

~~2010 Compensation~~

Annual Base Salary

Base Salary Earned⁽¹⁾
$ 315,114

Annual Incentive Compensation

Executive Incentive Compensation Plan $ 398,147

Long-Term Incentive Compensation

Restricted Stock Units⁽²⁾
$ 517,021
Stock Options⁽²⁾
$ 396,788

Pension Plan

Annual Change in Present Value of Accumulated Pension Benefit N/A

Other Compensation

Deferred Compensation Plan Contribution⁽¹⁾
$ 0
Thrift Match $ 6,709
Service-Based Thrift Contribution $ 7,350
TaxGross-Ups
$ 0
Perquisites and Personal Benefits $ 0

~~2010 Total Compensation~~

~~Equity Awarded in 2010~~

Other Compensation

Deferred Compensation Plan Contribution

$ 39,950

Thrift Match

$ 7,350

Service-Based Thrift Contribution

$ 7,350

Tax Gross-Ups

$ 0

Perquisites

$ 20,000

Other

$ 2,113

2011 TOTAL COMPENSATION

LOGO

~~May 13, 2010~~

~~Stock Options~~

~~60,292 shares~~⁽³⁾

EQUITY AWARDEDIN 2011

~~May 13, 2010~~

March 4, 2011

Restricted Stock Units

~~38,661~~

9,750 units⁽³⁾

March 4, 2011

Stock Options

24,531 shares

March 4, 2011

Performance Shares

14,130 shares

~~(1)~~

Mr. Elders’ base salary earned reflects his earnings from his April 30, 2010 hire date. No Deferred Compensation Plan contribution was made to Mr. Elders in 2010 because he was not an employee at the time such contributions were made.

~~(2)~~

~~All~~

(1) Each equity ~~grants are~~grant is disclosed at the grant date fair value of the award.

(2) Mr. Elders does not participate in our qualified defined benefit plan due to commencing his employment with the Company after the plan was closed to new participants in 2006.

GARY L. CARLSON

SENIOR VICE PRESIDENTAND CHIEF ADMINISTRATION OFFICER

Age: 57

Tenure with McDermott: 2 years

Mr. Carlson has served as our Senior Vice President and Chief Administration Officer since February 2012. Previously, he served as: Senior Vice President, Chief Human Resources Officer from May 2011 to February 2012; Senior Vice President, Human Resources from July 2010 to May 2011; Senior Vice President, Human Resources and Organization Development for our subsidiary J. Ray McDermott, S.A. from March 2010 to July 2010; Senior Vice President, Human Resources of MWH Global, Inc., an energy and environmental engineering, construction and water resource management firm, from 2008 to 2010; and Vice President, Human Resources of KBR, Inc., an engineering, construction and services company, from 2004 to 2008.

2011 COMPENSATION

~~(3)~~

~~As adjusted pursuant to the equity conversion~~

Annual Base Salary

Base Salary Earned

$332,000

Annual Incentive Compensation

Executive Incentive Compensation Plan

$ 0

Long-Term Incentive Compensation⁽¹⁾

Restricted Stock Units

$116,688

Stock Options

$ 94,406

Performance Shares

$238,175

Pension Plan⁽²⁾

Annual Change in ~~connection with the Spin-off.~~Present Value of Accumulated Pension Benefit

N/A

~~Gary L. Carlson~~

~~Senior Vice President, Human Resources~~

~~Age: 56~~

~~Tenure with McDermott: 1 year~~

Mr. Carlson has served as our Senior Vice President, Human Resources since July 2010. Previously, he served as: Senior Vice President, Human Resources and Organization Development for our subsidiary J. Ray McDermott, S.A. from March 2010 to July 2010; Senior Vice President, Human Resources of MWH Global, Inc., an energy and environmental engineering, construction and water resource management firm, from 2008 to 2010; and Vice President, Human Resources of KBR, Inc., an engineering, construction and services company, from 2004 to 2008.

~~2010 Compensation~~

Annual Base Salary

Base Salary Earned⁽¹⁾
$ 243,333

Annual Incentive Compensation

Executive Incentive Compensation Plan $ 334,400

Long-Term Incentive Compensation

Restricted Stock Units⁽²⁾
$ 527,051
Stock Options⁽²⁾
$ 165,771

Pension Plan

Annual Change in Present Value of Accumulated Pension Benefit N/A

Other Compensation

Deferred Compensation Plan Contribution⁽¹⁾
$ 0
Thrift Match $ 6,583
Service-Based Thrift Contribution $ 7,300
TaxGross-Ups
$ 24,600
Perquisites and Personal Benefits $ 68,367

~~2010 Total Compensation~~

~~Equity Awarded in 2010~~

Other Compensation

Deferred Compensation Plan Contribution

$ 24,800

Thrift Match

$ 6,030

Service-Based Thrift Contribution

$ 7,350

Tax Gross-Ups

$ 11,720

Perquisites⁽³⁾

$ 68,606

Other

$ 2,113

2011 TOTAL COMPENSATION

LOGO

~~May 13, 2010~~

~~Stock Options~~

~~25,189 shares~~⁽³⁾

EQUITY AWARDEDIN 2011

~~May 13, 2010~~

March 4, 2011

Restricted Stock Units

~~39,411~~

4,551 units⁽³⁾

March 4, 2011

Stock Options

9,813 shares

March 4, 2011

Performance Shares

5,652 shares

~~(1)~~

Mr. Carlson’s base salary earned reflects his earnings from his March 29, 2010 hire date. No Deferred Compensation Plan Contribution was made to Mr. Carlson in 2010 because he was not an employee at the time such contributions were made.

~~(2)~~

~~All~~

(1) Each equity ~~grants are~~grant is disclosed at the grant date fair value of the award.

(2) Mr. Carlson does not participate in our qualified defined benefit plan due to commencing his employment with the Company after the plan was closed to new participants in 2006.

(3) The amount reported for Mr. Carlson includes $48,606 attributable to the cost of providing him relocation assistance in connection with his move from Colorado to Texas.

LIANE K. HINRICHS

SENIOR VICE PRESIDENT, GENERAL COUNSELAND CORPORATE SECRETARY

Age: 54

Tenure with McDermott: 13 years

Ms. Hinrichs has been our Senior Vice President, General Counsel and Corporate Secretary since October 2008. Previously, she served as our: Vice President, General Counsel and Corporate Secretary from January 2007 to September 2008; Corporate Secretary and Associate General Counsel, Corporate Compliance and Transactions from January 2006 to December 2006; Associate General Counsel, Corporate Compliance and Transactions, and Deputy Corporate Secretary from June 2004 to December 2005; Assistant General Counsel, Corporate Secretary and Transactions from October 2001 to May 2004; and Senior Counsel from May 1999 to September 2001. Prior to joining McDermott in 1999, she was a partner in a New Orleans law firm.

2011 COMPENSATION

~~(3)~~

~~As adjusted pursuant to the equity conversion~~

Annual Base Salary

Base Salary Earned

$435,575

Annual Incentive Compensation

Executive Incentive Compensation Plan

$ 0

Long-Term Incentive Compensation⁽¹⁾

Restricted Stock Units

$256,759

Stock Options

$212,421

Performance Shares

$535,894

Pension Plan

Annual Change in ~~connection with the Spin-off.~~Present Value of Accumulated Pension Benefit

$ 76,760

~~Liane K. Hinrichs~~

~~Senior Vice President, General Counsel & Corporate Secretary~~

~~Age: 53~~

~~Tenure with McDermott: 12 years~~

Ms. Hinrichs has been our Senior Vice President, General Counsel and Corporate Secretary since October 2008. Previously, she served as our: Vice President, General Counsel and Corporate Secretary from January 2007 to September 2008; Corporate Secretary and Associate General Counsel, Corporate Compliance and Transactions from January 2006 to December 2006; Associate General Counsel, Transactions, Corporate Compliance and Deputy Corporate Secretary from June 2004 to December 2005; Assistant General Counsel, Corporate Secretary and Transactions from October 2001 to May 2004; and Senior Counsel from May 1999 to September 2001. Prior to joining McDermott in 1999, she was a partner in a New Orleans law firm.

~~2010 Compensation~~

Annual Base Salary

Base Salary Earned $ 419,225

Annual Incentive Compensation

Executive Incentive Compensation Plan $ 317,673

Long-Term Incentive Compensation

Restricted Stock Units⁽¹⁾
$ 399,963
Stock Options⁽¹⁾
$ 276,912

Retention Agreement Grant

Restricted Stock⁽¹⁾
$ 654,563

Pension Plan

Annual Change in Present Value of Accumulated Pension Benefit $ 121,620

Other Compensation

Deferred Compensation Plan Contribution $ 29,549
Thrift Match $ 6,629
Service-Based Thrift Contribution $ 1,108
TaxGross-Ups
$ 0
Perquisites and Personal Benefits $ 0

~~2010 Total Compensation~~

~~Equity Awarded in 2010~~

Other Compensation

Deferred Compensation Plan Contribution

$ 43,511

Thrift Match

$ 6,689

Service-Based Thrift Contribution

$ 7,350

Tax Gross-Ups

$ 0

Perquisites

$ 20,000

Other

$ 0

2011 TOTAL COMPENSATION

LOGO

~~March 4, 2010~~

~~Stock Options~~

~~45,313 shares~~

EQUITY AWARDEDIN 2011⁽²⁾

March 4, ~~2010~~2011

Restricted Stock Units

~~30,556~~

10,014 units⁽²⁾

~~August 2, 2010~~

~~Restricted Stock~~

~~52,198~~

March 4, 2011

Stock Options

22,080 shares

March 4, 2011

Performance Shares

12,717 shares

~~(1)~~

~~All~~

(1) Each equity ~~grants are~~grant is disclosed at the grant date fair value of the award.

JOHN T. MCCORMACK

EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER

Age: 65

Tenure with McDermott: 9 years

Mr. McCormack, 65, has served as our Executive Vice President, Chief Operating Officer since June 2011. Previously, he served as our Senior Vice President, Operations, from July 2010 to June 2011; Senior Vice President, Operations of our subsidiary J. Ray McDermott, S.A. from January 2006 to July 2010; Vice President of J. Ray McDermott, S.A. from May 2004 to January 2006; and Vice President, Project Services of J. Ray McDermott, S.A. since he joined McDermott in January 2003 to May 2004.

2011 COMPENSATION

~~(2)~~

~~As adjusted pursuant to the equity conversion~~

Annual Base Salary

Base Salary Earned

$447,381

Annual Incentive Compensation

Executive Incentive Compensation Plan

$ 0

Long-Term Incentive Compensation⁽¹⁾

Restricted Stock Units

$281,173

Stock Options

$253,847

Performance Shares

$634,020

Pension Plan⁽²⁾

Change in ~~connection with the Spin-off.~~Present Value of Accumulated Pension Benefit

N/A

~~John T. Nesser, III~~

~~Executive Vice President & Chief Operating Officer~~

~~Age: 62~~

~~Tenure with McDermott: 13 years~~

Mr. Nesser has been our Executive Vice President and Chief Operating Officer since July 2010. Previously, he served as: Executive Vice President and Chief Operating Officer of J. Ray McDermott, S.A. since October 2008; Executive Vice President, Chief Administrative and Legal Officer from January 2007 to September 2008; Executive Vice President and General Counsel from January 2006 to January 2007; Executive Vice President, General Counsel and Corporate Secretary from February 2001 to January 2006; Senior Vice President, General Counsel and Corporate Secretary from January 2000 to February 2001; Vice President and Associate General Counsel from June 1999 to January 2000; and Associate General Counsel from October 1998 to June 1999. Previously, he served as a managing partner of Nesser, King & LeBlanc, a New Orleans law firm, which he co-founded in 1985.

~~2010 Compensation~~

Annual Base Salary

Base Salary $ 509,381

Annual Incentive Compensation

Executive Incentive Compensation Plan $ 609,729

Long-Term Incentive Compensation

Restricted Stock Units⁽¹⁾
$ 324,986
Stock Options⁽¹⁾
$ 224,998

Retention Agreement Grant

Restricted Stock⁽¹⁾
$ 871,254

Pension Plan

Annual Change in Present Value of Accumulated Pension Benefit $ 160,951

Other Compensation

Deferred Compensation Plan Contribution $ 36,806
Thrift Match $ 6,577
Service-Based Thrift Contribution $ 0
TaxGross-Ups
$ 0
Perquisites and Personal Benefits $ 0

~~2010 Total Compensation~~

~~Equity Awarded in 2010~~

Other Compensation

Deferred Compensation Plan Contribution

$ 36,170

Thrift Match

$ 7,350

Service-Based Thrift Contribution

$ 7,350

Tax Gross-Ups

$ 0

Perquisites

$ 20,000

Other

$ 0

2011 TOTAL COMPENSATION

LOGO

~~March 4, 2010~~

~~Stock Options~~

~~36,818 shares~~

EQUITY AWARDEDIN 2011⁽²⁾⁽³⁾

March 4, ~~2010~~2011

Restricted Stock Units

~~24,828~~

4,533 units⁽²⁾

~~August 2, 2010~~

March 4, 2011

Stock Options

11,406 shares

March 4, 2011

Performance Shares

6,570 shares

May 13, 2011

Restricted Stock Units

~~69,478~~

8,058 units

May 13, 2011

Stock Options

18,312 shares

May 13, 2011

Performance Shares

11,274 shares

~~(1)~~

~~All~~

(1) Each equity ~~grants are~~grant is disclosed at the grant date fair value of the award.

(2)

~~As adjusted pursuant~~ Mr. McCormack does not participate in our qualified defined benefit plan because he had not met the applicable eligibility requirements at the time the plan was closed to new participants in 2006.

(3) In addition to the ~~equity conversion~~March 4, 2011 grants Mr. McCormack received grants of long-term incentive awards on May 13, 2011 in connection with ~~the Spin-off.~~his promotion to Executive Vice President, Chief Operating Officer.

EXECUTIVE OFFICERS

~~Executive Officers~~

Set forth below is the age (as of May ~~6, 2011)~~10, 2012), the principal positions held with McDermott or our subsidiaries, and other business experience information for each of our current executive officers other than our Continuing Named Executives. For information on our Continuing Named Executives, see “Named Executives Profiles” above. Unless we otherwise specify, all positions described below are positions with McDermott International, Inc.

Scott V. Cummins, ~~48,~~49, has served as our Senior Vice President and General Manager, Asia Pacific, since November 2011. Previously, he served as: our Vice President and General Manager, Asia Pacific, ~~since~~from July ~~2010. Previously, he served as:~~2010 to November 2011; Vice President and General Manager, Asia Pacific, of our subsidiary J. Ray McDermott, S.A. (“JRM”) from April 2008 to July 2010; Vice President, Asia Pacific Business Development, Sales and Marketing, of JRM from September 2006 to April 2008; Business Development Director of JRM from September 2003 to August 2006; and Division Manager, Middle East Fabrication Operations of JRM from November 1999 to September 2003. Mr. Cummins joined McDermott in June ~~1986,~~1996, and his earlier positions with the Company include positions in marine, fabrication and project operations roles.

~~Daniel M. Houser, 56,~~

Stewart A. Mitchell, 45, has served as our Senior Vice President ~~Operations,~~and General Manager, Middle East, since November ~~2010.~~2011. Previously, he served as: our Vice President and General Manager, ~~Europe and Caspian,~~Middle East, from July 2010 to November 2010; Vice President and General Manager of JRM from May 2000 to July 2010; Vice President of JRM from August 1999 to May 2000; Vice President and Area Executive of JRM from March 1998 to August 1999; and Vice President and Group Executive of JRM from March 1997 to March 1998. Mr. Houser has held various other positions since he joined McDermott in 1977.

John T. McCormack, 64, has served as our Senior Vice President, Operations, since July 2010. Previously, he served as: Senior Vice President, Operations of JRM from January 2006 to July 2010; Vice President of JRM from May 2004 to January 2006; and Vice President, Project Services of JRM since he joined McDermott in January 2003 to May 2004.

~~Stewart A. Mitchell, 44, has served as our Vice President and General Manager, Middle East, since July 2010. Previously, he served as:~~2011; Vice President and General Manager of JRM from July 2007 to July 2010; General Manager of Middle East Projects of JRM from October 2005 to June 2007, Project Director and Manager of numerous projects for JRM from January 2002 to September 2005 and Construction Management and Field Operations of JRM from June 1992 to December 2001. Prior to joining McDermott in 1992, he held ~~Project Engineering~~project engineering positions with European Marine Contractors (a joint venture company of Brown & Root and Saipem SpA).

Steven W. Roll, ~~52,~~53, has served as our Vice President and General Manager, Atlantic, since November 2011. Previously, he served as: our Vice President, Global Commercial Development from June 2011 to November 2011; Vice President, Global Business Development from May 2011 to June 2011; Vice President, Business Development and Operational Strategy ~~since~~from July ~~2010. Previously, he served as:~~2010 to May 2011; Vice President, Business Development and Operational Strategy of JRM from May 2010 to July 2010; Vice President of JRM from April 2008 to May 2010; and Vice President and General Manager of JRM from January 2002 to April 2008. Mr. Roll has held various other positions since he joined McDermott in 1980.

COMPENSATIONDISCUSSIONAND ANALYSIS

~~Compensation Discussion and Analysis~~

The following Compensation Discussion and Analysis, or CD&A, provides information relevant to understanding the ~~2010~~2011 compensation of our executive officers identified in the Summary Compensation Table, whom we refer to as our Named ~~Executives.~~Executives (we refer to our Named Executives other than Mr. Nesser, who retired in 2011, as our “Continuing Named Executives”). The following discussion also contains statements regarding future individual and company performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We caution investors not to apply these statements toin other contexts.

Executive Summary

In ~~2010, our~~2011, the Compensation Committee continued its commitment to targeting reasonable and competitive total direct compensation for our Named Executives, with a significant and increased portion of that compensation being performance-based. The Compensation Committee also took into special consideration the intended Spin-off of our subsidiary, B&W, which was completed on July 30, 2010. Because of the complexity and significance of the anticipated Spin-off and the material changes it would have on the company and its operations, our Compensation Committee implemented compensation practices during this transitional year that differed from our traditional practices. Individual elements ofAccordingly, our compensation ~~structure during this transitional year sought to incentivize operational performance, long-term stock appreciation and~~programs provide competitive opportunities, but the ~~completion~~earning of ~~the Spin-off, and the individual elements~~most of ~~total direct compensation were structured with these goals in mind.~~

Reflecting our Compensation Committee’s compensation philosophy, compensation arrangements in 2010 for our Named Executives (excluding retention payments made in connection with the Spin-off and the sign-on equity grant provided to Mr. Carlson, as discussed in further detail below) resulted in:


	•	~~target total direct compensation within approximately 15% of the median compensation for officers in comparable positions in our market, with the exception of Messrs. Elders and Nesser;~~

	•	~~performance-based compensation accounting for over 46% of target total direct compensation, on average; and~~


	•	~~performance-based compensation accounting for 50% of target long-term incentive compensation.~~

~~As in prior years, our Compensation Committee continued to believe that a significant portion of a Named Executive’s compensation should be performance-based, designed to promote and reward the~~those opportunities is dependent upon achievement of ~~short-and longer-term objectives that are expected to drive stockholder value. Performance-based compensation for 2010 reflected a balance among the~~performance goals ~~of driving operational performance, pursuing long-term~~and/or stock appreciation and completing the Spin-off. As a result, McDermott continued to utilize traditional metrics, such as tying annual incentives to operating income and granting stock options as a component of long-term incentives, while adding incentives for certain Named Executive Officers based on completion of the Spin-off. In using these performance metrics and emphasizing longer-term performance incentives, the Compensation Committee believes that our compensation practices help to create stockholder value without encouraging executives to take unnecessary and excessive risks to earn incentive compensation. See “Corporate Governance — Board of Directors and Its Committee — Policies and Practices on Risk” for information regarding the relationship between our compensation practices and risks.

~~In anticipation of the Spin-off, the Compensation Committee made certain adjustments within each element of total direct compensation as set forth below:~~


	•	~~Annual Base Salary:~~ For Messrs. Johnson’s and Bethards’ annual base salary increase effective April 1, the Compensation Committee considered market range compensation based on the market data for the chief executive officer of a standalone company rather than the chief executive officer of a business unit. The Compensation Committee determined this treatment was appropriate because, in anticipation of the pending Spin-off, Messrs. Johnson and Bethards had begun assuming responsibilities that were more typical of the chief executive officer of a standalone company, including meeting with investors and presenting to analysts.

	•	~~Annual Incentive:~~ ~~The financial performance component of the annual incentive for Messrs. Johnson and Bethards was based~~


		entirely on operating income attributable to their respective business units. The target annual incentive for those employees not employed by one of our business units prior to the Spin-off, our “Corporate” employees, including Messrs. Fees and Taff and Ms. Hinrichs, was tied to completing the Spin-off, prorated through the effective date of the Spin-off. For Corporate employees, the remainder of the year’s award opportunity consisted of a financial performance component and an individual performance component.


	•	~~Long-Term Incentive:~~ In 2010, our Compensation Committee awarded restricted stock units to emphasize retention of key employees and stock options to reward stock price appreciation. Although performance shares have been a component of our long-term incentive compensation in recent years, the Compensation Committee determined in 2010, in anticipation of the pending Spin-off, that it was more appropriate for the post-spin Board of Directors of each of the two standalone companies to establish performance targets and metrics tailored to the strategies of the post-spin companies. As a result, performance shares were not awarded during 2010. Additionally, Mr. Fees was not awarded a long-term incentive during 2010, because it was anticipated he would serve as Chairman of the Board of Directors of B&W following the Spin-off and would not be an employee of McDermott or B&W at that time. We have returned to the use of performance shares in 2011, granting performance shares that comprised 50% of long-term incentive for officers.

~~Highlights of McDermott’s performance in 2010 include:~~


	•	~~Completion of the Spin-off on July 30, 2010;~~

	•	~~Consolidated operating income of $314.9 million, which was the primary metric for annual incentive compensation for our Named Executives;~~

	•	~~Stock price appreciation from December 31, 2009 to December 31, 2010 of approximately 65%, excluding the value~~


		~~attributed to the Spin-off distribution of B&W common stock.~~¹

~~Following the completion of the Spin-off, we reviewed our compensation policies and practices and, based on this review, instituted the following changes:~~


	•	~~Our Compensation Committee and Board of Directors approved a new form ofchange-in-control~~ ~~agreement that was entered into with several of our executive officers following the Spin-off. The newchange-in-control~~ agreements: (1) contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control; (2) do not provide for excise tax~~gross-ups,~~ ~~thereby eliminating thegross-up~~ provisions in prior agreements; and (3) require the applicable officer’s execution of a release prior to payment of certain benefits. For more information, please see “Employment and Severance Arrangements —~~Change-In-Control~~ ~~Agreements” in this Compensation Discussion and Analysis.~~

	•	In an effort to further align the interests of stockholders and our directors and officers, our Governance Committee approved revised stock ownership guidelines that require our officers at the level of vice president or above and non-management directors to retain a significantly greater amount of McDermott stock than required by our previous stock ownership guidelines. For more information, please see “Other Compensation Policies — Stock Ownership Guidelines” in this Compensation Discussion and Analysis.

	•	Our Compensation Committee adopted a clawback policy under which McDermott shall seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall-Street Reform and Consumer Protection Act or any other “clawback” provision

¹~~The excluded value attributed to the distribution of B&W stock is based on the opening trading~~ price ~~of B&W common stock as quoted on the NYSE Consolidated Transactions Reporting System on August 2, 2010, the first day of “regular way” trading for B&W common stock following the Spin-off.~~


		~~required by law or the listing standards of the New York Stock Exchange.~~

Additionally, in March 2011, our Compensation Committee returned to the use of performance shares as a component of long-term incentive compensation. Long — term incentive awards to Continuing Named Executives in 2011 were comprised of 50% performance shares, 25% restricted stock units and 25% stock options, excluding Mr. Nesser who did not receive any long-term incentive compensation for 2011 as a result of his intentions to retire by year-end 2011. Combining the grant of performance shares with the continued use of stock options, 75% of target long-term incentive compensation for 2011 is performance-based.

~~Overview of Compensation Programs and Objectives~~

~~Philosophy and Objectives.~~performance. Our compensation programs are based on our belief that our ability to attract, retain and motivate qualified employees to develop, expand and execute sound business opportunities is essential to the success of our company. ~~To that end, the~~The Compensation Committee, with the assistance of its compensation consultant, has designed and administered compensation programs with the participation of our ~~management.~~management in light of this philosophy. These programs generally seek to provide compensation that:

incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and

•

~~incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and~~

•

promotes retention of well-qualified executives, while aligning the interests of our executives with those of our stockholders.

Reflecting these compensation objectives, compensation arrangements in 2011 for our Continuing Named Executives resulted in:

target total direct compensation within approximately 15% of the median compensation for officers in comparable positions

in our market, with the exception of Mr. Johnson, whose target total direct compensation was set slightly above market due to his demonstrated leadership following the Spin-off;

performance-based compensation accounting for over 60% of target total direct compensation, on average, as compared to 46% in 2010; and

performance-based compensation accounting for 75% of target long-term incentive compensation, as compared to 50% in 2010.

As in prior years, our Compensation Committee continued to believe that a significant portion of a Named Executive’s compensation should be performance-based, designed to promote and reward the achievement of short- and longer-term objectives that are expected to drive stockholder value. Performance-based compensation for 2011 reflected a balance among the goals of driving operational performance and pursuing long-term stock appreciation. With these goals in mind, we continued to utilize our established approaches of tying annual incentives to operating income and granting stock options as a component of long-term incentives, while implementing some adjustments. Among the adjustments was the inclusion of return on invested capital as a financial performance component of annual incentives. We also resumed granting performance shares, which may vest based upon McDermott’s total shareholder return relative to its peers. The Compensation Committee had decided not to utilize performance shares as an element of long-term incentive compensation in 2010, in anticipation of the spin-off of The Babcock & Wilcox Company to our stockholders ( the “Spin-off”), which was completed on July 30, 2010. In using the performance metrics described above and emphasizing longer-term performance incentives for the 2011 compensation program, the Compensation Committee believes that our compensation practices help to create stockholder value without encouraging executives to take unnecessary and excessive risks to earn incentive compensation.

The significant 2011 adjustments to the performance-based elements of total direct compensation are reflected below:

Annual Incentive: The 70% financial performance component of the annual

incentive for 2011 was 70% based on operating income and 30% based on return on invested capital (“ROIC”). The Compensation Committee believes that ROIC is an appropriate financial measure to use for compensation purposes in addition to operating income because it is an indicator of McDermott’s capital efficiency and productivity. ROIC incentivizes the efficient management of assets and aligns management’s interests with those of our ~~stockholders.~~stockholders by measuring stockholder value creation and/or erosion when compared to the cost of capital.

~~For 2010, we structured~~

Long-Term Incentives: In 2011, our Compensation Committee increased the percentage of performance-based compensation in ~~anticipation~~our long-term incentive awards for Continuing Named Executives by 50% over 2010. Specifically, performance-based compensation was increased by our Compensation Committee from 50% of long-term incentive compensation for Continuing Named Executives in 2010 to 75% of long-term incentive compensation for Continuing Named Executives in 2011. Additionally, in 2011 our Compensation Committee resumed the use of performance shares, in addition to awards of restricted stock units and stock options. Long-term incentives for Continuing Named Executives in 2011 were comprised 50% of performance shares, 25% of restricted stock units and 25% of stock options, resulting in 75% of long-term incentives being performance-based. The 2011 performance shares may be paid out based upon McDermott’s relative total shareholder return in comparison to its peers over three-, four- and five-year periods. The Compensation Committee believes the performance shares are an appropriate element of incentive compensation in that they align management’s interests with those of our stockholders by focusing on long-term stockholder return.

McDermott’s financial performance in 2011 included:

Consolidated revenue of $3.4 billion, as compared to $2.4 billion for 2010;

Consolidated operating income of $250.7 million, as compared to $314.9 million for 2010; and

Consolidated ROIC of 8%.

Operationally, in 2011 McDermott:

Achieved backlog of $3.88 billion as of December 31, 2011;

Achieved substantial growth in the Asia Pacific segment, as reflected by increases of over 115% in both revenue and operating income in the segment as compared to 2010;

Amended/refinanced its credit facility to extend the scheduled maturity date, provide additional liquidity, obtain additional flexibility under covenants and reduce fees; and

Established a joint venture entity which we co-own with two Brazilian companies, which joint venture plans to bid to provide engineering, procurement and construction services to the oil and gas industry offshore Brazil.

Under McDermott’s 2011 compensation program,

None of the ~~Spin-off. As a result,~~Continuing Named Executives were awarded bonuses under the 2011 EICP. Based on McDermott’s 2011 financial results, the Continuing Named Executives were eligible to earn approximately 18% of their respective 2011 target EICP compensation, ~~arrangements~~subject to the assessment of their respective individual goals. Upon the recommendation of Mr. Johnson based on the 2011 financial results, the Compensation Committee, in ~~2010 sought~~the exercise of its discretion, determined that, although the Continuing Named Executives and other participants in the EICP were eligible to ~~balance operational performance, long-term stock appreciation~~earn approximately 18% of their target EICP compensation, 0% would be awarded in light of the financial results. Instead, as recommended by Mr. Johnson, the Compensation Committee determined that the bonus amounts that otherwise would have been payable should effectively be returned to the shareholders in the form of additional operating income. In making this recommendation and decision, respectively, Mr. Johnson and the ~~completion~~Compensation Committee considered the increase in 2011

revenues of approximately 43%, together with the decrease in 2011 operating income by approximately 20%, from 2010 levels, the continued performance issues in the Atlantic segment and issues relating to several projects in other segments.

In making its decision not to award bonuses for 2011 under the EICP, the Compensation Committee noted that Mr. Johnson had achieved the individual performance component, based on the Governance Committee’s assessment of Mr. Johnson’s individual performance against stated goals, and each of Messrs. Elders, Carlson and McCormack and Ms. Hinrichs had achieved their respective individual performance components based on Mr. Johnson’s assessment of their respective individual

performance achievements against stated goals, with the exception of the ~~Spin-off.~~financial performance goal and safety goal for Mr. McCormack.

As of December 31, 2011, (1) the estimated payout as a percent of target for the performance shares granted in 2011 was 0%, and (2) the share price of our common stock had not exceeded the strike price of the stock options granted in 2011, although as noted below, the estimated payout and share price may change during the term of the performance shares and stock options.

The following table summarizes the 2011 performance-based compensation opportunities for each of our Continuing Named Executives as compared to the realizable value of such opportunities as of December 31, 2011:

2011 Performance-Based Compensation Opportunity vs. Realizable Value as of December 31, 2011


	EICP⁽¹⁾		Performance Shares⁽²⁾⁽³⁾		Stock Options⁽²⁾⁽³⁾		Total
S. M. Johnson
2011 Opportunity	$	942,603	$	2,382,132	$	944,089	$	4,268,824
2011 Realizable Value	$	0	$	0	$	0	$	0
P. L. Elders
2011 Opportunity	$	336,911	$	595,438	$	236,000	$	1,168,349
2011 Realizable Value	$	0	$	0	$	0	$	0
G. L. Carlson
2011 Opportunity	$	199,233	$	238,175	$	94,406	$	531,814
2011 Realizable Value	$	0	$	0	$	0	$	0
L. K. Hinrichs
2011 Opportunity	$	261,381	$	535,894	$	212,421	$	1,009,696
2011 Realizable Value	$	0	$	0	$	0	$	0
J. T. McCormack
2011 Opportunity	$	274,549	$	634,020	$	253,847	$	1,162,416
2011 Realizable Value	$	0	$	0	$	0	$	0

(1)	2011 Opportunity Values for EICP are disclosed at the Continuing Named Executives’ target EICP award. The 2011 Opportunity Value provided for Mr. McCormack reflects his target EICP award following his promotion to Executive Vice President, Chief Operating Officer.

(2)	2011 Opportunity Values for performance shares and stock options are disclosed at the grant date fair value of the respective awards.

(3)

The 2011 Realizable Values shown above are measured as of December 31, 2011. However, the amount of the performance shares granted in 2011 that ultimately vest, if any, will be determined by reference to our total shareholder return over three-, four- and five-year periods. See “Long-Term Incentive Compensation — Analysis of 2011 Equity Grants.” The vesting of any of these performance shares would impact the future Realizable Value of these performance share awards. In addition, an increase in our stock price compared to our stock price at December 31, 2011 may impact the future Realizable Value of the stock option awards granted in 2011.

Over the past two years, McDermott has also adopted certain compensation and governance policies and practices, as summarized below:

Change in control agreements that: (1) contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control; (2) do not provide for excise tax gross-ups, thereby eliminating the gross-up provisions in prior agreements; and (3) require the applicable officer’s execution of a release prior to payment of certain benefits.

Revised stock ownership guidelines that require our officers at the level of vice president or above and nonemployee directors to retain a dollar value of McDermott stock based on a multiple of their respective base salaries or annual retainers.

A clawback policy under which McDermott would seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange; and prohibition of directors, officers and employees from engaging in “short sales” or trading in puts, calls or other options on McDermott’s common stock, and prohibition from engaging in hedging transactions and from holding McDermott shares in a margin account or pledging McDermott shares as collateral for a loan.

Impact of 2011 Say on Pay Vote on Executive Compensation

In approving the 2012 compensation of the Continuing Named Executives, the Compensation Committee reviewed the vote on the say-on-pay proposal at the 2011 annual general meeting of stockholders. Approximately 99% of the votes cast on the say-on-pay proposal at that meeting were voted in favor of the proposal. The Compensation Committee believes this affirms stockholders’ support of the Company’s approach to executive compensation. Accordingly, the Compensation Committee did not adopt any specific changes based on the vote. The Compensation Committee will continue to consider the outcome of the Company’s

say-on-pay votes when making future compensation decisions for the named executive officers. The Compensation Committee expects to continue to hold the advisory vote to approve named executive officer compensation every year.

Role of Compensation Committee, Compensation Consultant and Management

Compensation Committee. The Compensation Committee has primary responsibility for determining and approving, on an annual basis, the compensation of our CEO and other executive officers. The Compensation Committee receives information and advice from its compensation consultant as well as from our human resources department and management to assist in compensation determinations.

Compensation Consultant.Our Compensation Committee ~~determined it appropriate to engage a new compensation consultant following the completion of the Spin-off. After a selection process involving six compensation consulting firms,~~selected and engaged Pay Governance LLC, or “Pay Governance,” ~~was selected, and has served~~to serve as the consultant to the Compensation Committee on executive and director compensation matters in November 2010, and Pay Governance has been serving in that capacity since ~~November 2010.~~that time. Pay Governance provides advice and analysis to the Compensation Committee on the

design, structure and level of executive and director compensation, and, when requested by the Compensation Committee, attends meetings of the Compensation Committee and participates in executive sessions without members of management present. ~~Prior to November 2010, Meridian Compensation Partners LLC or “Meridian,” (which was spun-off from Hewitt Associates LLC, or “Hewitt,” in February 2010), served as the consultant~~Pay Governance reports directly to the Compensation Committee, and the Committee reviews, on ~~executive~~an annual basis, Pay Governance’s performance and provides Pay Governance with direct feedback on its performance. Pay Governance also attends meetings of the Governance Committee with respect to nonemployee director compensation. ~~Prior to its spin-off of Meridian, Hewitt served as the consultant to the Compensation Committee since October 2007.~~

In ~~connection with their services to the Compensation Committee, both~~2011, Pay Governance ~~and Meridian sought and received input from our executive management on various matters and worked with our executive management to formalize proposals for the Compensation Committee.~~

~~In 2010, neither Pay Governance nor Meridian performed~~did not perform any services for McDermott other than as described above. ~~Hewitt assisted~~

Role of CEO and Management. While the Compensation Committee has the responsibility to approve and monitor all compensation for our executive officers, management plays an important role in ~~preparing~~determining executive compensation. Management, at the request of the Compensation Committee, recommends financial goals and works with Pay Governance to analyze competitive market data and to recommend compensation levels for our executive officers. Our Chief Executive Officer, Mr. Johnson, likewise assists the Compensation Committee by providing his evaluation of the performance ~~graph included in~~of our other executive officers and recommending compensation for those officers.

Overview of Compensation Elements

The following table summarizes the principal elements of our compensation program for our Named Executives, which we collectively refer to as “total direct compensation.”


Compensation Element	Objective	Key Features
Annual Base Salary	To provide a fixed level of compensation that helps attract and retain executives	• Salary level recognizes an executive officer’s experience, skill and performance, with the goal of being market competitive based on the officer’s role and responsibilities within the organization. • Adjustments may be made based on individual performance, inflation, pay relative to market and internal equity considerations. • This element is paid in cash.
Annual Incentive	To motivate and reward the achievement of short-term company performance	• The Compensation Committee establishes an annual incentive bonus opportunity for each Named Executive at the beginning of the year. • The annual incentive aligns the Named Executives’ interests with McDermott’s short-term corporate strategies, and correlates pay with the achievement of short-term company goals. • To qualify for a payout, McDermott must achieve a predetermined performance threshold. Actual payouts to Named Executives are based on a combination of financial and individual performance factors, as well as other individual contributions throughout the year. • This element is paid in cash.

Long-Term Incentives	To motivate and reward the achievement of long-term company performance (typically three or more years), align executives’ interests with those of our stockholders and retain executives	• Long-term awards for our Named Executives in 2011 consisted of 50% performance shares, 25% stock options and 25% restricted stock units. Performance Shares • Structured to be paid out in shares of McDermott common stock at the end of three-, four- and five-year performance periods to the extent applicable performance goals are met. • Performance goals are based on total stockholder return over the applicable performance period relative to McDermott’s peer group. Performance shares pay out at target if these goals are met, below target or not at all if the goals are not met, and above target if the goals are exceeded, up to 200% of the target award. • Intended to align the Named Executives’ interests with those of our stockholders with a focus on long-term results. Stock Options • Structured to vest in one-third increments on the first, second and third anniversaries of the grant date. • Intended to strengthen the relationship between the long-term value of our stock price and the potential financial gain for our Named Executives, as the value of each stock option is realized on exercise only if our stock price increases from the date of grant. Restricted Stock Units • Structured to be paid out in shares of McDermott common stock in one-third increments on the first, second and third anniversaries of the grant date. • Intended to encourage retention of the Named Executives as the restricted stock units vest based on continued employment with McDermott.

Defining Market Range Compensation — Benchmarking

To identify median compensation for each element of total direct compensation, the Compensation Committee relies on “benchmarking.” This involves reviewing the compensation of our Named Executives relative to the compensation paid to similarly situated executives at companies we consider our peers. As a result, the annual ~~report onForm 10-K~~base salary, target annual incentive compensation and target long-term incentive compensation as a whole for each of the Named Executives is benchmarked. However, the specific performance metrics and performance levels used within elements of annual and long-term compensation are designed for the ~~year ended December 31, 2010. Hewitt had been providing that service to management for several years prior to serving~~principal purpose of supporting our strategic and financial goals and/or driving the creation of stockholder value, and, as a result, are not generally benchmarked.

Following the engagement of Pay Governance as the Compensation Committee’s consultant ~~and~~in November 2010, Pay Governance reviewed the ~~fees for that service amounted to less than $2,000 in 2010.~~

~~Elements.~~ ~~With the objectives outlined above in mind,~~peer group the Compensation Committee ~~has approved annual compensation~~uses for ~~Named Executives, principally consisting~~benchmarking at the Compensation Committee’s request and recommended revisions to the component companies. These suggested revisions were discussed and adopted by the Compensation Committee with some further revisions. At the direction of the ~~following three elements:~~


	•	~~annual base salary;~~

	•	~~annual incentives; and~~

	•	~~long-term incentives.~~

~~Collectively, we refer~~Compensation Committee, Pay Governance compiled market data from two groups, the Proxy Peer Group and the Survey Group, as discussed below.

Proxy Peer Group. Pay Governance utilized market data based on a set of 18 comparator companies (the “Proxy Peer Group”), identified through a screen of companies with business and financial parity to ~~these elements~~McDermott. The component companies of the Proxy Peer Group are included on page 42 of this CD&A. The Proxy Peer Group was used as the ~~“total direct compensation” of a Named Executive.~~

~~Annual base salary provides a fixed level of compensation that helps attract and retain highly qualified executives. Annual incentive and long-term incentive compensation are~~primary reference point for the principal performance-based components of a Named Executive’s compensation. The annual incentive element is cash-based compensation generally designed to incentivize a Named Executive to achieve performance goals relative to the then-current fiscal year. Long-term incentives are generally equity-based and are designed to retain and closely align the interests of Named Executives, with ~~our stockholders. Performance-based long-term incentive compensation is designed~~the exception of Mr. Carlson, due to ~~promote~~ the ~~achievement~~lack of ~~performance~~

~~goals, only over a longer period — typically~~proxy information on his position. With the exception of ~~three years. Additionally, in 2010, retention grants were made to certain of our Named Executives~~market data provided in connection with Mr. McCormack’s promotion to Executive Vice President, Chief Operating Officer (“EVP, COO”), market data from the Proxy Peer Group represented 2009 compensation, as reported in 2010 proxy statements for the fiscal year ended 2009, and is not size-adjusted. The market data provided from the Proxy Peer Group in connection with Mr. McCormack’s promotion to EVP, COO represented 2010 compensation, as reported in 2011 proxy statements for the fiscal year ended 2010.

Survey Peer Group. Pay Governance also utilized market data based on a set of 99 companies in similar industries which participate in Towers Watson surveys (the “Survey Peer Group”). The Survey Peer Group is intended to provide a reference point for pay levels within similar industries. Aside from screening companies on the basis of their ~~continued employment through~~industry classifications, no further refinements or judgments were applied in the ~~Spin-off.~~identification of companies within the sample. The ~~retention grants were made pursuant~~component companies of the Survey Peer Group are included on page 42 of this CD&A. The Survey Peer Group was used as a secondary reference for the Named Executives, with the exception of Mr. Carlson, for whom it was used as a primary reference. Market data from the Survey Peer Group represents 2010 compensation as reported to the ~~terms~~survey and, when possible, size adjusted. Corporate positions, including that of Mr. Carlson, were evaluated based on both expected 2011 revenues of $3.4 billion and a longer-term objective of $5 billion in annual revenues, and business unit positions were evaluated based on their respective profit and loss levels.

In this CD&A references to “market” or “our market” are references to the ~~retention agreements entered into~~compensation of executives at companies within the Proxy Peer Group for each Named Executive with ~~those Named Executives in December 2009. For more information on these retention grants, see “Long-Term Incentive Compensation” below.~~

~~As we discuss in more detail below,~~ the ~~Compensation Committee also administers several plans as part~~exception of ~~our post-employment compensation arrangements designed to reward long-term service~~Mr. Carlson, and ~~performance.~~

the Survey Peer Group for Mr. Carlson.

Target Total Direct ~~Compensation.~~Compensation

The Compensation Committee seeks to provide reasonable and competitive compensation. As a result, it targets the elements of total direct compensation for our Named Executives generally within approximately 15% of the median compensation of our market for comparable positions. Throughout this CD&A, we refer to compensation that is within approximately 15% of market median as “market range” compensation.

The Compensation Committee may set elements of total direct compensation above or below the market range to account for a Named Executive’s performance and experience, internal equity and other factors or situations that are not typically captured by looking at standard market data and practices and that the Compensation Committee deems relevant to the appropriatenessand/or competitiveness of a Named Executive’s compensation.

When making decisions regarding individual compensation elements, the Compensation ~~Committee~~Commit-

tee also ~~considered~~considers the effect on the Named Executive’s target total direct compensation and target total cash-based compensation (annual base salary and annual incentives), as applicable. Our Compensation Committee’s goal is to establish target compensation for each element ~~it considers appropriate to support the compensation objectives~~ that, when combined, create a target total direct compensation award for each Named Executive that is reasonable and ~~competitive.~~

competitive and supports the Company’s compensation philosophy and objectives.

~~Defining Market Range Compensation — Benchmarking.~~2011 Overview To identify median compensation for each element of total direct compensation, the Compensation Committee relies on “benchmarking” — reviewing the compensation of our Named Executives relative to the compensation paid to similarly situated executives at companies we consider our

peers. As a result, the annual base salary, target annual incentive compensation and target long-term incentive compensation as a whole for each of the Named Executives is benchmarked. However, the specific performance metrics and performance levels used within elements of annual and long-term compensation are designed for the principal purpose of supporting our strategic and financial goals~~and/or~~ ~~driving the creation of stockholder value, and, as a result, are not generally benchmarked.~~

At the request of the Compensation Committee, Meridian conducted a market compensation analysis and provided advice regarding the median compensation of the three elements of total direct compensation for our officers, including the Named Executives. Using survey data from its proprietary compensation database (adjusted upwards by Meridian for the purpose of bringing the market data current), Meridian collected information from companies generally reflecting the size, scope and complexity of the business and executive talent at McDermott. To account for the size of our operations relative to peer companies, Meridian used regression analysis to adjust the market information on peer companies based on revenue. Prior to the Spin-off, Meridian analyzed information from two principal peer groups, the JRM/Corporate Group and the Babcock & Wilcox Group, to account for the diversity of geography and industry among our operations at that time. In anticipation of the Spin-off, Meridian also conducted a review of possible peer companies for McDermott and B&W post Spin-off. Through this review, the “Post-Spin Group” for McDermott was selected and approved by the Compensation Committee. In 2010, no Named Executives’ compensation was benchmarked against the Babcock & Wilcox Group other than Mr. Bethards. The component companies of each group are included on page 46 of this Compensation Discussion and Analysis.

~~JRM/Corporate Group~~. With the exception noted below, the JRM/Corporate Group was the primary compensation benchmark prior to the Spin-off for our executives at the segments previously referred to as our corporate and Offshore Oil and Gas Construction segments, both of which are based in Houston, Texas. This group was compiled by Meridian with assistance from our management. The JRM/Corporate Group consisted of 43 companies with operations in engineering, construction, government operations~~and/or~~ ~~energy, and was generally utilized in determining market range compensation for Messrs. Johnson, Fees, Taff, Carlson and Nesser and Ms. Hinrichs. For~~

Mr. Johnson, the JRM/Corporate Group was adjusted by Meridian in consideration of the lower revenues of JRM as a standalone company as compared to McDermott. The Post-Spin Group was used as the benchmark for Mr. Johnson’s compensation adjustments in connection with his promotion to President and Chief Executive Officer of McDermott following the completion of the Spin-off.

~~Babcock & Wilcox Group~~. The Babcock & Wilcox Group was the primary compensation benchmark for executives of our former Power Generation Systems and Government Operations segments, including Mr. Bethards. This group consisted of 27 engineering, construction~~and/or~~ ~~governments operations companies that were more specifically representative of our former Power Generation Systems and Government Operations segments.~~

~~Post-Spin Group~~. The Post-Spin Group was utilized as the primary compensation benchmark for McDermott’s officers following the Spin-off, including for Mr. Johnson’s promotion to President and Chief Executive Officer of McDermott on July 30, 2010. Because of the proximity of the Spin-off to Mr. Elders’ date of hire, the Post-Spin Group was also utilized in determining the market range compensation for Mr. Elders when he was hired in April 2010. Meridian compiled this group with assistance from our management. The group consisted of 14 energy equipment and services and construction and engineering companies.

~~Custom Peer Group~~. The Custom Peer Group was used by Meridian on a limited basis as a comparator to the JRM/Corporate Group and the Babcock & Wilcox Group. This group was identified by Hewitt in October 2007 with the assistance of management. The Custom Peer Group consisted of nine engineering and construction companies and is the same group we used

~~in the performance graph included in our annual report onForm 10-K~~ for the years ended December 31, 2007 and 2008. Compensation information for Custom Peer Group companies was based on information reported by those companies in publicly available Securities and Exchange Commission filings.

In this CD&A references to “market” or “our market” are references to the compensation of executives at companies within the JRM/Corporate Group, Babcock & Wilcox Group or Post-Spin Group, as applicable.

~~Total Direct Compensation~~

~~2010 Overview.~~ ~~Excluding the retention awards and the sign-on grant made to Mr. Carlson, the 2010~~2011 target total direct compensation for each of our Named Executives was within the market range of target total direct compensation, except for ~~Messrs. Elders~~Mr. Johnson and Mr. Nesser. The target total direct compensation for

Mr. ~~Elders~~Johnson was set ~~slightly~~ above market range due to Mr. Johnson’s demonstrated leadership as Chief Executive Officer following the level of compensation that was considered appropriate to induce Mr. Elders to accept the Chief Financial Officer position and the value of long-term incentives granted to him in connection with his hiring.Spin-off. The target total direct compensation for Mr. Nesser was set ~~above~~below market range ~~based on~~due to no long-term incentives being provided to him in advance of his ~~lengthy experience with and his depth of knowledge of McDermott.~~

anticipated retirement.

The chart below shows the ~~2010~~2011 target total direct compensation by element for each Named Executive. Because the amount of compensation actually paid through the compensation elements that are performance-based is not fixed at the outset, Named Executives may earn compensation above or below the market range for similarly situated executives in our market.

~~2010~~2011 Target Total Direct Compensation Summary⁽¹⁾

Annual

Incentive⁽²⁾ Long-Term
Named Executive Annual Base Salary (% of Salary) Incentive
S. M. Johnson⁽³⁾Pres. & CEO, JRM
$ 768,750 85 % $ 2,500,000
Pres. & CEO, MII $ 920,000 100 % —
J. A. Fees $ 922,500 100 % —
P. L. Elders $ 470,000 70 % $ 1,034,000
M. S. Taff $ 520,150 70 % $ 1,212,000
B. C. Bethards $ 539,360 70 % $ 2,500,000
G. L. Carlson⁽⁴⁾
$ 320,000 55 % $ 432,000
L. K. Hinrichs $ 422,300 55 % $ 800,000
J. T. Nesser $ 512,500 70 % $ 650,000


Named Executive	Annual Base Salary		Annual Incentive⁽¹⁾ (% of Salary)	Long-Term Incentive⁽²⁾		Target Total Direct Compensation as Percent of Market⁽³⁾	Percent Performance- Based⁽⁴⁾
S. M. Johnson	$	950,000	100%	$	4,000,000	117%	67%
P. L. Elders	$	485,000	70%	$	1,000,000	86%	60%
G. L. Carlson	$	336,000	60%	$	416,720	112%	54%
L. K. Hinrichs	$	440,000	60%	$	931,767	103%	59%
J. T. McCormack⁽⁵⁾
EVP, COO	$	500,000	70%	$	1,125,000	73%	59%
SVP, Operations	$	400,000	50%	$	465,000	106%	51%
J. T. Nesser	$	512,508	70%		—	83%	41%
Average Mix of Compensation Elements⁽⁶⁾		22%	17%		61%	N/A	60%


(1)		When we refer to Total Direct Compensation in this “Compensation Discussion and Analysis,” we exclude the retention payments made in connection with the Spin-off. See “Compensation Discussion and Analysis — Employment and Severance Agreements — Retention Agreements” for a discussion of those payments.

~~(2)~~		When making decisions as to the elements of a Named Executive’s total direct compensation, the Compensation Committee considers the dollar value of annual incentive compensation but typically awards this element as percentages of annual base salary. This is primarily because our market generally targets annual incentive on apercentage-of-salary basis.

(2)	The values provided in this column are the target values of long-term incentives approved by the Compensation Committee. For more information on the grant date fair values of long-term incentives, see the “Grants of Plan-Based Awards” table under “Compensation of Executive Officers” below.

(3)	Market = Median annual base salary, based on the benchmark applicable to the executive. 100% represents median compensation.

(4)

With the exception of Mr. Nesser, performance-based compensation consists of a Named Executive’s annual incentive and 75% of the target value of long-term incentives, representing that portion of long-term incentive compensation attributable to performance shares and stock options. For Mr. Nesser, performance-based compensation consists only of Mr. Nesser’s annual incentive, as he was not granted long-term incentive compensation in 2011 in anticipation of his retirement by year-end 2011.

(5)

In connection with Mr. ~~Johnson’s~~McCormack’s promotion to ~~President and Chief Executive Officer of McDermott~~EVP, COO on ~~July~~June 30, ~~2010, his~~2011, Mr. McCormack’s annual base salary and annual incentive compensation target were increased. ~~No additional~~Additionally, Mr. McCormack received a supplemental long-term incentive award with a target value of $660,000, which, when combined with the long-term incentive award of $465,000 granted to him in March 2011, resulted in total long-term incentives ~~were awarded to Mr. Johnson in connection with his promotion.~~of $1,125,000.


~~(4)~~(6)		~~Mr. Carlson’s target long-term incentive~~The values provided for the average mix of compensation ~~reflected on this chart does~~elements do not include ~~a sign-on equity grant of restricted stock units that was made~~Mr. McCormack’s target compensation pertaining to ~~offset compensation and benefits he forfeited when he left~~ his ~~previous employer to join McDermott.~~former position or Mr. Nesser’s target compensation.

While the Compensation Committee does not set a specific target allocation among the elements of total direct compensation, it believes that a significant portion of a Named Executive’s total direct compensation should be performance-based. ~~Excluding the retention grants~~As shown above, excluding Mr. McCormack’s target compensation from his former position and Mr. ~~Carlson’s sign-on grant,~~Nesser’s target compensation, on average, performance-based compensation accounted for approximately ~~46.5%~~60% of a Named Executive’s ~~2010~~2011 target total direct compensation and ~~50%~~75% of his or her long-term incentive ~~compensation. The average 2010 mix~~compensation, representing that portion of ~~target total direct~~long-term incentive compensation ~~elements for our Named Executives was as follows:~~

~~(1) Excluding retention grants~~attributable to performance shares and ~~Mr. Carlson’s sign-on equity grant.~~

stock options.

Annual Base Salary

~~2010 Base Salaries.~~ In considering the April 1, 2010 salary adjustments, the Compensation Committee was provided with and took into account (1) the recommendation of our then current Chief Executive Officer, Mr. Fees, as to 2010 base salaries for Messrs. Johnson, Taff, Bethards, Carlson and Nesser and Ms. Hinrichs, (2) Meridian’s analysis of market compensation for those individuals and for Mr. Fees (as adjusted by Meridian to bring the data forward to April 1, 2010) and (3) tally sheets showing the 2009 compensation and benefits of Messrs. Johnson, Fees, Taff and Bethards, who were each Named Executives in 2009, and annual and long-term incentives and

retention amounts previously awarded. Additionally, in May 2010, the Compensation Committee was provided with (1) the recommendation of our then current Chief Executive Officer, Mr. Fees, as to the 2010 base salary of Mr. Elders, and (2) Meridian’s analysis of market compensation for Mr. Elders.

In each instance, Meridian’s market analysis compared the recommended base salary and the target total direct compensation of each officer (assuming 2010 salary recommendations were approved and disregarding the retention payments and sign-on awards) to the median compensation of the applicable market.

The ~~2010~~2011 base salaries for our Named Executives, which reflect increases that became effective as of April 1, 2011, were as follows:

2010 Annual
Percent
Percent of
Named Executive Base Salary⁽¹⁾ Increase Market⁽²⁾
S. M. Johnson
Pres. & CEO, JRM $ 768,750 2.50 % 83 %
Pres. & CEO, MII $ 920,000 N/A 114 %
J. A. Fees $ 922,500 2.50 % 86 %
P. L. Elders $ 470,000 N/A 117 %
M. S. Taff $ 520,150 3.00 % 98 %
B. C. Bethards $ 539,360 2.50 % 51 %
G. L. Carlson $ 320,000 N/A 107 %
L. K. Hinrichs $ 422,300 3.00 % 98 %
J. T. Nesser $ 512,500 2.50 % 163 %


Named Executive	2011 Annual Base Salary		Percent Increase	Percent of Market⁽¹⁾
S. M. Johnson	$	950,000	3.26%	106%
P.L. Elders	$	485,000	3.19%	105%
G. L. Carlson	$	336,000	5.00%	105%
L. K. Hinrichs	$	440,000	4.19%	114%
J. T. McCormack
EVP, COO	$	500,000	N/A	81%
SVP, Operations	$	400,000	3.09%	110%
J. T. Nesser	$	512,508	0.00%	100%


(1)		~~Base salary adjustments were effective April 1, 2010.~~

~~(2)~~		Market = Median annual base salary, based on the benchmark applicable to the executive. 100% represents median compensation.

When considering base salaries effective April 1, ~~2010,~~2011, the Compensation Committee sought to set salaries within the market ~~range, with increases in line with expected adjustments of 2-3% in our market as reported by Meridian.~~range. Accordingly, ~~Messrs. Johnson, Fees, Taff, Bethards and Nesser and Ms. Hinrichs each received a salary increase within this range. Following such salary increases and~~ the ~~establishment of salary for Messrs. Elders and Carlson, our Named Executives’~~Compensation Committee set annual base salaries ~~were generally~~ within market range for each Named Executive, with the exception of Mr. Nesser. Although Mr. Nesser’s base salary was above market range, the Compensation Committee considered this to be appropriate, based upon his experience and depth of knowledge of our operations and in anticipation of his promotion to Chief Operating Officer of McDermott following the Spin-off.

year-over-year increases ranging from 0-5%.

In ~~August 2010,~~May 2011, in consideration of the market compensation analysis and recommendation provided

by ~~Meridian~~Pay Governance in connection with Mr. ~~Johnson’s July~~McCormack’s June 30, ~~2010~~2011 promotion to ~~President and Chief Executive Officer of McDermott,~~EVP, COO, the Compensation Committee increased Mr. ~~Johnson’s~~McCormack’s base salary to ~~$920,000, which was within~~$500,000 effective June 30, 2011. The Compensation Committee approved this slightly below market ~~range.~~salary based on Mr. McCormack’s relative experience with his new

position and in light of internal pay equity considerations.

Annual Incentive Compensation

~~2010~~2011 Overview and Target ~~Compensation.~~Compensation. The Compensation Committee administers our annual incentive compensation program under our Executive Incentive Compensation Plan ~~which we refer to as the EICP.~~

(the “EICP”).

The EICP is a cash incentive plan designed to motivate and reward our Named Executives and other key employees for their contributions to business goals and other factors that we believe drive our earnings~~and/or~~ ~~create~~ and promote creation of stockholder value.

The target ~~2010~~2011 EICP compensation for our Named Executives was as follows:

Target EICP

(% of annual
Percent of
Named Executive base salary) Market⁽¹⁾

S. M. Johnson⁽²⁾

Pres. & CEO, JRM 85 % 85 %
Pres. & CEO, MII 100 % 87 %
J. A. Fees 100 % 88 %
P. L. Elders 70 % 86 %
M. S. Taff⁽³⁾
70 % 96 %
B. C. Bethards⁽³⁾
70 % 88 %
G. L. Carlson 55 % 104 %
L. K. Hinrichs 55 % 89 %
J. T. Nesser 70 % 135 %


Named Executive	Target EICP (% of annual base salary)	Percent of Market⁽¹⁾
S. M. Johnson	100%	102%
P. L. Elders	70%	87%
G. L. Carlson	60%	121%
L. K. Hinrichs	60%	85%
J. T. McCormack⁽²⁾
EVP, COO	70%	71%
SVP, Operations	50%	113%
J. T. Nesser	70%	67%


(1)		Market = Median target annual incentive compensation, based on the benchmark applicable to the executive. 100% represents median compensation.

(2)		Mr. ~~Johnson’s~~McCormack’s target EICP was prorated based on his length of service at his current and former positions.

~~(3)~~		~~Information provided for Messrs. Taff and Bethards is through the effective date of the Spin-off.~~

~~No changes were made to 2010~~

The 2011 target EICP for Messrs. Johnson, Elders and Nesser remained unchanged from ~~the 2009~~their respective 2010 targets. Mr. Carlson’s and Ms. Hinrichs’ respective targets ~~except~~were each increased to 60% of annual base salary earned for 2011. This resulted in an above-market target for Mr. ~~Johnson, whose 2010~~Carlson; however, the Compensation Committee deemed this target appropriate based on internal pay equity considerations. Mr. McCormack’s 2011 target EICP was increased ~~effective and for~~to 50% of annual base salary earned when the ~~period beginning August 1, 2010~~targets were set by the Compensation Committee in February 2011 based on internal pay equity considerations. The target was then increased to 70% in connection with his promotion to ~~President and Chief Executive Officer of McDermott. In connection with their hiring~~EVP, COO in ~~2010, the Compensation Committee set Messrs. Elders’ and Carlson’s 2010~~June 2011 to bring his target EICP ~~at 70% and 55%, respectively, which was within the~~award closer to market range for ~~their positions. Mr. Elders’ 2010 target EICP was prorated to take into account~~ his ~~April 30, 2010 hire date. Notwithstanding Mr. Carlson’s March 29, 2010 hire date, his 2010 target EICP was not prorated, in order to partially offset Mr. Carlson’s forfeiture of compensation~~new position and ~~benefits at his previous employer. The Compensation Committee set 2010 target EICP for Messrs. Taff, Nesser and Bethards at the same level for~~based on internal pay equity ~~reasons.~~considerations.

~~2010~~2011 EICP Performance ~~Goals.~~Goals. Traditionally, EICP compensation has consisted of a financial performance component and an individual performance component. To continue to drive performance of McDermott’s operations, the ~~2010~~2011 EICP target compensation for ~~business unit~~ officers, including ~~Messrs. Johnson and Bethards,~~the Named Executives, was also set utilizing ~~the traditional~~ financial and individual performance components. ~~However, to drive~~Generally, the ~~timely and successful completion of the Spin-off, 2010 EICP target compensation for our Corporate officers, including Messrs. Fees and Taff and~~

~~Ms. Hinrichs, was set based on the completion of the Spin-off. Generally, for non-Corporate executives the 2010~~2011 target EICP was split between financial and individual components as follows:

70% of target EICP was attributable to financial performance, of which 70% was attributable to operating income and 30% was attributable to return on invested capital; and

30% of target EICP was attributable to individual performance.


	•	~~70% of target EICP was attributable to financial performance; and~~

	•	~~30% of target EICP was attributable to individual performance.~~

Financial performance is the largest factor in determining EICP compensation, because the Compensation Committee generally considers it to be more objective and to more directly influence the creation of stockholder value, as compared to individual performance. Individual performance, however, serves as an important metric to help promote the achievement of strategic ~~non-financial goals.~~goals that may not be measured in an annual financial metric. To reward significant individual contributions, the Compensation Committee maintained the individual component for ~~2010~~2011 at 30% of target EICP for ~~2010.~~2011. However, to maintain the emphasis on financial performance, payment of EICP compensation (including for individual performance) required the attainment of athe threshold level of operating income financial performance. The maximum EICP compensation a Named Executive could earn in ~~2010~~2011 was ~~200%~~a multiple of 2x target EICP. For all Named Executives, the Compensation Committee had the discretion to decrease an EICP payment.

As a result, for ~~Messrs. Johnson, Elders, Carlson and Nesser,~~each Named Executive the EICP payment amount was principally determined based on: (1) the attainment of annual financial ~~goals (which represented up to 140% of EICP compensation);~~goals; and (2) the attainment of annual individual goals, ~~(which represented up to 60% of EICP compensation).~~as displayed below:

~~In connection with~~

LOGO

2011 Financial Performance Goals. Historically, the Spin-off, however, the Compensation Committee determined that for our Corporate executive officers, including Messrs. Fees and Taff and Ms. Hinrichs, the primary component of 2010 EICP compensation was completing the Spin-off. These Corporate Named Executives were eligible to receive target EICP compensation, prorated through the effective date of the Spin-off. For the Corporate executive officers who continued employment with McDermott following the Spin-off, EICP compensation for the balance of 2010 was set based on the traditional financial and individual components applicable to their post-spin employment, prorated for the balance of 2010.

As a result, the EICP payment amount for Ms. Hinrichs was principally determined based on: (1) the completion of the Spin-off (which represented 100%, prorated for the period through the completion of the Spin-off); (2) the attainment of financial goals for the remainder of 2010 (which represented up to 140%, prorated for the balance of 2010); and (3) the attainment of individual goals for the remainder of 2010 (which represented up to 60%, prorated for the balance of 2010).

Mr. Fees’ EICP payment amount was determined based on the completion of the Spin-off, which represented 100% of target EICP, prorated for his period of service as a Corporate executive officer. Because of Mr. Taff’s departure to join B&W and Mr. Bethards’ continued employment with B&W following the Spin-off, and in accordance with the Employee Matters Agreement dated July 2, 2010 to which McDermott and B&W became parties in connection with the Spin-off (the “Employee Matters Agreement”), their EICP payment amounts were determined and paid by B&W in 2011.

~~The components of EICP compensation for each of the Continuing Named Executives are illustrated in the charts below.~~

~~2010 Financial Goals.~~ ~~Historically, the Financial Goals~~ for the EICP consisted of operating income levels

related to McDermottand/or business unit operating income relevant to each Named Executive. Those Named Executives who were considered Corporate executive officers had Financial Goals generally based on consolidated McDermott operating income, whereas those Named Executives who were the chief executive officers of the business units had Financial Goals generally based on both consolidated McDermott operating income and business unit operating income. As discussed above, however, in connection with the Spin-off the Compensation Committee determined that the 2010 target award opportunity would be attributable to completing the Spin-off for Corporate executive officers. Additionally, the Compensation Committee determined that the chief executive officers of the business units (Messrs. Johnson and Bethards) should have Financial Goals entirely attributable to the operating income results of their respective business units. Accordingly, the respective business unit’s operating income was used for establishing each such Named Executive’s Financial Goals.

The Compensation Committee considers operating income an appropriate financial measure to use for compensation purposes because it is the primary driver of net income, which the Compensation Committee expects to drive our stock price. In comparison to net income, however, operating income is more directly influenced by the revenues generated and costs incurred as a result of management ~~action~~action. In 2011, operating income comprised 70% of the financial performance component of a Named Executive’s target EICP award.

In 2011, the Compensation Committee added return on invested capital, or ROIC, as an additional financial performance metric under the EICP. The Compensation Committee considers ROIC an appropriate financial measure to use for compensation purposes because it is an indicator of McDermott’s capital efficiency and ~~is more readily allocable~~productivity. ROIC also incentivizes the management of assets, and aligns management’s interest with those of our stockholders by measuring stockholder value creation and/or erosion when compared to ~~our operating segments.~~the cost of capital. ROIC comprised 30% of the financial performance component of a Named Executive’s target EICP award for 2011.

~~Historically, the~~

The Compensation Committee established three primary levels of operating income ~~goals. These levels~~and ROIC goals, which together would determine the threshold, target and maximum amounts that would be paid under the financial performance component of the ~~EICP, with~~EICP. In establishing the target level, ~~being based on~~the Compensation Committee considered management’s internal estimates of operating income and ROIC, discussed those estimates with Mr. Johnson, and then set the target level and threshold and maximum levels ~~set~~ as a percentage of the target level. The Compensation Committee designs incentive compensation to drive target level performance and does not believe that compensation should be earned for performance substantially below that level. As a result, no EICP compensation would be earned (including for individual performance) unless athe threshold level of operating income financial performance was attained, irrespective of the level of ROIC attained. The Compensation Committee believes that Named

Executives should be rewarded for superior financial performance. It therefore establishes a maximum level performance goal to incentivize higher performance, but caps the payout to maximize returns to stockholders for performance above the maximum payout ~~level, thereby reducing risk related to incentive compensation.~~

level.

~~The performance range between the threshold level~~For other levels of operating income and ~~the maximum level was relatively narrow prior to 2009. In 2009, however, the Compensation Committee sought to increase the performance range~~ROIC between threshold and maximum, ~~level goals, making~~ the ~~maximum payment more difficult relative to target and reducing the minimum performance required to be attained before any EICP compensation~~percentage paid would be ~~earned. In addition,~~determined by linear interpolation using the ~~Compensation Committee established~~two neighboring pre-established performance levels and payout as a ~~range~~multiple of target award. No payment would have been earned under the EICP for ~~target comprised of three separate~~2011 if operating income ~~goals. The intended effect of these changes was to reduce~~results had been below the significance of the impact of minor variations in financial results. The Compensation Committee maintained this approach in 2010, considering a number of performance goals recommended by management, including threshold level, ~~goals as low as 50% of target operating income and maximum level goals as high as 120% of target operating income. Similar to 2009, and in consultation with Meridian,~~notwithstanding the ~~Compensation Committee set the 2010 threshold level operating income goal at 70% of target and the maximum level operating income goal at 120% of target. The operating income goals at the~~

ROIC performance level.

~~target level ranged from 95% of the target goal to 105% of the target goal.~~

A Named Executive would have been eligible to earn the following amounts under the ~~2010~~2011 EICP based on attaining the following levels of operating ~~income:~~income and ROIC:


	~~Payout (as % of~~
~~Operating Income Performance Level~~	~~target EICP award)~~


~~Threshold (70% of Target)~~		25	%
~~Target (Min) (95% of Target)~~		98	%
~~Target (100%)~~		~~100~~	%
~~Target (Max) (105% of Target)~~		~~102~~	%
~~Maximum (120% of Target)~~		~~200~~	%

For other levels of operating income between threshold and maximum, the percentage paid would have been determined by linear interpolation using the two neighboring pre-established performance levels and percentage payout of target award. No payment would have been earned under the

2011 EICP ~~for 2010 if operating income results had been below the threshold level.~~

~~The operating income goals for 2010 EICP compensation were as follows:~~

Payout Matrix


	Performance Goal	Consolidated Operating Income (in millions)	Payout⁽¹⁾ (as a multiple of target EICP award)	Performance Goal	Consolidated ROIC	Payout⁽²⁾ (as a multiple of target EICP award)
	>120%	>$420	2.00	>120%	>16.7%	2.00
Maximum	120%	$420	2.00	120%	16.7%	2.00
	110%	$385	1.50	110%	15.3%	1.50
Target	100%	$350	1.00	100%	13.9%	1.00
	90%	$315	0.75	97%	13.4%	0.75
	80%	$280	0.50	93%	12.9%	0.50
Threshold	70%	$256	0.25	90%	12.4%	0.25
	< 70%	<$245	0.00	<90%	<12.4%	0.00


	~~Threshold~~	~~Target (Min)~~	~~Target~~	~~Target (Max)~~	~~Maximum~~
	~~(70% of Target)~~	~~(95% of Target)~~	~~(100%)~~	~~(105% of Target)~~	~~(120% of Target)~~


~~JRM~~ ~~• Offshore Oil & Gas Construction~~	~~$222 million~~	~~$301 million~~	~~$317 million~~	~~$333 million~~	~~$380 million~~
~~B&W~~⁽¹⁾	~~$210 million~~	~~$285 million~~	~~$300 million~~	~~$315 million~~	~~$360 million~~


(1)	The Payout for consolidated operating income is a multiple of target EICP award with respect to the 70% portion of financial performance goals attributable to operating income.

(2)

The ~~Compensation Committee set B&W performance~~Payout for consolidated ROIC is a multiple of target EICP award with respect to the 30% portion of financial goals ~~based on internal budgets, excluding $33 million of mPower expenses expected~~attributable to ~~be incurred in 2010, to avoid the adverse impact of strategic investments on a long-term initiative on a Named Executive’s EICP compensation.~~ROIC.

~~2010~~2011 Individual Performance Goals.Individual goals established for each Named Executive were tailored to the individual’s position and focused on supporting strategic initiatives and achieving common goals. Mr. ~~Fees established the~~Johnson’s individual goals ~~for~~were established by the Compensation Committee. Each Named Executive, with the exception of Messrs. Johnson and ~~Bethards. Messrs. Elders, Carlson and~~

Nesser, ~~each~~ proposed their respective individual goals, which were approved by Mr. Johnson. No ~~pre Spin-off~~ individual goals were established for ~~Messrs. Fees and Taff and Ms. Hinrichs because their pre Spin-off EICP award~~

was entirely attributable to completing the Spin-off. At the time the target EICP awards were determined, individual goals relating to post Spin-off employment with either McDermott or B&W were deferred to be addressedMr. Nesser in light of his anticipated retirement by ~~the respective company, as applicable. Ms. Hinrichs proposed her post Spin-off individual goals, which were approved by Mr. Johnson.~~year-end 2011. The individual goals ~~and their respective weightings~~ for our Continuing Named Executives’ ~~2010~~2011 EICP compensation are set forth in the table ~~below.~~on the following page.


Stephen M. Johnson:
~~Stephen M. Johnson:~~		• Lead the Company and set a philosophy that is well understood, widely supported, consistently applied and effectively implemented; • Establish ~~new executive leadership team to assist McDermott with post Spin-off transitional activities~~a clearly-articulated and ~~guide McDermott~~executable strategy for the Company which conserves cash and leverages capital expenditures in ~~the future (0-15%);~~
		a conservative manner; • Establish ~~clearly articulated strategy for cash~~appropriate annual and long-term financial objectives; ensure that appropriate systems are maintained to protect assets and maintain effective control of operations; • Develop, attract, retain, motivate and supervise an effective top management ~~and capital expenditures (0-15%);~~
		~~• Establish succession plan~~team capable of achieving objectives; provide for executive ~~officers~~management succession planning; • Serve as the chief spokesperson for the Company, communicating effectively with shareholders and ~~one management layer beneath executives (0-15%); and~~
		stakeholders; • ~~Enhance working relationship~~Work closely with ~~McDermott~~the Board of Directors ~~(0-15%).~~to keep them fully informed on all important aspects of the Company; make timely recommendations for Board action and respond to suggestions and directives from the Board and its committees; • Achieve specific safety goals and objectives and promote safe work practices as the highest operational priority; and • Assure that all operations and business dealings are conducted with the utmost compliance with applicable laws and regulations and the highest level of ethical behavior is exhibited by the Company.

Perry L. Elders:		• ~~Review~~Convert the capital allocation, management reporting, revenue pipeline and ~~assess post Spin-off~~estimating methodology from project initiatives into recurring processes; • Build a high performing finance team, including succession and development planning as well as implement development plans including changing duties of certain individuals; • Form a capital ~~structure, including liquidity~~team to oversee and ~~leverage (0-12%);~~manage the capital allocation and authorization process as well as identify and evaluate sources of capital; • Assess and optimize cash investments; • Establish balance sheet forecasts, improve annual budget process, establish operating unit level invested capital calculations to drive ROIC reporting; and • Assist the CEO and executive management with developing a new culture within the Company.
		~~• Develop capital expenditure process, including authorization and monitoring (0-12%);~~
Gary L. Carlson:		• ~~Enhance financial department~~Design and implement a global employee classification scheme; • Deploy talent development and succession planning ~~(0-12%);~~
		program to the project organization including discrete, measurable, and time sensitive candidate development plans; • ~~Develop roles~~Design and ~~processes throughout McDermott finance organization (0-12%);~~implement a global career development and
		performance management program; • ~~Enhance working relationship throughout McDermott (0-12%).~~
~~Gary L. Carlson:~~		Close the Third Country National pension plan to new participants and freeze benefit accruals thereunder, and establish a new defined contribution plan for non-U.S. expatriates; • Design a comprehensive mobilization program revision road map; and • Establish a ~~globally integrated talent development program (0-12%);~~comprehensive information technology plan and governance model, and complete the 2011 information technology initiatives on time and within budget.
		~~• Develop and implement a succession planning program(0-12%);~~
Liane K. Hinrichs:		• ~~Establish working relationship~~Lead the legal group through post Spin-off reorganization; • Work with ~~Compensation Committee (0-12%);~~the Board of Directors and management to continue enhancements to the ERM program; and • Lead the review, analysis and response to any significant changes in compliance requirements.
		~~• Assess and recommend go-forward plan for enterprise information technology (0-12%); and~~
John T. McCormack:		~~• Build cohesive global human resources organization to meet needs of McDermott post-spin (0-12%).~~
~~Liane K. Hinrichs:~~		~~• Complete Spin-off related activities (0-60%).~~
~~John T. Nesser:~~		~~• Oversee operational transition following the Spin-off to stand alone marine construction company (0-12%);~~
		• Achieve ~~established~~specific safety goals and objectives; • Achieve specific levels of financial performance with respect to operating income, ~~goals (0-12%);~~
		return on invested capital and new bookings; • ~~Increase backlog, in quantity~~Provide for executive management succession planning; and ~~quality, from level at December 31, 2009 (0-12%);~~
		• ~~Enhance~~Improve communications among the Chief Executive Officer, Chief Operating Officer, McDermott operations ~~development~~personnel and ~~succession planning(0-12%);~~ ~~and~~
		~~• Maintain high ethical standards through oversight and training and meet or exceed established safety goals (0-12%).~~
customers.

~~2010~~2011 Annual Incentive Compensation Payments.The ~~2010~~2011 target and final EICP compensation amounts for each Named Executive are shown in the table below. ~~No information is provided for Messrs. Taff or Bethards. Pursuant to the Employee Matters Agreement, B&W assumed responsibility for~~

the grant and payment of 2010 annual incentive compensation for certain employees, including Messrs. Taff and Bethards, which compensation was earned in connection with their employment with B&W following the Spin-off and paid by B&W in 2011.

~~2010~~2011 EICP Payment Summary

2010 EICP

Named
Target
Total 2010
Executive % of Salary Annual Incentive
S. M. Johnson⁽¹⁾
$ 1,218,863
Pres. & CEO, JRM 85 %
Pres. & CEO, MII 100 %
J. A. Fees 100 % $ 535,808
P. L. Elders 70 % $ 398,147
G. L. Carlson 55 % $ 334,400
L. K. Hinrichs 55 % $ 317,673
J. T. Nesser 70 % $ 609,729


Named Executive	2011 EICP Target % of Salary	Final 2011 Annual Incentive
S. M. Johnson	100%	$	0
P. L. Elders	70%	$	0
G. L. Carlson	60%	$	0
L. K. Hinrichs	60%	$	0
J. T. McCormack⁽¹⁾
EVP, COO	70%
SVP, Operations	50%	$	0
J. T. Nesser	70%	$	206,408


(1)		Mr. ~~Johnson’s~~McCormack’s target EICP was prorated based on his length of service at his current and former positions.

Analysis of ~~2010~~2011 EICP ~~Payments.~~Payments. In February ~~2011,~~2012, the Compensation Committee considered (1) McDermott’s ~~2010~~2011 consolidated operating income ~~as adjusted to compare to the established JRM operating income performance goals;~~and ROIC; (2) ~~the non-management directors’ assessment of the individual performance of Mr. Johnson; (3)~~ Mr. Johnson’s self-assessment of his individual performance relative to his individual goals; (3) the nonemployee directors’ assessment of the individual performance of Mr. Johnson; and (4) Mr. Johnson’s recommendation of each other Continuing Named Executive’s ~~2010~~2011 EICP compensation based on his assessment of the financial and individual performance applicable to each of those Continuing Named Executives.

In February 2010, the financial performance goals for 2010 EICP compensation were established based on the operating income of JRM, which was comprised of the reporting segment we previously referred to as the Offshore Oil & Gas Construction segment. As a result of the Spin-off, however, the Offshore Oil & Gas Construction segment no longer exists as a segment for financial reporting purposes. Therefore, in order to determine whether the financial goals were attained, the Compensation Committee utilized McDermott’s consolidated operating income, which was slightly above the threshold level of ~~$314.9~~$245.0 million, ~~taking into account legacy corporate general~~ and ~~administrative expenses to establish~~consolidated ROIC of 8%, which was below the ~~operating~~threshold level of 12.4%. The consolidated ROIC percentage was derived by dividing (1) the sum of income from continuing operations before noncontrolling interest less net income attributable to ~~JRM had~~noncontrolling interest by (2) the ~~Spin-off not occurred.~~average net assets during 2011, which was calculated by subtracting current liabilities from total assets. The ~~Compensation Committee also specifically considered certain impairments and charges totaling~~consolidated operating income of $250.7 million resulted in a notional payout level of approximately ~~$73.1 million, including costs incurred in connection~~26% with respect to the ~~discontinuance of our fabrication yard in Kazakhstan, impairment charges on two~~70% portion of the ~~four vessels we are retaining from the Secunda acquisition, which charges diminished~~financial performance goals attributable to operating income, and ~~also~~ the ~~asset impairment costs~~consolidated ROIC of ~~our charter fleet business, as discussed~~8% resulted in ~~our Annual~~

~~Report onForm 10-K~~ ~~for~~a notional payout of 0.00% with respect to the ~~year ended December 31, 2010.~~30% portion of

~~Mr. Johnson.~~ ~~Mr. Johnson earned approximately 160.3%~~

financial performance goals attributable to consolidated ROIC. The combined operating income and ROIC performance resulted in eligibility of ~~his 2010 target~~the participants in the EICP ~~or $1,218,863. Based on McDermott’s 2010 financial results, Mr. Johnson was eligible~~ to earn ~~190%~~approximately 18% of ~~his 2010~~their target EICP compensation, subject to the assessment of ~~his~~their individual goals. ~~Mr. Johnson’s 160.3% was comprised 132%~~

The Continuing Named Executives. None of the Continuing Named Executives were awarded bonuses under the 2011 EICP. Based on McDermott’s 2011 financial ~~performance component~~results, the Continuing Named Executives were eligible to earn approximately 18% of their respective 2011 target EICP compensation, subject to the assessment of their respective individual goals. Upon the recommendation of Mr. Johnson based on ~~McDermott’s~~the 2011 financial results, the Compensation Committee, in the exercise of its discretion, determined that, although the Continuing Named Executives and other participants in the EICP were eligible to earn approximately 18% of their target EICP compensation, 0% would be awarded in light of the financial results. Instead, as recommended by Mr. Johnson, the Compensation Committee determined that the bonus amounts that otherwise would have been payable should effectively be returned to the shareholders in the form of additional operating income, resulting in the reported consolidated operating income of $250.7 million. In making this recommendation and ~~28.3%~~decision, respectively, Mr. Johnson and the Compensation Committee considered the increase in 2011 revenues of approximately 43%, together with the decrease in 2011 operating income by approximately 20%, from 2010 levels, the continued performance issues in the Atlantic region and issues relating to several projects in other regions.

In making its decision not to award bonuses for 2011 under the EICP, the Compensation Committee noted that Mr. Johnson had achieved the individual performance component, based on the Governance Committee’s assessment of Mr. Johnson’s individual performance against stated ~~goals.~~goals, and each of Messrs. Elders, Carlson and McCormack and Ms. Hinrichs had achieved their respective individual performance components based on Mr. Johnson’s assessment of their respective individual performance achievements against stated goals, with the exception of the financial performance goal and a safety goal for Mr. McCormack.

Mr. Nesser. Pursuant to the terms of Mr. Nesser’s separation agreement entered into in connection with his retirement, Mr. Nesser was paid

~~Mr. Fees.~~ ~~In connection with the Spin-off and Mr. Fees’ termination of employment for “good reason” as defined in his retention agreement, Mr. Fees was paid~~

his prorated ~~2010~~2011 EICP compensation in August ~~2010.~~2011. Per the terms of his ~~retention~~separation agreement, Mr. ~~Fees~~Nesser was ~~to be~~ paid a cash payment equal to his target bonus under the EICP times a fraction, the numerator of which was the number of days elapsed in the year in which the ~~termination~~retirement took place and the denominator of which was 365. ~~Based on his July 30, 2010 termination date,~~ Mr. ~~Fees’~~Nesser received a prorated target bonus of ~~$922,500 was prorated such that he received an EICP payment of $535,808.~~

~~Mr. Elders.~~ ~~Mr. Elders earned approximately 181.5% of his 2010 target EICP (which was prorated~~$206,408, based on his length of service with McDermott during 2010), or $398,147. Based on McDermott’s 2010 financial results, Mr. Elders was eligible to earn 190% of his 2010 target EICP compensation. Mr. Elders’ 181.5% was comprised 133.7% under the financial performance component based on McDermott’s operating income and 47.8% under the individual component based on Mr. Johnson’s assessment of Mr. Elders’ individual performance against stated goals.

~~Mr. Carlson.~~ Mr. Carlson earned 190% of his 2010 target EICP, or $334,400. Based on McDermott’s 2010 financial results, Mr. Carlson was eligible to earn 190% of his 2010 target EICP compensation. Mr. Carlson’s 190% was comprised 133% under the financial performance component based on McDermott’s operating income and 57% under the individual component based on Mr. Johnson’s assessment that Mr. Carlson met or exceeded his individual goals.

~~Ms. Hinrichs.~~ ~~As a Corporate employee, Ms. Hinrichs had 2 EICP periods during 2010.~~partial year service. For

the period prior to the Spin-off, and because of the completion of the Spin-off, Ms. Hinrichs earned 100% of her target EICP compensation, prorated for her length of service as a Corporate employee, or 7/12 of the year. For the period following the Spin-off, Ms. Hinrichs was eligible to earn 190% of her 2010 target EICP compensation, prorated for the balance of 2010, or 5/12 of the year. Following the Spin-off, Ms. Hinrichs earned 190% of her 2010 target EICP compensation, which was comprised 133% under the financial performance component based on McDermott’s operating income and 57% under the individual component based on Mr. Johnson’s assessment that Ms. Hinrichs met or exceeded her individual goals. As a result, Ms. Hinrichs earned 190% of her 2010 target EICP for 5/12 of the year, which combined with the pre Spin-off period, totaled $317,673.

~~Mr. Nesser.~~ ~~Mr. Nesser earned approximately 171% of his 2010 target EICP, or $609,729. Based on McDermott’s 2010 financial results, Mr. Nesser was eligible to earn 190% of his 2010 target EICP compensation.~~ more information regarding Mr. Nesser’s ~~171% was comprised 133% under the financial performance component based on McDermott’s operating income~~separation agreement, see “Employment and ~~38% under the individual component based on Mr. Johnson’s assessment of Mr. Nesser’s individual performance against stated goals.~~

Severance Arrangements — Employment and Separation Agreements” below.

Long-Term Incentive Compensation

The Compensation Committee believes that the interests of our stockholders are best served when a significant percentage of executive compensation is comprised of equity and other long-term incentives that appreciate in value contingent upon increases in the value of our common stock and other performance measures that reflect improvements in McDermott’s business fundamentals. Therefore, long-term incentive compensation represents the single largest element of our Named Executives’ total direct compensation.

Analysis of ~~2010~~2011 Equity Grants.

Mix of ~~2010 Equity.~~2011 Equity. In 2010, the type and mix of equity the Compensation Committee granted was principally a function of two factors: (1) the Compensation Committee’s desire to maintain a strong correlation between pay and performance in long-term incentives and (2) the anticipated Spin-off. As a result,2011, the Compensation Committee allocated long-term incentive compensation to officers, including ~~certain~~the Continuing Named Executives, as ~~follows (excluding retention~~

follows:

~~payments made in connection with the Spin-off and the sign-on grant made to Mr. Carlson):~~

50% performance shares;


	•	~~50% restricted stock units; and~~

	•	~~50% non-qualified stock options.~~

25% non-qualified stock options; and

~~To promote the retention of employees,~~

25% restricted stock units represented a larger percentage of a Named Executive’s long-term incentive compensation than in the recent past. At the time of grant, the Compensation Committee anticipated that the restricted stock units would be converted at the Spin-off into restricted stock units of either McDermott or B&W, depending primarily on which company the recipient’s employment continued with post-spin. As a result, restricted stock units were intended to provide an immediate long-term retention for continuing employees. The restricted stock units generally vest one-third on the first, second and third anniversaries of the grant date.units.

To ~~maintain~~strengthen its commitment to performance-based compensation, the Compensation Committee ~~utilized~~resumed using performance shares in 2011. The Compensation Committee believes the granting of total shareholder return (“TSR”) performance shares is an appropriate element of incentive compensation, in that TSR performance shares align the Continuing Named Executives’ interests with those of our stockholders, with a focus on long-term results. The amount of performance shares that vest, if any, is scheduled to initially be determined at the end of three calendar years (including 2011) based on McDermott’s TSR relative to the Proxy Peer Group during the same period, with subsequent measurements of TSR relative to the Proxy Peer Group at the end of four and five calendar years (including 2011). The total percentage of performance shares which

will vest, if any, may range in amount between 0% and 200% of the number of shares granted, depending on McDermott’s TSR relative to the Proxy Peer Group over the applicable measurement periods. As of December 31, 2011, the estimated payout as a percentage of target for the performance shares granted in 2011 was 0% due to the Company’s share price performance versus the Proxy Peer Group.

As in 2009 and 2010, in 2011 the Compensation Committee continued to use stock options, which reward and drive performance based on absolute stock price improvement. The stock options ~~also~~ generally vest in one-third increments on the first, second and third anniversaries of the grant date and have an option term of 7seven years.

~~Consistent~~ As of December 31, 2011, the price of the Company’s shares had not exceeded the strike price of the stock options granted in 2011.

Similarly, as in 2008, 2009 and 2010, the Compensation Committee awarded restricted stock units to the Continuing Named Executives, although such restricted stock units represented a smaller percentage of the Continuing Named Executive’s long-term incentive compensation than in the recent past. Restricted stock units are intended to promote the retention of employees, including the Continuing Named Executives, and generally vest in one-third increments on the first, second and third anniversaries of the grant date.

In 2011 our Compensation Committee adopted a clawback policy under which McDermott would seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange. Each grant made to the Continuing Named Executives in 2011 was subject to this clawback policy.

Additionally, and consistent with our recent past practice, our grant agreements for awards made in ~~2010~~2011 contained a forfeiture provision. In ~~2010,~~2011, this provision provided that in the event that, while the grantee is employed by McDermott or performing services on behalf of McDermott under any consulting agreement, the grantee is convicted of a ~~felony or~~ misdemeanor involving fraud, dishonesty or moral turpitude or a felony, or the grantee engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, the business reputation

or economic interests of the Company, then all rights and benefits awarded under the respective agreements are immediately forfeited, terminated and withdrawn.

The Compensation Committee also considered using performance shares in 2010, as it had each year since 2006. However, the Compensation Committee elected not to utilize performance shares as a component of long-term compensation during 2010, because it determined it was more appropriate for the post-spin board of directors at each post Spin-off company to establish performance targets and metrics tailored to the strategies of the post-spin company. The decision not to award performance shares was influenced by observed complexities in establishing goals for McDermott in the midst of significant change during the measurement period.

We anticipate that future long-term incentive compensation will continue to emphasize performance-based equity awards, including the use of performance shares. In March 2011, the Compensation Committee’s long-term compensation allocation for officers, excluding Mr. Nesser, who informed McDermott that he intends to retire by year-end 2011, was as follows:


	•	~~50% performance shares;~~
	•	~~25% restricted stock units; and~~
	•	~~25% non-qualified stock options.~~

For more information regarding the ~~2010~~2011 performance shares, stock options and restricted stock units, ~~and stock options,~~ see the ~~Grants~~“Grants of Plan-Based ~~Awards~~Awards” table under “Compensation of Executive Officers” ~~below and disclosures under “Compensation of Executive Officers — Estimated Future Payouts Under Equity Incentive Plan Awards.”~~

below.

Value of ~~2010~~2011 Long-Term Incentive ~~Compensation.~~Compensation. The ~~2010~~2011 target long-term incentive compensation for our Named Executives was as follows:

Target LTI
Percent of
Named Executive⁽¹⁾ Value Market⁽²⁾
S. M. Johnson $ 2,500,000 84 %
P. L. Elders $ 1,034,000 130 %
M. S. Taff $ 1,212,000 102 %
B. C. Bethards $ 2,500,000 79 %
G. L. Carlson⁽³⁾
$ 432,000 120 %
L. K. Hinrichs $ 800,000 101 %
J. T. Nesser $ 650,000 102 %


Named Executive⁽¹⁾	Target LTI Value		Percent of Market⁽²⁾
S. M. Johnson	$	4,000,000	125%
P. L. Elders	$	1,000,000	79%
G. L. Carlson	$	416,720	114%
L. K. Hinrichs	$	931,767	105%
J. T. McCormack⁽³⁾ EVP, COO SVP, Operations	$ $	1,125,000 465,000	81% 100%


(1)		No long-term incentive award was granted to Mr. ~~Fees~~Nesser in ~~2010~~2011 in ~~anticipation~~light of his ~~termination of employment from McDermott in connection with the Spin-off.~~anticipated retirement by year-end 2011.

(2)		Market = Median target long-term incentives based on the benchmark applicable to the executive. 100% represents median compensation.

(3)

The target LTI value shown in connection with Mr. ~~Carlson’s~~McCormack’s promotion to EVP, COO reflects his March 2011 LTI award in addition to a supplemental award in the amount of $660,000 in connection with his promotion. Percent of market reflected for Mr. McCormack’s current position is the percent of market based upon a combination of Mr. McCormack’s target ~~long-term incentive compensation does not include a sign-on equity grant of restricted stock units that was made to offset compensation~~LTI award values from his former and ~~benefits he forfeited when he left his previous employer to join McDermott.~~current positions.

~~Meridian advised~~

When considering the target values of long-term incentive to be provided to the Continuing Named Executives, the Compensation Committee ~~that due~~sought to ~~economic and stock~~set target values within the market conditions in 2010, the long-term incentive compensation of companies in our market decreased 10%-20% as compared to 2009. As a result of these market decreases, most of our executive officers, including Messrs. Johnson, Taff and Nesser and Ms. Hinrichs, received a lesser value ofrange. Accordingly, each Continuing Named Executive’s target long-term incentive ~~compensation as compared to~~value was within market range, with the ~~2009~~exception of Messrs. Johnson and Elders and Mr. McCormack’s target ~~value awards (exclusive of the retention grants discussed below) in order for the~~

~~Compensation Committee to maintain their~~ long-term incentive ~~compensation within market range. The~~value associated with his promotion to EVP, COO in June 2011. When granted, the value of ~~Messrs. Elders’ and Carlson’s~~Mr. Johnson’s long-term incentive compensation was above market range in order to induce Messrs. Elders and Carlson to accept positions at JRM with the expectation that they would become executive officers of McDermott upon completion of the Spin-off. As a result of internal equity considerations, the Compensation Committee set the same target long-term incentive value forfurther compensate Mr. Johnson ~~and~~for his performance following the Spin-off, while continuing to incentivize him based on the long-term performance of McDermott. The value of Mr. ~~Bethards, although market data indicated that Mr. Bethards’ target~~Elders’ long-term incentive compensation was ~~approximately 21%~~ below market —

range; however, combined with the ~~difference attributable to the use~~other components of ~~different benchmarks~~compensation for ~~these positions.~~

~~As previously mentioned, Mr. Carlson~~2011, his target total direct compensation was also granted additional long-term incentives in 2010 in the form of a sign-on grant of restricted stock units made to offset compensation and benefits he forfeited when he left his previous employer to join McDermott.within market range. The value of ~~this sign-on grant was not included in setting~~ Mr. ~~Carlson’s target~~McCormack’s long-term incentive ~~compensation.~~

~~Additionally,~~compensation following his promotion to EVP, COO was also set below market range in ~~connection with~~light of the ~~Spin-off and pursuant~~Compensation Committee’s view that a newly promoted Chief Operating Officer should receive competitive compensation, although not necessarily equal to the ~~retention agreements entered into by McDermott with certain key members~~compensation of ~~management~~a more experienced officer in a similar position.

As of December ~~2009,~~31, 2011, (1) the estimated payout as ~~discussed~~a percent of target for the performance shares granted in ~~further detail below, Messrs. Johnson~~2011 was 0%, and ~~Nesser and Ms. Hinrichs each received an additional award based on their continued employment with McDermott on~~(2) the ~~effective date~~share price of our common stock had not exceeded the strike price of the ~~Spin-off. Each~~stock options granted in 2011. However, the amount of performance shares granted in 2011 that ultimately vest, if any, will be determined by reference to our total shareholder return over three-, four- and five-year periods. The vesting of these ~~Named Executives received~~performance shares would impact the future realizable value of these performance shares. In addition, an ~~award of restricted~~increase in our stock ~~equal in~~price compared to our stock price at December 31, 2011 may impact the future realizable value ~~to the sum~~ of the ~~Named Executive’s annual base salary and target bonus under the EICP~~stock options granted in effect immediately prior to the effective date of the Spin-off. The restricted stock awards vest 100% on July 30, 2011, which is the first anniversary of the effective date of the Spin-off, provided the Named Executive remains employed with McDermott through that date. The Compensation Committee did not consider the retention agreement restricted stock awards when determining the value of long-term incentive to be awarded in 2010 because the restricted stock awards were an incentive to retain key members of management through the completion of and for one year following the Spin-off rather than to incentivize long-term performance. Additionally, pursuant to the retention agreements entered into in December 2009, at the time the 2010 target long-term incentive value was determined in early 2010, the restricted stock awards remained contingent and were not awarded until the completion of the Spin-off. The value of

2011.

~~the retention agreement restricted stock award grants to Messrs. Johnson and Nesser and Ms. Hinrichs were as follows:~~

Grant Date Fair

Named Executive Value of Award Shares Granted
S. M. Johnson $ 1,422,186 113,412
L. K. Hinrichs $ 654,563 52,198
J. T. Nesser $ 871,254 69,478

Messrs. Bethards and Taff each received similar retention payments in the form of restricted stock award grants made by B&W equal in value to the sum of their respective annual base salary and target bonus in effect immediately prior to the effective date of the Spin-off, except that one-third of the value of Mr. Taff’s retention award was made in cash.

Sizing Long-Term Incentive ~~Compensation.~~Compensation. The Compensation Committee generally determines the size of equity-based grants as a dollar value, rather than granting a targeted number of shares. The number of restricted stock units, performance shares and stock options granted can be expressed through the following formula:

target value of target long-termincentive($)/FMV($).

The fair market value of one restricted stock unit ~~or share of restricted stock~~ was computed based on the full fair market value of McDermott’s common stock based on the closing price of our common stock on the New York Stock Exchange on the date of grant. The fair market value of one ~~stock option~~performance share was determined by ~~Meridian~~Pay Governance using a Monte Carlo valuation model and the fair market value of an option to acquire one share of our common stock was determined by Pay Governance using a Black-Scholes ~~formula based also on~~model. Both of these valuation models consider the full fair market value of our common stock on the date of ~~grant.~~ grant in conjunction with other valuation inputs. Full fair market value may differ from grant date fair value dependent on the analysis performed under Accounting Standards Codification Topic 718.

For example, for the long-term incentive compensation granted to ~~all of~~ the Continuing Named Executives ~~(except Messrs. Elders and Carlson)~~ in ~~February 2010,~~March 2011, the fair market value of our common stock as of the date the grants were ~~calculated~~determined (based on the closing price of our common stock on the New York Stock Exchange) was ~~$25.37,~~$25.64, compared to the ~~discounted~~ value of ~~$17.11~~$35.38 for each performance share and the value of $10.19 for an option to acquire one share of our common stock. Because the long-term incentive compensation grants vest over three years, the number of shares calculated ~~were~~was rounded to the nearest multiple of three.

In prior years, fair market value of the stock was determined using a discounted share price to reflect the vesting conditions and transfer restrictions characterizing the equity awards. The valuation methodology was changed with respect to awards made in 2010, which had the intended effect of lowering the number of shares and units that otherwise would have been granted.

All outstanding long-term incentive awards prior to the Spin-off, including those granted in 2010, were converted or adjusted in connection with the Spin-off. For more information, see “Treatment of Equity-Based Compensation in Connection with the Spin-off” below.

Timing of Equity ~~Grants.~~Grants. To avoid timing equity grants ahead of the release of material non-public information, the Compensation Committee generally grants stock option and other equity awards effective as of the first day of the next open trading window following the meeting at which the grants are approved, which is generally the third NYSE trading day following the filing of our annual report onForm 10-K or quarterly report onForm 10-Q with the ~~Securities and Exchange Commission.~~SEC. This practice was followed for all long-term incentive compensation grants to Continuing Named Executives in 2010, with the exception of the restricted stock award retention grants made to Messrs. Johnson and Nesser and Ms. Hinrichs pursuant to their retention agreements. The retention grants of restricted stock were earned on the effective date of the Spin-off and, therefore, were made on the first business day following that date.

~~Treatment of Equity-Based Compensation in Connection with the Spin-off.~~ ~~In connection with the Spin-off, McDermott sought to preserve the intrinsic value of outstanding equity awards as of the date of the Spin-off. As~~2011.

Perquisites

We provide a ~~result, McDermott’s outstanding equity-based compensation awards were generally treated as follows:~~


	•	Each outstanding option to purchase shares of McDermott common stock held by a director, officer or employee of McDermott who remained a director, officer or employee of McDermott and did not become a director, officer or employee of B&W immediately after the Spin-off was replaced with an adjusted option to purchase McDermott common stock. Each of those adjusted options reflected adjustments generally intended to preserve the intrinsic value of the original option and the ratio of the exercise price to the fair market value of the stock subject to the option, each as of the date of the Spin-off. The replacement options were generally made subject to the same terms and conditions as the options that were replaced. To the extent the options that were replaced had already vested, the replacement options were also vested.


	•	Each outstanding option to purchase shares of McDermott common stock held by a person who was or became a director of B&W (but not of McDermott) or by a person who was or became an officer or employee of B&W immediately after the Spin-off was replaced with a substitute option to purchase shares of B&W common stock. Each of those substitute options have terms generally intended to preserve the intrinsic value of the original option and the ratio of the exercise price to the fair market value of the stock subject to the option, each as of the date of the Spin-off. The substitute options were generally made subject to the same terms and conditions as the options that were replaced. To the extent the options that were replaced had already vested, the substitute options were also vested.

	•	Each outstanding option to purchase shares of McDermott common stock that was held by (1) a person who was a director of McDermott and who remained on the board of directors of McDermott and was also on the board of directors of B&W immediately after the Spin-off or (2) a person who was one of a small number of officers of B&W who would not serve as officers of B&W after the Spin-off (the “Former B&W Officers”) were replaced with both an adjusted McDermott stock option and a substitute B&W stock option. Both options, when combined, have terms that were generally intended to preserve the intrinsic value of the original option and the ratio of the exercise price to the fair market value of the stock subject to the option, each as of the date of the Spin-off. Both the replacement and the substitute options were generally made subject to the same terms and conditions as the original options. All McDermott stock options held by directors of McDermott as of the date of the Spin-off were previously vested pursuant to their original terms. Accordingly, all adjusted or substitute options issued to McDermott directors were also vested.

	•	~~The McDermott restricted stock awards, restricted stock unit awards and deferred stock unit awards of officers or employees of McDermott who remained officers or employees of McDermott and did not~~


		become officers or employees of B&W immediately after the Spin-off were replaced with adjusted McDermott awards, each of which generally preserved the value of the original award as of the date of the Spin-off. The adjusted awards were generally made subject to the same terms and conditions as the awards that were replaced. As of the distribution date, none of McDermott’s directors held any restricted stock awards, restricted stock unit awards, deferred stock unit awards or performance share awards.

	•	The McDermott restricted stock awards, restricted stock unit awards and deferred stock unit awards of persons who were or became officers or employees of B&W immediately after the Spin-off were converted into substitute B&W awards, each of which generally preserved the value of the original award as of the date of the Spin-off. The adjusted awards were generally made subject to the same terms and conditions as the awards being replaced.

	•	The McDermott restricted stock unit awards and deferred stock unit awards of the Former B&W Officers were converted into rights to receive (1) an equivalent number of unrestricted shares of McDermott common stock and (2) one share of B&W common stock for every two shares of McDermott common stock, in accordance with the Spin-off. In the Spin-off, Former B&W Officers maintained their shares of McDermott restricted stock, which were already issued and outstanding on the record date of the Spin-off. As a result, Former B&W Officers received the distribution of B&W common stock payable with respect to these restricted shares in the Spin-off.

	•	The McDermott performance share awards of officers or employees of McDermott who remained officers or employees of McDermott and did not become officers or employees of B&W immediately after the spin-off were converted into unvested rights to receive the value of deemed target performance in restricted stock units of McDermott common stock, with the same vesting terms as the original awards.


	•	The McDermott performance share awards of persons who were or would be officers or employees of B&W immediately after the Spin-off were converted into unvested rights to receive the value of deemed target performance in restricted stock units of B&W common stock, with the same vesting terms as the original awards.

	•	The McDermott performance share awards of the Former B&W Officers were converted into rights to receive the value of deemed target performance in restricted stock units of McDermott common stock and B&W common stock, in accordance with the~~one-for-two~~ ~~ratio used in the Spin-off.~~

	•	One-half of Mr. Taff’s McDermott stock options, restricted stock, restricted stock units and performance shares were converted as if he were an officer of McDermott following the Spin-off, and the other half of such awards was converted as if he were an officer of B&W following the Spin-off.

In the case of adjusting McDermott options or granting substitute B&W options, the conversion formula resulted in fractional shares or fractional cents in some cases. Any fractional shares that were subject to adjusted McDermott options and substitute B&W options were disregarded, and thelimited number of shares subject to such options was rounded down to the next lower whole number of shares. The exercise price for such options was rounded up to the next higher whole cent. There were no stock appreciation rights outstanding under the McDermott incentive plans at the time of the Spin-off.

~~Perquisites~~

~~Perquisites are not factored into the determination of the total direct compensation of our Named Executives, because they are typically provided to Named Executives on an exception basis.~~

~~We own a fractional interest in one aircraft through an aircraft management company, which we use for business purposes~~perquisites and ~~make available~~other personal benefits to our Named ~~Executives~~Executives. In 2011 our Compensation Committee adopted a perquisite allowance for limited personal use. When we permit the personal use of aircraft by a Named Executive, we have a choice regarding the amount of income imputed to the executive officer for that use. Under current Internal Revenue Service rules, we may impute to the executive officer the actual cost incurred by us for the flight or an amount based on Standard

Industry Fare Level (“SIFL”) rates set by the U.S. Department of Transportation. Imputing income based on SIFL rates usually results in less income tax liability to the executive officer but higher income taxes to us due to limitations on deducting aircraft expenses that exceed the income imputed to employees. To minimize our cost of permitting the personal use of the aircraft, we impute income for personal use of aircraft tocertain officers, including our Named Executives, in ~~an amount that results in the least amount of tax burden for McDermott.~~

As required by applicable Securities and Exchange Commission rules, for purposes of our compensation related disclosures in this proxy statement, we calculate compensation in respect of personal use of corporate aircraft based on our “incremental cost.” We compute incremental cost for personal use of aircraft based on the actual cost incurred by us for the flight, including:


	•	~~the cost of fuel;~~

	•	~~a usage charge equal to the hourly rate charged by our flight operator multiplied by the flight time;~~

	•	~~“dead head” costs, if applicable, of flying aircraft without passengers to and from locations; and~~

	•	~~the dollar amount of increased income taxes we incur as a result of disallowed deductions under IRS rules.~~

Since the aircraft is used primarily for business travel, incremental costs generally exclude fixed costs such as the purchase price of our interest in the aircraft, aircraft management fees, depreciation, maintenance and insurance. Our cost for flights, whether business or personal, is not affected by the number of passengers. As a result, we do not assign any amount, other than the amount of ~~any disallowed deduction, when computing incremental costs for the presence of guests accompanying a~~$20,000. The perquisite allowance was provided in order to cover company-required physicals, financial planning and non-company-required spousal travel.

Additionally, and consistent with our past practice, we may reimburse Named Executive on such flights. While we do not generally incur any additional cost, this travel may result in imputed income to the Named Executive and disallowed deductions on our income taxes. We will reimburse the Named ExecutiveExecutives for the travel expenses of a guest accompanying a Named Executive, including the provision of agross-up for any imputed income, but only when the presence of that guest is related to the underlying business purpose of the trip. We also provide our Named Executives with a taxgross-up ~~for income incurred in connection with a relocation with McDermott or one of our~~

on any relocation-related expense reimbursements that may be subject to tax.

~~affiliated companies. During 2010, in connection with the Spin-off and the realignment of the management teams for McDermott and B&W, relocation benefits, including taxgross-ups,~~ ~~were provided to certain executives under our relocation program.~~

~~On February 28, 2011 the Compensation Committee adopted a perquisite allowance for certain officers, including our Named Executives.~~

Retirement Plans

~~Overview.~~Thrift Plan. We ~~have provided~~provide retirement benefits for most of our U.S. employees, including our Named Executives, through sponsorship of ~~a combination of qualified defined benefit pension plans, which we refer to as our “Retirement Plans,” and~~the McDermott Thrift Plan, a qualified defined contribution 401(k) plan, which we refer to as our “Thrift Plan.” ~~Prior~~

Retirement and Excess Plans. Some of our longer-term U.S. employees, including Mr. Nesser and Ms. Hinrichs, are entitled to retirement benefits under the ~~Spin-Off, we sponsored the following Retirement Plans under which the eligible Named Executives were covered:~~


	•	~~“Retirement Plan for Employees of McDermott Incorporated and Participating Subsidiary and Affiliated Companies” (the “MI Retirement Plan”~~McDermott (U.S.);

	•	~~“Retirement Plan for Employees of J. Ray McDermott Holdings, LLC and Participating Subsidiary and Affiliated Companies” (the “JRM Retirement Plan”);~~

	•	~~“Retirement Plan for Employees of Babcock & Wilcox Governmental Operations” (the “B&W Governmental Operations Retirement Plan”); and~~

	•	~~“Retirement Plan for Employees of Babcock & Wilcox Commercial Operations” (the “B&W Commercial Operations Retirement Plan”).~~

~~As a result of the Spin-off, we are no longer a sponsor of the B&W Government Operations~~ Retirement Plan, or the ~~B&W Commercial Operations Retirement Plan.~~

~~In addition to the broad-based~~ qualified ~~plans described above,~~defined benefit pension plan we sponsor, ~~unfunded, nonqualified excess retirement plans,~~ which we refer to as our “Retirement Plan.” The Retirement Plan has been closed to new participants since 2006, and benefit accruals under the Retirement Plan were frozen altogether in 2010.

We also sponsor an unfunded, nonqualified excess retirement plan, which we refer to as our “Excess ~~Plans.~~Plan.” The Excess ~~Plans cover~~Plan covers a small group of highly compensated employees, including ~~Messrs. Fees, Bethards and~~Mr. Nesser and Ms. Hinrichs, whose ultimate benefits under the Retirement ~~Plans~~Plan are reduced by Internal Revenue Code limits on the amount of benefits which may be provided under qualified plans and the amount of compensation which may be taken into

account in computing benefits under qualified plans. Benefits under the Excess ~~Plans~~Plan are paid from our general assets.

~~In 2003, we closed~~ As is the ~~JRM~~case with the Retirement Plan, ~~to new participants and froze benefit accruals for existing participants. In lieu of future defined benefit plan accruals~~benefits under the ~~JRM Retirement~~Excess Plan ~~we amended our Thrift Plan~~have been frozen since 2010, and no further benefits are accruing to ~~provide affected employees with an automatic cash contribution to their Thrift Plan account equal to 3% of~~Ms. Hinrichs or Mr. Nesser under the ~~employee’s base pay, plus overtime pay, expatriate pay~~Excess Plan.

Messrs. Johnson, Elders, and ~~commissions, which we refer to collectively as “thriftable earnings.”~~

In 2006, we closed the MI Retirement Plan, B&W Governmental Operations Retirement Plan and B&W Commercial Operations Retirement Plan to new salaried participants and froze benefit accruals for existing salaried participants with less than five years of credited service as of March 31, 2006, subject to specific annual~~cost-of-living~~ increases. In lieu of future defined benefit plan accruals under those Plans, we further amended our Thrift Plan to provide an automatic cash contribution to the Thrift Plan accounts of affected employees and new hires in an amount between 3% and 8% of the employee’s thriftable earnings, based on their length of service. Mr. Taff didCarlson do not participate in athe Retirement Plan or anthe Excess Plan because their employment with McDermott commenced after new participation in the Retirement Plan was closed. Mr. McCormack does not participate in the Retirement Plan or the Excess Plan because he had not met the ~~MI Retirement Plan~~applicable eligibility requirements at the time ~~that~~the Retirement Plan was closed to new participants.

In 2007, we offered salaried participants in the MI Retirement Plan, B&W Governmental Operations Retirement Plan, and B&W Commercial Operations Retirement Plan with between five and 10 years of credited service as of January 1, 2007 the one-time irrevocable choice between (i) continuing to accrue future benefits under the Retirement Plan or (ii) freezing their Retirement Plan accrued benefit as of March 31, 2007, subject to annual~~cost-of-living~~ increases, and receiving an automatic service-based cash contribution to their Thrift Plan account instead. Mr. Nesser and Ms. Hinrichs met this credited service criteria under the MI Retirement Plan and thus were affected by this action. Mr. Nesser and Ms. Hinrichs elected to continue accruing benefits under the Retirement Plan. As discussed below, as of June 30, 2010, all benefit accruals under the Retirement Plan were frozen, including Mr. Nesser’s and Ms. Hinrichs’ benefits under the Retirement Plan.

~~Messrs. Johnson, Elders, Taff and Carlson do not participate in a Retirement Plan or an Excess Plan, because their employment with McDermott~~

~~commenced after new participation in the applicable Retirement Plan was closed, as discussed above.~~

During 2010, and in connection with the Spin-off, the Retirement Plans were realigned, such that assets and liabilities under these Plans which were attributable to B&W employees and certain former employees were transferred to the B&W Government Operations Retirement Plan and the B&W Commercial Operations Retirement Plan, as applicable, and the MI Retirement Plan was merged into the JRM Retirement Plan. These changes are described further below, under “Recent Changes to Retirement Plans.” Since the Spin-off, the only Retirement Plan we sponsor is the consolidated JRM Retirement Plan, which has been renamed the “McDermott (U.S.) Retirement Plan”.

See the ~~Pension Benefit~~“Pension Benefits” table under “Compensation of Executive Officers” below for more information regarding ~~our Retirement Plans and our Excess Plans.~~

~~Recent Changes to Retirement Plans Covering Named Executives.~~ ~~As of April 30, 2010, and in anticipation of~~ the Spin-off, the assets and liabilities attributable to participants in the MI Retirement Plan who were either (1) active employees of B&W or one of its subsidiaries on July 1, 2010 (“B&W Employees”), or (2) terminated employees of McDermott, B&W or a subsidiary on July 1, 2010, but originally hired by B&W or one of its subsidiaries (“Former B&W Employees”), were transferred to the B&W Governmental Operations Retirement Plan, and, effective May 1, 2010, a subsidiary of B&W assumed sponsorship of the B&W Governmental Operations Retirement Plan from McDermott. The participants affected by this transfer became covered under the B&W Governmental Operations Retirement Plan, and are entitled to benefits under that Plan identical to those which they had accrued under the MI Retirement Plan as of the date of the transfer. For purposes of eligibility and vesting under the B&W Governmental Operations Retirement Plan, the affected participants were credited with service for any period of employment with McDermott or a subsidiary to the same extent that such service would be credited if it had been performed for B&W or one of its subsidiaries. For purposes of benefit levels, accruals and benefit commencement entitlements under the B&W Governmental Operations Retirement Plan, the affected participants were credited with service for any period of employment with McDermott or a subsidiary to the same extent that such service would have been taken into account pursuant to the terms of the MI

Retirement Plan. Mr. Fees was affected by this change, based on his status as a Former B&W Employee on the relevant date, and therefore his coverage was transferred from the MI Retirement Plan to the B&W Governmental Operations Retirement Plan.

~~All remaining assets and liabilities of the MI Retirement Plan were then transferred as of May 31, 2010 to the JRM~~ Retirement Plan and the MI Retirement Plan was merged into the JRM Retirement Plan and thereafter renamed “McDermott (U.S.) Retirement Plan” (referred to herein as the “McDermott Retirement Plan”). As of June 30, 2010, all benefit accruals under the McDermott Retirement Plan were frozen and any further~~cost-of-living~~ increases on accrued benefits ceased. As active employees of McDermott on the relevant date participating in the MI Retirement Plan, Ms. Hinrichs and Mr. Nesser were affected by the merger of the two Plans. Moreover, based on Mr. Nesser’s and Ms. Hinrichs’ 2007 elections to continue accruing benefits under the retirement plan in lieu of receiving the service-based cash contribution under the Thrift Plan, their benefit accruals under the McDermott Retirement Plan were frozen.

~~Also in connection with the Spin-off, the B&W Commercial Operations Retirement Plan and other qualified pension plans and~~ Excess ~~Plans sponsored by B&W or a subsidiary prior to the Spin-off were transferred to B&W.~~

Plan.

Deferred Compensation ~~Plan.~~Plan ~~In 2005, as part of our determination to move away from defined benefit plans, our management recommended that the Board of Directors and the~~. The Deferred Compensation ~~Committee terminate our then-existing non-qualified defined benefit supplemental executive retirement plan. In its place, our Board of Directors and Compensation Committee established~~Plan is a ~~new~~ defined contribution supplemental executive retirement plan ~~which we referred to as~~established by our Board and the ~~“SERP,”~~Compensation Committee to help maintain the competitiveness of our post-employment compensation as compared to our market. In November 2010, our Board of Directors and Compensation Committee approved amendments to the SERP which (1) changed the name of the SERP to the McDermott International, Inc. Director and Executive Deferred Compensation Plan, which we refer to as our Deferred Compensation Plan, (2) provided for the participation of members of our Board in the Deferred Compensation Plan, and (3) provided for other updates to the Deferred Compensation Plan.

The Deferred Compensation Plan is an unfunded, nonqualified plan that provides participants with benefits based on the participant’s notional account balance at the time of retirement or termination. Under the Deferred Compensation Plan, on an annual basis the Compensation Committee has the discretion to credit a specified participant’s notional account

with an amount equal to a percentage of the participant’s prior-year base salary and annual bonus paid in the prior year. We refer to such credit as a “Company Contribution.” In ~~2010,~~2011, Messrs. ~~Fees, Taff, Bethards~~Johnson, McCormack and Nesser and Ms. Hinrichs each were participants in the Deferred Compensation Plan and received a Company Contribution in an amount equal to 5% of their respective prior-year base salaries and annual bonuses paid in the prior year. ~~Mr. Johnson was~~Messrs. Elders and Carlson were also ~~a participant~~participants and received (1) a Company Contribution in an amount equal to 5% of ~~his~~their respective prior-year base salary ~~paid. In addition, Mr. Johnson received~~paid, and (2) a discretionary contribution equal in value to 5% of ~~his~~their respective target ~~bonus~~bonuses for 2010 and the value of ~~the~~their respective prior-year target base ~~salary he~~salaries they would have earned for the period January 1, ~~2009~~2010 through ~~his April 1, 2009~~their respective hire ~~date. No Company Contribution was made for Messrs. Elders or Carlson, because they were not participants in the Deferred Compensation Plan at the time such contributions were made.~~

Additionally, under the amendments to the Deferred Compensation Plan adopted in November 2010, beginning in 2011 any eligible employee, including our Continuing Named Executives, may defer up to 50% of his or her annual salary~~and/or~~ ~~up to 100% of any bonus earned in any plan year, and any director may elect to defer up to 100% of his or her annual retainer and fees earned in any plan year.~~

dates.

The Compensation Committee has designated deemed mutual fund investments to serve as indices for the purpose of determining notional investment gains and losses to each participant’s account for any Company Contribution or participant elected deferrals. Each participant allocates any Company Contributions and deferrals among the various deemed investments. Deferred Compensation Plan benefits are based on the participant’s vested notional account balance at the time of retirement or termination. Please see the ~~Nonqualified~~“Nonqualified Deferred ~~Compensation~~Compensation” table and accompanying narrative below for more information about the Deferred Compensation Plan and Company Contributions to our Named Executives’ Deferred Compensation Plan accounts.

Employment and Severance Arrangements

Employment and Separation ~~Agreements.~~Agreements. Except forchange-in-control agreements ~~and retention agreements,~~described below, we do not currently have any employment or severance agreements with any of our Continuing Named Executives.

In connection with Mr. Nesser’s retirement, a subsidiary of McDermott entered into a Separation Agreement with Mr. Nesser. Under the terms of the Separation Agreement, Mr. Nesser was entitled to receive various payments and benefits under a Restructuring Transaction Retention Agreement entered into between Mr. Nesser and a subsidiary of McDermott in connection with the Spin-off. These payments and benefits included: (1) a cash payment of two times the sum of Mr. Nesser’s annual base salary and target EICP award; (2) a prorated target EICP award; (3) a cash payment equal to two years

of medical benefits; (4) earned but unused vacation; and (5) full vesting of Mr. Nesser’s outstanding equity awards granted in 2008 and 2009. In addition to those benefits, under the Separation Agreement, Mr. Nesser is treated as if he had continued to be an employee of McDermott for purposes of the vesting of an award of restricted stock units and stock options, which were granted to Mr. Nesser in 2010 and remained unvested as of the date of his Separation Agreement, in accordance with the vesting schedule of those awards.

Additionally, under the Separation Agreement, Mr. Nesser provided general consulting and advisory services to McDermott for a period of six months following his retirement. In consideration of those services, Mr. Nesser received $25,000 per month, as well as reimbursement of reasonable expenses incurred by Mr. Nesser in rendering those services. See “Potential Payments Upon Termination or Change in Control” below for more information on the payments made to and benefits received by Mr. Nesser under his Separation Agreement.

Change-in-Control ~~Agreements.~~ Agreements. In our experience,change-in-control agreements for certain executive officers are common within our industry, and our Board and Compensation Committee believe that providing these agreements to our Named Executives protects stockholders’ interests by helping to assure management continuity and focus through and beyond a change in control. Accordingly, the Compensation Committee has offeredchange-in-control agreements to key senior executives since 2005. ~~Following the Spin-off, on August 6, 2010, our Board of Directors approved a new form of~~Our change-in-control ~~agreement for Messrs. Johnson and Nesser and Ms. Hinrichs, and providedchange-in-control~~ ~~agreements to Messrs. Elders, and Carlson. Ourchange-in-control~~ agreements generally provide a cash severance payment of two (2.99 for Mr. Johnson) times the sum of the Named Executive’s annual base salary and target EICP and a pro-rated bonus payment under the EICP. In addition, each such officer would become fully vested in any outstanding and unvested equity-based awards and his or her respective account balance in our Deferred Compensation Plan.

Ourchange-in-control agreements contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control. In addition, the ~~new~~change-in-control agreements: (1) do not provide for excise taxgross-ups; (2) require the applicable officer’s execution of a release prior to payment of certain benefits; and (3) provide for the potential reduction in payments to an applicable officer in order to avoid excise taxes.

Because ~~they are~~he is no longer employed by McDermott, ~~Messrs. Fees, Taff and Bethards~~Mr. Nesser no longer ~~have~~has a change-in-control ~~agreements~~ agreement with McDermott. See the ~~Potential~~“Potential Payments Upon Termination or Change in ~~Control~~Control” table under “Compensation of Executive Officers” below and the accompanying disclosures for more information regarding thechange-in-control agreements with our Continuing Named Executives, as well as other plans and arrangements that have different trigger mechanisms that relate to a change in control.

~~Retention Agreements.~~ In connection with the December 2009 announcement of our plans to complete the Spin-off, and to ensure retention of key employees and executives through the completion of the separation of B&W from McDermott and for one year thereafter, on December 10, 2009, we entered into retention agreements with 17 key members of management, including Messrs. Johnson, Fees, Taff, Nesser and Bethards and Ms. Hinrichs.

Generally, the retention agreements provided either a retention or severance payment to the Named Executives in connection with the Spin-off. The retention agreements generally provided a retention payment in the form of a restricted stock grant made near the time of the Spin-off that vests one year following the effective date of the Spin-off, equal to 100% (149.5% in the case of Mr. Fees) of the sum of the Named Executive’s annual base salary plus target annual incentive. That amount represented one-half of the severance payment that otherwise would have been provided under each Named Executive’s retention agreement in the event of a qualifying termination on a change in control, and discussed below. Accordingly, on the first NYSE trading day following the effective date of the Spin-off, McDermott made grants of restricted stock to Messrs. Johnson and Nesser and Ms. Hinrichs in connection with their continued employment with McDermott. The grants of restricted stock made to Messrs. Taff and Bethards were made by B&W pursuant to the terms of their respective retention agreements, which were assumed by B&W on completion of the Spin-off pursuant to the Employee Matters Agreement. With respect to Mr. Taff, one-third of his retention payment was payable in cash on the effective date of the Spin-off, in recognition of his agreement to serve as the Chief Financial Officer of B&W following the Spin-off, and that payment was made by B&W.

~~Although the Spin-off did not constitute a change in control for purposes of thechange-in-control~~ agreements or other McDermott compensation plans, the Compensation Committee determined that the need to maintain continuity of management and personnel that exists under a change in control scenario equally existed in connection with the Spin-off. As a result, the retention agreements provide for severance payments that would generally be the same as the severance payments that would be made in connection with a qualifying termination on or following a change in control. Accordingly, the retention agreements provide for a cash severance payment of two (2.99 for Mr. Fees) times the sum of the Named Executive’s annual base

salary and target EICP, prorated target annual incentive compensation and a cash payment equal to two years of medical benefits as well as the full vesting of outstanding long-term incentive grants and Deferred Compensation Plan balance. The only payments provided for under the retention agreement not otherwise payable in a change in control were (1) a cash payment equal to two years of medical benefits and (2) the potential early vesting of the Named Executive’s Thrift Plan account. Under the terms of the Thrift Plan, unvested balances would become vested in the event a participant is involuntarily terminated in connection with a reduction in force. Because involuntary terminations for reasons other than cause in connection with the Spin-off generally would have been considered to be associated with a reduction in force, the Compensation Committee determined to add the vesting of Thrift Plan accounts to the severance benefits to avoid any ambiguity on that point. The Thrift Plan normally vests after three years of service. As a result of his commencement of employment in 2009, Mr. Johnson is the only Named Executive with a retention agreement to which this benefit may be applicable.

Mr. Fees’ retention agreement also contained restrictions on his ability to compete with McDermott (including both B&W and JRM), or solicit our employees, for two years following the termination of his employment.

See the Potential Payments Upon Termination or Change in Control table under “Compensation of Executive Officers — Retention Agreements” below and the accompanying disclosures for more information regarding the retention agreements with certain of our Named Executives.

Other Compensation Policies

Stock Ownership Guidelines.To assist with the alignment of the interests of directors, executive officers and stockholders, we believe our directors and officers should have a significant financial stake in McDermott. To further that goal, we have adopted stock ownership guidelines in 2005, as amended effective August 9, 2010 and November 9, 2011, requiring generally that our ~~non-management~~nonemployee directors and our officers at the level of vice president or above maintain a minimum ownership interest in McDermott. The stock ownership requirements are as follows:


	•	Chief Executive Officer — five times annual base salary;

Executive Officers directly reporting to the Chief Executive Officer — three times annual base salary;

Other Elected Vice Presidents — two times annual base salary; and

Nonemployee Directors — five times annual Board member retainer.


	•	~~Executive Officers directly reporting to the Chief Executive Officer — three times annual base salary;~~

	•	~~Other Elected Vice Presidents — two times annual base salary; and~~

	•	~~Non-management Directors — five times annual retainer.~~

Directors and officers have five years from the effective date of the amended stock ownership guidelines, or their initial election as a director/officer, or a change in position which increases the expected ownership level, whichever is later, to comply with

the guidelines. The Governance Committee reviews each director’s and officer’s progress towards the requirements of the stock ownership guidelines annually, and may waive or modify the stock ownership guidelines for directors and officers in the Governance Committee’s sole discretion.

Derivatives Trading and Hedging. McDermott’s Insider Trading Policy prohibits all directors, officers and employees, including our Continuing Named Executives, from engaging in “short sales” or trading in puts, calls or other options on McDermott’s common stock. Additionally, directors, officers

and employees are prohibited from engaging in hedging transactions, and from holding McDermott shares in a margin account or pledging McDermott shares as collateral for a loan.

Clawback Policy. Our Compensation Committee has adopted a clawback policy under which McDermott ~~shall~~would seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank ~~Wall-Street~~Wall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

Additionally, consistent with our recent ~~past,~~practice, our grant agreements for awards made in ~~2010~~2011 contain a forfeiture provision. In ~~2010,~~2011, this provision provided that in the event that, while the grantee is employed by McDermott or performing services on behalf of McDermott under any consulting agreement, the grantee is convicted of a ~~felony or~~ misdemeanor involving fraud, dishonesty or moral turpitude or a felony, or the grantee engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, the business reputation or economic interests of the Company, then all rights and benefits awarded under the respective agreements are immediately forfeited, terminated and withdrawn.

2011 PEER GROUPS


Proxy Peer Group:

Baker Hughes Incorporated	FMC Technologies, Inc.	National Oilwell Varco, Inc.
Cal Dive International, Inc.	Global Industries Ltd^{. 1}	Noble Corporation
Cameron International Corporation	Halliburton Company	Oceaneering International, Inc.
Chicago Bridge & Iron Company	Helix Energy Solutions Group, Inc.	Oil States International, Inc.
Dresser-Rand Group, Inc.	Jacobs Engineering Group, Inc.	Shaw Group, Inc.
Foster Wheeler AG	KBR, Inc.	Tidewater Inc.

Survey Peer Group:
Ameron International Corporation	Fluor Corporation	Owens Corning
Anadarko Petroleum Corporation	The Goodyear Tire & Rubber Company	Owens-Illinois, Inc.
A.O. Smith Corporation	Graco Inc.	Parker Hannifin Corporation
Ball Corporation	Greif, Inc.	Parsons Corporation
Barnes Group, Inc.	HD Supply, Inc.	Pittsburgh Corning Corporation
Beam, Inc.	Herman Miller, Inc.	Polymer Group, Inc.
Bemis Company, Inc.	Hess Corporation	PolyOne Corporation
BG US Services	HNTB Corporation	PulteGroup, Inc.
Bovis Lend Lease International Ltd.	Holcim Ltd.	Saudi Arabian Oil Co.
BP p.l.c.	Hunt Consolidated, Inc.	SCA Americas, Inc.
Brady Corporation	Husky Injection Molding Systems Ltd.	Schlumberger Limited
Building Materials Corporation of America	Illinois Tool Works Inc.	Sealed Air Corp.
Calgon Carbon Corporation	Ingersoll Rand plc	Shell Oil Company
Cameron International Corporation	ION Geophysical Corporation	Simpson Manufacturing Company, Inc.
Caterpillar Inc.	Irving Oil Commercial G.P.	Sonoco Products Co.
Cemex Internacional S.A de C.V.	ITT Corporation	Spectra Energy Corp
Chevron Corporation	Jacobs Engineering Group, Inc.	SPX Corporation
CH2M Hill Companies, Ltd.	KBR, Inc.	Stantec Inc.
Cimarex Energy Co.	Key Energy Services, Inc.	Sunoco, Inc.
Connell Limited Partnership	Koch Industries, Inc.	Swagelok Company
ConocoPhillips	Lafarge North America Inc.	Terex Corporation
Cooper Industries plc	L.B. Foster Company	Tesoro Corporation
Corning Incorporated	Magellan Midstream Partners, L.P.	Textron Inc.
DCP Midstream LLC	MAG Industrial Automation Systems LLC	Thermadyne Industries, Inc.
Deere & Company	The Manitowoc Company, Inc.	Thomas & Betts Corporation
Devon Energy Corporation	Marathon Oil Corporation	3M Company
Donaldson Company, Inc.	Matthews International Corporation	The Timken Company
Eaton Corporation	MeadWestvaco Corporation	The Toro Company
EMCOR Group, Inc.	Milacron LLC	Trinity Industries, Inc.
Exterran Holdings, Inc.	Mine Safety Appliances Company	Unifi, Inc.
Exxon Mobil Corporation	Murphy Oil Corporation	USG Corporation
Ferrovial, S.A.	MWH Global, Inc.	Valero Energy Corporation
Flowserve Corporation	Occidental Petroleum Corporation	Watts Water Technologies, Inc.

~~2010 Peer Groups~~

~~JRM/Corporate Group:~~

~~Alliant Techsystems Inc.~~

~~Ameron International Corp.~~

~~Anadarko Petroleum Corp.~~

~~Baker Hughes, Inc.~~

~~BJ Services Company~~

~~Cameron International, Inc.~~

~~Chicago Bridge & Iron Company N.V.~~

~~Cooper Industries Plc~~

~~Curtiss-Wright Corporation~~

~~Devon Energy Corporation~~

~~Dover Corporation~~

~~Eaton Corporation~~

~~El Paso Corporation~~

~~ESCO Technologies Inc.~~

~~Flowserve Corporation~~

~~FMC Technologies, Inc.~~

~~Foster Wheeler AG~~

~~General Dynamics Corporation~~

~~Granite Construction Incorporated~~

~~Halliburton Company~~

~~Honeywell International, Inc.~~

~~Hubbell Incorporated~~

~~Illinois Tool Works Inc.~~

~~Ingersoll-Rand plc~~

~~ITT Corp.~~

~~Joy Global Inc.~~

~~KBR, Inc.~~

~~Lockheed Martin Corporation~~

~~Martin Marietta Materials, Inc.~~

~~Noble Corporation~~

~~Northrop Grumman Corporation~~

~~Pioneer Natural Resources Company~~

~~Raytheon Company~~

~~Rockwell Collins, Inc.~~

~~The Shaw Group Inc.~~

~~The Williams Companies, Inc.~~

~~Terex Corporation~~

~~Textron Inc.~~

~~Thomas & Betts Corporation~~

~~USG Corporation~~

~~Valmont Industries, Inc.~~

~~Vulcan Materials Company~~

~~Walter Industries, Inc.~~

~~Babcock & Wilcox Group:~~

~~Ameron International Corp.~~

~~Chicago Bridge & Iron Company N.V.~~

~~Cooper Industries Plc~~

~~Curtiss-Wright Corporation~~

~~Dover Corporation~~

~~Eaton Corporation~~

~~ESCO Technologies Inc.~~

~~Flowserve Corporation~~

~~General Dynamics Corporation~~

~~Honeywell International, Inc.~~

~~Hubbell Inc.~~

~~Illinois Tool Works Inc.~~

~~Ingersoll-Rand plc~~

~~ITT Corporation~~

~~Joy Global Inc.~~

~~Lockheed Martin Corporation~~

~~Martin Marietta Materials, Inc.~~

~~Northrop Grumman Corporation~~

~~Raytheon Company~~

~~Rockwell Collins, Inc.~~

~~The Shaw Group Inc.~~

~~Terex Corporation~~

~~Textron, Inc.~~

~~Thomas & Betts Corporation~~

~~USG Corporation~~

~~Valmont Industries, Inc.~~

~~Vulcan Materials Company~~

~~Post-Spin Group:~~

~~Cal Dive International, Inc.~~

~~Cameron International, Inc.~~

~~Chicago Bridge & Iron Company N.V.~~

~~Dresser Rand Group, Inc.~~

~~Foster Wheeler AG~~

~~Fluor Corporation~~

¹Global Industries ~~Inc.~~

~~Helix Energy Solutions Group, Inc.~~

~~KBR, Inc.~~

~~Oceaneering International, Inc.~~

Ltd. was acquired by Technip S.A. in December 2011.

~~Oil States International, Inc.~~

~~The Shaw Group, Inc.~~

~~Tetra Technologies, Inc.~~

~~URS Corporation~~

~~Custom Peer Group:~~

~~Cal Dive International, Inc.~~

~~Chicago Bridge & Iron Company N.V.~~

~~Fluor Corporation~~

~~Foster Wheeler AG~~

~~Jacobs Engineering Group, Inc.~~

~~KBR, Inc.~~

~~Oceaneering International, Inc.~~

~~The Shaw Group Inc.~~

~~URS Corporation.~~

COMPENSATION COMMITTEE REPORT

~~Compensation Committee Report~~

We have reviewed and discussed the Compensation Discussion and Analysis with McDermott’s management and, based on our review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

Thomas C. Schievelbein, Chairman

Roger A. Brown

Mary L. Shafer-Malicki

David A. Trice

COMPENSATIONOF EXECUTIVE OFFICERS

~~Compensation of Executive Officers~~

The following table summarizes the prior three years’ compensation of our ~~current and former~~ Chief Executive ~~Officers,~~Officer, our ~~current and former~~ Chief Financial ~~Officers,~~Officer, our three highest paid executive officers who did not serve as our CEO and CFO during ~~2010~~2011 and were employed by McDermott as of December 31, ~~2010,~~2011, and Mr. ~~Bethards,~~Nesser, who would have been one of our three highest paid executive officers but for the fact that he was not employed by McDermott as of December 31, ~~2010.~~2011. We refer to these persons as our Named Executives. No compensation information is provided for Mr. ~~Johnson for 2008 because he joined our company in 2009, no information is provided for Mr.~~ Elders for ~~2008 or~~ 2009 because he joined our company in 2010, and no information is provided for Mr. Carlson or Ms. Hinrichs for ~~2008 or~~ 2009 because they did not become Named Executives until ~~2010.~~

2010 or for Mr. McCormack for 2009 or 2010 because he did not become a Named Executive until 2011.

~~Summary Compensation Table~~SUMMARY COMPENSATION TABLE

Change in

Pension

Value and

Nonqualified

Non-Equity
Deferred

Stock
Option
Incentive Plan
Compensation
All Other

Name and Principal Position Year Salary(1) Bonus(2) Awards(3) Awards(4) Compensation(5) Earnings(6) Compensation(7) Total
S.M. Johnson 2010 $ 827,083 $ 0 $ 2,672,142 $ 865,313 $ 1,218,863 N/A $ 163,683 $ 5,747,084
President and Chief 2009 $ 562,500 $ 0 $ 2,664,402 $ 1,435,394 $ 1,131,563 N/A $ 83,929 $ 5,877,788
Executive Officer 2008 N/A N/A N/A N/A N/A N/A N/A N/A

J.A. Fees 2010 $ 455,625 $ 0 $ 0 $ 0 $ 535,808 $ 374,757 $ 5,820,921 $ 7,187,111
Former Chief Executive 2009 $ 900,000 $ 0 $ 3,543,276 $ 1,995,846 $ 1,665,000 $ 399,782 $ 111,407 $ 8,615,311
Officer 2008 $ 592,500 $ 270,223 $ 6,835,450 $ 0 $ 570,803 $ 143,028 $ 148,310 $ 8,560,314

P.L. Elders 2010 $ 315,114 $ 0 $ 517,021 $ 396,788 $ 398,146 N/A $ 14,059 $ 1,641,128
Senior Vice President and 2009 N/A N/A N/A N/A N/A N/A N/A N/A
Chief Financial Officer 2008 N/A N/A N/A N/A N/A N/A N/A N/A

M.S. Taff 2010 $ 256,288 $ 0 $ 302,996 $ 209,757 $ 0 N/A $ 74,609 $ 843,650
Former Senior Vice 2009 $ 505,000 $ 0 $ 980,544 $ 552,314 $ 707,000 N/A $ 59,315 $ 2,804,173
President and Chief 2008 $ 440,000 $ 110,000 $ 1,671,638 $ 0 $ 141,207 N/A $ 45,757 $ 2,408,602
Financial Officer

B.C. Bethards 2010 $ 311,337 $ 0 $ 1,249,955 $ 865,319 $ 0 $ 509,958 $ 87,074 $ 3,023,643
President and Chief 2009 $ 526,200 $ 0 $ 840,544 $ 473,450 $ 663,012 $ 305,160 $ 65,693 $ 2,874,059
Executive Officer, Former 2008 $ 438,675 $ 10,000 $ 1,207,512 $ 0 $ 509,298 $ 158,014 $ 54,831 $ 2,378,330
Subsidiary B&W

G.L. Carlson 2010 $ 243,333 $ 0 $ 527,051 $ 165,771 $ 334,400 N/A $ 106,850 $ 1,377,405
Senior Vice President, 2009 N/A N/A N/A N/A N/A N/A N/A N/A
Human Resources 2008 N/A N/A N/A N/A N/A N/A N/A N/A

L.K. Hinrichs 2010 $ 419,225 $ 0 $ 1,054,526 $ 276,912 $ 317,673 $ 121,620 $ 37,286 $ 2,227,242
Senior Vice President, 2009 N/A N/A N/A N/A N/A N/A N/A N/A
General Counsel and 2008 N/A N/A N/A N/A N/A N/A N/A N/A
Corporate Secretary

J.T. Nesser 2010 $ 509,381 $ 0 $ 1,196,240 $ 224,998 $ 609,729 $ 160,951 $ 43,383 $ 2,744,682
Executive Vice President, 2009 $ 500,000 $ 0 $ 418,899 $ 235,945 $ 595,000 $ 155,330 $ 93,156 $ 1,998,330
Chief Operating Officer 2008 $ 500,000 $ 100,000 $ 2,697,009 $ 0 $ 136,122 $ 104,864 $ 74,933 $ 3,612,928


Name and Principal Position	Year		Salary		Bonus		Stock Awards⁽¹⁾		Option Awards⁽¹⁾		Non-Equity Incentive Plan Compensation⁽²⁾		Change in Pension Value and Nonqualified Deferred Compensation Earnings⁽³⁾		All Other Compensation⁽⁴⁾		Total

S.M. Johnson President and Chief Executive Officer		2011	$	942,500	$	0	$	3,382,092	$	944,089	$	0		N/A	$	132,099	$	5,400,780
		2010	$	827,083	$	0	$	2,672,142	$	865,313	$	1,218,863		N/A	$	163,683	$	5,747,084
		2009	$	562,500	$	0	$	2,664,402	$	1,435,394	$	1,131,563		N/A	$	83,929	$	5,877,788

P.L. Elders		2011	$	481,250	$	0	$	845,428	$	236,000	$	0		N/A	$	76,763	$	1,639,441
Senior Vice President and Chief Financial Officer		2010	$	315,114	$	0	$	517,021	$	396,788	$	398,146		N/A	$	14,059	$	1,641,128
Senior Vice President and Chief Financial Officer		2009		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A

G.L. Carlson Senior Vice President and Chief Administration Officer		2011	$	332,000	$	0	$	354,863	$	94,406	$	0		N/A	$	120,619	$	901,888
		2010	$	243,333	$	0	$	527,051	$	165,771	$	334,400		N/A	$	106,850	$	1,377,405
		2009		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A

L.K. Hinrichs Senior Vice President, General Counsel and Corporate Secretary		2011	$	435,575	$	0	$	792,653	$	212,421	$	0	$	76,760	$	77,550	$	1,594,959
		2010	$	419,225	$	0	$	1,054,526	$	276,912	$	317,673	$	121,620	$	37,286	$	2,227,242
		2009		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A

J.T. McCormack Executive Vice President, Chief Operating Officer		2011	$	447,381	$	0	$	915,194	$	253,847	$	0		N/A	$	70,870	$	1,687,292
		2010		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
		2009		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A

J.T. Nesser Former Executive Vice President, Chief Operating Officer		2011	$	296,828	$	0	$	0	$	0	$	206,408	$	163,357	$	2,034,893	$	2,701,486
		2010	$	509,381	$	0	$	1,196,240	$	224,998	$	609,729	$	160,951	$	43,383	$	2,744,682
		2009	$	500,000	$	0	$	418,899	$	235,945	$	595,000	$	155,330	$	93,156	$	1,998,330

(1)

The amounts reported in this column represent the aggregate grant date fair value of stock awards or option awards, as applicable, granted to each Named Executive and computed in accordance with FASB ASC Topic 718. See the “Grants of Plan-Based Awards” table for ~~2010 for Messrs. Fees, Taff~~more information regarding the stock awards and ~~Bethards represent their base salary earned through the effective date of the Spin-off.~~ option awards we granted in 2011.

(2)

The amounts reported in this column are attributable to the annual incentive awards earned in fiscal years 2009, 2010 and 2011, but paid in 2010, 2011 and 2012, respectively. The amount reported for ~~Messrs. Elders and Carlson~~Mr. Nesser is his 2011 target EICP award, prorated to take into account his length of service in 2011. See the “Grants of Plan-Based Awards” table for more information regarding the annual incentive awards earned in 2011.

(3)	The amounts reported in this column represent ~~their base salary earned from their respective hire dates.~~
~~(2)~~	~~See “Bonus” below for a discussion~~the changes in actuarial present values of the accumulated benefits under defined benefit plans, determined by comparing the prior completed fiscal year end amount to the covered fiscal year end amount.

(4) The amounts ~~included~~reported in this ~~column.~~
~~(3)~~ ~~See “Stock Awards” below~~column for ~~a discussion of~~2011 are attributable to the ~~amounts included in this column.~~
~~(4)~~ ~~See “Option Awards” below for a discussion of the amounts included in this column.~~
~~(5)~~ ~~See “Non-Equity Incentive Plan Compensation” below for a discussion of the amounts included in this column.~~
~~(6)~~ ~~See “Change in Pension Value and Nonqualified Deferred Compensation Earnings” below for a discussion of the amounts included in this column.~~
~~(7)~~ ~~See “All Other Compensation” below for a discussion of the amounts included in this column.~~following:

~~Bonus.~~ The amounts reported in the “Bonus” column are attributable to discretionary bonus awards made in 2008 due to circumstances in that year. No discretionary bonuses were made to any of the Named Executives during 2009 or 2010.

~~Stock Awards.~~ The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of stock awards granted in 2010 and computed in accordance with FASB ASC Topic 718. The grant date fair values shown for Messrs. Johnson, Elders, Carlson and Taff and Ms. Hinrichs are based on (1) the number of shares or units as converted in connection with the Spin-off, and (2) the closing price of our common stock on the date of grant as adjusted to reflect the Spin-off; provided, that the grant date fair value shown for Mr. Taff is attributable to the one-half of his pre Spin-off McDermott awards that were converted to post Spin-off McDermott awards. The grant date fair value shown for Mr. Bethards represents the pre Spin-off grant date fair value of his award. The aggregate grant date fair values shown for Messrs. Johnson and Nesser and Ms. Hinrichs include the grant of restricted stock awards made pursuant to their respective retention agreements in connection with the completion of the Spin-off.

~~See the “Grants of Plan-Based Awards” table for more information regarding the stock awards we granted in 2010.~~

~~Option Awards.~~ The amounts reported in the “Option Awards” column represent the aggregate grant date fair value of all option awards granted in 2010 and computed in accordance with FASB ASC Topic 718. The grant date fair values shown for Messrs. Johnson, Elders, Carlson and Taff and Ms. Hinrichs are based on (1) the number of options as converted in connection with the Spin-off, and (2) the closing price of our common stock on the date of grant as adjusted to reflect the Spin-off; provided,

that the grant date fair value shown for Mr. Taff is attributable to the one-half of his pre Spin-off McDermott awards that were converted to post Spin-off McDermott awards. The grant date fair value shown for Mr. Bethards represents the pre Spin-off grant date fair value of his award. We use a Black-Scholes option-pricing model for measuring the fair value of stock options. The determination of the fair value of an award on the date of grant using an option-pricing model requires various assumptions, such as the expected life of the award and stock price volatility. For a discussion of the valuation assumptions, see Note 9 to our consolidated financial statements included in our annual report on~~Form 10-K~~ ~~for the year ended December 31, 2010.~~

~~See the “Grants of Plan-Based Awards” table for more information regarding the option awards we granted in 2010.~~

~~Non-Equity Incentive Plan Compensation.~~ The amounts reported in the “Non-Equity Incentive Plan Compensation” column are attributable to the annual incentive awards earned in fiscal years 2008, 2009 and 2010, but paid in 2009, 2010 and 2011, respectively. See the “Grants of Plan-Based Awards” table for more information regarding the annual incentive awards earned in 2010.

~~Change in Pension Value and Nonqualified Deferred Compensation Earnings.~~ The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column represent the changes in actuarial present values of the accumulated benefits under defined benefit plans, determined by comparing the prior completed fiscal year end amount to the covered fiscal year end amount.

~~All Other Compensation.~~ ~~The amounts reported for 2010 in the “All Other Compensation” column are attributable to the following:~~

All Other Compensation

Deferred
Service-Based

Compensation Plan
Thrift

Contribution Thrift Match Contribution Tax Gross-Ups Perquisites Other
S. M. Johnson $ 69,375 $ 7,095 $ 7,350 $ 21,025 $ 58,838 —

J. A. Fees $ 87,051 $ 7,150 — $ 32,763 $ 76,188 $ 5,617,769

P. L. Elders — $ 6,709 $ 7,350 — — —

M. S. Taff $ 37,810 $ 7,350 $ 7,671 $ 646 $ 21,132 —

B. C. Bethards $ 52,275 $ 4,900 — — $ 29,899 —

G. L. Carlson — $ 6,583 $ 7,300 $ 24,600 $ 68,367 —

L. K. Hinrichs $ 29,549 $ 6,629 $ 1,108 — — —

J. T. Nesser $ 36,806 $ 6,577 — — — —

~~Deferred Compensation Plan Contribution.~~ ~~See the “Nonqualified Deferred Compensation” table for more information regarding the Deferred Compensation Plan contributions made in 2010.~~

~~Thrift Match and Service-Based Thrift Contribution.~~ We refer to our defined contribution plan as our Thrift Plan. For information regarding our Thrift Plan matching contributions and service-based Thrift Plan contributions, see “Compensation Discussion and Analysis — Post-employment Compensation — Retirement Plans” above.

~~TaxGross-Ups.~~ ~~The taxgross-ups~~ ~~reported for 2010 under “All Other Compensation” are attributable to the following:~~


	Deferred Compensation Plan Contribution^(A)		Thrift Match^(B)		Service-Based Thrift Contribution^(B)		Perquisites^(C)		Tax Gross-Ups^(D)		Other^(E)
S. M. Johnson	$	97,932	$	6,817	$	7,350	$	20,000		—		—
P. L. Elders	$	39,950	$	7,350	$	7,350	$	20,000		—	$	2,113
G. L. Carlson	$	24,800	$	6,030	$	7,350	$	68,606	$	11,720	$	2,113
L. K. Hinrichs	$	43,511	$	6,689	$	7,350	$	20,000		—		—
J. T. McCormack	$	36,170	$	7,350	$	7,350	$	20,000		—		—
J. T. Nesser	$	55,219	$	6,608	$	7,350	$	21,525		—	$	1,944,191

(A)

The amounts reported in this column are attributable to contributions made by McDermott under the Deferred Compensation Plan.

•

~~Mr. Johnson~~(B)

The amounts reported in these columns are attributable to contributions made under our defined contribution plan, which we refer to as our Thrift Plan.

	(C)	The amounts reported in this column are attributable to a lump-sum perquisite allowance in the amount of $20,000 received ~~taxgross-ups~~ ~~associated with income imputed to him as a result of amounts we paid him~~ by ~~reason of expenses he incurred in connection with his relocation from Idaho to Texas, following his appointment as Chief Operating Officer~~certain officers of McDermott in ~~2009.~~

•	~~Mr. Fees received taxgross-ups~~ associated with income imputed to him as a result of amounts we paid him by reason of expenses he incurred in connection with his relocation from Texas to Virginia following his retirement as Chief Executive Officer of McDermott and appointment as Chairman2011, including each of the ~~Board of Directors of B&W and as a result of his spouse accompanying him on business travel during~~Named Executives. With the ~~period he was Chief Executive Officer of McDermott.~~

•	~~Mr. Taff received taxgross-ups~~ ~~associated with income imputed to him as a result of his spouse accompanying him on business travel.~~

•	~~Mr. Carlson received taxgross-ups~~ ~~associated with income imputed to him as a result of amounts~~


	we paid him by reason of expenses he incurred in connection with his relocation from Colorado to Texas, following his appointment as Senior Vice President, Human Resources and Organizational Development of JRM in 2010.

~~Perquisites.~~ Perquisites and other personal benefits received by a Named Executive are not included if their aggregate value does not exceed $10,000. During 2010, in connection with the Spin-off and the realignment of the management teams for McDermott and B&W, relocation benefits were provided to certain executives under our relocation program. For Messrs. Johnson, Fees, Taff, Carlson and Bethards the values of the perquisites and other personal benefits reported for 2010 are as follows:


•	Mr. Johnson: $42,198 is attributable to the costs of providing him relocation assistance in connection with his move from Idaho to Texas, and $16,640 is attributable to tax preparation and financial planning fees.

•	Mr. Fees: $58,382 is attributable to the costs of providing him relocation assistance in connection with his move from Texas to Virginia, and $12,544 is attributable to a retirement gift provided to Mr. Fees by McDermott. The remainder is attributable to the cost of club dues, the costs resulting from his spouse accompanying him on business travel, the cost of promotional merchandise in connection with a board of directors meeting and the cost of a physical examination.

•	~~Mr. Taff: $14,852 is attributable to the costs of financial advisory fees. The remainder is attributable to the cost~~exception of an executive physical ~~the costs resulting from his spouse accompanying him on business travel, the cost of a gift provided~~


	~~to Mr. Taff~~required by McDermott, ~~in connection with~~ the ~~Spin-off and~~perquisite allowance was permitted to be used for any purpose determined by the ~~cost of tax preparation fees.~~


•	recipient. Additionally, the amount reported for Mr. ~~Carlson: $66,717 is~~Carlson includes $48,606 attributable to the costs of providing him relocation assistance in connection with his move from Colorado to ~~Texas,~~Texas. The amount reported for Mr. Nesser includes a gift in connection with his retirement from McDermott.

(D)

The amount reported in this column for Mr. Carlson is attributable to tax gross-ups associated with income imputed to him as a result of amounts we paid to Mr. Carlson by reason of expenses he incurred in connection with his relocation.

	(E)	The amounts reported in this column for Messrs. Elders and ~~the remainder is~~Carlson are attributable to the cost to McDermott for the Named Executive’s spouse to accompany the Named Executive, at McDermott’s request, to attend the 2011 Annual Meeting of ~~a physical examination.~~

•	Stockholders in Panama City, Panama. The amount reported in this column for Mr. ~~Bethards: $20,978~~Nesser is attributable to: (1) payments made pursuant to Mr. Nesser’s Separation Agreement consisting of (a) a cash severance payment in the ~~costs~~amount of ~~providing him relocation assistance~~$1,742,527, (b) two times the full annual cost of coverage for medical, dental and vision benefits in ~~connection with his move from Virginia to North Carolina following his appointment as Chief Executive Officer~~the amount of ~~B&W, $7,500 is attributable to financial planning~~$35,127, (c) unused vacation for 2011 in the amount of $39,424 and (d) consulting fees in the amount of $125,000; and ~~the remainder is attributable to~~(2) the cost to McDermott for Mr. Nesser’s spouse to accompany him, at McDermott’s request, to attend the 2011 Annual Meeting of ~~club dues.~~Stockholders in Panama City, Panama in the amount of $2,113. For more information regarding Mr. Nesser’s Separation Agreement, see “Compensation Discussion and Analysis — Employment and Severance Arrangements — Employment and Separation Agreements” above.

~~Other.~~ In connection with Mr. Fees’ termination of employment for “good reason” as defined under his retention agreement, Mr. Fees received (1) a cash severance payment in the amount of $5,516,550, (2) payment of his 2010 target EICP award, prorated to take into account his length of service in 2010, in the amount of $535,808, (3) two times the full annual cost of coverage for medical, dental and vision benefits in the amount of $30,257, and (4) unused vacation for 2010 in the amount of $70,962. See “Compensation Discussion and Analysis — Employment and Severance Arrangements — Retention Agreements” above for more information regarding Mr. Fees’ retention agreement.

GRANTSOF PLAN-BASED AWARDS

~~Grants of Plan-Based Awards~~

The following Grants of Plan-Based Awards table provides additional information about stock awards and equity and non-equity incentive plan awards we granted to our Named Executives during the year ended December 31, ~~2010.~~

All Other
All Other

Stock
Option

Awards:
Awards:
Exercise
Grant Date
Estimated Possible Payouts Under
Number of
Number of
or Base
Fair Value
Committee
Non-Equity Incentive Plan Awards⁽¹⁾ Estimated Future Payouts Under Equity Incentive Plan Awards Shares of
Securities
Price of
of Stock and
Action
Threshold
Target
Maximum
Stock
Underlying
Option
Option
Name Grant Date Date Threshold Target Maximum (#) (#) (#) or Units⁽²⁾ Options⁽³⁾ Awards Awards⁽⁴⁾

S. M. Johnson
02/25/10 02/25/10 $ 133,091 $ 760,521 $ 1,521,042 — — — — — — —
03/04/10 02/25/10 — — — 95,493 — — $ 1,249,956
03/04/10 02/25/10 — — — — 141,597 $ 13.09 $ 865,313
08/02/10 08/02/10 — — — 113,412 — — $ 1,422,186

J. A. Fees
02/25/10 02/25/10 $ 601,699 $ 916,875 $ 1,298,906 — — — — — — —

P. L. Elders
05/06/10 05/06/10 $ 38,383 $ 219,333 $ 438,667 — — — — — — —
05/13/10 05/06/10 — — — 38,661 — — $ 517,021
05/13/10 05/06/10 — — — — 60,292 $ 13.37 $ 396,788

M. S. Taff
02/25/10 02/25/10 $ 237,204 $ 361,454 $ 512,059 — — — — — — —
03/04/10 02/25/10 — — — 23,148 — — $ 302,996
03/04/10 02/25/10 — — — — 34,324 $ 13.09 $ 209,757

B. C. Bethards⁽⁵⁾
02/25/10 02/25/10 $ 65,669 $ 375,249 $ 750,498 — — — — — — —
03/04/10 02/25/10 — — — 49,269 — — $ 1,249,955
03/04/10 02/25/10 — — — — 73,056 $ 25.37 $ 865,319

G.L. Carlson
02/25/10 02/25/10 $ 30,800 $ 176,000 $ 352,000 — — — — — — —
05/13/10 05/06/10 — — — 39,411 — — $ 527,051
05/13/10 05/06/10 — — — — 25,189 $ 13.37 $ 165,771

L. K. Hinrichs
02/25/10 02/25/10 $ 151,314 $ 230,574 $ 326,646 — — — — — — —
03/04/10 02/25/10 — — — 30,556 — — $ 399,963
03/04/10 02/25/10 — — — — 45,313 $ 13.09 $ 276,912
08/02/10 08/02/10 — — — 52,198 — — $ 654,563

J. T. Nesser
02/25/10 02/25/10 $ 62,398 $ 356,563 $ 713,125 — — — — — — —
03/04/10 02/25/10 — — — 24,828 — — $ 324,986
03/04/10 02/25/10 — — — — 36,818 $ 13.09 $ 224,998
08/02/10 08/02/10 — — — 69,478 — — $ 871,254

2011.


Name	Grant Date		Committee Action Date		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards⁽¹⁾			Estimated Future Payouts Under Equity Incentive Plan Awards⁽²⁾			All Other Stock Awards: Number of Shares of Stock or Units⁽³⁾	All Other Option Awards: Number of Securities Underlying Options⁽⁴⁾	Exercise or Base Price of Option Awards	Grant Date Fair Value of Stock and Option Awards⁽⁵⁾
Name	Grant Date		Committee Action Date		Threshold	Target	Maximum	Threshold (#)	Target (#)	Maximum (#)			Exercise or Base Price of Option Awards	Grant Date Fair Value of Stock and Option Awards⁽⁵⁾
S.M. Johnson
EICP		02/28/11		02/28/11	$115,469	$942,603	$1,885,205	—	—	—	—	—	—		—
PShares		03/04/11		02/28/11	—	—	—	28,265	56,529	113,058	—	—	—	$	2,382,132
RSUs		03/04/11		02/28/11	—	—	—	—	—	—	39,000	—	—	$	999,960
Stock Options		03/04/11		02/28/11	—	—	—	—	—	—	—	98,133	$25.64	$	944,089

P.L. Elders
EICP		02/28/11		02/28/11	$41,272	$336,911	$673,822	—	—	—	—	—	—		—
PShares		03/04/11		02/28/11	—	—	—	7,065	14,130	28,260	—	—	—	$	595,438
RSUs		03/04/11		02/28/11	—	—	—	—	—	—	9,750	—	—	$	249,990
Stock Options		03/04/11		02/28/11	—	—	—	—	—	—	—	24,531	$25.64	$	236,000

G.L. Carlson
EICP		02/28/11		02/28/11	$24,406	$199,233	$398,466	—	—	—	—	—	—		—
PShares		03/04/11		02/28/11	—	—	—	2,826	5,652	11,304	—	—	—	$	238,175
RSUs		03/04/11		02/28/11	—	—	—	—	—	—	4,551	—	—	$	116,688
Stock Options		03/04/11		02/28/11	—	—	—	—	—	—	—	9,813	$25.64	$	94,406

L.K. Hinrichs
EICP		02/28/11		02/28/11	$32,019	$261,381	$522,763	—	—	—	—	—	—		—
PShares		03/04/11		02/28/11	—	—	—	6,359	12,717	25,434	—	—	—	$	535,894
RSUs		03/04/11		02/28/11	—	—	—	—	—	—	10,014	—	—	$	256,759
Stock Options		03/04/11		02/28/11	—	—	—	—	—	—	—	22,080	$25.64	$	212,421

J.T. McCormack
EICP		02/28/11		02/28/11	$33,632	$274,549	$549,098	—	—	—	—	—	—		—
PShares		03/04/11		02/28/11	—	—	—	3,285	6,570	13,140	—	—	—	$	276,860
RSUs		03/04/11		02/28/11	—	—	—	—	—	—	4,533	—	—	$	116,226
Stock Options		03/04/11		02/28/11	—	—	—	—	—	—	—	11,406	$25.64	$	109,731
PShares		05/13/11		05/06/11	—	—	—	5,637	11,274	22,548	—	—	—	$	357,160
RSUs		05/13/11		05/06/11	—	—	—	—	—	—	8,058	—	—	$	164,947
Stock Options		05/13/11		05/06/11	—	—	—	—	—	—	—	18,312	$20.47	$	144,115

J.T. Nesser
EICP		02/28/11		02/28/11	$43,948	$358,756	$717,511	—	—	—	—	—	—		—

(1)

This column reflects the threshold, target and maximum payout opportunities under the Executive Incentive Compensation Plan, or EICP. For 2011, the EICP awards were based 70% on the attainment of financial goals and 30% on the attainment of individual goals. The 70% financial component was based 70% on consolidated operating income and 30% on consolidated return on invested capital. The financial goals contain threshold, target and maximum performance levels which, if achieved, result in payments of 25%, 100% and 200% of the financial component, respectively. The threshold payout amount provided was determined based on achieving the consolidated operating income threshold (or 12.25% of the target amounts shown), which, if not achieved, would result in no amounts being paid on an EICP award.

On February 28, 2011, our Compensation Committee established target EICP awards expressed as a percentage of the Named Executive’s 2011 annual base salary earned, as follows: Mr. Johnson — 100%, Mr. Elders — 70%, Mr. Carlson — 60%, Ms. Hinrichs — 60%, Mr. McCormack — 50% and Mr. Nesser — 70%. With the exception of Mr. McCormack, the target amounts shown were computed according to the following formula: Target % * [(2010 base salary * 90/365) + (2011 base salary * 275/365)]. In connection with Mr. McCormack’s June 30, 2011 promotion to EVP, COO, on May 6, 2011 our Compensation Committee approved an increase in target EICP award for Mr. McCormack from 50% to 70% effective and for the period beginning June 30, 2011. Accordingly, the amount shown in Mr. McCormack’s target column reflects his target EICP award under his former and current positions, prorated based on the length of service in each position. The target amount shown for Mr. McCormack was computed according to the following formula: SVP Target % * [(2010 base salary * 90/365) + (2011 SVP base salary * 90/365)] + EVP, COO Target % * (2011 EVP, COO base salary * 185/365). The actual EICP payouts for the Named Executives for 2011 are provided in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.

(2)
This column reflects the target, threshold and maximum payout opportunities of grants of performance shares under the 2009 LTIP. Each grant represents the right to receive one share of McDermott common stock for each vested performance share. The amount of performance shares that vest, if any, is scheduled to initially be determined on December 31, 2013 based on our total shareholder return relative to the Proxy Peer Group during the same period, with subsequent measurements of total shareholder return relative to the Proxy Peer Group on December 31, 2014 and December 31, 2015. The amounts shown in the “threshold” column represent the number of performance shares that will vest, which is 50% of the amount granted, and the amounts shown in the “maximum” column represent the number of performance shares that will vest, which is 200% of the amount granted, based on our total shareholder return relative to the Proxy Peer Group. The maximum number of performance shares which will vest based on performance through December 31, 2013 is 150% of the amount granted if our total shareholder return ranks in the 75^th percentile or higher relative to the Proxy Peer Group. A maximum of 200% of the amount of performance shares granted may vest based on performance through December 31, 2014 and 2015, less any amount previously vested. The following table provides the measurement periods, total shareholder return percentile rank and corresponding vesting percentage of the amount of performance shares granted:


~~(1)~~	~~See “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” below for a discussion of the amounts included in this column.~~

~~(2)~~ Measurement Period	~~See “All Other Stock Awards” below~~	Total Shareholder Return Percentile Rank	Vesting Percentage of Performance Shares Granted
36 Months Ending December 31, 2013		³90^th Percentile 75^th Percentile 50^th Percentile 25^th Percentile < 25^th Percentile	150% 150% 100% 50% 0%
48 Months Ending December 31, 2014		³90^th Percentile 75^th Percentile 50^th Percentile 25^th Percentile < 25^th Percentile	200%* 150%* 100%* 50%* 0%*
60 Months Ending December 31, 2015		³90^th Percentile 75^th Percentile 50^th Percentile 25^th Percentile < 25^th Percentile	200%* 150%* 100%* 50%* 0%*

*Less

any amounts vested through prior measurement periods.

(3)

This column reflects grants of restricted stock units under the 2009 LTIP. Each restricted stock unit represents the right to receive one share of McDermott common stock and is generally scheduled to vest in one-third increments on the first, second and third anniversaries of the date of grant. Upon vesting, the restricted stock units are converted into shares of McDermott common stock.

(4)

This column reflects grants of stock options under the 2009 LTIP. Each grant represents the right to purchase at the exercise price shares of McDermott common stock over a period of seven years. The stock options are generally scheduled to vest and become exercisable in one-third increments on the first, second and third anniversaries of the date of grant.

(5)	This column reflects the full grant date fair values of the equity awards computed in accordance with FASB ASC Topic 718. Grant date fair values are determined using the closing price of our common stock on the date of grant for restricted stock units, a Monte Carlo simulation model for performance shares, and the Black-Scholes option pricing model for stock options. The Monte Carlo simulation model for performance shares and the Black-Scholes option pricing model for stock options each requires various assumptions, including but not limited to the expected life of the award and stock return and stock price volatility. For more information regarding the compensation expense related to 2011 awards, and a discussion of ~~the amounts~~valuation assumptions utilized in performance share and option pricing, see Note 8 to our consolidated financial statements included in ~~this column.~~

~~(3)~~	~~See “All Other Option Awards” below~~our annual report on form 10-K for ~~a discussion of~~ the ~~amounts included in this column.~~

~~(4)~~	~~See “Grant Date Fair Value of Stock and Option Awards” below for a discussion of the amounts included in this column.~~

~~(5)~~	Equity award amounts provided for Mr. Bethards reflect the pre Spin-off awards granted to him by McDermott. In connection with the Spin-off, Mr. Bethards’ outstanding equity awards were converted into B&W equity awards. For more information, see “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Treatment of Equity-Based Compensation in Connection with the Spin-off” above.year ended December 31, 2011.

OUTSTANDING EQUITY AWARDSAT FISCAL YEAR-END

~~Estimated Possible Payouts Under Non-Equity Incentive Plan Awards~~

Our Compensation Committee administers the Executive Incentive Compensation Plan, an annual cash incentive program, which we refer to as the EICP. The payment amount, if any, of an EICP award is determined based on: (1) the attainment of short-term financial goals; (2) the attainment of short-term individual goals; and (3) the exercise of the Compensation Committee’s discretionary authority. Each year, our Compensation Committee establishes financial goals and, with respect to our Chief Executive Officer, individual goals. For 2010, our Chief Executive Officer established or approved individual goals for the other Named Executives.

The financial goals contain threshold, target and maximum performance levels which, if achieved, result in payments of 25%, 100% and 200% of the financial component, respectively. If the threshold financial goal is not achieved, no amount is paid on an EICP. For purposes of evaluating McDermott’s performance under the financial performance component, our Compensation Committee may adjust our results prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for unusual, nonrecurring or other items in the Committee’s discretion, subject to certain limitations set forth in the EICP. For 2010, payment is made on an EICP award under the individual component only if the threshold financial goal is achieved. Any such payment is based on the attainment of the Named Executive’s individual goals as determined and evaluated by our Chief Executive Officer or, with respect to our Chief Executive Officer, by our Governance Committee. In addition, our Compensation Committee may decrease an EICP award in its discretion. The maximum EICP award a Named Executive can earn is 200% of his or her target EICP award.

The amounts shown reflect grants of 2010 EICP awards. Our Compensation Committee established target EICP awards expressed as a percentage of the Named Executive’s 2010 base salary. With the exception of Messrs. Johnson, Elders and Carlson, the amount shown in the “target” column represents the value of the target EICP award determined by multiplying the target percentage established for each Named Executive by the Named Executive’s 2009 and 2010 base salaries, prorated to take into account the April 1, 2010 effective date of the 2010 base salaries. For 2010, the target percentage of base salary for each Named Executive and the formula used to

~~compute the target EICP award (with the exception of Messrs. Johnson, Elders and Carlson) were as follows:~~


~~Named Executive~~		~~Target Percentage of Base Salary~~

~~J. A. Fees~~		~~100%~~
~~M. S. Taff~~		~~70%~~
~~B. C. Bethards~~		~~70%~~
~~L. K. Hinrichs~~		~~55%~~
~~J. T. Nesser~~		~~70%~~



~~Formula to Compute Target EICP Awards:~~

Target % * [(2009 base salary ¹/₄) + (2010 base salary ³/₄)]

In connection with Mr. Johnson’s July 30, 2010 promotion from President and Chief Executive Officer of JRM to President and Chief Executive Officer of McDermott, on August 5, 2010 our Compensation Committee approved a base salary increase and an increase in the target EICP award for Mr. Johnson. Accordingly, the amount shown in Mr. Johnson’s target column represents his target EICP award under his former and current position, prorated based on the length of service in each position and to take into account the changes in base salary that occurred throughout the year. For 2010, the target percentage of base salary for Mr. Johnson and the formula used to compute the target EICP award were as follows:


~~Named Executive~~		~~Target Percentage of Base Salary~~

~~S. M. Johnson~~
~~Pres. & CEO, JRM~~		~~85%~~
~~Pres. & CEO, MII~~		~~100%~~



~~Formula to Compute Target EICP Award:~~

85% * [(2009 base salary ³/₁₂) + (2010 JRM salary ⁴/₁₂)]
+
100% * (2010 MII salary *⁵/₁₂)

Because Mr. Elders was hired on April 30, 2010, the amount shown in his “target” column represents the value of the target EICP award determined by multiplying the target percentage established for Mr. Elders by his 2010 base salary, prorated to take into account his time of employment during the year. For 2010, the target percentage of base salary for

~~Mr. Elders and the formula used to compute the target EICP award were as follows:~~


~~Named Executive~~		~~Target Percentage of Base Salary~~

~~P. L. Elders~~		~~70%~~



~~Formula to Compute Target EICP Award:~~

70% * (2010 base salary *²/₃)

The amount shown in Mr. Carlson’s “target” column represents the value of the target EICP award determined by multiplying the target percentage established for Mr. Carlson by his 2010 base salary. For 2010, the target percentage of base salary for Mr. Carlson and the formula used to compute the target EICP award were as follows:


~~Named Executive~~		~~Target Percentage of Base Salary~~

~~G. L. Carlson~~		~~55%~~



~~Formula to Compute Target EICP Award:~~

~~55% * 2010 base salary~~

With the exception of Messrs. Fees and Taff and Ms. Hinrichs, the amount shown in the “threshold” column represents the amount payable under the EICP assuming the threshold level of the financial goals, but no individual goal, is attained and our Compensation Committee does not exercise any discretion over the EICP award. The financial goal represents 70% of the target EICP award. Attaining only the threshold level, or 25%, of the financial goal results in an EICP payment of 17.50% of the target EICP award. Prior to the completion of the Spin-off, the Compensation Committee determined that for all EICP participants not employed through one of McDermott’s pre-Spin-off operating segments (our Corporate executive officers), including Messrs. Fees and Taff and Ms. Hinrichs, the 2010 target award opportunity through the effective date of the Spin-off would be attributable to the completion of the Spin-off. Accordingly, the amount shown in the “threshold” column for Messrs. Fees and Taff and Ms. Hinrichs represents the amount payable under the EICP assuming the target award opportunity, but prorated based on the actual period of service during 2010 as a Corporate executive officer through the effective date of the Spin-off. For Ms. Hinrichs, who continued to be

employed by McDermott following the Spin-off, 70% and 30% of the 2010 target award opportunity for the period in 2010 after the effective date of the Spin-off was attributable to financial performance and individual performance, respectively, prorated for the period in 2010 after the effective date of the Spin-off.

The amount shown in the “maximum” column represents the maximum amount payable under the EICP, which is 200% of the target amount shown, with the exception of Messrs. Fees and Taff and Ms. Hinrichs. The amount shown in the “maximum” column for these individuals is comprised of 100% of their target EICP award, prorated for the actual period of service during 2010 as a Corporate executive officer through the effective date of the Spin-off, and 200% of their target EICP award, prorated for the balance of 2010. See “Compensation Discussion and Analysis — Annual Incentive Compensation” above for more information about the 2010 EICP awards and performance goals.

~~All Other Stock Awards~~

~~The amounts shown reflect grants of restricted stock units and restricted stock under the 2009 LTIP.~~

Each restricted stock unit represents the right to receive one share of McDermott common stock and, with the exception of the restricted stock units granted to Mr. Carlson, are scheduled to vest in one-third increments on the first, second and third anniversaries of the date of grant. The restricted stock units granted to Mr. Carlson are scheduled to vest on the first, second and third anniversaries of his date of hire. Upon vesting, the restricted stock units are converted into shares of McDermott common stock.

The August 2, 2010 grants were grants of restricted stock made in accordance with the indicated Named Executives’ retention agreements and are scheduled to vest one year following the completion of the Spin-off. Upon vesting, the restrictions on the shares lapse. With the exception of the restricted stock awards granted on August 2, 2010 and the stock awards made to Mr. Bethards, the stock awards reflect the as-adjusted number of restricted stock units following adjustments made to the awards in connection with the Spin-off. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation” above for more information regarding the 2010 restricted stock units and restricted stock and the treatment of equity-based awards in connection with the Spin-off.

~~All Other Option Awards~~

The amounts shown reflect grants of stock options under the 2009 LTIP. Each grant represents the right to purchase at the exercise price shares of McDermott common stock over a period of seven years. With the exception of grants of stock options awarded to Mr. Carlson, the stock options are generally scheduled to vest and become exercisable in one-third increments on the first, second and third anniversaries of the date of grant. The stock options granted to Mr. Carlson are scheduled to vest and become exercisable on the first, second and third anniversaries of his date of hire. With the exception of grants of stock options awarded to Mr. Bethards, the stock options and exercise prices included are the as-adjusted number of stock options and exercise prices following conversions made to the awards in connection with the Spin-off. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation” above for more information regarding the 2010 stock options and the treatment of equity-based awards in connection with the Spin-off.

~~Grant Date Fair Value of Stock and Option Awards~~

~~The amounts included in the “Grant Date Fair Value of Stock and Option Awards” column represent~~

the full grant date fair values of the equity awards computed in accordance with FASB ASC Topic 718. The grant date fair values shown for Messrs. Johnson, Elders, Carlson and Taff and Ms. Hinrichs are based on (1) the number of shares, units or options as converted in connection with the Spin-off, and (2) the closing price of our common stock on the date of grant as adjusted to reflect the Spin-off; provided, that the grant date fair values shown for Mr. Taff are attributable to the one-half of his pre Spin-off McDermott awards that were converted to post Spin-off McDermott awards. The grant date fair values shown for Mr. Bethards represent the pre Spin-off grant date fair value of his awards. We use a Black-Scholes option-pricing model for measuring the fair value of stock options granted. The determination of the fair value of an award on the date of grant using an option-pricing model requires various assumptions, such as the expected life of the award and stock price volatility. For more information regarding the compensation expense related to 2010 awards, and a discussion of valuation assumptions utilized in option pricing, see Note 9 to our consolidated financial statements included in our annual report on~~Form 10-K~~ ~~for the year ended December 31, 2010.~~

~~Outstanding Equity Awards at Fiscal Year-End~~

The following Outstanding Equity Awards at Fiscal Year-End table summarizes the equity awards we have made to our Named Executives which were outstanding as of December 31, 2010. With the exception of the restricted stock awards granted on August 2, 2010, the awards in this table reflect the original grant date and the as-adjusted award amounts outstanding and as-adjusted exercise prices following adjustments and conversions in connection with the Spin-off. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Treatment of Equity-Based Compensation in Connection with the Spin-off.”

Option Awards⁽¹⁾ Stock Awards⁽²⁾
Equity
Incentive
Plan Awards:
Equity
Market
Incentive
or Payout
Equity
Plan Awards:
Value of
Incentive
Market
Number of
Unearned
Plan Awards:
Value of
Unearned
Shares,
Number of
Number of
Number
Number of
Shares or
Shares,
Units or
Securities
Securities
of Securities
Shares or
Units of
Units or
Other
Underlying
Underlying
Underlying
Units of
Stock That
Other
Rights That
Unexercised
Unexercised
Unexercised
Option
Option
Stock That
Have Not
Rights That
Have
Options
Options
Unearned
Exercise
Expiration
Have Not
Vested
Have Not
Not Vested
Name Grant Date Exercisable Unexercisable Options Price Date Vested (3) Vested (3)
S. M. Johnson

Stock Options 05/14/09 85,248 170,496 — $ 9.36 05/14/16
Stock Options 03/04/10 — 141,597 — $ 13.09 03/04/17
RSU 05/14/09 120,149 $ 2,485,883 — —
RSU(4) 05/14/09 104,302 $ 2,158,008 — —
RSU 03/04/10 95,493 $ 1,975,750 — —
Restricted Stock 08/02/10 113,412 $ 2,346,494 — —
J. A. Fees

RSU 10/01/08 142,445 $ 2,947,187 — —
P. L. Elders

Stock Options 05/13/10 — 60,292 — $ 13.37 05/13/17
RSU 05/13/10 38,661 $ 799,896 — —
M. S. Taff

Stock Options 03/05/09 — 52,870 — $ 5.64 03/05/16
Stock Options 03/04/10 — 34,324 — $ 13.09 03/04/17
Restricted Stock 03/03/08 2,225 $ 46,035 — —
RSU(4) 03/03/08 24,092 $ 498,463 — —
RSU 03/05/09 37,258 $ 770,868 — —
RSU(4) 03/05/09 32,343 $ 669,177 — —
RSU 03/04/10 23,148 $ 478,932 — —
G. L. Carlson

Stock Options 05/13/10 — 25,189 — $ 13.37 03/29/17
RSU 05/13/10 39,411 $ 815,414 — —
L. K. Hinrichs

Stock Options 03/05/09 — 54,405 — $ 5.64 03/05/16
Stock Options 03/04/10 — 45,313 — $ 13.09 03/04/17
Restricted Stock 03/03/08 2,616 $ 54,125 — —
RSU(4) 03/03/08 28,317 $ 585,879 — —
Restricted Stock 11/10/08 7,417 $ 153,458 — —
RSU 03/05/09 38,337 $ 793,193 — —
RSU(4) 03/05/09 33,283 $ 688,625 — —
RSU 03/04/10 30,556 $ 632,204 — —
Restricted Stock 08/02/10 52,198 $ 1,079,977 — —
J. T. Nesser

Stock Options 03/05/09 — 45,172 — $ 5.64 03/05/16
Stock Options 03/04/10 — 36,818 — $ 13.09 03/04/17
Restricted Stock 03/03/08 4,651 $ 96,229 — —
RSU(4) 03/03/08 17,113 $ 354,068 — —
Restricted Stock 08/14/08 3,754 $ 77,670 — —
RSU(4) 08/14/08 9,240 $ 191,176 — —
RSU 03/05/09 23,874 $ 493,953 — —
RSU(4) 03/05/09 18,516 $ 383,096 — —
RSU 03/04/10 24,828 $ 513,691 — —
Restricted Stock 08/02/10 69,478 $ 1,437,500 — —

2011.


				Option Awards⁽¹⁾									Stock Awards
Name	Grant Date			Number of Securities Underlying Unexercised Options Exercisable		Number of Securities Underlying Unexercised Options Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested⁽²⁾		Market Value of Shares or Units of Stock That Have Not Vested⁽⁴⁾		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested⁽⁵⁾		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested⁽⁴⁾
S.M. Johnson
Stock Options		05/14/09			170,496		85,248	—	$	9.36		05/14/16
Stock Options		03/04/10			47,199		94,398	—	$	13.09		03/04/17
Stock Options		03/04/11			—		98,133	—	$	25.64		03/04/18
RSU		05/14/09												60,075	$	691,463		—		—
RSU⁽³⁾		05/14/09												104,302	$	1,200,516		—		—
RSU		03/04/10												63,663	$	732,761		—		��
RSU		03/04/11												39,000	$	448,890		—		—
Performance Shares		03/04/11												—		—		28,265	$	325,330
P.L. Elders
Stock Options		05/13/10			20,097		40,195	—	$	13.37		05/13/17
Stock Options		03/04/11			—		24,531	—	$	25.64		03/04/18
RSU		05/13/10												25,774	$	296,659		—		—
RSU		03/04/11												9,750	$	112,223		—		—
Performance Shares		03/04/11												—		—		7,065	$	81,318
G.L. Carlson
Stock Options		05/13/10			8,396		16,793	—	$	13.37		03/29/17
Stock Options		03/04/11			—		9,813	—	$	25.64		03/04/18
RSU		05/13/10												26,274	$	302,414		—		—
RSU		03/04/11												4,551	$	52,382		—		—
Performance Shares														—		—		2,826	$	32,527
L.K. Hinrichs
Stock Options		03/05/09			—		27,203	—	$	5.64		03/05/16
Stock Options		03/04/10			15,104		30,209	—	$	13.09		03/04/17
Stock Options		03/04/11			—		22,080	—	$	25.64		03/04/18
RSU		03/05/09												19,169	$	220,635		—		—
RSU⁽³⁾		03/05/09												33,283	$	383,087		—		—
RSU		03/04/10												20,371	$	234,470		—		—
RSU		03/04/11												10,014	$	115,261		—		—
Performance Shares		03/04/11												—		—		6,359	$	73,192
J.T. McCormack
Stock Options		03/05/09			—		14,155	—	$	5.64		03/05/16
Stock Options		03/04/10	��		8,518		17,037	—	$	13.09		03/04/17
Stock Options		03/04/11			—		11,406	—	$	25.64		03/04/18
Stock Options		05/13/11			—		18,312	—	$	20.47		05/13/18
RSU		03/05/09												9,974	$	114,800		—		—
RSU⁽³⁾		03/05/09												17,316	$	199,307		—		—
RSU		03/04/10												11,490	$	132,250		—		—
RSU		03/04/11												4,533	$	52,175		—		—
Performance Shares		03/04/11												—		—		3,285	$	37,810
RSU		05/13/11												8,058	$	92,748		—		—
Performance Shares		05/13/11												—		—		5,637	$	64,882
J.T. Nesser
Stock Options		03/05/09			45,172		—	—	$	5.64		03/05/16
Stock Options		03/04/10			12,273		24,545	—	$	13.09		03/04/17
RSU		03/04/10												16,184	$	186,278		—		—

(1) The awards in this column represent grants of stock options, which generally become exercisable in accordance with the following vesting schedule:


~~(1)~~Grant Date		~~See “Option Awards” below for a discussion~~Vesting Schedule:
03/05/09		1/3 per year on first, second and third anniversaries of ~~the amounts reported~~grant date
05/14/09		1/3 per year on first, second and third anniversaries of grant date
03/04/10		1/3 per year on first, second and third anniversaries of grant date
05/13/10		Mr. Elders: 1/3 per year on first, second and third anniversaries of grant date
05/13/10		Mr. Carlson: 1/3 per year on March 29, 2011, 2012 and 2013 (the first, second and third anniversaries of Mr. Carlson’s hire date)
03/04/11		1/3 per year on first, second and third anniversaries of grant date
05/13/11		1/3 per year on first, second and third anniversaries of grant date

(2)	The awards in this column ~~including~~represent grants of restricted stock units, which, with the exception of those grants of restricted stock units discussed in Note (3) below, generally vest in accordance with the following vesting ~~dates of unexercisable option awards.~~schedule:


Grant Date		Vesting Schedule:
03/05/09		1/3 per year on first, second and third anniversaries of grant date
~~(2)~~ 05/14/09		~~See “Stock Awards” below for a discussion~~1/3 per year on first, second and third anniversaries of ~~the amounts reported in this column including the vesting dates of outstanding stock awards.~~grant date
03/04/10		1/3 per year on first, second and third anniversaries of grant date
05/13/10		Mr. Elders: 1/3 per year on first, second and third anniversaries of grant date
~~(3)~~ 05/13/10		~~Market values in these columns are based~~Mr. Carlson: 1/3 per year on ~~the closing price~~March 29, 2011, 2012 and 2013 (the first, second and third anniversaries of ~~our common stock as of December 31, 2010 ($20.69), as reported on the New York Stock Exchange.~~Mr. Carlson’s hire date)
03/04/11		1/3 per year on first, second and third anniversaries of grant date
05/13/11		1/3 per year on first, second and third anniversaries of grant date

~~(4)~~

(3)

The grant of restricted stock units was converted from an original grant of performance shares in connection with the Spin-off and generally vests 100% on the third anniversary of the grant date.

(4)	Market values in these columns are based on the closing price of our common stock as reported on the New York Stock Exchange as of December 30, 2011 ($11.51).

(5)

~~No information is provided for Mr. Bethards because he had no outstanding equity~~The awards ~~granted by McDermott~~in this column represent grants of performance shares, which generally may vest on the third, fourth and/or fifth anniversaries of the grant date based on the attainment of performance levels as of December 31, ~~2010. In connection with the Spin-off, all of Mr. Bethards’ outstanding equity awards,~~2013, 2014 and ~~one half of Mr. Taff’s equity awards, were converted to equity awards of~~2015. The ~~Babcock & Wilcox Company. See “Compensation Discussion~~number and ~~Analysis — Long-Term Incentive Compensation — Conversion of Equity in Connection with the Spin-off” for more information.~~

~~Option Awards.~~ Information presented in the “Option Awards” columns relates to options to purchase shares of our common stock held by our Named Executives as of December 31, 2010. With the exception of Mr. Carlson, whose unexercisable options vest in three equal installments on the first, second and third anniversaries of his date of hire, all unexercisable options generally vest in three equal installments on the first, second and third anniversaries of the grant date, as follows:


~~Grant Date~~		~~One third of grant vests on:~~


~~03/05/09~~		~~March 5, 2011 and 2012~~
~~05/14/09~~		~~May 14, 2011 and 2012~~
~~03/04/10~~		~~March 4, 2011, 2012 and 2013~~
~~05/13/10~~		~~Mr. Carlson: March 29, 2011, 2012 and 2013~~
~~05/13/10~~		~~Mr. Elders: May 13, 2011, 2012 and 2013~~

~~Stock Awards.~~ Information presented in the Stock Awards columns relates to awards of restricted stock and restricted stock units held by our Named Executives as of December 31, 2010. The awards reported in the “Number of Shares or Units of Stock that have not Vested” column reflect stock awards subject to service-based vesting.

~~Restricted Stock Awards.~~ With the exception of the restricted stock granted on August 2, 2010, shares of restricted stock are generally scheduled to vest in one-third increments on the first, second and third anniversaries of the grant date. The restricted stock awards granted on August 2, 2010 were granted pursuant to retention agreements we entered into with certain of our Named Executives in connection with the Spin-off. See “Compensation Discussion and Analysis — Employment and Severance Arrangements — Retention Agreements” above for more information regarding the retention agreements. The vesting schedule of the restricted stock outstanding as of December 31, 2010 is as follows:


~~Grant Date~~		~~Restricted Stock Awards vest:~~


~~03/03/08~~		~~One-third of grant vests on March 3, 2011~~
~~08/14/08~~		~~One-third of grant vests on August 14, 2011~~
~~11/10/08~~		~~One-third of grant vests on November 10, 2011~~
~~08/02/10~~		~~100% of grant vests on July 30, 2011~~

~~Restricted Stock Units.~~ Restricted stock units represent the right to receive one share of our common stock for each vested restricted stock unit. With the exception of restricted stock units that were converted from performance shares in connection with the Spin-off and restricted stock units granted to Mr. Carlson, restricted stock units outstanding as of December 31, 2010 are generally scheduled to vest in one-third increments on the first, second and third anniversaries of the grant date. Restricted stock units that were converted from performance shares in connection with the Spin-off generally vest 100% on the third anniversary of the grant date, as discussed in footnote (4) to the “Outstanding Equity Awards at Fiscal Year-End” table above. Restricted stock units granted to Mr. Carlson generally vest in three equal installments on the first, second and third anniversaries of his date of hire. The vesting schedule of the restricted stock units outstanding as of December 31, 2010 is as follows:


~~Grant Date~~		~~Vesting Schedule:~~


~~03/03/08~~⁽¹⁾		~~100% of grant vests on March 3, 2011~~
~~08/14/08~~⁽¹⁾		~~100% of grant vests on August 14, 2011~~
~~10/01/08~~⁽²⁾		~~100% of grant is vested~~
~~03/05/09~~		~~One-third of grant vests on March 5, 2011 and 2012~~
~~03/05/09~~⁽¹⁾		~~100% of grant vests on March 5, 2012~~
~~05/14/09~~		~~One-third of grant vests on May 14, 2011 and 2012~~
~~05/14/09~~⁽¹⁾		~~100% of grant vests on May 14, 2012~~
~~03/04/10~~		~~One-third of grant vests on March 4, 2011, 2012 and 2013~~
~~05/13/10~~		~~Mr. Carlson: One-third of grant vests on March 29, 2011, 2012 and 2013~~
~~05/13/10~~		~~Mr. Elders: One-third of grant vests on May 13, 2011, 2012 and 2013~~


~~(1)~~		~~The grant of restricted stock units was converted from an original grant~~value of performance shares ~~in connection with the Spin-off.~~

~~(2)~~		~~The grant of restricted stock units was converted from an original grant of~~reported is based on achieving threshold performance ~~shares in connection with the Spin-off. 100%~~as of the ~~grant is vested, but will settle on October 1, 2011 in accordance with the terms of Mr. Fees’ retention agreement.~~December 31, 2013 measurement date.

OPTION EXERCISESAND STOCK VESTED

~~Option Exercises and Stock Vested~~

The following Option Exercises and Stock Vested table provides ~~additional~~ information about the value realized by our Named Executives on exercises of option awards and vesting of stock awards during the year ended December 31, ~~2010.~~

Option Awards Stock Awards
Shares
Shares

Acquired
Value Realized
Acquired
Value Realized
Name on Exercise (#) on Exercise on Vesting (#) on Vesting
S. M. Johnson 0 N/A 30,995 $ 743,620.10
J. A. Fees 295,716 $ 1,832,421.36 467,935 $ 7,770,761.52
P. L. Elders 0 N/A 0 N/A
M. S. Taff 48,724 $ 462,249.66 59,019 $ 1,471,140.67
B. C. Bethards⁽¹⁾
23,383 $ 332,155.52 70,427 $ 1,783,605.96
G. L. Carlson 0 N/A 0 N/A
L. K. Hinrichs 14,035 $ 205,612.75 52,827 $ 1,274,986.04
J. T. Nesser 11,653 $ 169,609.42 151,031 $ 2,847,018.83

2011.


	Option Awards⁽¹⁾				Stock Awards⁽²⁾
Name	Shares Acquired on Exercise (#)		Value Realized on Exercise		Shares Acquired on Vesting (#)		Value Realized on Vesting
S. M. Johnson		0		N/A		205,316	$	4,333,356
P. L. Elders		0		N/A		12,887	$	263,797
G. L. Carlson		0		N/A		13,137	$	327,374
L. K. Hinrichs		27,202	$	526,200		119,901	$	2,679,780
J. T. McCormack		14,154	$	273,959		29,822	$	762,999
J. T. Nesser		0		N/A		85,423	$	2,036,053


(1)	Each stock option exercise reported was effected as a simultaneous exercise and sale. The value realized on exercise was calculated based on the difference between the exercise prices of the stock options and the prices at which the shares were sold.

(2)

~~Information provided for Mr. Bethards is through July 31, 2010. In~~The number of shares acquired on vesting reported represents the aggregate number of shares that vested during 2011 in connection with awards of restricted stock and restricted stock units. The value realized on vesting was calculated based on the ~~Spin-off, Mr. Bethards’ outstanding option~~fair market value of the underlying shares on the vesting date. The following table sets forth the amounts of shares attributable to restricted stock and restricted stock ~~awards were converted~~units for each Named Executive and the value realized on vesting of each respective type of award, as well as the number of shares withheld by McDermott to ~~B&W option and stock awards. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Conversion of Equity in Connection with~~satisfy the ~~Spin-off” for more information.~~minimum statutory withholding tax due upon vesting:

~~Option Awards.~~ Each stock option exercise reported in the Option Exercises and Stock Vested table was effected as a simultaneous exercise and sale, with the exception of one stock option exercise without a simultaneous sale of the underlying shares by each of Messrs. Fees, Bethards and Nesser and Ms. Hinrichs representing 98,572, 23,383, 11,653 and 14,035 shares, respectively. For simultaneous exercise and sales, the value realized on exercise was calculated based on the difference between the exercise prices of the stock options and the prices at which the shares were sold. For the exercise without a simultaneous sale of the underlying shares of options by Messrs. Fees, Bethards and Nesser and Ms. Hinrichs, the value realized on exercise was calculated based on the difference between the exercise price of the stock options and the average of the highest and lowest reported trading price of our common stock on the date of exercise.

~~Stock Awards.~~ For each Named Executive, the number of shares acquired on vesting reported in the Option Exercises and Stock Vested table represents the aggregate number of shares that vested during 2010 in connection with awards of performance shares, restricted stock, restricted stock units~~and/or~~ deferred stock units. The awards of deferred stock units reflected in this table were payable entirely in cash in an amount equal to the number of vested units multiplied by the average of the highest and lowest price of our common stock on the date of vesting. As a result, no shares of stock were actually acquired upon the vesting of these deferred stock units. The following table sets forth the amount of shares attributable to performance shares, restricted stock, restricted stock units and deferred stock units, for each Named Executive:

Performance Shares Restricted Stock Restricted Stock Units Deferred Stock Units
Number of
Number of
Number of
Number of

Shares
Value
Shares
Value
Shares
Value
Shares
Value
Acquired on
Realized
Acquired
Realized
Acquired
Realized
Acquired
Realized
Name Vesting on Vesting on Vesting on Vesting on Vesting on Vesting on Vesting on Vesting
S. M. Johnson 0 N/A 0 N/A 30,995 $ 743,260.10 0 N/A
J. A. Fees 63,600 $ 1,603,356.00 32,880 $ 458,417.60 362,305 $ 5,470,996.42 9,150 $ 237,991.50
P. L. Elders 0 N/A 0 N/A 0 N/A 0 N/A
M. S. Taff 33,000 $ 831,930.00 2,296 $ 58,938.32 19,223 $ 490,474.85 4,500 $ 89,797.50
B. C. Bethards 44,400 $ 1,119,324.00 1,310 $ 33,627.70 24,717 $ 630,654.26 0 N/A
G. L. Carlson 0 N/A 0 N/A 0 N/A 0 N/A
L. K. Hinrichs 33,300 $ 839,493.00 8,767 $ 160,520.99 9,890 $ 252,343.35 870 $ 22,628.70
J. T. Nesser 52,500 $ 1,323,525.00 6,153 $ 110,922.42 85,988 $ 1,246,367.51 6,390 $ 166,203.90


	Restricted Stock				Restricted Stock Units
Name	Shares Acquired on Vesting (#)		Value Realized on Vesting		Shares Acquired on Vesting (#)		Value Realized on Vesting		Shares Acquired by McDermott on Vesting of Stock Awards (#)
S. M. Johnson		113,412	$	2,287,520		91,904	$	2,045,836		71,653
P. L. Elders		0		N/A		12,887	$	263,797		3,408
G. L. Carlson		0		N/A		13,137	$	327,374		3,474
L. K. Hinrichs		62,231	$	1,204,301		57,670	$	1,475,479		39,842
J. T. McCormack		1,196	$	30,354		28,626	$	732,645		7,957
J. T. Nesser		8,405	$	192,972		77,018	$	1,843,081		27,253

The number of shares acquired in connection with the exercise of stock options, to the extent applicable, and the vesting of performance shares, restricted stock awards and restricted stock units includes the following number of shares withheld by us at the election of each Named Executive to satisfy the minimum statutory withholding tax due upon exercise or vesting. For more information on the withholding of shares to cover taxes due upon exercise or vesting, see the “Certain Relationships and Related Transactions” section of this proxy statement.

Shares Acquired by McDermott
Shares Acquired by McDermott
Name on Exercise of Stock Options on Vesting of Stock Awards
S. M. Johnson N/A 11,297
J. A. Fees 62,550 155,899
P. L. Elders N/A N/A
M. S. Taff N/A 17,777
B. C. Bethards 15,744 27,163
G. L. Carlson N/A N/A
L. K. Hinrichs 8,123 16,943
J. T. Nesser 7,423 51,304

~~Pension Benefits~~PENSION BENEFITS

The following Pension Benefits table shows the present value of accumulated benefits payable to each of our Named Executives under the qualified defined benefit pension ~~plans~~plan (referred to as the Retirement ~~Plans)~~Plan) and nonqualified pension ~~plans~~plan (referred to as the Excess ~~Plans)~~Plan) that we ~~sponsored prior to the Spin-off and those we have continued to sponsor since the Spin-off.~~

Present Value of
Payments
Number of Years
Accumulated
During
Name Plan Name Credited Service Benefit⁽¹⁾ 2010
S.M. Johnson N/A N/A N/A N/A
N/A N/A N/A N/A
J.A. Fees⁽²⁾
B&W Governmental Operations Retirement Plan 31.167 $1,224,477 $0
B&W Governmental Operations Excess Plan 31.167 $3,216,141 $0
P.L. Elders N/A N/A N/A N/A
N/A N/A N/A N/A
M.S. Taff N/A N/A N/A N/A
N/A N/A N/A N/A
B.C. Bethards⁽³⁾
B&W Governmental Operations Retirement Plan 37.000 $1,246,422 $0
B&W Governmental Operations Excess Plan 37.000 $1,719,768 $0
G.L. Carlson N/A N/A N/A N/A
N/A N/A N/A N/A
L.K. Hinrichs McDermott Retirement Plan 11.167 $315,251 $0
McDermott Excess Plan 11.167 $131,970 $0
J.T. Nesser McDermott Retirement Plan 11.750 $391,366 $0
McDermott Excess Plan 11.750 $440,724 $0

sponsor.

Name

Plan Name

Number of
Years Credited
Service

Present Value of
Accumulated Benefit⁽¹⁾

Payments
During 2011

S. M. Johnson

N/A

P. L. Elders

N/A

G. L. Carlson

N/A

L. K. Hinrichs

McDermott Retirement Plan

11.167

369,359

McDermott Excess Plan

11.167

154,621

J. T. McCormack

N/A

J. T. Nesser

McDermott Retirement Plan

11.75

468,199

McDermott Excess Plan

11.75

527,248


(1)		~~In connection with the Spin-off and pursuant to the Employee Matters Agreement, the accumulated pension benefits of Messrs. Fees and Bethards were transferred to B&W on June 30, 2010.~~ The present ~~values~~value of accumulated benefits ~~provided for Messrs. Fees and Bethards are~~reflected above is based on a ~~5.6%~~4.8% discount rate and the ~~1994 Group Annuity Mortality Table projected to 2010, which are the assumptions used by B&W~~IRS static table for valuation years beginning in ~~computing the present values.~~

~~(2)~~		In connection with Mr. Fees’ retirement from McDermott on July 30, 2010, Mr. Fees commenced receiving an unreduced early retirement benefit under the B&W Governmental Operations Retirement Plan as of August 1, 2010. Such payments were made by B&W and are not included in the table above.

~~(3)~~		~~The number of years of credited service for Mr. Bethards includes 0.417 years (July31-December 31,~~ ~~2010) when he was no longer an employee of McDermott following the Spin-off.~~2012.

Overview of Qualified ~~Plans.~~Plan. The Retirement ~~Plans we sponsor in which the eligible Named Executives participate are~~Plan is funded by ~~trusts~~a trust and ~~generally cover~~covers eligible ~~regular full-time~~ employees of McDermott and its subsidiaries, as described below in the section entitled “Participation and Eligibility.” Nonresident alien employees who do not earn income in the United States and temporary resident alien employees are not eligible to participate in the Retirement ~~Plans.~~Plan. In reviewing pension benefits payable to our Named Executives, it is important to note:


	•	~~Ms. Hinrichs and Mr. Nesser participated in the MI Retirement Plan until their participation was transferred to the JRM Retirement Plan through the merger of the MI~~

Of the Named Executives, only Ms. Hinrichs and Mr. Nesser participate in the Retirement Plan; and


		Retirement Plan into the JRM Retirement Plan in connection with the Spin-off; the JRM Retirement Plan was thereafter renamed the “McDermott (U.S.) Retirement Plan” (referred to herein as the “McDermott Retirement Plan”) and provides benefits for eligible McDermott employees. As of June 30, 2010, benefit accruals under the McDermott Retirement Plan were frozen for all participants, including Ms. Hinrichs and Mr. Nesser;

	•	~~Mr. Fees participated in the MI Retirement Plan until his participation was transferred to the B&W Governmental Operations Retirement Plan in connection with the Spin-off;~~

60As of 2006, all new participation in the Retirement Plan was closed, and benefit accruals under the Retirement Plan were frozen for all participants, including Ms. Hinrichs and Mr. Nesser, as of June 30, 2010.


	•	~~Mr. Bethards participates in the B&W Governmental Operations Retirement Plan; and~~

	•	~~Due to their respective employment dates, Messrs. Johnson, Elders, Taff and Carlson do not participate in our Retirement Plans.~~

For more information on our ~~Retirement Plans,~~retirement plans, see “Compensation Discussion and Analysis — ~~Post-employment Compensation —~~ Retirement Plans.”

Participation and ~~Eligibility.~~Eligibility. The Retirement Plan includes provisions related to eligibility, participation and benefit formulas for employees who were employed by McDermott’s subsidiary J. Ray

McDermott Holdings, LLC and other designated affiliates thereof (collectively, the “JRM Coverage Group”), as well as for employees who were employed by McDermott Incorporated (now known as McDermott Investments, LLC) (collectively, the “MI Coverage Group”) and certain former salaried employees of a subsidiary of The Babcock & Wilcox Company who transferred to employment with McDermott Incorporated (collectively, “Former B&W Coverage Group”).

Generally, employees ~~over the age~~ of ~~21 years~~participating employers who met a one-year service requirement were ~~hired before April 1, 2005 are~~ eligible to participate in the ~~McDermott Retirement Plan or the B&W Governmental Operations~~ Retirement Plan, subject to the following:

For the MI Coverage Group (which includes Ms. Hinrichs and Mr. Nesser):

New participation in the Retirement Plan was closed effective April 1, 2006.

For participants with less than five years of service as of March 31, 2006 — Benefit accruals under the Retirement Plan were frozen as of that date, but cost-of-living increases continued to be paid, as discussed further below. Affected employees received service- based employer cash contributions to their Thrift Plan accounts. On June 30,


	•	~~For participants with less than five years of service as of March 31, 2006 — The plans were closed to new salaried participants and benefit accruals were frozen as of that date, butcost-of-living~~ ~~increases continued to be paid, as discussed further below. Affected employees received annual service-based company cash contributions to their Thrift Plan accounts. On June 30,~~ 2010, the provision of thecost-of-living increase under the ~~McDermott~~ Retirement Plan was terminated, and, for affected participants, the Thrift Plan service-based contribution was replaced by a cash contribution equal to 3% of ~~thriftable~~base pay, plus overtime pay, expatriate pay and commissions, which we refer to collectively as “thriftable earnings.

	•	For participants with more than five but less than ten years of service as of January 1, 2007 — If a participant made an election to do so, benefit accruals were frozen as of March 31, 2007, with the electing participants receiving annual service-based company cash contributions to their Thrift Plan accounts. As of June 30, 2010, benefit accruals under the McDermott Retirement Plan were frozen altogether, and in lieu of any service-based cash contributions, affected participants now receive a cash contribution to their Thrift Plan accounts equal to 3% of thriftable earnings.

	•	Frozen accrued benefits of affected employees under these plans increased annually in line with increases in the Consumer Price Index, up to a maximum of 8% and a minimum of 1%, for each year the employee remained employed. However, as of June 30, 2010, the provision of the~~cost-of-living~~”

For participants with more than five but less than ten years of service as of January 1, 2007 (which includes Mr. Nesser and Ms. Hinrichs) — A one-time irrevocable choice was offered to (1) continue benefit accruals under the Retirement Plan, or (2) freeze benefit accruals as of March 31, 2007, subject to annual cost-of-living increases, and receive instead service-based employer cash contributions to their Thrift Plan accounts. As of June 30, 2010, benefit accruals under the Retirement Plan were frozen altogether, and in lieu of any service-based cash contributions, affected participants now receive a cash contribution to their Thrift Plan accounts equal to 3% of thriftable earnings.

With respect to the cost-of-living increase, frozen accrued benefits of affected employees increased annually in line with increases in the Consumer Price Index, up to a maximum of 8% and a minimum of 1%, for each year the employee remained employed. As of June 30, 2010, the provision of the cost-of-living increase under the Retirement Plan was terminated, and the accrued benefits under the Retirement Plan were frozen altogether.

For the JRM Coverage Group (which includes Mr. McCormack), new participation was closed and benefit accruals were frozen effective April 1, 2003, with no cost-of-living allowance. Mr. McCormack did not meet the Plan’s one-year service requirement for eligibility to participate in the Retirement Plan prior to the participation closure for the JRM Coverage Group.


		~~increase under the McDermott Retirement Plan was terminated and the accrued benefits under the McDermott Retirement Plan were frozen altogether.~~

~~Benefits.~~ ~~Benefits applicable to~~

No Named Executives are included in the Former B&W Coverage Group.

Benefits. Mr. Nesser and Ms. Hinrichs are the only Named Executives entitled to benefits under ~~these Plans~~the Retirement Plan. Their benefits are calculated as follows:


	•	For participants originally employed by our former Power Generation Systems or Government Operations segments (“Tenured Employees”) before April 1, 1998 (which includes Messrs. Fees and Bethards) — benefits are calculated based on years of credited service and final average cash compensation (including bonuses and commissions).

	•	For salaried participants originally hired by our subsidiary formerly known as McDermott Incorporated on or after April 1, 1998 (which includes Mr. Nesser and Ms. Hinrichs) — benefits are calculated as 1.2% of final average monthly compensation up to the Social Security limit times credited service up to 35 years, plus 1.65% of final average monthly compensation in excess of the Social Security limit times credited service up to 35 years. Final average monthly compensation excludes bonuses and commissions.

~~The present value~~ of ~~accumulated benefits reflected~~final average monthly compensation as of June 30, 2010 up to the Social Security limit times credited service up to 35 years, plus 1.65% of final average monthly compensation as of June 30, 2010 in excess of the ~~Pension Benefit Table above is based on a 5.25% discount rate~~Social Security limit times credited service up to 35 years. Final average monthly compensation excludes bonuses and ~~the 1994 Group Annuity Mortality Table projected to 2005.~~

commissions.

Retirement and Early ~~Retirement.~~Retirement. Under ~~each of these plans,~~the Retirement Plan, normal retirement is age 65. The normal form of payment is a single-life annuity or a 50% joint and survivor annuity, depending on the employee’s marital status when payments are scheduled to begin. Early retirement eligibility and benefits under ~~these plans~~the Retirement Plan depend on the employee’s date of hire and age. ~~Mr. Bethards is currently eligible for early retirement. Mr. Fees retired on July 31, 2010 and at that time was eligible for an unreduced early retirement benefit.~~

~~For Tenured Employees hired before April 1, 1998 (which includes Messrs. Fees and Bethards):~~


	•	~~an employee is eligible for early retirement if the employee has completed at least 15 years of credited service and attained the age of 50; and~~


	•	early retirement benefits are based on the same formula as normal retirement, but the pension benefit is unreduced if the sum of the employee’s age and years of service equals 75 or greater at the date benefits commence; otherwise the pension benefit is reduced 4% for each “point” less than 75.

For employees hired on or after April 1, ~~1998:~~

1998 (including Mr. Nesser and Ms. Hinrichs):


	•	an employee is eligible for ~~early retirement after completing at least 15 years of credited service and attaining the age of 55; and~~

	•	~~early retirement benefits are based on the same formula as normal retirement, but the pension benefit is generally reduced 0.4% for each month that benefits commence before age 62.~~

~~Mr. Fees commenced receiving an unreduced~~ early retirement after completing at least 15 years of credited service and attaining the age of 55; and

early retirement benefits are based on the same formula as normal retirement, but the pension benefit ~~under the B&W Governmental Operations Retirement Plan as of August 1, 2010.~~is generally reduced 0.4% for each month that benefits commence before age 62.

~~Neither Mr. Nesser nor~~

Ms. Hinrichs ~~have~~has not accrued enough credited service to be eligible for

early retirement under the ~~McDermott~~ Retirement Plan.

At Mr. Nesser’s resignation from employment with McDermott on July 29, 2011, he had not accrued enough credited service to be eligible for early retirement under the Retirement Plan.

Overview of Nonqualified ~~Plans.~~Plan. To the extent benefits payable under ~~these~~the Retirement ~~Plans~~Plan are limited by Section 415(b) or 401(a)(17) of the Internal Revenue Code, pension benefits will be paid directly by the applicable subsidiary of McDermott ~~or B&W~~ under the terms of the unfunded excess benefit ~~plans~~plan maintained by ~~them~~McDermott (referred to as the “Excess ~~Plans”~~Plan”). Effective January 1, 2006, the Excess ~~Plans were~~Plan was amended to limit the annual bonus payments taken into account in calculating the Excess Plan benefits to the lesser of the actual bonus paid or 25% of the prior

year’s base salary. Furthermore, because benefits entitlement under the Excess Plan and the Retirement Plan are linked, benefits under the Excess Plan have been frozen since 2006 when benefit accruals under the Retirement Plan were frozen.

Mr. Nesser and Ms. Hinrichs ~~Mr. Fees and Mr. Bethards~~ each participate in anthe Excess Plan. Based on Mr. ~~Fees retired on July 31, 2010~~Nesser’s age and ~~commenced receiving an~~accrued service at his resignation from employment, he will not be entitled to commence benefit payments under the Excess Plan ~~benefit on February 1, 2011. His benefit commencement was subject to a six-month delay following his~~until normal retirement ~~date, based on his status as a “specified employee” as defined in Code Section 409A(a)(2)(B)(i) and related IRS regulations and rulings.~~under the Retirement Plan.

NONQUALIFIED DEFERRED COMPENSATION

~~Nonqualified Deferred Compensation~~

The following Nonqualified Deferred Compensation table summarizes our Named Executives’ compensation under the McDermott International, Inc. Director and Executive Deferred Compensation Plan (the “Deferred Compensation Plan”). The compensation shown in this table is entirely attributable to ~~our~~the Deferred Compensation Plan.

Executive
Company
Aggregate
Aggregate
Aggregate
Contributions in
Contributions in
Earnings
Withdrawals/
Balance
Name 2010 2010 in 2010 Distributions at 12/31/10
S. M. Johnson $ 0 $ 69,375 $ 7,252 $ 0 $ 76,627
J. A. Fees $ 0 $ 87,051 $ 49,735 $ 0 $ 422,469
P. L. Elders $ 0 $ 0 $ 0 $ 0 $ 0
M. S. Taff $ 0 $ 37,810 $ 20,439 $ 0 $ 198,227
B. C. Bethards $ 0 $ 52,275 $ 25,782 $ 0 $ 524,588
G. L. Carlson $ 0 $ 0 $ 0 $ 0 $ 0
L. K. Hinrichs $ 0 $ 29,549 $ 0 $ 0 $ 91,059
J. T. Nesser $ 0 $ 36,806 $ 83,667 $ 0 $ 746,029

~~Overview of our Deferred Compensation Plan.~~ ~~Our~~The Deferred Compensation Plan is an unfunded, defined contribution retirement plan for directors and officers of McDermott and its subsidiaries selected to participate by our Compensation Committee. Benefits under the Deferred ~~Compensation~~Compensa-

tion Plan are based on (1) the participant’s deferral account, which is comprised of the notional account balance reflecting any executive contributions of deferred compensation, and (2) the participant’s vested percentage in his or her company account, which is comprised of the notional account balance reflecting any company contributions. A participant is at all times 100% vested in his or her deferral account. A participant generally vests in his or her company account 20% each year, subject to accelerated vesting for death, disability and termination without cause or termination within 24 months following a change in control. ~~In connection with the Spin-off,~~


Name	Executive Contributions in 2011⁽¹⁾		Company Contributions in 2011⁽²⁾		Aggregate Earnings in 2011⁽³⁾			Aggregate Withdrawals/ Distributions		Aggregate Balance at 12/31/11⁽⁴⁾
S. M. Johnson	$	0	$	97,932	($	9,651	)	$	0	$	164,908
P. L. Elders	$	0	$	39,950	$	796		$	0	$	40,746
G. L. Carlson	$	0	$	24,800	($	286	)	$	0	$	24,514
L. K. Hinrichs	$	0	$	43,511	$	0.00		$	0	$	134,570
J. T. McCormack	$	0	$	36,170	$	1,383		$	0	$	37,553
J. T. Nesser	$	0	$	55,219	($	34,873	)	$	0	$	766,375

(1)

In November 2010, our Compensation Committee approved the deferral of eligible executives’ compensation beginning January 1, 2011. Under the terms of our Deferred Compensation Plan, an eligible executive may defer up to 50% of his or her annual salary and/or up to 100% of any bonus earned in any year.

(2)

We make annual contributions to specified participants’ notional accounts equal to a percentage of the participant’s prior-year compensation. Under the terms of the Deferred Compensation Plan, the contribution percentage does not need to be the same for each participant. Additionally, our Compensation Committee may make a discretionary contribution to a participant’s account at any time. With the exception of Messrs. Elders and Carlson, for 2011, our contributions on behalf of Named Executives who were participants equaled 5% of the respective Named Executives’ base salaries and annual incentive compensation awards paid in 2010. Messrs. Elders and Carlson received a Company Contribution in an amount equal to 5% of their respective prior-year base salary paid. In addition, Messrs. Elders and Carlson received a discretionary contribution equal in value to 5% of their respective target bonus for 2010 and the value of their respective prior-year target base salaries they would have earned for the period January 1, 2010 through their respective hire dates. All of our 2011 contributions are included in the Summary Compensation Table above as “All Other Compensation.”

(3)

The amounts reported in this column represent hypothetical accrued gains or losses during 2011 on each Named Executive’s account. The accounts are “participant-directed,” in that each participant personally directs the investment of contributions made on his or her behalf. As a result, any accrued gains or losses are attributable to the performance of the Named Executive’s notional mutual fund investments. No amount of the earnings shown is reported as compensation in the Summary Compensation Table.

(4)

The amounts reported in this column consist of contributions made by McDermott and hypothetical accrued gains or losses as of December 31, 2011. The balances shown include contributions from previous years which have been reported as compensation to the Named Executives in the Summary Compensation Table for those years — to the extent a Named Executive was included in the Summary Compensation Table during those years. The amounts of such contributions previously included in the Summary Compensation Table and years reported are as follows: Mr. Johnson received a contribution from McDermott of $69,375 in 2010; Ms. Hinrichs received a contribution from McDermott of $29,549 in 2010; and Mr. Nesser received contributions from McDermott of $36,806, $55,104 and $44,926 in 2010, 2009 and 2008, respectively.

As of December 31, 2011, Messrs. Johnson, Elders, Carlson and McCormack are 20% vested in their respective Deferred Compensation Plan balances shown as a result of becoming participants in the Deferred Compensation Plan ~~accounts of Messrs. Fees, Taff and Bethards were transferred, and B&W assumed the liabilities of those accounts, pursuant to the Employee Matters Agreement.~~

~~Executive Contributions in 2010.~~ ~~In November 2010, our Compensation Committee approved the deferral of eligible executives’ compensation beginning January 1,~~during 2011. ~~Under the terms of our Deferred Compensation Plan, an eligible executive may defer up to 50% of his or her annual salaryand/or~~ ~~up to~~Mr. Nesser is 100% ~~of any bonus earned in any year. No executive contributions were made in 2010.~~

~~Company Contributions in 2010.~~ We make annual contributions to specified employees’ notional accounts equal to a percentage of the employee’s prior-year compensation. Under the terms of the SERP, the contribution percentage does not need to be the same for each participant. Additionally, our Compensation Committee may make a discretionary contribution to a participant’s account at any time.

With the exception of Mr. Johnson, for 2010, our contributions on behalf of Named Executives who were participants equaled 5% of the Named Executives’ base salaries and annual incentive compensation awards paid in 2009. Mr. Johnson received a company contribution in an amount equal to 5% of his prior-year base salary paid, and received a discretionary contribution equal in value to 5% of his target bonus for 2010 and the value of his prior-year target base salary for the period January 1, 2009 through his April 1, 2009 hire date. Because Messrs. Elders and Carlson were added as participants to the Deferred Compensation Plan in August 2010, no contributions were made to their respective accounts during the year. To the extent a contribution was made, all of our 2010 contributions are included in the Summary Compensation Table above as “All Other Compensation.”

~~Aggregate Earnings in 2010.~~ The amount reported in this table as earnings represents hypothetical accrued gains during 2010 on each Named Executive’s account. The accounts are “participant-directed,” in that each participating officer personally directs the investment of contributions made on his or her behalf. As a result, any accrued gains or losses are

~~attributable to the performance of the Named Executive’s notional mutual fund investments.~~

~~No amount of the earnings shown is reported as compensation in the Summary Compensation Table.~~

~~Aggregate Balance at12/31/10.~~ The balance of a participating officer’s account consists of contributions made by us and hypothetical accrued gains or losses. The balances shown represent the accumulated account values (including gains and losses) for each Named Executive as of December 31, 2010.

The balances shown include contributions from previous years which have been reported as compensation to the Named Executives in the Summary Compensation Table for those years — to the extent a Named Executive was included in the Summary Compensation Table during those years. The amounts and years reported are as follows:

Amount
Named Executive⁽¹⁾ Year Reported
J.A. Fees 2009 $ 64,774.00
2008 $ 54,155.00
M.S. Taff 2009 $ 41,378.00
2008 $ 31,125.00
B.C. Bethards 2009 $ 44,948.00
2008 $ 31,042.00
J. T. Nesser 2009 $ 55,104.00
2008 $ 44,926.00


~~(1)~~		No information is provided for Mr. Johnson because he was not a participant in the Deferred Compensation Plan prior to 2010. No information is provided for Messrs. Elders and Carlson and Ms. Hinrichs because they did not become Named Executives until 2010.

~~As of December 31, 2010, Mr. Johnson is 0%~~ vested in his Deferred Compensation Plan balance ~~shown as a result of becoming a participant in the Deferred Compensation Plan during 2010. Messrs. Fees, Taff, Nesser and Bethards are each 100% vested in their Deferred Compensation Plan balance~~ shown.

In May 2009, our Compensation Committee amended the Deferred Compensation Plan to vest Deferred Compensation Plan balances that were unvested as of December 31, 2008 (including future gains and losses thereon). Amounts allocated on or after January 1, 2009 vest pursuant to the participant’s vested percentage, based on years of participation. Accordingly, Ms. Hinrichs is ~~72.95%~~84.38% vested in her Deferred Compensation Plan balance shown.

POTENTIAL PAYMENTS UPON TERMINATIONOR CHANGEIN CONTROL

~~Potential Payments Upon Termination or Change in Control~~

The following tables show potential payments to certain of our Named Executives under existing contracts, agreements, plans or arrangements, whether written or unwritten, for various scenarios under which a payment would be due (assuming each is applicable) involving a change in control or termination of employment of each of our Named Executives, assuming a December 31, ~~2010~~2011 termination date and, where applicable, using the closing price of our common stock of ~~$20.69~~$11.51 (as reported on the New York Stock Exchange) as of December ~~31, 2010.~~30, 2011. These tables do not reflect amounts that would be payable to the Named Executives pursuant to benefits or awards that are already vested.

The amounts reported in the below tables for stock options, restricted stock units and ~~restricted stock units,~~performance shares represent the value of unvested and accelerated shares or units, as applicable, calculated by:

for stock options: multiplying the number of accelerated options by the difference between the exercise price and $11.51 (the closing price of our common stock on December 30, 2011, as reported on the New York Stock Exchange); and

for restricted stock units and performance shares: multiplying the number of accelerated shares or units by $11.51 (the closing price of our common stock on December 30, 2011, as reported on the New York Stock Exchange).


	•	~~for stock options: multiplying the number of accelerated options by the difference~~


		~~between the exercise price and $20.69 (the closing price of our common stock on December 31, 2010, as reported on the New York Stock Exchange); and~~

	•	for restricted stock and restricted stock units: multiplying the number of accelerated shares or units by $20.69 (the closing price of our common stock on December 31, 2010, as reported on the New York Stock Exchange).

Mr. Nesser retired from McDermott on July 29, 2011. In connection with his retirement, a subsidiary of McDermott entered into a Separation Agreement with Mr. Nesser. Under the ~~Spin-off, Messrs. Fees, Taff and Bethards terminated employment with McDermott effective July 30, 2010. Because~~terms of the Separation Agreement, Mr. ~~Taff joined B&W following the Spin-off, and Mr. Bethards continued employment with B&W following the Spin-off, no termination event occurred under which they were~~Nesser was entitled to ~~any payments. Payments made to Mr. Fees~~receive the payments and benefits detailed in ~~connection with his termination are discussed below under the “Estimated Value~~Section 1 of ~~Benefits to Be Received Upon Termination under~~ the Restructuring Transaction Retention ~~Agreements” table.~~

~~Estimated Value of Benefits to Be Received Upon Termination under the Restructuring Transaction Retention Agreements~~

The following table shows the estimated value of payments and other benefits due to certain of the Named Executives assuming termination under the restructuring transaction retention agreements as of December 31, 2010.

S.M. Johnson P.L. Elders G.L. Carlson L.K. Hinrichs J.T. Nesser
Severance Payments $ 3,361,042 —      —      $ 1,305,748 $ 1,738,126
EICP $ 920,000 —      —      $ 232,265 $ 358,750
Deferred Compensation Plan $ 76,627 —      —      $ 24,634 —
Benefits $ 8,843 —      —      $ 2,664 $ 26,974
Thrift Plan $ 12,658 —      —      —      —
Stock Options (unvested and accelerated) $ 1,931,720 —      —      $ 818,795 $ 679,839
Restricted Stock (unvested and accelerated) —      —      —      $ 207,583 $ 173,899
Restricted Stock Units (unvested and accelerated) $ 4,643,891 —      —      $ 2,067,697 $ 1,422,293
TaxGross-Up
—      —      —      —      —

Total
$ 10,954,781 —      —      $ 4,659,386 $ 4,399,881

~~In contemplation of the Spin-off, on December 10, 2009, we~~Agreement entered into ~~retention agreements with certain key members of our management, including Messrs. Johnson and~~between Mr. Nesser and ~~Ms. Hinrichs. The retention agreements provide either~~ a ~~retention or severance payment to these employees in connection with the disposition~~subsidiary of ~~all or substantially all of the stock or assets of B&W or JRM (whether by a spin-off, sale or otherwise), which we have referred to~~

as a “restructuring transaction” in the retention agreements. In the event the applicable employee is terminated prior to the first anniversary of the effective date of the restructuring transaction, either (1) by the employer company for any reason other than cause or disability or (2) by the employee for good reason, the employer company would be required to pay the employee a cash severance payment, an EICP payment, 200% of the annual cost of coverage for medical,

dental and vision benefits, and an amount equal to the unvested portion of the Named Executive’s Thrift Plan account. The employee would also receive accelerated vesting with respect to the unvested portion of his or her Deferred Compensation Plan account balance and certain of his or her outstanding, unvested equity awards.

~~Severance Payment.~~ The severance payment that would be made to the applicable Named Executive in connection with his or her termination of employment is a cash payment equal to 200% of the sum of his or her annual base salary prior to termination and his or her EICP target award applicable to the year in which the termination occurs. For a hypothetical termination as of December 31, 2010, the severance payment under a restructuring transaction would have been calculated in the same manner as a severance payment under a change in control. For more information, see “Estimated Value of Benefits to be Received Upon Change in Control — Severance Payment.” Severance payments under a restructuring transaction would be in lieu of any payment under any severance policy generally applicable to the salaried employees of McDermott.

~~EICP Payment.~~ The EICP Payment that would be made to each applicable Named Executive in connection with his or her termination of employment would be calculated in the same manner as an EICP Payment under a change in control. For more information, see “Estimated Value of Benefits to be Received Upon Change in Control — EICP Payment” below.

~~Deferred Compensation Plan.~~ The amounts reported represent 100% of Mr. Johnson’s and 27.05% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2010 that would become vested if terminated under the retention agreements.

~~Benefits.~~ The amounts reported represent two times the full annual cost of coverage for medical, dental and vision benefits provided to the applicable Named Executive and the Named Executive’s covered dependents for the year ended December 31, 2010.

~~Thrift Plan.~~ ~~The amount reported represents the unvested portion of the Named Executive’s Thrift Plan account balance as of December 31, 2010.~~

~~Equity Awards.~~ The amounts reported for stock options, restricted stock and restricted stock units represent the value of unvested and accelerated shares or units, as applicable, for the 2008 and 2009 grants of such awards. The amount reported for restricted stock units also includes the value of unvested and accelerated units resulting from the conversion of the 2008 and 2009 grants of performance shares into restricted stock unitsMcDermott in connection with the Spin-off. ~~For more information on the conversion or adjustment of equity awards, see “Compensation Discussion~~These payments and ~~Analysis — Long-Term Incentive Compensation — Treatment of Equity-Based Awards in Connection with the Spin-off”.~~

~~Mr. Fees terminated his employment with McDermott for good reason effective July 30, 2010. In connection with his termination, Mr. Fees received~~benefits included: (1) a cash severance payment in the amount of ~~$5,516,550,~~$1,742,527, (2) payment of his ~~2010~~2011 target EICP award, prorated to take into account his length of service in ~~2010,~~2011, in the amount of ~~$535,808,~~$206,408, (3) two times the full annual cost of coverage for medical, dental and vision benefits in the amount of ~~$30,257,~~$35,127, (4) unused vacation for ~~2010~~2011 in the amount of ~~$70,962,~~$39,424, (5) the value of unvested and accelerated stock options in the amount of ~~$1,360,294,~~$328,174, and (6) the value of unvested and accelerated restricted stock ~~in the amount of $379,354,~~ and ~~(7) the value of unvested and accelerated~~ restricted stock units in the amount of ~~$3,698,622.~~$547,034. Pursuant to the terms of his Separation Agreement, Mr. ~~Fees~~Nesser will also ~~was fully vested~~continue to vest in ~~a grant of 144,540~~24,545 stock options and 16,553 restricted stock units ~~that have not settled in accordance with his retention agreement.~~as if he had remained employed by McDermott through March 4, 2013. The value of ~~these~~the stock options and restricted stock units, less a number of restricted stock units that were forfeited in connection with the payment of certain taxes, will be determined on ~~the original measurement date, which is October 1, 2011.~~

March 4, 2012 and March 4, 2013. In addition, Mr. ~~Fees~~Nesser received $25,000 per month for the performance of consulting services as set forth in accordance with the Employee Matters Agreement, a number of shares of B&W common stock generally equal to the number of shares that would have been distributed in the Spin-off with respect to the number of shares of McDermott common stock received on his ~~vested McDermott equity awards. His outstanding McDermott equity was converted pursuant to the Employee Matters~~Separation Agreement.

~~Estimated Value of Benefits to Be Received Upon Retirement~~

~~The following table shows the estimated value of payments and other benefits due the Continuing Named Executives assuming their retirement as~~ As of December 31, 2010. This table does not reflect amounts that would be payable pursuant to benefits or awards that are already vested; for example, pension benefits. See the “Pension Benefits” table above for more information on pension benefits.2011, Mr. Nesser ~~informed~~had received $125,000 for the ~~Company that he intends to retire by year-end 2011.~~provision of these consulting services.

S.M. Johnson P.L. Elders G.L. Carlson L.K. Hinrichs J.T. Nesser
Severance Payments — — — — —
EICP — — — — —
Deferred Compensation Plan — — — — —
Stock Options (unvested and accelerated) — — — — $ 169,960
Restricted Stock (unvested and accelerated) — — — — $ 86,950
Restricted Stock Units (unvested and accelerated) — — — — —

Total
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 256,910

~~Deferred Compensation Plan.~~ Under the terms of the Deferred Compensation Plan, participants are eligible for retirement upon attaining age 65. None of the Named Executives are currently eligible for retirement under the terms of the Deferred Compensation Plan.

~~Equity Awards.~~ Generally, the terms of our restricted stock and option award grants define retirement as a voluntary termination of employment after attaining age 60 and completing 10 years of service with McDermott, and the terms of our restricted stock unit award grants define retirement as attaining age 60 and completing 10 years of service with McDermott. Under this definition, the only Named Executive eligible for retirement as of a December 31, 2010 is Mr. Nesser. With the exception of grants of restricted

stock under the retention agreements, the outstanding grants of restricted stock and the unvested grants of stock options provide for accelerated vesting of a percentage of the Named Executive’s outstanding shares if his or her retirement date is on or after the first anniversary of the grant date, and a greater percentage of accelerated vesting if his or her retirement date is on or after the second anniversary of the grant date. The outstanding grants of restricted stock units provide for accelerated vesting of a percentage of the Named Executive’s outstanding units if the date he or she becomes retirement eligible is on or after the first anniversary of the grant date, and a greater percentage of accelerated vesting if he or she becomes retirement eligible on or after the second anniversary of the grant date.

Estimated Value of Benefits to Be Received Upon Termination Due to Death or Disability

The following table shows the value of payments and other benefits due the Continuing Named Executives assuming their death or disability as of December 31, ~~2010.~~

S.M. Johnson P.L. Elders G.L. Carlson L.K. Hinrichs J.T. Nesser
Severance Payments — — — — —
EICP — — — — —
Deferred Compensation Plan $ 76,627 — — $ 24,634 —
Stock Options (unvested and accelerated) $ 3,007,857 $ 441,337 $ 184,383 $ 1,163,174 $ 959,655
Restricted Stock (unvested and accelerated) $ 2,346,494 — — $ 1,287,559 $ 1,611,399
Restricted Stock Units (unvested and accelerated) $ 6,619,641 $ 799,896 $ 815,414 $ 2,699,900 $ 1,935,984

Total
$ 12,050,619 $ 1,241,233 $ 999,797 $ 5,175,267 $ 4,507,038

~~Deferred Compensation Plan.~~ The amount reported represents 100% of Mr. Johnson’s and 27.05% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2010 that would become vested on death or disability. Each of Messrs. Elders and Carlson has a zero balance in his Deferred Compensation Plan account as of December 31, 2010. Mr. Nesser was 100% vested in his

~~Deferred Compensation Plan balance as of December 31, 2010.~~

~~Equity Awards.~~ Under the terms of the awards outstanding for each Named Executive as of December 31, 2010, all unvested stock awards become vested and all unvested option awards become vested and exercisable on death or disability.

2011.

   S.M. Johnson P.L. Elders G.L. Carlson L.K. Hinrichs J.T. McCormack
Severance Payments
—    —    —    —    —
EICP
—    —    —    —    —
Deferred Compensation Plan⁽¹⁾
$ 131,926    $ 32,597    $ 19,611    $ 21,020    $ 30,042
Stock Options⁽²⁾ (unvested and accelerated)
$ 0    $ 0    $ 0    $ 0    $ 0
Restricted Stock Units⁽³⁾ (unvested and accelerated)
$ 3,073,630    $ 408,881    $ 354,796    $ 953,454    $ 591,280
Performance Shares⁽⁴⁾ (unvested)
$ 650,649    $ 162,636    $ 65,055    $ 146,373    $ 205,384
Total
$ 3,856,205    $ 604,114    $ 439,462    $ 1,120,847    $ 826,706
(1) The amounts reported represent 80% of Messrs. Johnson’s, Elders’, Carlson’s, and McCormack’s and 15.62% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2011 that would become vested on death or disability.
(2) Under the terms of the stock option awards outstanding for each of the Continuing Named Executives as of December 31, 2011, all unvested option awards would become vested and exercisable on death or disability. Due to the exercise price of the stock options outstanding and the closing price of our common stock on December 30, 2011, the aggregate value of stock options that would become vested and exercisable on death or disability for all Continuing Named Executives would be $0.
(3) Under the terms of the restricted stock unit awards outstanding for each of the Continuing Named Executives as of December 31, 2011, all unvested restricted stock unit awards would become vested and exercisable on death or disability.
(4) Under the terms of the performance share awards outstanding for each of the Continuing Named Executives as of December 31, 2011, 100% of the initial performance shares granted would vest on the third, fourth and fifth anniversary of the grant date on death or disability. The number of performance shares that would vest is the number of performance shares that would have vested based on actual performance had the Continuing Named Executive remained employed with McDermott until the third, fourth and fifth anniversaries of the grant date. Accordingly, each Continuing Named Executive may vest in a number of performance shares ranging from 0% — 200% of the initial performance shares granted, depending on McDermott’s total shareholder return relative to its peers during the applicable measurement periods. The amounts reported assume a total of 100% of the initial performance shares granted will vest during the applicable measurement periods, valued at the closing price of McDermott stock as reported on the NYSE on December 30, 2011, although the actual value of such performance shares that may vest on the third, fourth and fifth anniversary of the date of grant could be $0 for each Continuing Named Executive and up to $1,301,298 for Mr. Johnson, $325,273 for Mr. Elders, $130,109 for Mr. Carlson, $292,745 for Ms. Hinrichs, and $410,769 for Mr. McCormack, in each case representing a total of 200% of the initial performance shares granted. Additionally, the value of McDermott stock could be greater or less than the amount used to value the performance shares for this table.

Estimated Value of Benefits to Be Received Upon Change in Control

~~The following table shows the estimated value of payments and other benefits due the Continuing Named Executives assuming a change in control and termination as of December 31, 2010.~~

S.M. Johnson P.L. Elders G.L. Carlson L.K. Hinrichs J.T. Nesser
Severance Payments $ 5,024,758 $ 1,378,666 $ 992,000 $ 1,305,748 $ 1,738,126
EICP $ 920,000 $ 329,000 $ 176,000 $ 232,265 $ 358,750
Deferred Compensation Plan $ 76,627 — — $ 24,634 —
Stock Options (unvested and accelerated) $ 3,007,857 $ 441,337 $ 184,383 $ 1,163,174 $ 959,655
Restricted Stock (unvested and accelerated) $ 2,346,494 — — $ 1,287,559 $ 1,611,399
Restricted Stock Units (unvested and accelerated) $ 6,619,641 $ 799,896 $ 815,414 $ 2,699,900 $ 1,935,984

Total
$ 17,995,377 $ 2,948,899 $ 2,167,797 $ 6,713,280 $ 6,603,914

We havechange-in-control agreements with various officers, including each of our Continuing Named Executives. Generally, under these agreements, if a Continuing Named Executive is terminated within one year following a change in control either (1) by the company for any reason other than cause or death or ~~disability;~~disability, or (2) by the Continuing Named Executive for good reason, ~~the company~~McDermott is required to pay the Continuing Named Executive a ~~cash~~ severance payment based on the Continuing Named Executives’ salary and ana severance payment based on the Continuing Named Executives’ target EICP ~~payment.~~percentage. In addition to these payments, the Continuing Named Executive would be entitled to various accrued benefits earned through the date of termination, such as earned but unpaid salary, earned but unused vacation and reimbursements.

Under these agreements, a “change in control” generally occurs on the occurrence of any of the following:

a person becomes the beneficial owner of 30% or more of the combined voting power of McDermott’s then outstanding voting stock unless such acquisition is made directly from McDermott in a transaction approved by a majority of McDermott’s incumbent directors;

individuals who are incumbent directors cease for any reason to constitute a majority of McDermott’s board;


	•	a person becomes the beneficial owner of 30% or more of the combined voting power of McDermott’s then outstanding voting stock unless such acquisition is made directly from McDermott in a transaction approved by a majority of McDermott’s incumbent directors;

	•	~~individuals who are incumbent directors cease for any reason to constitute a majority of McDermott’s board;~~

	•	completion of a merger or consolidation of McDermott with another company or an acquisition by McDermott or its subsidiaries, unless immediately following such merger, consolidation or acquisition: (1) all or substantially all of the individuals or entities that were the beneficial owners of outstanding McDermott voting securities immediately before ~~such merger, consolidation or~~

acquisition beneficially own at least 50% of the then outstanding shares of voting stock of the parent corporation resulting from the merger, consolidation or acquisition in the same relative proportions as their ownership immediately before such merger, consolidation or acquisition; (2) if such merger, consolidation or acquisition beneficially own at least 50% of the then outstanding shares of voting stock of the parent corporation resulting from the merger, consolidation or acquisition in the same relative proportions as their ownership immediately before such merger, consolidation or acquisition; (2) if such merger, consolidation or acquisition

		involves the issuance or payment by McDermott of consideration to another entity or its ~~shareholders,~~stockholders, the total fair market value of such consideration plus the principal amount of the consolidated long-term debt of the entity or business being acquired, does not exceed 50% of the sum of the fair market value of the outstanding McDermott voting stock plus the principal amount of the Company’s consolidated long-term debt; (3) no person beneficially owns 30% or more of the then outstanding shares of the voting stock of the parent company resulting from such merger, consolidation or acquisition; and (4) a majority of the members of the board of directors of the parent corporation resulting from such merger, consolidation or acquisition were incumbent directors of McDermott immediately before such merger, consolidation or acquisition;

	•	completion of the sale or disposition of 50% or more of the assets of McDermott and its subsidiaries on a consolidated basis, unless immediately following such sale or disposition: (1) the individuals and entities that were beneficial owners of outstanding McDermott voting stock immediately before such sale or disposition beneficially own at least 50% of the then outstanding shares of voting

completion of the sale or disposition of 50% or more of the assets of McDermott and its subsidiaries on a consolidated basis, unless immediately following such sale or disposition: (1) the individuals and entities that were beneficial owners of outstanding McDermott voting stock immediately before such sale or disposition beneficially own at least 50% of the then outstanding shares of voting stock of McDermott and of the entity that acquires the largest portion of such assets, and (2) a majority of the members of the McDermott Board (if it continues to exist) and the board of directors of the entity that acquires the largest portion of such assets were incumbent directors of McDermott immediately before the completion of such sale or disposition; or

any other set of circumstances is deemed by the Board in its sole discretion to constitute a change in control.

69The change-in-control agreements do not provide for excise tax gross-ups. They do, however, provide for the potential reduction in payments to the applicable officer in order to avoid excise taxes.

The following table shows the estimated value of payments and other benefits due the Continuing Named Executives assuming a change in control and termination as of December 31, 2011.


	S.M. Johnson		P.L. Elders		G.L. Carlson		L.K. Hinrichs		J.T. McCormack
Salary-Based Severance Payment⁽¹⁾	$	5,658,882	$	1,643,822	$	1,070,466	$	1,402,763	$	1,549,098
EICP-Based Severance Payment⁽²⁾	$	950,000	$	339,500	$	201,600	$	264,000	$	350,000
Deferred Compensation Plan⁽³⁾	$	131,926	$	32,597	$	19,611	$	21,020	$	30,042
Stock Options⁽⁴⁾ (unvested and accelerated)	$	0	$	0	$	0	$	0	$	0
Restricted Stock Units⁽⁴⁾ (unvested and accelerated)	$	3,073,630	$	408,881	$	354,796	$	953,454	$	591,280
Performance Shares⁽⁴⁾ (unvested and accelerated)	$	650,649	$	162,636	$	65,055	$	146,373	$	205,384
Total	$	10,465,087	$	2,587,436	$	1,711,528	$	2,787,610	$	2,725,804

(1)
		stock of McDermott and of the entity that acquires the largest portion of such assets, and (2) a majority of the members of the McDermott Board (if it continues to exist) and the board of directors of the entity that acquires the largest portion of such assets were incumbent directors of McDermott immediately before the completion of such sale or disposition; or


	•	~~any other set of circumstances is deemed by the Board in its sole discretion to constitute a change in control.~~

~~Severance Payment.~~The salary-based severance payment made to each Continuing Named Executive, with the exception of Mr. Johnson, in connection with a change in control would be a cash payment equal to 200% of the sum of his or her annual base salary prior to termination and his or her EICP target award applicable to the year in which the termination occurs. The severance payment made to Mr. Johnson in connection with a change in control would be a cash payment equal to 299% of the sum of his annual base salary prior to termination and his EICP target award applicable to the year in which the termination occurs. The severance payment made to Mr. Johnson in connection with a change in control would be a cash payment equal to 299% of the sum of his annual base salary prior to termination and his EICP target award applicable to the year in which the termination occurs.

For a hypothetical termination as of December 31, ~~2010,~~2011, the salary-based severance payment under a change in control would have been calculated based on the following base salary and target EICP ~~awards:~~


	•	~~Mr. Johnson: $920,000 base salary and $760,521 target EICP;~~
	•	~~Mr. Elders: $470,000 base salary and $219,333 target EICP;~~
	•	~~Mr. Carlson: $320,000 base salary and $176,000 target EICP;~~
	•	~~Ms. Hinrichs: $422,300 base salary and $230,574 target EICP; and~~
	•	~~Mr. Nesser: $512,500 base salary and $356,563 target EICP.~~

awards. See “Grants of Plan-Based ~~Awards — Estimated Possible Payouts Under Non-Equity Incentive Plan~~ Awards” above for more information on the calculation of target EICP awards.




Continuing Named Executive	Annual Base Salary		Target EICP Award
S. M. Johnson	$	950,000	$	942,603
P. L. Elders	$	485,000	$	336,911
G. L. Carlson	$	336,000	$	199,233
L. K. Hinrichs	$	440,000	$	261,381
J. T. McCormack	$	500,000	$	274,549

(2)	Each Continuing Named Executive could receive up to two EICP-based severance payments in connection with a change in control depending on the timing of the termination relative to the payment of an EICP award, as follows:

If an EICP ~~Payment.~~ ~~The EICP is an annual cash-based performance incentive plan under which payments are made in~~award for the year ~~following~~prior to termination is paid to other EICP participants after the date of the Continuing Named Executive’s termination, the Continuing Named Executive would be entitled to a cash payment equal to the product of the Continuing Named Executive’s target EICP percentage (or, if greater, the actual amount of the bonus determined under the EICP for the year prior to termination) and the Continuing Named Executive’s annual base salary for the applicable period. No such payment would have been due a Continuing Named Executive on a December 31, 2011 termination, because the 2010 EICP awards had already been paid prior to the Continuing Named Executive’s termination date.

The Continuing Named Executive would be entitled to a prorated EICP payment based upon the Continuing Named Executive’s target EICP percentage for the year in which ~~performance is measured. For example, 2010~~the termination occurs and the number of days in which the Continuing Named Executive was employed with us during that year. Based on a hypothetical December 31, 2011 termination, each Continuing Named Executive would have been entitled to an EICP ~~awards are paid in~~payment equal to 100% of his or her 2011 ~~for performance achieved during 2010. As a result, depending~~target EICP percentage times annual base salary, calculated based on the ~~timing~~following base salary and target EICP percentage:



Continuing Named Executive	Annual Base Salary		Target EICP Percentage
S. M. Johnson	$	950,000		100	%
P. L. Elders	$	485,000		70	%
G. L. Carlson	$	336,000		60	%
L. K. Hinrichs	$	440,000		60	%
J. T. McCormack	$	500,000		70	%

(3)

The amounts reported represent 80% of Messrs. Johnson’s, Elders’, Carlson’s and McCormack’s and 15.62% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2011 that would become vested in connection with a termination of employment following a change in control. Under the Deferred Compensation Plan, a “change in control” generally occurs if:

a person (other than a McDermott employee benefit plan or a corporation owned by McDermott stockholders in substantially the same proportion as the ownership of McDermott voting shares) is or becomes the beneficial owner of 30% or more of the ~~termination relative~~combined voting power of McDermott’s then outstanding voting stock;

during any period of two consecutive years, individuals who at the beginning of such period constitute McDermott’s Board of Directors, and any new director whose election or nomination by McDermott’s Board was approved by at least two-thirds of the directors of McDermott’s Board then still in office who either were directors at the beginning of the period or whose election or nomination was previously approved, cease to constitute a majority of McDermott’s Board;

a merger or consolidation of McDermott, with any other corporation or entity has been completed, other than a merger or consolidation which results in the outstanding McDermott voting securities immediately prior to such merger or consolidation continuing to represent at least 50% of the combined voting power of the voting securities of McDermott or the surviving entity outstanding immediately after such merger or consolidation;

McDermott’s stockholders approve (1) a plan of complete liquidation of McDermott; or (2) an agreement for the sale or disposition by McDermott of all or substantially all of McDermott’s assets; or

within one year following the completion of a merger or consolidation transaction involving McDermott, (1) individuals who, at the time of execution and delivery of definitive agreements completing such transaction constituted the Board, cease for any reason (excluding death, disability or voluntary resignation) to constitute a majority of the Board; or (2) either individual, who at the first execution and delivery of definitive agreements completing the transaction, served as Chief Executive Officer or Chief Financial Officer does not, for any reason (excluding death, disability or voluntary resignation), serve as the Chief Executive Officer or Chief Financial Officer, as applicable, of McDermott, or if McDermott does not continue as a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, as the Chief Executive Officer or Chief Financial Officer, as applicable, of a corporation or other entity that is (A) a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, and (B) the surviving entity in such transaction or a parent entity of the surviving entity or McDermott following the completion of such transaction; provided, however, that a Change in Control would not be deemed to have occurred pursuant to this clause in the case of a merger or consolidation which results in the voting securities of McDermott outstanding immediately prior to the ~~payment~~completion of ~~an EICP award, a Named Executive could receive up~~the transaction continuing to ~~two~~

represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 55% of the combined voting power of the voting securities of the McDermott or the surviving entity outstanding immediately after such merger or consolidation.

~~EICP payments in connection with a change in control, as follows:~~

(4)
	•	~~If an EICP award for~~Under the ~~year prior to termination is paid to other EICP participants after the date~~terms of the stock option and restricted stock unit awards outstanding, all unvested stock options would become vested and exercisable and all unvested restricted stock units would become vested on a change in control, regardless of whether there is a subsequent termination of employment. Due to the exercise price of the stock options outstanding for our Continuing Named ~~Executive’s~~Executives and the closing price of our common stock on December 30, 2011, the aggregate value of stock options that would become vested and exercisable on a change in control, regardless of whether there is a subsequent termination ~~the Named Executive~~of employment, would be ~~entitled to a cash payment equal to~~$0. Under the ~~product~~terms of the ~~Named Executive’s EICP target~~performance share awards outstanding, the greater of (1) 100% of the initial performance shares granted, or (2) the vested percentage of initial performance shares determined in accordance with the grant agreement would become vested on a change in control, regardless of whether there is a subsequent termination of employment. Under our 2001 D&O Plan and 2009 LTIP, a “change in control” generally occurs under the same circumstances described above with respect to our Deferred Compensation Plan, except that the 2001 D&O Plan and the ~~Named Executive’s annual base salary for~~2009 LTIP do not include, as a change in control event, the ~~applicable period. No such payment would have been due a Named Executive on a December 31, 2010 termination, because~~event described in the ~~2009 EICP awards had already been paid prior to the Named Executive’s termination date.~~

	•	~~The Named Executive would be entitled to a prorated EICP payment based upon the Named Executive’s target award for the year~~last bullet in which the termination occurs and the number of days in which the executive was employed with us during that year. Based on a hypothetical December 31, 2010 termination, each Continuing Named Executive would have been entitled to an EICP payment equal to 100% of his or her 2010 target EICP. See the schedule of target EICP amounts for each Named Executive under “Severance Payment”note (3) above.

~~Deferred Compensation Plan.~~ The amount reported represents 100% of Mr. Johnson’s and 27.05% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2010 that would become vested in connection with a termination of employment following a change in control. Each of Messrs. Elders and Carlson has a zero balance in his Deferred Compensation Plan account as of December 31, 2010. Mr. Nesser was 100% vested in his Deferred Compensation Plan balance as of December 31, 2010. Under the Deferred Compensation Plan, a “change in control” generally occurs if:


	•	a person (other than a McDermott employee benefit plan or a corporation owned by McDermott shareholders in substantially the same proportion as the ownership of McDermott voting shares) is or becomes the beneficial owner of 30% or more of the combined voting power of McDermott’s then outstanding voting stock;

	•	~~during any period of two consecutive years, individuals who at the beginning of such~~

ADVISORY VOTETO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

(ITEM 2)


		period constitute McDermott’s Board of Directors, and any new director whose election or nomination by McDermott’s Board was approved by at least two-thirds of the directors of McDermott’s Board then still in office who either were directors at the beginning of the period or whose election or nomination was previously approved, cease to constitute a majority of McDermott’s Board;


	•	a merger or consolidation of McDermott, with any other corporation or entity has been completed, other than a merger or consolidation which results in the outstanding McDermott voting securities immediately prior to such merger or consolidation continuing to represent at least 50% of the combined voting power of the voting securities of McDermott or the surviving entity outstanding immediately after such merger or consolidation;

	•	~~McDermott’s stockholders approve (1) a plan of complete liquidation of McDermott; or (2) an agreement for the sale or disposition by McDermott of all or substantially all of McDermott’s assets;~~

	•	within one year following the completion of a merger or consolidation transaction involving McDermott, (1) individuals who, at the time of execution and delivery of definitive agreements completing such transaction constituted the Board, cease for any reason (excluding death, disability or voluntary resignation) to constitute a majority of the Board; or (2) either individual, who at the first execution and delivery of definitive agreements completing the transaction, served as Chief Executive Officer or Chief Financial Officer does not, for any reason (excluding death, disability or voluntary resignation), serve as the Chief Executive Officer or Chief Financial Officer, as applicable, of McDermott, or if McDermott does not continue as a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act


		of 1934, as amended, as the Chief Executive officer or Chief Financial Officer, as applicable, of a corporation or other entity that is (A) a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, and (B) the surviving entity in such transaction or a parent entity of the surviving entity or McDermott following the completion of such transaction; provided, however, that a Change in Control shall not be deemed to have occurred pursuant to this clause in the case of a merger or consolidation which results in the voting securities of the McDermott outstanding immediately prior to the completion of the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 55% of the combined voting power of the voting securities of the McDermott or the surviving entity outstanding immediately after such merger or consolidation.

~~TaxGross-Up.~~ ~~Thechange-in-control~~ ~~agreements do not provide for excise taxgross-ups.~~

~~Equity Awards.~~ Under the terms of the awards outstanding, all unvested restricted stock and restricted stock units would become vested on a change in control, regardless of whether there is a subsequent termination of employment. All unvested stock options would become vested and exercisable on a change in control, regardless of whether there is a subsequent termination of employment. Under our 2001 D&O Plan and 2009 LTIP, a “change in control” generally occurs under the same circumstances described above with respect to our Deferred Compensation Plan, except that the 2001 D&O Plan and the 2009 LTIP do not include, as a change in control event, the event described in the last bullet above under “Deferred Compensation Plan.”

~~Excise Tax Cutback Provision.~~ ~~Thechange-in-control~~ ~~agreements provide for the potential reduction in payments to the applicable officer in order to avoid excise taxes.~~

~~Advisory Vote on Executive Compensation~~

~~(Item 2)~~

As required by Section 14A(a)(1) of the Exchange Act, we are providing our stockholders with an advisory vote onto approve named executive officer compensation.

The Compensation Committee has overall responsibility for our compensation plans, policies and programs with respect to the Named Executives. Additional information regarding the Compensation Committee and its role is described under “Compensation Discussion and Analysis” and the related tables and narrative disclosures. Our compensation programs are based on our belief that our ability to attract, retain and motivate qualified employees to develop, expand and execute sound business opportunities is essential to the success of our company. To that end, the Compensation Committee, with the assistance of its compensation consultant, designs and administers compensation programs with the participation of our management. These programs generally seek to provide compensation that:

incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and

promotes retention of well-qualified executives, while aligning the interests of our executives with those of our stockholders.


	•	~~incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and~~

	•	~~promotes retention of well-qualified executives, while aligning the interests of our executives with those of our stockholders.~~

We believe our compensation programs motivate and retain the Continuing Named Executives, while allowing for appropriate levels of business risk through some of the following features:


	•		Reasonable ~~and Competitive~~ Compensation Programs — Using the elements of total direct compensation, the Compensation Committee seeks to provide compensation opportunities for ~~the Named Executives~~employees targeted ~~within approximately 15% of~~at or near the median compensation of comparable positions in our market. As a result, we believe the total direct compensation of ~~the Named Executives~~executive officer employees provides ana reasonable and appropriate mix of cash and equity, annual and longer-term incentives, and performance metrics.

•

Emphasize Long-Term Incentive Over Annual Incentive Compensation — Long-term incentive compensation typically makes up a larger percentage of ~~a Named Executive’s~~an executive officer employee’s total direct ~~compensation than~~compen-


		sation than annual incentive compensation. Incentive compensation helps drive performance and align the interests of ~~the Named Executives~~those employees with those of stockholders. ~~Furthermore,~~In addition, tying a significant portion of ~~a Named Executive’s~~an employee’s total direct compensation to long-term incentives (which typically vest over a period of three or more years) helps to promote longer-term perspectives regarding ~~company~~our company’s performance.

	•		Clawback Policy — The Compensation Committee has adopted a policy under which McDermott shall seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank ~~Wall-Street~~Wall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

	•		Long-Term Incentive Compensation Subject to Forfeiture — The Compensation Committee may terminate any outstanding stock award if the recipient, while employed by McDermott or performing services on behalf of McDermott under any consulting agreement: (1) is convicted of a misdemeanor involving fraud, dishonesty or moral turpitude or a ~~felony,~~felony; or (2) engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, our business reputation or economic interests.

	•		Linear and Capped Incentive Compensation Payouts — The Compensation Committee establishes financial performance goals which are used to plot a linear payout formula for annual incentive compensation, eliminating payout “cliffs” between the established performance goals. The maximum payout for the annual incentive compensation is capped at 200% ~~percent~~ of target.

•

Use of Multiple and Appropriate Performance Metrics — Utilizing diversified performance measures helps prevent compensation opportunities from being overly weighted toward the performance

result of a single measure. In general, our incentive programs are historically based on a mix of financial and individual goals. In recent years our primary financial


		performance metric has been operating income. ~~Operating~~Compared to other financial metrics, operating income is a measure of the profitability of our ~~business. Use of this measure~~business which helps drive accountability at our operating segments thereby reducing risks related to incentive compensation by putting the focus on quality of revenues not quantity. Additionally, commencing in 2011, the Compensation Committee utilized total shareholder return and return on invested capital as additional performance measures.


	•		Stock Ownership Guidelines — ~~The Named Executives~~Our executive officers and directors are subject to share ownership guidelines which also helps promote longer-term perspectives and align the interests of ~~the Named Executives~~our executive officers and directors with those of our stockholders. In 2010, we increased the stock ownership requirements for both our ~~Named Executives~~executive officers and nonemployee directors to further ~~promote~~emphasize this alignment of interests.

~~As discussed~~

Reflecting these compensation objectives, compensation arrangements in ~~more detail under “Compensation Discussion and Analysis,” the compensation payments we made to several~~2011 for our Continuing Named Executives resulted in:

target total direct compensation within approximately 15% of the median compensation for officers in ~~2010 included~~comparable positions in our market, with the exception of Mr. Johnson, whose target total direct compensation was set slightly above market due to his demonstrated leadership following the Spin-off;

performance-based compensation accounting for over 60% of target total direct compensation, on average, as compared to 46% in 2010; and

performance-based compensation, accounting for 75% of target long-term incentive compensation, as compared to 50% in 2010.

McDermott’s financial performance in 2011 included:

Consolidated revenue of $3.4 billion, as compared to $2.4 billion for 2010;

Consolidated operating income of $250.7 million, as compared to $314.9 million for 2010; and

Consolidated ROIC of 8%.

Operationally, in 2011 McDermott also:

Achieved backlog of $3.88 billion as of December 31, 2011;

Achieved substantial ~~payments, primarily~~growth in our Asia Pacific segment, as reflected by increases of over 115% in both revenue and operating income in the segment as compared to 2010;

Amended/refinanced our credit facility to extend the scheduled maturity date, provide additional liquidity, obtain improved covenants and reduce fees; and

Established a joint venture entity which we co-own with two Brazilian companies, which joint venture plans to bid to provide engineering, procurement and construction (“EPC”) services to the oil and gas industry offshore Brazil.

Under McDermott’s 2011 compensation program,

None of the Continuing Named Executives were awarded bonuses under the 2011 EICP. Based on McDermott’s 2011 financial results, the Continuing Named Executives were eligible to earn approximately 18% of their respective 2011 target EICP compensation, subject to the assessment of their respective individual goals. Upon the recommendation of Mr. Johnson based on the 2011 financial results, the Compensation Committee, in the exercise of its discretion, determined that, although the Continuing Named Executives and other participants in the EICP were eligible to earn approximately 18% of their target EICP compensation, 0% would be awarded in light of the financial results. Instead, as recommended by Mr. Johnson, the Compensation Committee determined that the bonus amounts that otherwise would have been payable should effectively be returned to the shareholders in the form of ~~restricted stock grants, made pursuant to retention agreements we entered into~~additional operating income. In making this recommendation and decision, respectively, Mr. Johnson and the Compensation Committee considered the increase in contemplation of the Spin-off. We entered into those retention agreements to assist in our efforts to retain the Named Executives through the spin-off process and to motivate them to contribute towards the successful completion of the Spin-off, which was completed on July 30, 2010. Upon completion of the Spin-off, one of the Named Executives retired and became the Chairman of the Board of B&W, and two of the Named Executives became the CEO and CFO, respectively, of B&W.2011


	•	~~target total direct compensation within approximately 15% of the median~~


		revenues of approximately 43%, together with the decrease in 2011 operating income by approximately 20% from 2010 levels, the continued performance issues in the Atlantic segment and issues relating to several projects in other segments.

individual performance components based on Mr. Johnson’s assessment of their respective individual performance achievements against stated goals, with the exception of the financial performance goal and a safety goal for Mr. McCormack.

2011 Performance-Based Compensation Opportunity vs. Realizable Value as of December 31, 2011


	EICP⁽¹⁾		Performance Shares⁽²⁾⁽³⁾		Stock Options⁽²⁾⁽³⁾		Total
S. M. Johnson
2011 Opportunity	$	942,603	$	2,382,132	$	944,089	$	4,268,824
2011 Realizable Value	$	0	$	0	$	0	$	0
P. L. Elders
2011 Opportunity	$	336,911	$	595,438	$	236,000	$	1,168,349
2011 Realizable Value	$	0	$	0	$	0	$	0
G. L. Carlson
2011 Opportunity	$	199,233	$	238,175	$	94,406	$	531,814
2011 Realizable Value	$	0	$	0	$	0	$	0
L. K. Hinrichs
2011 Opportunity	$	261,381	$	535,894	$	212,421	$	1,009,696
2011 Realizable Value	$	0	$	0	$	0	$	0
J. T. McCormack
2011 Opportunity	$	274,549	$	634,020	$	253,847	$	1,162,416
2011 Realizable Value	$	0	$	0	$	0	$	0

(1)	2011 Opportunity Values for ~~officers~~EICP are disclosed at the Continuing Named Executives’ target EICP award. The 2011 Opportunity Value provided for Mr. McCormack reflects his target EICP award following his promotion to EVP, COO.

(2)	2011 Opportunity Values for performance shares and stock options are disclosed at the grant date fair value of the respective awards.

(3)	The 2011 Realizable Values shown above are measured as of December 31, 2011. However, the amount of the performance shares granted in ~~comparable positions~~2011 that ultimately vest, if any, will be determined by reference to our total shareholder return over three-, four- and five-year periods. See “Long-Term Incentive Compensation — Analysis of 2011 Equity Grants.” The vesting of any of these performance shares would impact the future Realizable Value of these performance share awards. In addition, an increase in our ~~market, with~~stock price compared to our stock price at December 31, 2011 may impact the ~~exception of Messrs. Elders and Nesser;~~

	•	~~performance-based compensation accounting for over 46% of target total direct compensation, on average; and~~

	•	~~performance-based compensation accounting for 50% of target long-term incentive compensation.~~

~~The performance-based compensation that was paid out in 2010 reflected the Compensation Committee’s commitment to pay for performance.~~

~~Highlights of McDermott’s performance in 2010 include:~~


	•	~~Completion~~future Realizable Value of the ~~Spin-off on July 30, 2010;~~

	•	~~Consolidated operating income of $314.9 million, which was the primary metric for annual incentive compensation for our Named Executives;~~

	•	~~Stock price appreciation from December 31, 2009 to December 31, 2010 of approximately 65%, excluding the value attributable to the distribution of B&W common~~ stock option awards granted in ~~the Spin-off.~~2011.

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

“RESOLVED, that the compensation paid to the Named Executives, as disclosed pursuant to Item 402 ofRegulation S-K, including the Compensation Discussion and Analysis, compensation tables and

accompanying narrative discussion in McDermott’s proxy statement relating to its ~~2011~~2012 annual meeting of stockholders is hereby APPROVED.”

While the resolution is non-binding, the Board of Directors plans to consider the outcome of the vote when making future compensation decisions.

~~Advisory Vote on the Frequency of~~
~~Advisory Votes on Executive Compensation~~

~~(Item 3)~~

As required by Section 14A(a)(2) of the Exchange Act, we are providing our stockholders with an advisory vote to determine whether the stockholder vote on executive compensation should occur every one, two or three years.

We believe having an advisory vote on executive compensation every year, rather than every two or three years, should help our stockholders evaluate our executive compensation and communicate their approval or disapproval to us on a prompt basis as is practicable.

~~For the reasons discussed above, the Board of Directors recommends that stockholders vote to hold the advisory vote on executive compensation every~~

year. Stockholders are not voting, however, to approve or disapprove of this particular recommendation. The proxy card provides for four choices and stockholders are entitled to vote on whether the advisory vote on executive compensation should be held every one, two or three years, or to abstain from voting.

While the result of this advisory vote on the frequency of the vote on executive compensation is non-binding, the Board of Directors plans to consider the outcome of the vote when deciding how frequently to conduct the vote on executive compensation.

~~The Board of Directors unanimously recommends that you vote to hold the advisory vote on executive compensation EVERY YEAR.~~

AUDIT COMMITTEE REPORT

~~Approval of the Company’s~~
~~Executive Incentive Compensation Plan~~

~~(Item 4)~~

Since 2001, we have utilized our Executive Incentive Compensation Plan, effective February 1, 2001. Effective February 28, 2006, our Board adopted the amended and restated Executive Incentive Compensation Plan (the “EICP”) to provide annual incentive compensation to various employees, including our executive officers. Our Board approved the most recent version of the EICP, which is described below, on February 28, 2011. Stockholder approval of the EICP is necessary at least once every five years in order for awards paid under the EICP to be considered “performance-based compensation” under Internal Revenue Code Section 162(m).

~~Summary of the EICP~~

~~The following summary of the EICP is qualified in its entirety by reference to the full text of the EICP, which is attached as Appendix A to this Proxy Statement.~~

The EICP is administered by the Compensation Committee of our Board of Directors, composed entirely of non-management, independent directors appointed by our Board of Directors. All of our employees are eligible to participate in the EICP. Our Chief Executive Officer automatically participates in the EICP, and the participants are selected by the Compensation Committee, in its sole discretion. During 2010, 20 employees participated in the EICP, not including those employees who participated in the EICP prior to the Spin-off.

Under the EICP, the Compensation Committee establishes, for each plan year, performance goals and award opportunities. The award opportunities correspond to various levels of achievement of the preestablished performance goals based on combinations of one or more corporate, group, divisional or individual goals. The award opportunity is typically based on the achievement of preestablished targeted performance goals, including company, group or division performance. The potential final award varies in relation to the various levels of achievement of the preestablished performance goals with a minimum or “threshold” performance achievement required before there is any payout and a limitation on the maximum payout. Performance goals and measures used to determine

~~award opportunities are based on one or more of the following criteria:~~


	•	~~revenue and income measures (which include revenue, gross margin, income from operations, net income, net sales and earnings per share);~~

	•	~~expense measures (which include costs of goods sold, sales, general and administrative expenses and overhead costs);~~

	•	~~operating measures (which include volume, margin, breakage and shrinkage, productivity and market share);~~

	•	~~cash flow measures (which include net cash flow from operating activities and working capital);~~

	•	~~liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, cash flow and free cash flow);~~

	•	~~leverage measures (which include equity ratio and net debt);~~

	•	~~market measures (including those relating to market price, stock price, total shareholder return and market capitalization measures);~~

	•	return measures (which include return on equity, return on assets, cash flow return on assets, cash flow return on capital, cash flow return on equity, return on capital and return on invested capital);

	•	~~corporate value measures (which include compliance, safety, environmental and personnel matters);~~

	•	~~other measures such as those relating to acquisitions, dispositions or customer satisfaction; and~~

	•	~~other measures consistent with deductibility under Section 162(m).~~

Once established, performance goals normally are not changed during the plan year. However, the Compensation Committee may adjust performance goals to account for changes in accounting principles and the occurrence of external changes or other

unanticipated business conditions that may materially affect the fairness of the goals or unduly influence our ability to meet them, to the extent permitted under Section 162(m). The Compensation Committee has the authority to reduce or eliminate final awards, based on any criteria it deems appropriate. In addition, the Compensation Committee may use such other performance goals and measures, including subjective measures, and make adjustments to performance goals and measures during the plan year, if the Compensation Committee determines that compliance with Section 162(m) is not desired.

Following the end of each plan year, awards are computed for each plan participant. The EICP places a $3 million limit on payouts to any one plan participant in respect of any one-year period. The Board of Directors may amend the EICP from time to time.

~~EICP Benefits~~

Future benefits that will be received under the EICP by particular individuals or groups cannot be determined at this time. For the year ended December 31, 2010, approximately $6,749,444 in cash bonuses were paid to our employees under the EICP, of which approximately $4,766,960 was paid to the Company’s executive officers as a group. The cash bonus paid to the Named Executives is described above under “Compensation Discussion and Analysis — Annual Incentive Compensation.” Performance goals and award opportunities were established for certain of our officers, including the Continuing Named Executives, in February 2011. The award

~~opportunities for certain of these officers, including the Continuing Named Executives, are subject to stockholder approval of the EICP.~~

~~Recommendation and Vote Required~~

Our Board of Directors unanimously recommends a vote “FOR” approval of the EICP. We believe strongly that the EICP has served as an essential component of compensation, allowing us to provide reasonable incentives to and reward the performance results achieved by executive officers and other key employees in a manner most favorable to our stockholders. Approval of this proposal requires the affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote and actually voting on this proposal at the Annual Meeting. Because abstentions are not actual votes with respect to this proposal, they will have no effect on the outcome of the vote on this proposal. In general, brokers do not have discretionary authority on proposals relating to executive compensation. Therefore, absent instructions from you, your broker may not vote your shares on this proposal. Broker non-votes will have no effect on the vote.

Stockholder approval of the EICP is only necessary for awards under the EICP to be considered “performance-based compensation” under Internal Revenue Code Section 162(m). In the event this proposal is not approved by stockholders, the Board of Directors may continue to make awards under the EICP.

~~Audit Committee Report~~

The Board of Directors appoints an Audit Committee to review McDermott International, Inc.’s financial matters. Each member of the Audit Committee meets the independence requirements established by the New York Stock Exchange. The Audit Committee is responsible for the appointment, compensation, retention and oversight of McDermott’s independent registered public accounting firm. We are also responsible for recommending to the Board that McDermott’s audited financial statements be included in its Annual Report onForm 10-K for the fiscal year.

In making our recommendation that McDermott’s financial statements be included in its Annual Report onForm 10-K for the year ended December 31, ~~2010,~~2011, we have taken the following steps:

We discussed with Deloitte & Touche LLP (“D&T”), McDermott’s independent registered public accounting firm for the year ended December 31, 2011, those matters required to be discussed by Statements on Auditing Standards No. 61, as amended, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, including information regarding the scope and results of the audit. These communications and discussions are intended to assist us in overseeing the financial reporting and disclosure process.

We conducted periodic executive sessions with D&T, with no members of McDermott management present during those discussions. D&T did not identify any material audit issues, questions or discrepancies, other than those previously discussed with management, which were resolved to the satisfaction of all parties.


	•	We discussed with Deloitte & Touche LLP (“D&T”), McDermott’s independent registered public accounting firm for the year ended December 31, 2010, those matters required to be discussed by Statements on Auditing Standards No. 114, each as amended, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, including information regarding the scope and results of the audit. These communications and discussions are intended to assist us in overseeing the financial reporting and disclosure process.

	•	We conducted periodic executive sessions with D&T, with no members of McDermott management present during those discussions. D&T did not identify any material audit issues, questions or discrepancies, other than those previously discussed with management, which were resolved to the satisfaction of all parties.

	•	~~We conducted periodic executive sessions with McDermott’s internal audit department and regularly received reports regarding McDermott’s internal control procedures.~~

	•	We reviewed, and discussed with McDermott’s management and D&T, management’s report and D&T’s report and attestation on internal control over financial reporting, each of which was prepared in accordance with Section 404 of the Sarbanes-Oxley Act.

	•	We received and reviewed the written disclosures and the letter from D&T required by applicable requirements of the Public Company Accounting Oversight Board regarding D&T’s communications with the audit committee concerning D&T’s independence from McDermott, and have discussed with D&T their independence from McDermott. We also considered whether the provision of nonaudit services to McDermott is compatible with D&T’s independence.

	•	~~We determined that there were no former D&T employees, who previously participated in the McDermott audit, engaged in a financial reporting oversight role at McDermott.~~

	•	We reviewed, and discussed with McDermott’s management and D&T, McDermott’s audited consolidated balance sheet at December 31, 2010, and consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for the year ended December 31, 2010.

We conducted periodic executive sessions with McDermott’s internal audit department and regularly received reports regarding McDermott’s internal control procedures.

We reviewed, and discussed with McDermott’s management and D&T, management’s report and D&T’s report and attestation on internal control over financial reporting, each of which was prepared in accordance with Section 404 of the Sarbanes-Oxley Act.

We received and reviewed the written disclosures and the letter from D&T required by applicable requirements of the Public Company Accounting Oversight Board regarding D&T’s communications with the audit committee concerning D&T’s independence from McDermott, and have discussed with D&T its independence from McDermott. We also considered whether the provision of non-audit services to McDermott is compatible with D&T’s independence.

We determined that there were no former D&T employees, who previously participated in the McDermott audit, engaged in a financial reporting oversight role at McDermott.

We reviewed, and discussed with McDermott’s management and D&T, McDermott’s audited consolidated balance sheet at December 31, 2011, and consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for the year ended December 31, 2011.

Based on the reviews and actions described above, we recommended to the Board that McDermott’s audited financial statements be included in its Annual Report onForm 10-K for the year ended December 31, ~~2010~~2011 for filing with the Securities and Exchange Commission.

THE AUDIT COMMITTEE

David A. Trice, Chairman

Stephen G. Hanks

D. Bradley McWilliams

RATIFICATIONOF APPOINTMENTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMFOR YEAR ENDING DECEMBER 31, 2012

(ITEM 3)

~~Ratification of Appointment of Independent Registered Public Accounting Firm for Year Ending December 31, 2011~~

~~(Item 5)~~

Our Board of Directors has ratified the decision of the Audit Committee to appoint Deloitte & Touche LLP to serve as the independent registered public accounting firm to audit our financial statements for the year ending December 31, ~~2011.~~2012. Although we are not required to seek stockholder approval of this appointment, it has been our practice to do so. No determination has been made as to what action the Audit Committee and the Board of Directors would take if our stockholders fail to ratify the appointment. Even if the appointment is ratified, the Audit Committee retains discretion to appoint a new independent registered public accounting firm at any time if the Audit Committee concludes such a change would be in the best interests of McDermott. Representatives of ~~Deloitte & Touche LLP are expected to~~D&T will be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so and to respond to appropriate questions.

For the years ended December 31, ~~2010~~2011 and ~~2009,~~2010, McDermott paid Deloitte & Touche fees, including expenses and taxes, totaling ~~$5,888,537~~$3,621,356 and ~~$8,649,858,~~$5,888,537, which can be categorized as follows:

2010 2009
Audit

The Audit fees for the years ended December 31, 2010 and 2009 were for professional services rendered for the audits of the consolidated financial statements of McDermott, the audit of McDermott’s internal control over financial reporting, statutory and subsidiary audits, reviews of the quarterly consolidated financial statements of McDermott and assistance with review of documents filed with the SEC $ 3,992,500 ⁽¹⁾ $ 7,195,103
Audit-Related

The Audit-Related fees for the years ended December 31, 2010 and 2009 were for assurance and related services, employee benefit plan audits and advisory services related to Sarbanes-Oxley Section 404 compliance $ 518,205 ⁽²⁾ $ 271,405
Tax

The Tax fees for the years ended December 31, 2010 and 2009 were for professional services rendered for consultations on various U.S. federal, state and international tax matters, international tax compliance and tax planning, and assistance with tax examinations $ 1,232,498 ⁽³⁾ $ 916,131
All Other

The fees for All Other services for the years ended December 31, 2010 and 2009 were for professional services rendered for translation services and other advisory or consultation services not related to audit or tax $ 145,334 ⁽⁴⁾ $ 267,219
Total
$ 5,888,537 $ 8,649,858


	2011		2010
Audit
The Audit fees for the years ended December 31, 2011 and 2010 were for professional services rendered for the audits of the consolidated financial statements of McDermott, the audit of McDermott’s internal control over financial reporting, statutory and subsidiary audits, reviews of the quarterly consolidated financial statements of McDermott and assistance with review of documents filed with the SEC.	$	3,220,477	$	3,992,500	⁽¹⁾
Audit-Related
The Audit-Related fees for the years ended December 31, 2011 and 2010 were for assurance and related services, employee benefit plan audits and advisory services related to Sarbanes-Oxley Section 404 compliance.	$	114,367	$	518,205	⁽²⁾
Tax
The Tax fees for the years ended December 31, 2011 and 2010 were for professional services rendered for consultations on various U.S. federal, state and international tax matters, international tax compliance and tax planning, and assistance with tax examinations.	$	286,512	$	1,232,498	⁽³⁾
All Other
The fees for All Other services for the years ended December 31, 2011 and 2010 were for professional services rendered for translation services and other advisory or consultation services not related to audit or tax.	$	0	$	145,334	⁽⁴⁾
Total	$	3,621,356	$	5,888,537


(1)		Audit fees for 2010 include $215,000 of fees paid by McDermott attributable to the audit of B&W.

(2)		Audit-Related fees for 2010 include $480,205 of fees paid by McDermott attributable to audit-related services for B&W.

(3)		Tax fees for 2010 include $91,800 of fees paid by McDermott attributable to tax services for B&W.

(4)

All Other fees for 2010 include $140,000 of fees paid by McDermott attributable to other services for B&W.

It is the policy of our Audit Committee to preapprove all audit, review or attest engagements and permissible non-audit services to be performed by our independent registered public accounting firm, subject to, and in compliance with, thede minimisexception for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 and the applicable rules and regulations of the SEC. Our Audit Committee did not rely on thede minimisexception for any of the fees disclosed above.

Recommendation and Vote Required

Our Board of Directors recommends that stockholders vote “FOR” the ratification of the decision of our Audit Committee to appoint Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, ~~2011.~~2012. The proxy holders will vote all proxies received for approval of this proposal unless instructed otherwise. Approval of this proposal requires the affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote and actually voting on this proposal at the Annual Meeting. Because abstentions are not actual votes with respect to this proposal, they have no effect on the outcome of the vote on this proposal.

SECURITY OWNERSHIPOF DIRECTORSAND EXECUTIVE OFFICERS

~~Security Ownership of Directors and Executive Officers~~

The following table sets forth the number of shares of our common stock beneficially owned as of February ~~28, 2011~~29, 2012 by each director or nominee as a director, and each Named Executive and all our directors and executive officers as a group, including shares that those persons have the right to acquire within 60 days on the vesting of restricted stock units or the exercise of stock options.


Name			Shares Beneficially Owned
	~~Shares~~
	~~Beneficially~~
~~Name~~	~~Owned~~
~~Brandon C. Bethards~~		0
John F. Bookout, III⁽¹⁾		~~34,244~~40,106
Roger A. Brown⁽²⁾		~~68,904~~74,766
~~Ronald C. Cambre~~ Gary L. Carlson⁽³⁾		~~33,933~~44,423
~~Gary~~ Perry L. ~~Carlson~~Elders⁽³⁾⁽⁴⁾		~~21,572~~41,030
~~Perry L. Elders~~⁽⁴⁾ Stephen G. Hanks		2616,620
~~John A. Fees~~ Liane K. Hinrichs⁽⁵⁾		~~36,444~~205,715
Stephen ~~G. Hanks~~M. Johnson⁽⁶⁾		~~10,758~~514,834
~~Liane K. Hinrichs~~ D. Bradley McWilliams⁽⁶⁾⁽⁷⁾		~~228,953~~70,671
~~Stephen M. Johnson~~ John T. McCormack⁽⁷⁾⁽⁸⁾		~~316,398~~70,845
~~D. Bradley McWilliams~~ John T. Nesser⁽⁸⁾⁽⁹⁾		~~64,809~~409,470
~~John T. Nesser~~ Thomas C. Schievelbein^(9)(10)		~~617,046~~103,108
~~Thomas C. Schievelbein~~⁽¹⁰⁾ Mary Shafer-Malicki		~~97,246~~6,790
~~Mary Shafer-Malicki~~ David A. Trice		016,165
~~Michael S. Taff~~⁽¹¹⁾		~~90,537~~
~~David A. Trice~~		~~10,303~~
All directors and executive officers as a group ~~(23~~(16 persons)^(12)(11)		~~2,095,844~~1,938,545


(1)		Shares owned by Mr. Bookout include 6,105 shares of common stock that he may acquire on the exercise of stock options, as described above.

(2)		Shares owned by Mr. Brown include 38,085 shares of common stock that he may acquire on the exercise of stock options, as described above.

(3)		Shares owned by Mr. Carlson include ~~8,396~~20,064 shares of common stock that he may acquire on the exercise of stock options, as described above, ~~13,136~~14,654 shares of common stock that he will acquire on the vesting of restricted stock units, as described above, and 4042 shares of common stock held in the McDermott Thrift Plan.

(4)		Shares owned by Mr. Elders include 26 shares of common stock held in the McDermott Thrift Plan. Not included are 12,886 shares of common stock that Mr. Elders will acquire on the vesting of restricted stock units on May 13, 2011 and 20,09728,274 shares of common stock that he may acquire on the exercise of stock options, ~~at any time after they vest~~as described above, 3,250 shares of common stock that he will acquire on ~~May 13, 2011.~~

~~(5)~~		~~Shares owned by Mr. Fees include 17,796~~the vesting of restricted stock units, as described above, and 27 shares of common stock held in the McDermott Thrift Plan. ~~Not included in this amount are 142,445 restricted stock units in which Mr. Fees is 100% vested, but which have not settled pursuant to the terms of his retention agreement.~~


~~(6)~~	(5)	Shares owned by Ms. Hinrichs include ~~62,231 restricted shares of common stock as to which she has sole voting power but no dispositive power, 42,306~~64,772 shares of common stock that she may acquire on the exercise of stock options, as described above, ~~57,760~~65,975 shares of common stock that she will acquire on the vesting of restricted stock units, as described above, and ~~2,857~~2,980 shares of common stock held in the McDermott Thrift Plan.


~~(7)~~	(6)	Shares owned by Mr. Johnson include ~~113,412 restricted shares of common stock as to which he has sole voting power but no dispositive power, 132,447~~297,605 shares of common stock that he may acquire on the exercise of stock options, as described above, ~~31,830~~44,831 shares of common stock that he will acquire on the vesting of restricted stock units, as described above, and ~~611~~637 shares of common stock held in the McDermott Thrift Plan.


~~(8)~~	(7)	Shares owned by Mr. McWilliams include 37,876 shares of common stock that he may acquire on the exercise of stock options, as described above.


~~(9)~~	(8)	Shares owned by Mr. ~~Nesser~~McCormack include ~~77,883 restricted shares of common stock as to which he has sole voting power but no dispositive power, 34,859~~34,994 shares of common stock that he may acquire on the exercise of stock options, as described above, ~~53,526~~34,546 shares of common stock that he will acquire on the vesting of restricted stock units, as described above, and ~~14,480~~1,305 shares of common stock held in the McDermott Thrift Plan.

(9)

Shares owned by Mr. Nesser include 62,121 shares of common stock held in a grantor retained annuity trust of which he is trustee and has indirect beneficial ownership, 69,717 shares of common stock that he may acquire on the exercise of stock options, as described above, and 8,276 shares of common stock that he will acquire on the vesting of restricted stock units.

(10)		Shares owned by Mr. Schievelbein include 72,538 shares of common stock that he may acquire on the exercise of stock options, as described above.

(11)		Shares owned by Mr. Taff include 2,225 restricted shares of common stock as to which he has sole voting power but no dispositive power, 37,876 shares of common stock that he may acquire on the exercise of stock options, as described above, and 50,436 shares of common stock that he will acquire on the vesting of restricted stock units, as described above.

~~(12)~~		Shares owned by all directors and executive officers as a group include ~~261,151 shares of common stock as to which they have sole voting power but no dispositive power, 594,914~~792,219 shares of common stock that may be acquired on the exercise of stock options, as described above, ~~299,989~~213,188 shares of common stock that may be acquired on the vesting of restricted stock units, as described above, and ~~59,841~~23,172 shares of common stock held in the McDermott Thrift Plan.

Shares beneficially owned in all cases constituted less than one percent of the outstanding shares of common stock on February ~~28, 2011,~~29, 2012, as determined in accordance withRule 13d-3(d)(1) under the Securities Exchange Act of 1934.

~~Security Ownership of Certain Beneficial Owners~~SECURITY OWNERSHIPOF CERTAIN BENEFICIAL OWNERS

The following table furnishes information concerning all persons known by us to beneficially own 5% or more of our outstanding shares of common stock, which is our only class of voting stock outstanding:


Title of Class
		~~Amount and~~
		~~Nature of~~
		~~Beneficial~~			~~Percent of~~
~~Title of Class~~	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class⁽¹⁾
Common Stock	T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202		37,243,988	⁽²⁾		~~34,137,175~~⁽²15.84	%
Common Stock	BlackRock, Inc. 40 East 52^)nd Street New York, NY 10022		15,391,846	⁽³⁾		~~14.59~~6.55	%
Common Stock	Artisan Partners Holdings LP 875 East Wisconsin Avenue Suite 800 Milwaukee, WI 53202		13,551,800	⁽⁴⁾		5.77	%
Common Stock
~~Common Stock~~	~~BlackRock, Inc.~~ ~~40 East 52nd Street~~ ~~New York, NY 10022~~		~~19,075,409~~⁽³	⁾		~~8.15~~	%

~~Common Stock~~	PRIMECAP Management Company 225 South Lake Ave., #400 Pasadena, CA 91101		12,406,760	⁽⁵⁾		~~13,123,360~~⁽⁴5.28	%
Common Stock	FMR LLC 82 Devonshire Street Boston, MA 02109	⁾	11,820,617	⁽⁶⁾		~~5.61~~5.03	%


(1)		Percent is based on outstanding shares of our common stock on February ~~28, 2011.~~29, 2012.

(2)		As reported onSchedule 13G/A filed with the SEC on February 10, ~~2011.~~2012. TheSchedule 13G/A reports beneficial ownership of ~~34,137,175~~37,243,988 shares of our common stock by T. Rowe Price Associates, Inc. (“Price Associates”), which has sole voting power over ~~8,636,609~~8,642,022 shares and sole dispositive power over ~~34,137,175~~37,243,988 shares. These securities are owned by various individual and institutional investors, including T. Rowe Price Mid-Cap Growth Fund, which has sole voting power over ~~12,500,000~~13,000,000 shares and sole dispositive power over no shares, for which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be the beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.

(3)		As reported on Schedule 13G/A filed with the SEC on February ~~7, 2011.~~13, 2012. The Schedule 13G/A reports beneficial ownership of ~~19,075,409~~15,391,846 shares of our common stock and sole voting power and sole dispositive power over ~~19,075,409~~15,391,846 shares.

(4)	As reported on Schedule 13G filed on February 7, 2012. The Schedule 13G reports beneficial ownership of 13,551,800 shares of our common stock, shared voting power over 13,219,900 shares and shared dispositive power over 13,551,800 shares.

(5)

As reported on Schedule 13G/A filed with the SEC on February ~~14, 2011.~~13, 2012. The Schedule 13G/A reports beneficial ownership of ~~13,123,360~~12,406,760 shares of our common stock, sole voting power over ~~7,600,160~~6,929,160 shares and sole dispositive power over ~~13,123,360~~12,406,760 shares.

(6)

As reported on Schedule 13G filed jointly by FMR LLC, Edward C. Johnson 3d and Fidelity Management & Research Company with the SEC on February 14, 2012. According to the Schedule 13G, FMR LLC has sole voting power over 880,417 shares and sole dispositive power over 11,820,617 shares. Of the shares reported, 10,940,200 shares are beneficially owned by Fidelity Management & Research Company, an investment adviser and a wholly-owned subsidiary of FMR LLC, as a result of acting as investment advisor to various investment companies (collectively, the “Fidelity Funds”); and each of FMR LLC and Mr. Edward C. Johnson 3d exercise sole dispositive power and the Fidelity Funds’ Board of Trustees exercises sole voting power with respect to these shares. In addition, FMR LLC and Mr. Edward C. Johnson 3d each exercise sole dispositive power and sole voting power with respect to 454 shares.

CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS

~~Certain Relationships and Related Transactions~~

Pursuant to our Code of Business Conduct, all employees (including our Named Executives) who have, or whose immediate family members have, any direct or indirect financial or other participation in any business that competes with, supplies goods or services to, or is a customer, of McDermott, are required to disclose to us and receive written approval from our Corporate Ethics and Compliance department prior to transacting such business. Our employees are expected to make reasoned and impartial decisions in the workplace. As a result, approval of the business is denied if we believe that the employee’s interest in such business could influence decisions relative to our business, or have the potential to adversely affect our business or the objective performance of the employee’s work. Our Corporate Ethics and Compliance department implements our Code of Business Conduct and related policies and the Governance Committee of our Board is responsible for overseeing our Ethics and Compliance Program, including compliance with our Code of Business Conduct. Our Board members are also responsible for complying with our Code of Business Conduct. Additionally, our Governance Committee is responsible for reviewing the professional occupations and associations of our Board members and reviews transactions between McDermott and other companies with which our Board members are affiliated. To obtain a copy of our Code of Business Conduct, please see the “Corporate Governance” section above in this proxy statement.

~~Certain of our~~

Our grant agreements for ~~restricted stock and~~ restricted stock units awarded under various long-term incentive plans provide that the withholding obligation of any applicable federal, state or other taxes that may be due on the vesting ~~in the year ending December 31, 2011~~ of those awards be satisfied by the grantee returning to us the number of such vested shares having a fair market value equal to the amount of such taxes. ~~Additionally, each~~Accordingly, in the year ending December 31, 2012, this withholding method will apply to an aggregate of 209,208 shares held by Mr. Johnson, 16,137 shares held by Mr. Elders, 14,654 shares held by Mr. Carlson, 10,302 shares held by Mr. Cummins, 65,975 shares held by Ms. Hinrichs, 15,577 shares held by Mr. Daniel M. Houser, 37,232 shares held by Mr. McCormack, 10,057 shares held by Mr. Mitchell and 21,297 shares held by Mr. Roll.

In the year ended December 31, 2011, a similar withholding method applied with respect to certain of

our grant agreements, and Messrs. Johnson,

Elders, Houser, McCormack, Mitchell, Nesser and Roll and Ms. Hinrichs ~~has~~ irrevocably elected to satisfy withholding obligations relating to all or a portion of any applicable federal, state or other taxes that ~~may~~would be due on the vesting ~~in the year ending December 31, 2011~~ of certain shares of restricted stock and restricted stock units awarded under various long-term incentive plans that dodid not provide for a withholding method in the same manner. These elections ~~are~~were subject to the approval of the Compensation Committee of our Board, which approval was granted. Accordingly, this withholding method ~~will apply~~applied to an aggregate of 205,316 shares held by Mr. Johnson, ~~142,445 shares held by Mr. Fees, 12,886~~12,887 shares held by Mr. Elders, ~~13,136~~13,137 shares held by Mr. Carlson, ~~12,964~~9,165 shares held by Mr. Cummins, 119,901 shares held by Ms. Hinrichs, 19,452 shares held by Mr. Houser, 29,822 shares held by Mr. McCormack, 14,021 shares held by Mr. Mitchell, ~~120,469~~85,423 shares held by Mr. Nesser and 21,479 shares held by Mr. Roll. In the year ended December 31, 2010, a similar withholding method applied, including with respect to the exercise price and tax withholding on the exercise and hold of stock options prior to the Spin-off, to an aggregate of 30,995 shares held by Mr. Johnson, 566,507 shares held by Mr. Fees, 59,019 shares held by Mr. Taff, 93,810 shares held by Mr. Bethards, 11,805 shares held by Mr. Cummins, 66,862 shares held by Ms. Hinrichs, 19,613 shares held by Mr. Houser, 27,992 shares held by Mr. McCormack, 22,031 shares held by Mr. Mitchell, 162,684 shares held by Mr. Nesser and 20,342 shares held by Mr. Roll, that vested in the year ended December 31, 2010. Those elections were also approved by the Compensation Committee.

We expect any transfers reflecting shares of ~~restricted~~McDermott stock returned to us will be reported in the SEC filings made by those transferring holders who are obligated to report transactions in our securities under Section 16 of the Securities Exchange Act of 1934.

Additionally, during 2011, the Investment Committee of the McDermott Master Trust (the “Trust”), the funding vehicle underlying the Retirement Plan, entered into an agreement with BlackRock Institutional Trust Company, N.A. (“BlackRock”), pursuant to which BlackRock agreed to manage the investment of a portion of the Trust assets. BlackRock is a subsidiary of BlackRock, Inc. and, collectively with certain other subsidiaries of BlackRock, Inc., owned approximately 6.55% of McDermott common stock on December 31, 2011 as reported on BlackRock, Inc.’s Schedule 13G/A filed with the SEC on February 13, 2012. The amount of Trust assets under management with BlackRock may vary from time to time. As of December 31, 2011, the value of the Trust assets under management with BlackRock was approximately $78.6 million. BlackRock receives a fee for investment management services for the portion of the Trust assets allocated to BlackRock. These fees are calculated quarterly in arrears by averaging the account’s prior three month-end market values and applying 25% of the annual fee schedule (6.0 basis points), or 1.5 basis points quarterly.

The Investment Committee of the Trust is a fiduciary of the Retirement Plan appointed by McDermott’s subsidiary that maintains the Retirement Plan. The Investment Committee is responsible for the management and control of the Trust assets and is authorized to appoint fund managers under the

~~Section 16(a)~~ ~~Beneficial Ownership Compliance~~

terms of the Retirement Plan and the Trust. Selection of fund managers is performed with the assistance of a third party investment consulting firm, in accordance with an investment policy statement approved and adopted by the Investment Committee.

SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own 10% or more of our voting stock, to file reports of ownership and changes in ownership of our equity securities with the SEC and the New York Stock Exchange. Directors, executive officers and 10% or more holders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review

of the copies of those forms furnished to us, or written representations that no forms were required, we believe that our directors, executive officers and 10% or more beneficial owners complied with all Section 16(a) filing requirements during the year ended December 31, ~~2010,~~2011, with

the exception of the following: (1) Mr. Stephen G. Hanks, Director, filed one late Form 4 to report open market purchases occurring in two broker-directed transactions; (2) Mr. Michael S. Taff, Former Senior Vice President and Chief Financial Officer,Ms. Hinrichs, who filed one late Form 4 reporting ~~the settlement of cash-based deferred stock units; and (3) Mr. John T. Nesser, Executive Vice President and Chief Operating Officer, filed two late Forms 4,~~ one ~~of which reported tax withholding on the vesting of restricted stock, and the other of which reported the vesting of restricted stock units and tax withholding on such vesting.~~

~~Stockholders’ Proposals~~

open market sale transaction.

STOCKHOLDERS’ PROPOSALS

Any stockholder who wishes to have a qualified proposal considered for inclusion in our proxy statement for our ~~2012~~2013 Annual Meeting must send notice of the proposal to our Corporate Secretary at our principal executive office no later than November ~~26, 2011.~~30, 2012. If you make such a proposal, you must provide your name, address, the number of shares of common stock you hold of record or beneficially, the date or dates on which such common stock was acquired and documentary support for any claim of beneficial ownership.

In addition, any stockholder who intends to submit a proposal for consideration at our ~~2012~~2013 Annual Meeting, but not for inclusion in our proxy materials, or who intends to submit nominees for election as directors at the meeting must notify our Corporate Secretary. Under our By-Laws, such notice must (1) be received at our executive offices no earlier than November ~~8, 2011~~11, 2012 or later than January ~~7, 2012~~10, 2013, and (2) satisfy specified requirements. A copy of the pertinent By-Law provisions can be found on our Web site atwww.mcdermott.comat ~~“Corporate~~“About Us — Leadership & Corporate Governance — ~~Governance Policies.~~Corporate Governance.”

By Order of the Board of Directors,

LIANE K. HINRICHS

Secretary

Dated: March ~~25, 2011~~

30, 2012

LOGO

~~Appendix A~~

~~Mcdermott International, Inc.~~
~~Executive Incentive Compensation Plan~~

~~(As Amended and Restated March 1, 2011)~~

1. ~~Plan.~~ This McDermott International, Inc. Executive Incentive Compensation Plan (this “Plan”) was adopted by McDermott International, Inc., a Panamanian corporation (the “Company”), to incentivize certain employees of the Company, its Subsidiaries or Affiliated Companies by enabling them to receive performance-based cash compensation.

2. ~~Objectives~~. This Plan is designed to attract and retain employees of the Company, its Subsidiaries and its Affiliated Companies and to stimulate the active interest of such persons in the development and financial success of the Company, its Subsidiaries and its Affiliated Companies. These objectives are to be accomplished by making cash awards under this Plan based on the achievement of certain performance goals. All awards payable under this Plan to Executive Officers are intended to be deductible by the Company under Section 162(m) (as such terms are defined below).

3. ~~Definitions.~~ ~~As used herein, the terms set forth below shall have the following respective meanings:~~

“Affiliated Company” means any corporation, joint venture, or other legal entity in which the Company, directly or indirectly, through one or more Subsidiaries, owns less than fifty percent but at least twenty percent of its voting control.

“Award Agreement” means (i) any written agreement (including in electronic form) between the Company and a Participant or (ii) any resolution of the Committee, in either case setting forth the terms, conditions and limitations applicable to a Performance Cash Award.

~~“Board” means the board of directors of the Company.~~

~~“Code” means the Internal Revenue Code of 1986, as amended.~~

“Committee” means the Compensation Committee of the Board, any successor committee thereto, such other committee of the Board as may be designated by the Board to administer this Plan including any subcommittee of the Board as designated by the Board.

“Disability” means permanent and total disability as determined under the Company’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A with respect to an Award subject to Section 409A.

~~“Employee” means an employee of the Company or any of its Subsidiaries or Affiliated Companies.~~

“Executive Officer” means a “covered employee” within the meaning of Section 162(m)(3) or any other executive officer designated by the Committee for purposes of exempting compensation payable under this Plan from the deduction limitations of Section 162(m).

~~“Participant” means an Employee to whom a Performance Cash Award has been made under this Plan.~~

“Performance Cash Award” or “Award” means the grant of any award to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in accordance with the objectives of this Plan, which award is subject to the attainment of one or more Performance Goals.

~~“Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Cash Award shall be earned.~~

~~A-1~~

~~“Section 162(m)” means Section 162(m) of the Code and any Treasury Regulations and guidance promulgated thereunder.~~

~~“Section 409A” means Section 409A of the Code and any Treasury Regulations and guidance promulgated thereunder.~~

“Separation from Service,” with respect to Awards that are subject to Section 409A, means a Participant’s Termination of Employment with the Company and any of its Subsidiaries or Affiliated Companies, other than by reason of death or Disability, that qualifies as a ‘separation from service’ for purposes of Section 409A. A Separation from Service will be deemed to occur where the Participant and the Company, its Subsidiary or its Affiliated Company reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) will be permanently reduced to a level that is 49% or less of the average level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to the Company and any of its Subsidiaries or Affiliated Companies for less than 36 months).

~~“Subsidiary” means any corporation, joint venture or other legal entity in which the Company, directly or indirectly, owns more than fifty percent (50%) of its voting control.~~

“Termination of Employment” means the termination of a Participant’s employment with, or performance of services for, the Company and any of its Subsidiaries or Affiliated Companies. Unless otherwise determined by the Committee, if a Participant’s employment with the Company, its Subsidiaries or its Affiliated Companies terminates but such Participant continues to provide services to the Company, its Subsidiaries or its Affiliated Companies in a non-employee capacity, such change in status shall not be deemed a Termination of Employment. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company, its Subsidiaries and its Affiliated Companies do not constitute a Termination of Employment. If an Award is subject to Section 409A, however, Termination of Employment for purposes of that Award shall mean the Participant’s Separation from Service.

4. ~~Eligibility.~~ ~~All Employees are eligible for Performance Cash Awards under this Plan in the sole discretion of the Committee.~~

5. ~~Administration~~.

~~(a)~~ ~~Authority of the Committee.~~ This Plan shall be administered by the Committee, which shall have the powers vested in it by the terms of this Plan, such powers to include the authority (within the limitations described in this Plan):


	•	~~to select the Employees to be granted Performance Cash Awards under this Plan;~~

	•	~~to determine the terms of Performance Cash Awards to be made to each Participant;~~

	•	~~to determine the time when Performance Cash Awards are to be granted and any conditions that must be satisfied before a Performance Cash Award is granted;~~

	•	~~to establish objectives and conditions for earning Performance Cash Awards;~~

	•	~~to determine the terms and conditions of Award Agreements (which shall not be inconsistent with this Plan) and, if required, who must sign each Award Agreement;~~

	•	~~to determine whether the conditions for earning a Performance Cash Award have been met and whether a Performance Cash Award will be paid at the end of an applicable performance period;~~

	•	~~except as otherwise provided in paragraph 10, to modify the terms of Performance Cash Awards made under this Plan;~~

	•	~~to determine if, when and under what conditions payment of all or any part of a Performance Cash Award may be deferred;~~

	•	~~to determine whether the amount or payment of a Performance Cash Award should be reduced or eliminated;~~

~~A-2~~


	•	~~to determine the guidelinesand/or~~ ~~procedures for the payment of Performance Cash Awards;~~

	•	to determine whether a Performance Cash Award should qualify, regardless of its amount, as deductible in its entirety for federal income tax purposes, including whether a Performance Cash Award granted to an Executive Officer should qualify as performance-based compensation;

	•	~~to interpret and administer this Plan any instrument or agreement relating to, or Award made under this Plan;~~

	•	~~to establish, amend, suspend, or waive such rules and guidelines;~~

	•	~~to appoint such agents as it shall deem appropriate for the proper administration of this Plan; and~~

	•	~~to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan.~~

The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Performance Cash Award in the manner and to the extent the Committee deems necessary or desirable to further Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole discretion and shall be final, conclusive and binding on all parties concerned.

~~(b)~~ ~~Limitation of Liability.~~ No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of paragraph 6 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.

6. ~~Delegation of Authority.~~ Except with respect to matters under Section 162(m) that are required to be determined or established by the Committee to qualify Performance Cash Awards to Executive Officers as qualified “performance-based compensation” the Committee may delegate to the Chief Executive Officer and to other senior officers of the Company or to such other committee of the Board its duties under this Plan pursuant to such conditions or limitations as the Committee may establish.

7. ~~Performance Cash Awards~~.

(a) The Committee shall determine the type or types of Performance Cash Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Performance Cash Awards. Each Performance Cash Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion. All or part of a Performance Cash Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries. Except as otherwise provided in paragraph 13, upon the termination of employment by a Participant, any deferred, unvested or unpaid Performance Cash Awards shall be treated as set forth in the applicable Award Agreement.

The terms, conditions and limitations applicable to any Performance Cash Awards granted to Participants pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. The Committee shall set Performance Goals in its sole discretion which, depending on the extent to which they are met, will determine the amount of Performance Cash Awards that will be paid out to the Participant.

~~(i)~~ ~~Nonqualified Performance Cash Awards.~~ Performance Cash Awards granted to Employees that are not intended to qualify as qualified performance-based compensation under Section 162(m) shall be based on achievement of such Performance Goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine.

~~(ii)~~ ~~Qualified Performance Cash Awards.~~ Performance Cash Awards granted to Executive Officers under this Plan that are intended to qualify as qualified performance-based compensation under Section 162(m) shall be paid on account of the attainment of one or more pre-established, objective Performance Goals established and administered by the Committee in accordance with Section 162(m) prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the lapse of 25% of the

~~A-3~~

period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to an Executive Officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies. A Performance Goal may include one or more of the following and need not be the same for each Executive Officer:


	•	~~revenue and income measures (which include revenue, gross margin, income from operations, net income, net sales and earnings per share);~~

	•	~~expense measures (which include costs of goods sold, sales, general and administrative expenses and overhead costs);~~

	•	~~operating measures (which include volume, margin, breakage and shrinkage, productivity and market share);~~

	•	~~cash flow measures (which include net cash flow from operating activities and working capital);~~

	•	~~liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, cash flow and free cash flow);~~

	•	~~leverage measures (which include equity ratio and net debt);~~

	•	~~market measures (including those relating to market price, stock price, total shareholder return and market capitalization measures);~~

	•	return measures (which include return on equity, return on assets, cash flow return on assets, cash flow return on capital, cash flow return on equity, return on capital and return on invested capital);

	•	~~corporate value measures (which include compliance, safety, environmental and personnel matters); and~~

	•	~~other measures such as those relating to acquisitions, dispositions or customer satisfaction.~~

Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo, performance relative to a peer group determined by the Committee or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and qualified Performance Cash Awards, it is the intent of this Plan to comply with Section 162(m), including, without limitation, Treasury Regulation § 1.162-27(e)(2)(i), as to grants to Executive Officers and the Committee in establishing such goals and interpreting this Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals applicable to qualified Performance Cash Awards, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any qualified Performance Cash Awards made pursuant to this Plan shall be determined by the Committee to the extent permitted under Section 162(m). Unless an Award Agreement provides to contrary, the Committee reserves the right in its sole discretion to reduce the amount payable pursuant to a Performance Cash Award to any lesser amount, including zero.

(b) The Committee shall adjust the Performance Goals (either up or down) and the level of the Performance Cash Award that a Participant may earn under this Plan, to the extent permitted pursuant to Section 162(m), if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced the Company’s ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, Performance Goals and Performance Cash Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board after such Performance Goals are established. Further, in the event a period of service to which a Performance Goal relates is less than 12 months, the Committee shall have the right, in its sole discretion, to adjust the Performance Goals and the level of Performance Cash Award opportunity.

~~A-4~~

~~(c) Notwithstanding anything to the contrary contained in this Plan, the amount payable to a Participant under this Plan in respect of any one-year period shall not exceed $3,000,000.~~

8. ~~Performance Cash Award Payment~~.

~~(a)~~ ~~General.~~ With the approval of the Committee and subject to paragraph 8(b), payment of Performance Cash Awards shall be made in the form of cash and shall be paid on or before March 15th of the year following the year in which Performance Goals are achieved. The payment of a Performance Cash Award may include such restrictions as the Committee shall determine.

~~(b)~~ ~~Deferral.~~ If permitted by the Committee, amounts payable in respect of Performance Cash Awards may be deferred and paid in accordance with the terms of the Company’s Director and Executive Deferred Compensation Plan (or any successor or similar plan), subject to the terms and conditions of such plan as it may be amended from time to time.

9. ~~Taxes.~~ The Company shall have the right to deduct applicable taxes from any Performance Cash Award payment and withhold, at the time of delivery or vesting of cash under this Plan, an appropriate amount of cash for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes.

~~10.~~ ~~Amendment, Modification, Suspension or Termination.~~ The Board or the Committee may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the rights of any Participant under any Performance Cash Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of the Company to the extent shareholder approval is otherwise required by applicable legal requirements.

~~11.~~ ~~Assignability.~~ Unless otherwise determined by the Committee in the Award Agreement, no Performance Cash Award or any other benefit under this Plan shall be assignable or otherwise transferable. Any attempted assignment of a Performance Cash Award or any other benefit under this Plan in violation of this paragraph 11 shall be null and void.

~~12.~~ ~~Adjustments.~~ In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Performance Cash Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Performance Cash Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for a Performance Cash Award or the assumption of the Performance Cash Award, (ii) to provide, prior to the transaction, for the acceleration of the vesting of the Performance Cash Award or (iii) to cancel any such Performance Cash Awards and to deliver to the Participants cash in an amount that the Board shall determine in its sole discretion.

~~13.~~ ~~Forfeiture.~~ An Award Agreement may provide that any or all Awards, including vested Awards, shall be forfeited, and a Participant shall be obligated to repay gains previously realized from Awards upon any event or condition established by the Committee. The Committee shall have the right to suspend any and all rights or benefits a Participant may have under an Award Agreement pending its investigation and final determination with regard to possible forfeiture or repayment events.

~~14.~~ ~~Unfunded Plan.~~ This Plan is unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to a Performance Cash Award of cash or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge

~~A-5~~

or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.

~~15.~~ ~~Section 409A of the Code.~~ It is intended that the payment of Performance Cash Awards under this Plan shall satisfy the short-term deferral exclusion from Section 409A, unless deferred in accordance with paragraph 8(b) in which case the Performance Cash Award shall be subject to the terms of the applicable of the Company’s Director and Executive Deferred Compensation Plan or other deferral plan, which is designed to be in compliance with Section 409A.

~~16.~~ ~~Governing Law.~~ Except to the extent preempted by U.S. federal law, the terms and provisions of this Plan shall be construed in accordance with the laws of the State of Texas, other than any conflicts of laws provisions thereof which would result in the application of the laws of any other jurisdiction.

~~17.~~ ~~No Right to Employment.~~ Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, a Subsidiary or an Affiliated Company to terminate any Participant’s employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company, any Subsidiary or any Affiliated Company.

~~18.~~ ~~Tax Consequences.~~ Nothing in this Plan or an Award Agreement shall constitute a representation by the Company to an Employee regarding the tax consequences of any Performance Cash Award received by an Employee under this Plan. Although the Company may endeavor to (i) qualify a Performance Cash Award for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment (e.g. under Section 409A), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or unavoidable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Performance Cash Awards under this Plan.

~~19.~~ ~~Successors.~~ All obligations of the Company under this Plan with respect to Performance Cash Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business~~and/or~~ ~~assets of the Company.~~

~~20.~~ ~~Effectiveness.~~ ~~This Plan was previously amended and restated effective February 28, 2006. This Plan is effective March 1, 2011.~~

~~IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer on the date first written above.~~

~~MCDERMOTT INTERNATIONAL, INC.~~


	~~By:~~	~~/s/ S.M. Johnson~~


	~~Title:~~	~~President and Chief Executive Officer~~

~~A-6~~

VOTE BY INTERNET — -www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May ~~5, 2011~~9, 2012 (May ~~3, 2011~~7, 2012 for participants in McDermott’s Thrift Plan). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ~~MCDERMOTT INTERNATIONAL, INC.~~

VOTE BY PHONE —- 1-800-690-6903 ~~757 N. ELDRIDGE PKWY~~

Use any touch-tone telephone to transmit your voting instructions up until ~~HOUSTON, TX 77079~~ 11:59 p.m. Eastern Time on May ~~5, 2011~~9, 2012 (May ~~3, 2011~~7, 2012 for participants in McDermott’s Thrift Plan). Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. ~~TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M32514-P06575 KEEP THIS PORTION FOR YOUR RECORDS~~

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

M43299-P20059 KEEP THIS PORTION FOR YOUR RECORDS

DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ~~ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION~~ ONLY WHEN SIGNED AND DATED.

MCDERMOTT INTERNATIONAL, INC.

For
All

Withhold All

For All
Except

To withhold authority to vote for any individual ~~All All Except~~ nominee(s), mark “For All Except” and write the ~~The Board of Directors recommends you vote FOR~~ number(s) of the nominee(s) on the line below. the following: 1. Election of Directors 0 0 0 Nominees: 01) John F. Bookout, III 05) D. Bradley McWilliams 02) Roger A. Brown 06) Thomas C. Schievelbein 03) Stephen G. Hanks 07) Mary Shafer-Malicki 04) Stephen M. Johnson 08) David A. Trice For Against Abstain

The Board of Directors recommends you vote FOR the ~~following proposal: 2. Advisory vote on executive compensation. 0 0 0 1 Year 2 Years 3 Years Abstain The Board~~following:

Election of Directors ~~recommends you vote 1 YEAR on the following proposal: 3. Advisory vote to determine the frequency with which to hold advisory votes on executive compensation. 0 0 0 0 For Against Abstain~~

Nominees:

01) John F. Bookout, III

05) D. Bradley McWilliams

02) Roger A. Brown

06) Thomas C. Schievelbein

03) Stephen G. Hanks

07) Mary Shafer-Malicki

04) Stephen M. Johnson

08) David A. Trice

The Board of Directors recommends you vote FOR the following proposals: ~~4. Approval~~

For

Against

Abstain

Advisory vote to approve named executive officer compensation.

Ratification of ~~our Executive Incentive Compensation Plan for tax deductibility reasons. 0 0 0 5. Ratification of~~the appointment of McDermott’s independent registered public accounting firm for the year ending December 31, ~~2011. 0 0 0~~ 2012.

The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Stockholder(s).If no direction is made, this proxy will be voted FOR ALL for item 1, and FOR items 2 4 and ~~5, and 1 Year for item~~ 3. If any other matters properly come before the meeting, the persons named in this proxy will vote in their discretion.

For address changes and/or comments, please check this box and write them 0 on the back where indicated.

Please indicate if you plan to attend this meeting. ~~0 0~~

Yes

Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee, guardian or other fiduciary, please give full title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation or partnership, please sign in full corporate or partnership name by duly authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

McDermott International, Inc.

Annual Meeting ~~Friday,~~

Thursday, May ~~6, 2011~~10, 2012 at 3:10:00 ~~p.m. Intercontinental Miramar Hotel Miramar Plaza, Balboa Avenue Panama City, Panama~~ a.m.

757 N. Eldridge Parkway, 14th Floor

Houston, Texas 77079

Dear Stockholder:

McDermott International, Inc. encourages you to vote the shares electronically through the Internet or the telephone, which are available 24 hours a day, 7 days a week. This eliminates the need to return the proxy card.

Your electronic vote authorizes the named proxies in the same manner as if you marked, signed, dated and returned the proxy card.

If you choose to vote the shares electronically, there is no need for you to mail back the proxy card.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Annual Report are available at ~~www.proxyvote.com. IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE M32515-P06575~~ www.proxyvote.com

IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG PERFORATION,

DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE


				M432100-P20059

McDERMOTT INTERNATIONAL, INC.

This proxy is solicited on behalf of the Board of Directors

Annual Meeting of Stockholders ~~— Friday,~~- Thursday, May ~~6, 2011 3:~~10, 2012 at 10:00 ~~p.m.~~ a.m.

The undersigned hereby appoints Stephen M. Johnson and Liane K. Hinrichs, and each of them individually, as proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of MCDERMOTT INTERNATIONAL, INC. (“McDermott”) that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 3:10:00 ~~p.m.~~a.m. local time, on ~~Friday,~~Thursday, May ~~6, 2011~~10, 2012 at ~~Intercontinental Miramar Hotel, Miramar Plaza, Balboa Avenue, Panama City, Panama,~~757 N. Eldridge Parkway, 14th floor, Houston, Texas 77079, and any adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED UNDER ITEM 1 ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, AND FOR EACH OF ITEMS 2 4 AND ~~5 AND FOR 1 YEAR FOR ITEM~~ 3.

THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF MCDERMOTT’S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, ~~2010~~2011 AND ITS NOTICE OF ~~2011~~2012 ANNUAL MEETING AND RELATED PROXY STATEMENT.

ATTENTION PARTICIPANTS IN MCDERMOTT’S THRIFT PLAN: If you hold shares of McDermott common stock through the McDermott Thrift Plan (the “Thrift Plan”), this proxy covers all shares for which the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust Company (“Vanguard”), Trustee of the ~~McDermott~~ Thrift Plan. Your proxy must be received no later than 11:59 p.m. Eastern Time on May ~~3, 2011.~~7, 2012. Any shares of McDermott common stock held in the Thrift Plan that are not voted or for which Vanguard does not receive timely voting instructions, will be voted in the same proportion as the shares for which Vanguard receives timely voting instructions from other participants in the Thrift Plan.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE REPLY CARD ENVELOPE

Address Changes/Comments: ~~___________________________ ________________________ (If~~

(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

	(1)		Title of each class of securities to which transaction applies:

	(2)		Aggregate number of securities to which transaction applies:

	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


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


Stephen M. Johnson	757 N. Eldridge Pkwy.
	Chairman of the Board of Directors, President and Chief Executive Officer	Houston, Texas 77079

	~~March 25, 2011~~


	•	~~executive leadership experience in the oil and gas exploration and production industry;~~

	•	~~knowledge of corporate governance issues; and~~

	•	~~experience as a board member for public companies, including McDermott.~~


	•	~~position as our President and Chief Executive Officer;~~

	•	experience in executive leadership for public companies in the engineering and construction industry, encompassing global experience, technical knowledge and complex business and financial structuring, as well as experience in the oil & gas, chemical processing, power generation, transportation, mining and government businesses;

	•	operational and financial expertise in the engineering and construction industry, both in the United States and in international markets, including having resided, worked or led complex business transactions in the United States, Europe, the Middle East and Asia Pacific regions;

	•	recognized leader in the area of risk management within the engineering and construction industry, having participated in the founding of the Engineering & Construction Risk Institute, a global organization focused on developing best practices in risk management, of which he is now Chairman; and

	•	~~broad knowledge of the demands and expectations of our core customers.~~


	•	~~operational, business technology development and risk mitigation and control experience gained through previous executive leadership;~~

	•	~~experience with the oversight of compensation strategies and plans; and~~

	•	~~experience as a board member for public companies, including McDermott.~~



COMPENSATION Mr. Schievelbein (Chair) Mr. Brown Ms. Shafer-Malicki Mr. Trice	• Evaluates our officer and director compensation plans, policies and programs and our employee benefit plans. • Approves and/or recommends to the Board for approval such officer and director compensation plans, policies and programs. • Oversees our disclosures relating to compensation plans, policies and programs, including overseeing the preparation of the Compensation Discussion and Analysis included in this proxy statement. • Acts in its sole discretion to retain or terminate any compensation consultant to be used to assist the Compensation Committee in the discharge of its responsibilities. For additional information on the role of compensation consultants, please see “Compensation Discussion and Analysis — Role of Compensation Committee, Compensation Consultant and Management” below. • For 2011, the Compensation Committee authorized our Chief Executive Officer, in consultation with his direct reports, to establish individual goals under our Executive Incentive Compensation Plan (“EICP”), for our other executive officers who participate in the EICP. • Under both our 2001 Directors and Officers Long-Term Incentive Plan (the “2001 D&O Plan”) and our 2009 McDermott International, Inc. Long-Term Incentive Plan (the “2009 LTIP”), our Compensation Committee may delegate some of its duties to our Chief Executive Officer or other senior officers. • Under our McDermott International, Inc. Director and Executive Deferred Compensation Plan, which we refer to as the “Deferred Compensation Plan,” the Compensation Committee may delegate any of its powers or responsibilities to one or more members of the Committee or any other person or entity.	7 Meetings in 2011

FINANCE Mr. McWilliams (Chair) Mr. Bookout Mr. Hanks Ms. Shafer-Malicki	• Reviews and oversees financial policies and strategies, mergers, acquisitions, financings, liabilities, investment performance of our pension plans and our capital structure. • Recommends any change in dividend policies or stock repurchase programs. • Oversees capital expenditures and capital allocation strategies. • Oversees our tax structure and monitors any developments relating to changes in tax legislation. • Generally has responsibility over such matters up to $50 million, and for activities involving amounts over $50 million, reviews the activity and makes a recommendation to the Board.	5 Meetings in 2011


	Fees Earned or		Stock
Name	Paid in Cash⁽¹⁾		Awards⁽²⁾		Total
John F. Bookout, III	$	95,000	$	109,979	$	204,979
Roger A. Brown	$	106,750	$	109,979	$	216,729
Ronald C. Cambre	$	247,500	$	109,979	$	357,479
Robert W. Goldman	$	68,000	$	109,979	$	177,979
Stephen G. Hanks	$	91,750	$	109,979	$	201,729
Oliver D. Kingsley Jr.	$	57,250	$	109,979	$	167,229
D. Bradley McWilliams	$	108,250	$	109,979	$	218,229
Richard W. Mies	$	57,250	$	109,979	$	167,229
Thomas C. Schievelbein	$	107,750	$	109,979	$	217,729
David A. Trice	$	105,750	$	109,979	$	215,729

	(1)		Amount Previously Paid:

	(2)		Form, Schedule or Registration Statement No.:

	(3)		Filing Party:


	Equity Awards
	Granted in 2010
			Shares of				Equity Awards Outstanding at
			Restricted		Grant Date		December 31, 2010
Name	Grant Date		Stock		Fair Value		Stock Awards		Option Awards
John F. Bookout, III		May 13, 2010		4,243	$	109,979		0		6,105
Roger A. Brown		May 13, 2010		4,243	$	109,979		0		38,085
Ronald C. Cambre		May 13, 2010		4,243	$	109,979		0		0
Robert W. Goldman		May 13, 2010		4,243	$	109,979		0		0
Stephen G. Hanks		May 13, 2010		4,243	$	109,979		0		0
Oliver D. Kingsley, Jr.		May 13, 2010		4,243	$	109,979		0		0
D. Bradley McWilliams		May 13, 2010		4,243	$	109,979		0		37,876
Richard W. Mies		May 13, 2010		4,243	$	109,979		0		0
Thomas C. Schievelbein		May 13, 2010		4,243	$	109,979		0		72,538
David A. Trice		May 13, 2010		4,243	$	109,979		0		0


Annual Base Salary
Base Salary Earned⁽¹⁾	$	315,114

Annual Incentive Compensation
Executive Incentive Compensation Plan	$	398,147

Long-Term Incentive Compensation
Restricted Stock Units⁽²⁾	$	517,021
Stock Options⁽²⁾	$	396,788

Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit		N/A

Other Compensation
Deferred Compensation Plan Contribution⁽¹⁾	$	0
Thrift Match	$	6,709
Service-Based Thrift Contribution	$	7,350
TaxGross-Ups	$	0
Perquisites and Personal Benefits	$	0


Annual Base Salary
Base Salary	$	509,381

Annual Incentive Compensation
Executive Incentive Compensation Plan	$	609,729

Long-Term Incentive Compensation
Restricted Stock Units⁽¹⁾	$	324,986
Stock Options⁽¹⁾	$	224,998

Retention Agreement Grant
Restricted Stock⁽¹⁾	$	871,254

Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit	$	160,951

Other Compensation
Deferred Compensation Plan Contribution	$	36,806
Thrift Match	$	6,577
Service-Based Thrift Contribution	$	0
TaxGross-Ups	$	0
Perquisites and Personal Benefits	$	0