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

 

SCHEDULE 14A

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

 

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MYR Group Inc.

(Name of Registrant as Specified In Its Charter)

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In March ofSince 2016, Mr. Hartwick becamehas served as Senior Vice President of Finance, Strategy, Risk & Chief Financial Officer for Ontario Power Generation, a provincial owner of power generation in Ontario, Canada. From February 2015 to March 2016, Mr. Hartwick served as the Chief Financial Officer of Wellspring Financial Corporation, a Canadian sales financing company. Prior to joining Wellspring Financial Corporation, Mr. Hartwick served for ten years as Director, President and Chief Executive Officer of Just Energy Group Inc., an integrated retailer of commodity products. At Just Energy Group, Inc., his role included putting in place a broad set of financing arrangements for growth in North America and the United Kingdom and the expansion of the sales organization across these locations.

 
 
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locations. Prior to that, Mr. Hartwick held a variety of senior executive roles, gaining an extensive financial background in the energy, consumer products and capital markets areas, including the positions of Chief Executive Officer and Chief Financial Officer at Just Energy Group, Inc., Chief Financial Officer at Hydro One, Inc. and a partner at Ernst & Young LLP. In each of these roles, Mr. Hartwick participated in the expansion and growth of the businesses and the establishment of financial platforms to support that growth. Mr. Hartwick currently serves on the Board of Directors of Spark Energy, Inc., a publicly-traded retail energy services company. From October 2004 to March of 2016, Mr. Hartwick served on the Board of Directors of Atlantic Power Corporation, a publicly-traded power generation company in the United States and Canada. From 2014 through 2016, Mr. Hartwick served on the Board of Governors for Trent University, his alma mater. Mr. Hartwick earned his Honors of Business Administration Degree from Trent University, Peterborough, Ontario and is a certified public accountant.Certified Public Accountant.

Qualifications, Experience, Key Attributes and Skills:

Through Mr. Hartwick’s senior executive positions, including the roles of chief executive officer and chief financial officer, he brings leadership, risk management, and strategic planning experience to the Board.Board and Audit Committee. Mr. Hartwick’s in-depth knowledge of financing initiatives as a senior executive in North American markets provides the Board with proficiencies to support business development, growth strategies and expenditure plans. Mr. Hartwick’s experience as a director of other publicly-traded companies enables him to provide insights into a variety of strategic planning, risk management, compensation, finance and governance practices. Mr. Hartwick’s leadership in the energy industry and financial sector make him a valued advisor and highly qualified to serve as a key member of theon our Board Audit Committee, and Nominating and Corporate GovernanceAudit Committee.

Gary R. Johnson

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NomineeCLASS III DIRECTORS

Larry F. Altenbaumer

Mr. Altenbaumer has over 40 years of experience in the energy industry. Since 2004, he has served as an independent consultant providing services to several organizations both inside and outside the energy industry. From 2005 to 2014, he served as an advisor to ArcLight Capital Partners, LLC (“ArcLight”), a private equity firm that has invested approximately $19 billion in energy infrastructure assets. Mr. Altenbaumer retired from Illinois Power Company (“Illinois Power”), an electric and natural gas utility, in 2004 after nearly 34 years of service. He served as President of Illinois Power from 1999 until his retirement in 2004, and served in various financial leadership positions before that, including Treasurer, Controller and Chief Financial Officer. During his tenure with Illinois Power, Mr. Altenbaumer also served as Executive Vice President for ElectionRegulated Delivery for Dynegy, Inc. (“Dynegy”), a wholesale power, capacity and ancillary service provider. Illinois Power became a subsidiary of Dynegy in 2000 in a transaction led by Mr. Altenbaumer for Illinois Power. Since 2005, he has served as an independent director and currently serves as Vice Chair for the Southwest Power Pool, a Federal Energy Regulation Commission (“FERC”) approved regional transmission organization covering portions of fourteen states. Since 2014, he has served as a Class IIIdirector for Summit Utilities, a privately-held holding company that owns and operates natural gas distribution companies in Colorado, Missouri, Maine, Arkansas and Oklahoma. In 2017, he stepped down from four years of serving as the President of the Economic Development Corporation and Macon County and then as its Executive Director — Reclassificationof the Midwest Inland Port, a regional economic development initiative based in Decatur, Illinois. He is currently chair of the board of Illinois Health and Science Corporation, a not-for-profit corporation whose principal subsidiary is Decatur Memorial Hospital. Mr. Altenbaumer received a Bachelor’s Degree in electrical engineering and computer science from Class Ithe University of Illinois in 1970.

Qualifications, Experience, Key Attributes and Skills:

Mr. Altenbaumer’s long record of achievement in various leadership positions at Illinois Power, including President, enables him to provide valuable insight into key aspects of successfully managing our day-to-day business and management operations. This experience and his current position as a director of the Southwest Power Pool and a member of its Human Resources Committee and Finance Committee support his role as Chairman of the Compensation Committee. His executive management roles, knowledge of our customers and competitors and range of consulting experience both inside and outside of the energy industry strengthen Mr. Altenbaumer’s ability to provide strategic leadership to help us better position ourselves for future growth and success. In addition, Mr. Altenbaumer’s board service for the Southwest Power Pool, along with the nature of his activity in support of several ArcLight portfolio companies, provide him with relevant expertise in areas related to corporate governance issues affecting U.S. publicly traded companies and arm him with a wide base of knowledge related to his Chairmanship of the Compensation Committee.

Bradley T. Favreau

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invest both actively and passively in companies undergoing change. Mr. Favreau has been at Engine Capital Management since 2013. His responsibilities include sourcing and evaluating investment opportunities as well as monitoring portfolio risk and position sizing. SinceFrom 2015 to 2017, Mr. Favreau has been servingserved as a director and a member of the audit committeeAudit Committee of RDM Corporation, a provider of solutions for the electronic commerce and payment processing industries. Prior to Engine Capital Management, in 2011, Mr. Favreau served as a consultant at HUSCO International, a global leader in the development and manufacture of hydraulic and electro-hydraulic controls for off-highway applications. At HUSCO International, his duties included identifying and initiating supply chain improvement initiatives. Mr. Favreau has also worked as an investment professional at Apax Partners, an international private equity investment group, and in the mergers and acquisition group at UBS AG. Mr. Favreau received a Master of Business Administration from Columbia Business School and a Bachelor of Science degree from the Kelley School of Business at Indiana University.

Qualifications, Experience, Key Attributes and Skills:

Mr. Favreau’s experience at an investment firm with investments in a broad range of industries provides the Board with additional financial and operational expertise. Such knowledge assists our Company to position itself for future growth and allocate capital effectively. Mr. Favreau’s experiences as a director and member of the audit committeeAudit Committee of RDM Corporation and as a consultant at HUSCO International offer the Board additional awareness and perspectives for the Company’s oversight and risk management functions. Mr. Favreau’sFavreau, with his financial background as well as hisand experience serving on another board of directors, has proven to be a valuable asset to the Board.

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William D. Patterson

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NON-EMPLOYEE DIRECTOR COMPENSATION

We use a combination of cash and equity-based compensation to attract and retain non-employee directors and to compensate such directors for their service on the Board in amounts that are commensurate with their Board and committee responsibilities. The Compensation Committee reviews director compensation periodically and recommends changes to the Board when it deems them appropriate. The Compensation Committee and the Board consider analyses prepared by Mercer, the Compensation Committee’s independent executive and director compensation consultant, of reported non-employee director compensation practices at our peer companies and generally seek to target our non-employee directors’ total compensation (defined as total cash compensation and total equity compensation) at or near the median total compensation of the non-employee directors of our peers.

In October of 2013,2016, at the request of our Compensation Committee, Mercer performed and presented to the Compensation Committee a study of reported non-employee director compensation practices (the “2016 Mercer Non-Employee Director Compensation Study”). The 2016 Mercer Non-Employee Director Compensation Study included comparisons of our non-employee director compensation to a peer group of companies, which remainedassisted the basisCompensation Committee with designing our non-employee director compensation program for 2017 to be competitive with the group and our markets.

According to the 2016 Mercer Non-Employee Director Compensation Study, total cash compensation compared to a group of our peers was below the 50^th percentile and annual equity compensation was near the 50^th percentile, which resulted in total direct compensation below the 50^th percentile. The 2016 Mercer Non-Employee Director Compensation Study made the following recommendations for our non-employee directors’directors:

The Compensation Committee considered the 2016 Mercer Non-Employee Director Compensation Study and recommended to the Board, and the Board committeesapproved, the following non-employee director compensation for 2016 has not increased from 2015 and was as follows:2017:

Retainer, Attendance and Committee Fees

Non-employee directors received

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In 2016, our Canadian non-employee directors received equity compensation in the form of time-based phantom stock unit grants with tandem dividend equivalents with a value of approximately $75,000. Each grant vests ratably over a three-year period. Vesting of these time-based phantom stock unit grants may be accelerated upon a change in control, as defined in the 2007 LTIP, and will be accelerated should a non-employee director resign from the Board during the vesting period, provided that such resignation is not due to the director’s breach of his fiduciary duty.TABLE OF CONTENTS

Other

Non-employee directors also received

defined in the 2017 Long-Term Incentive Plan (the “2017 LTIP”), and will be accelerated should the non-employee director resign from the Board during the vesting period, provided that such resignation is not due to the director’s breach of his fiduciary duty; and

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Director Stock Ownership

In 2011, theThe Board has established stock ownership guidelines for our non-employee directors to reinforce the importance of aligning the interests of our directors and stockholders. The guidelines generally require non-employee directors to meet an equity ownership level with a value equal to or greater than four times the annual retainer within five years from the later of the enactment of the guidelines (March 31, 2011) and the date the non-employee director was appointed to the Board. The non-employeeA director has three years to meet thean incremental increase in the newminimum stock ownership level caused by an increase in the annual retainer. We have adopted retention requirements with respect to these stock ownership guidelines whereby non-employee directors are expected to retain net shares received through an exercise of stock options or the vesting of restricted stock, restricted stock units or phantom stock units if they have not satisfied the required equity ownership level.

The following table sets forth each non-employee director’s ownership as of March 7, 20176, 2018 for stock ownership guidelines purposes:

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers, directors and persons who own more than 10% of our common stock to report their ownership of our common stock and changes in that ownership.

We reviewed copies of reports filed pursuant to Section 16(a) of the Exchange Act and any written representations from reporting persons that all reportable transactions were reported. Based solely on that review, we believe that during the fiscal year ended December 31, 2016,2017, all filings required of our executive officers and directors were timely made in accordance with the Exchange Act except for fourone Form 4’s,3, which werewas inadvertently filed one day late by the Company on February 23, 2016January 13, 2017 on behalf of Tod M. Cooper, Gerald B. Engen, Jr., William A. Koertner and Richard S. Swartz, Jr.Jeffrey J. Waneka.

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

We have a written policy and procedures for the review, approval and ratification of transactions with related persons, which have been adopted by the Board. Under our policy, the definition of related persons includes, among others, any person who is or was, during the last fiscal year, an executive officer, director or nominee for director of the Company, any stockholder owning more than 5% of any class of our voting securities, or an immediate family member of any such person.

It is the policy of the Company to prohibit related person transactions unless the Company’s Audit Committee has determined in advance of the Company or a subsidiary entering into the transaction that it will be conducted on terms that are fair to the Company or the subsidiary and the transaction is in the best interests of the Company or the subsidiary.

Pursuant to our policy, there were no reported transactions in 20162017 that qualified as a related person transaction. As a result, no reported transaction was referred to the Audit Committee or any other committee of the Board for review and no related person transaction was required to be disclosed in the Company’s filings.

 
 
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COMPENSATION COMMITTEE MATTERS

COMMITTEE INDEPENDENCE AND RESPONSIBILITIES

The Board established the standing Compensation Committee in accordance with our By-Laws. The Board has determined that each member of the Compensation Committee qualifies as an “independent” director as defined under the Nasdaq rules, as a “non-employee director” as defined in Rule 16b-3(b)(3) under the Exchange Act and as an “outside director” within the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Compensation Committee firmly believes that the compensation of our executive officers should emphasize paying for performance that contributes to our success while encouraging behavior that is in our stockholders’ long-term best interests. The Compensation Committee is responsible for assisting the Board in overseeing the Company’s compensation and employee benefit plans and practices, including its executive compensation plans and its incentive-compensation and equity-based plans. To represent and assist the Board in its oversight of the Company’s compensation practices and under its charter, the Compensation Committee performs, among others, the following tasks:

The “Compensation Discussion and Analysis” included in this Proxy Statement goes into further detail about the Compensation Committee’s processes for determining the appropriate levels of compensation for named executive officers and directors.

COMPENSATION CONSULTANTS

In order to fulfill its duties, the Compensation Committee has the authority to retain, at the Company’s expense, its own advisors and compensation consultants and to approve their compensation. These external compensation consultants provide the Compensation Committee with guidance on compensation trends, program designs and market research and advice and recommendations on both executive and director compensation. They also help evaluate the competitive position of named executive officers’ and directors’ compensation, and provide advice on incentive award programs. Their findings are discussed in more detail in the “Compensation Discussion and Analysis”.Analysis.”

Compensation consultants are engaged by and report directly to the Compensation Committee on executive compensation matters and meet separately with the Compensation Committee outside the

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presence of management. Interaction between the compensation consultants and management is generally limited to providing necessary information and data.

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LETTER FROM OUR COMPENSATION COMMITTEE

Dear Fellow Stockholder,

The Compensation Committee wisheswould like to express its gratitude to Mr. Koertner, whose leadership has been instrumental to the growththank Jack Alexander for his ten years of service on our Board and successfor his valuable role as one of the Company and whose integrity helped shapeBoard’s leading advocates for safety. We wish him the culture throughout the entire MYR Group organization. The Compensation Committee welcomes Mr. Swartz and the other members of the executive management team to their new leadership roles. The Committee is well acquainted with these executives; they are a product of the Company’s succession planning process and represent significant industry and Company experience augmented by the Company’s management development program. We have the utmost confidencebest in the abilities of this leadership team to continue to grow the value of MYR Group. Good progress was realized in 2016 in the advancement of the Company’s strategy to grow the Company through a balanced combination of organic growth and strategic acquisitions, all built on a foundation that emphasizes safety and quality relationships. We remain convinced that this strategy will continue to benefit our stockholders.his retirement beginning April 1, 2018.

MYR Group had the following performance results and significant achievements in 2016:

The Compensation Committee believes that the design of its compensation programs is an important driver of stockholder value creation at MYR Group and helpsby helping us attract, retain and retainincentivize quality talent. These programs reward success when the management team’s efforts build shareholderstockholder value and limit compensation when shareholder value declines and when our performance goalsexpectations are not met. We have designed our compensation programs to incentivize employees at all levels within the organization and to specifically reward our key leaders for their contributions to both our short-term and long-term performance. We believe that the pay of our executive officers should be directly linked to our long-term performance; thus, our compensation programs are designed to reward strong financial performance and safe operations. We also recognizeIn 2017, we demonstrated our commitment to this pay-for-performance philosophy. While we exceeded our target safety performance goals, we did not meet our financial performance goals. Consequently, the importance of acquiringCompensation Committee exercised its negative discretion under our Senior Management Incentive Plan and retaining the very best employees, and we regularly reviewmade no short-term incentive awards to our compensation programs to insure we are competitive with the marketnamed executive officers for quality talent.financial or safety performance in 2017.

The Compensation Committee annually reviews the performance metrics and the equity compensation vehicles used in our long-term equity compensation program to ensure they are aligned with the goals we believe will drive shareholderstockholder value. Following our analysis for 2016,2017, we continued to use the financial performance metric of return on invested capital and the market-based metric of relative total shareholderstockholder return. We believe these metrics align the long-term equity compensation opportunities of our executive officers with shareholderstockholder value creation. In addition to this focus on long-term value, we also provide short-term incentives to employees for both financial and safety performance.

Our 2016 “say-on-pay” proposal was overwhelming approved by stockholders. We recognize that our employees are our most important asset and we offer extensive training and professional development programs for all employees to provide them with opportunities for meaningful career paths. We have designed our compensation programs to incentivize and reward employees at all levels within the organization for their contributions to both our short-term and long-term performance.

In addition to our annual “say-on-pay” proposal, we welcome our stockholders to provide feedback on our executive compensation programs, as we believe these conversations have and will continue to improve our programs. With the positive responses to our “say-on-pay” votes over the recent years and based on our annual review of best practices with our independent compensation consultant, we have maintained our fundamental compensation programs and structures. Through these review processes and stockholder feedback, we willcontinue to endeavor to improve these programs with the objective of improving shareholderstockholder value.

On behalf of the Compensation Committee,

Larry F. Altenbaumer
Chair of the Compensation Committee

 
 
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COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

This Compensation Discussion and Analysis (the “CD&A”) describes the objectives, principles and material components of our executive officer compensation program for named executive officers.

Named Executive Officers

Our named executive officers for 20162017 were as follows:

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KEY FEATURES OF OUR COMPENSATION

We adhere to executive compensation best practices

 
 
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COMPONENTS OF OUR COMPENSATION

 
 
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OBJECTIVES OF OUR COMPENSATION PROGRAM

We seek to maintain the competitiveness of our executive compensation program with those of our peers and competitors. Adjustments to both overall compensation and the individual components of compensation are based on various factors, including results of compensation benchmarking studies, general economic conditions, the effects of inflation or other economic forces, changes in our business operations and the related financial results, results of our stockholder vote on our Say-on-Pay proposal and changes in the compensation practices of our competitors. We also take into account each executive officer’s individual performance when making compensation adjustments.

The primary objectives of our executive compensation program are to:

COMMUNICATIONS WITH STOCKHOLDERS ON EXECUTIVE COMPENSATION

At our 20162017 Annual Meeting, our stockholders voted on an advisory resolution regarding the compensation of our named executive officers, which was approved by more than 96% of the votes cast on the proposal (the “Say-on-Pay proposal”). These results demonstrated strong stockholder support for our overall executive compensation program. The Compensation Committee considered this favorable vote and determined that our current practices and processes did not require any significant modifications to address stockholder concerns. The Compensation Committee will continue to consider the outcome of these annual advisory votes when considering future executive compensation arrangements.

In addition to our annual Say-on-Pay proposal, stockholders are encouraged to provide feedback on our corporate governance policies and our executive compensation programs, including itstheir various components. We have reached out to and engaged in conversations with some of our larger stockholders regarding our compensation programs and philosophy, and have generally received positive feedback on our practices. We believe that these conversations have and will better situate our Company to modify our compensation programs to address stockholder concerns on an ongoing basis. Management reports to the Compensation Committee on issues or concerns our stockholders provide with respect to our executive compensation programs. We encourage stockholders to reach out to the Board or the Compensation Committee with any feedback on our executive compensation programs. For more information on providing feedback and the related procedures, please see “Corporate Governance — Communications with the Board and Reporting of Concerns” in this Proxy Statement.

 
 
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20162017 TARGET PERFORMANCE-BASED COMPENSATION

We endeavor to maintain strong compensation practices, which requires effective governance standards with respect to the oversight of our executive compensation policies and practices. Although we do not use a specific formula to determine the mix of at-risk pay that is performance-based and fixed compensation paid to our named executive officers, our emphasis on pay-for-performance resulted in at-risk performance-based compensation (which we define as performance share awards and cash awards tied to performance) representing a significant part of our named executive officers’ target compensation in 2016.2017. In 2016,2017, at-risk performance-based compensation represented approximately 55%52% of the target Total Direct Compensationtotal direct compensation for our CEO and an average of approximately 48% for our other named executive officers, as shown in the charts below:

As shown below for 2016,2017, the target Total Direct Compensationtotal direct compensation for our CEO and other named executive officers compared favorably withwas generally below the Peer Group median (as discussed below under “Peer Groups, Pay Mix and Use of Compensation Consultants”):

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MANAGEMENT’S ROLE IN DETERMINING COMPENSATION

The Compensation Committee oversees the executive compensation program for our named executive officers, as discussed under “Compensation Committee Matters.” Our management also plays an important role in setting the compensation of our named executive officers by initially recommending various aspects of incentive compensation, including financial performance goals, safety performance goals and strategic goals relating to each named executive officer. Management also makes recommendations regarding the salary, cash bonus and equity awards for our named executive officers (other than with respect to our CEO). While our management makes recommendations as to the goals and awards for named executive officers’ incentive compensation (other than with respect to our CEO), the Compensation Committee has final authority and complete discretion to ultimately set the compensation of our named executive officers.

At the request of the Compensation Committee, our CEO presents to the Compensation Committee his evaluation of the performance of our other named executive officers and his recommendations regarding their compensation. The Compensation Committee considers these evaluations and recommendations in determining our named executive officers’ salaries and the amounts that may be paid under our incentive plans. To assist the Compensation Committee, management also prepares information “tally sheets.”sheets”. The purpose of the tally sheets is to provide the Compensation Committee the information on key elements of actual realized compensation and potential realizable compensation for our named executive officers so that the Compensation Committee may fully evaluate our total compensation packages. Further, the Compensation Committee discusses compensation decisions with Mercer, its independent compensation consultant, and deliberates on such decisions without management present.

PEER GROUPS, PAY MIX AND USE OF COMPENSATION CONSULTANTS

The Compensation Committee believes that it is appropriate to utilize compensation benchmarking studies of our peer and competitor companies to establish initial compensation targets because the competitiveness of our compensation practices greatly influences our ability to attract, motivate and retain top executive officer talent, which is an important determinant of our business success. However, the Compensation Committee believes compensation benchmarking studies should be considered only as a point of reference for measurement and not as the determinative factor for our named executive officers’ compensation. The results of the studies do not supplant the significance of the individual performance of our named executive officers that the Compensation Committee considers when making compensation decisions. Because the information provided by compensation benchmark studies is just one of the pieces of information that is used in setting executive compensation, the Compensation Committee has discretion in determining the nature and extent of their use. Further, the Compensation Committee has discretion to determine the frequency of performing benchmarking and other studies.

We annually compare our compensation program with those companies in a peer group that the Compensation Committee evaluates together with Mercer (the “Peer Group”). The companies selected for inclusion in the Peer Group, which are listed below, were selected on the basis of a number of factors, including similar industry characteristics, organization size, financial characteristics such as revenues, total assets and market capitalization, as well as companies we compete against for talent. At the time of selection, all of the companies were publicly traded U.S. companies in the construction, engineering and commercial services industries with annual revenue between approximately one-quarterone-half and fourtwo times our annual revenue.

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During our 20152016 review of the makeup of our Peer Group, we removed PikeFurmanite Corporation, as it was no longer publicly traded and executive compensation data was no longer available, Willbros Group, given its reported organizational changes and divestiture of multiple units, and Cal Dive International, Inc. as it

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ANALYSIS OF 20162017 COMPENSATION DECISIONS AND ACTIONS

20162017 Base Salary

Salary is a critical element of our named executive officers’ compensation because it provides them with a base level of guaranteed monthly income as compensation for services provided to us. The Compensation Committee generally reviews the salaries of the named executive officers annually. To assist with that review, the Compensation Committee often will refer to the salaries in effect for comparable officers at companies in the Peer Group. The Compensation Committee also considers internal comparables, individual performance and level of responsibility, economic conditions and the Company’s financial performance in reviewing salary levels. When market or merit increases are warranted, changes in salary are generally made effective during our second quarter.

When setting salaries for our named executive officers for 2016,2017, the Compensation Committee considered the Mercer Executive Compensation Review, as well asindividual promotional adjustments to reflect increased responsibilities and certain other factors, including those specified above. As a result, the Compensation Committee made the following decisions related to base salaries for our named executive officers in 2016:2017:

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The basic formula for calculating the 2017 SMIP payout is as follows:

The Compensation Committee determined the percentage of each named executive officer’s salary to be subject to an award under the plan based on position, market pay levels and our overall compensation philosophy, which emphasizes performance-based compensation. No payouts under the 20162017 SMIP awards would be made unless the threshold levels for performance goals were achieved. Achievement of the performance goals above the maximum level would not result in any additional payments above the maximum payout level. Any such payouts under the 20162017 SMIP awards would be calculated by the straight-line mathematical interpolation between threshold and target and between target and maximum levels for performance between threshold and target and between target and maximum levels.

In 2016,2017, each named executive officer’s award opportunity was based on pre-tax income as the financial performance goal and total case incident rate and lost time caseincident rate as the safety performance goals. We chose these particular metrics because we believe they are strongly correlated with our success and are consistent with our compensation philosophy of linking named executive officers’ compensation with performance. The performance goals are intended to be challenging and ambitious but also realistic enough to be attainable given a concerted effort by our named executive officers in consideration of current market and competitive conditions and trends. The pre-established definition of pre-tax income provided for adjustments for the impact of specified unusual or non-recurring events.events, subject to the Compensation Committee’s negative discretion. In 2016,2017, no adjustments were made for consulting, legal and accounting fees associated with shareholder activism. The Compensation Committee adopted this definition for SMIP purposes because it believes these types of costs should not adversely affect incentive opportunities.any such specified unusual or non-recurring events.

In connection with its review of the percentage of each named executive officer’s salary that should be subject to an award under the SMIP in 20162017 and taking into account the Mercer Executive Compensation Review, the Compensation Committee set the following target, maximum and threshold award opportunities based on the achievement of financial and safety performance goals, subject to the weighting percentages set forth below:

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For 2016,2017, the levels of threshold, target and maximum performance, and the Company’s actual performance are shown in the following table:

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individual and corporate performance. As a result of this review, in 2016March of 2017, the Compensation Committee approved equity award compensation to our named executive officers under our 2007 LTIP and approved the following mix of equity awards:

The Compensation Committee elected this mix of equity awards because it represented an appropriate balance of the types of incentives provided withby the different types of equity instruments. For example, restricted stock provides a benefit by helping to retain key employees and performance shares are designed to vary the level of rewards a named executive officer receives dependent upon actual corporate performance and market results that are critical to stockholders.

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The number of 2016 ROIC-based performance shares earned can vary from zero to 200 percent of the target number of performance shares granted. The potential award levels are as follows (straight-line mathematical interpolation between threshold and target and between target and maximum levels):

TSR Performance Shares

The thirty percent of the equity compensation award granted as TSR-based performance shares can be earned based on the TSR of the Company’s stock compared to the TSR of a peer group over the performance period of March 24, 2016 through23, 2017 to December 31, 2018.2019. We define TSR as the change in the fair market value, adjusted for dividends, of the Company’sa company’s common stock. The measurement of change in fair market value over the performance period is based on the average closing price of common stock for the 20 days preceding the grant date of March 23, 2017 and the 20 days preceding December 31, 2019. The target number of TSR-based performance shares was determined by dividing the amount of the equity compensation award allocated to TSR performance by the closing pricefair value of the Company’s common stock on the date of grant.grant calculated by a Monte Carlo simulation. The number of TSR-based performance shares earned can vary from zero to 200 percent of the target number of performance shares granted. The potential award levels are as follows (straight-line mathematical interpolation between 25^th percentile and 50^th percentile and between 50^th percentile and 75^th percentile):

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The peer group of companies used for evaluating the Company’s relative TSR performance for the 20162017 grant of TSR-based performance shares are as follows:

TSR PEER GROUP FOR 20162017

20162017 Grants of Equity Awards

With respect to each named executive officer, the Compensation Committee considered the Mercer Executive Compensation Review, compensation levels of executive officers of our Peer Group, compensation objectives of retention and stockholder value creation and individual and corporate performance, and approved equity award grants to our named executive officers in the following amounts based on grant-date fair value, consistent with the presentation in the 20162017 Summary Compensation Table:

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started on January 1, 2015 and ended on December 31, 2017 and otherwise containcontained terms consistent with the performance shares granted in 20162017 described above. The 20142015 ROIC threshold, target and maximum for the 2014 Performance Period wasgoals were 7.5%, 12.0% and 15.0%, respectively. Based onThe Compensation Committee exercised its negative discretion to exclude the positive impacts of the Tax Act and the adoption of ASU No. 2016-09,Compensation — Stock Compensation (Topic 718) (see footnote 1,Recently Adopted Accounting Pronouncements to our audited consolidated financial statements for the fiscal year ended December 31, 2017 included in our 2017 Form 10-K) in its calculation of the three-year average 2014of 2015 ROIC. After this exercise of negative discretion, the three-year average 2015 ROIC of 11.7% for the 2014 Performance Period, 96.9%was 7.6% and 50.9% of the target ROIC performance shares awarded were earned. For the 2014 Performance Period,2015 performance share awards based on TSR, the TSR of the Company’s stock ranked at the 64.140.6^stth percentile of the TSR peer group and 156.4%71.8% of the target TSR performance shares were earned. The chart below shows the performance share payouts in 20162017 for each of our named executive officers that were awarded performance shares in 2014:2015: