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
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QUANTA SERVICES, INC.
Quanta Services, Inc.
(Name of Registrant as Specified In Its Charter)
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Notice of 2017 Annual Meeting
of Stockholders and
Proxy Statement
QUANTA SERVICES, INC. 2800 Post Oak Boulevard, Suite 2600 Houston, TX 77056 (713) 629-7600 |
QUANTA SERVICES, INC.
2800 Post Oak Boulevard, Suite 2600
Houston, TX 77056
(713) 629-7600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 201524, 2017
To our Stockholders:
The Annual Meeting of Stockholders of Quanta Services, Inc. (“Quanta”) will be held in the Williams Tower, 2nd2nd Floor Conference Center, Auditorium No. 1, located at 2800 Post Oak Boulevard, Houston, Texas 77056, on May 21, 201524, 2017 at 9:008:30 a.m. local time. At the meeting, you will be asked to consider and act upon the following matters, which are more fully described in the accompanying Proxy Statement:
1. | Election of |
2. | Approval, by non-binding advisory vote, of Quanta’s executive compensation; | |
3. | Recommendation, by non-binding advisory vote, of the frequency of future advisory votes on Quanta’s executive compensation; | |
4. | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year |
5. |
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Acting upon any other matters that are properly brought before the meeting, or any adjournments or postponements of the meeting, by or at the direction of the Board of Directors. |
Our stockholders of record at the close of business on March 23, 201527, 2017 are entitled to notice of, and to vote at, the annual meeting and any adjournments or postponements of the meeting.
By Order of the Board of Directors,
Carolyn M. Campbell
By Order of the Board of Directors, |
Carolyn M. Campbell |
Houston, Texas
April 14, 2017
April 9, 2015
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 2015:24, 2017:
The Notice, Proxy Statement and
2014 2016 Annual Report to Stockholders
are available atwww.proxyvote.com. www.proxyvote.com.
2017 Proxy Statement3
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2017 Proxy Statement5
TABLE OF CONTENTS
6Quanta Services, Inc.
QUANTA SERVICES, INC. 2800 Post Oak Boulevard, Suite 2600 Houston, TX 77056 (713) 629-7600 |
QUANTA SERVICES, INC.
2800 Post Oak Boulevard, Suite 2600
Houston, TX 77056
(713) 629-7600
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2015
We are distributing and making available this Proxy Statement, the form of proxy24, 2017
or voting instructions and our 2014 Annual Report beginning on or about April 9, 2015.
We are distributing and making available this Proxy Statement, the form of proxy or voting instructions and our 2016 Annual Report beginning on or about April 14, 2017. |
We are furnishing this proxy statement in connection with the solicitation of proxies by our Board of Directors (“Board”) to be voted at the 20152017 Annual Meeting of Stockholders of Quanta Services, Inc., a Delaware corporation, sometimes referred to as the Company, Quanta, us, we or like terms. The annual meeting will be held in Houston, Texas on Thursday,Wednesday, May 21, 2015,24, 2017, at 9:008:30 a.m. local time. The proxy materials, including this proxy statement, the form of proxy or voting instructions and our 20142016 annual report, are being distributed and made available on or about April 9, 2015.14, 2017.
In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), we are providing our stockholders access to our proxy materials on the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (“Notice”) will be mailed to most of our stockholders on or about April 9, 2015.14, 2017. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials to be sent to them by following the instructions in the Notice.
The Notice also provides instructions on how to inform us to send future proxy materials to you electronically by e-mail or in printed form by mail. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail or printed form will remain in effect until you terminate it.
Choosing to receive future proxy materials by e-mail will allow us to provide you with the information you need in a timelier manner, save us the cost of printing and mailing documents to you, and conserve natural resources.
2017 Proxy Statement7
Table of ContentsQUESTIONS AND ANSWERS ABOUT THE MEETING
What is the purpose of the meeting?
The meeting will be Quanta’s regular annual meeting of stockholders, and stockholders will be asked to vote on the following matters:
election of ten directors nominated by our Board;
ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2015; and
approval, by non-binding advisory vote, of Quanta’s executive compensation.
How does the Board recommend that stockholders vote?
The Board recommends that stockholders vote as follows:
FOR the election of all nominees as directors;
FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2015; and
FOR the advisory resolution approving Quanta’s executive compensation.
General Information
When and where is the annual meeting?
The annual meeting will be held in the Williams Tower, 2nd Floor Conference Center, Auditorium No. 1, located at 2800 Post Oak Boulevard, Houston, Texas 77056, on May 21, 2015 at 9:00 a.m. local time.
Who can attend the meeting?
All stockholders of record as of March 23, 2015, or their duly appointed proxies, may attend the meeting, and each may be accompanied by one guest. Seating, however, is limited. Admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 8:30 a.m. on May 21, 2015. Each stockholder will be asked to present valid picture identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not be permitted at the meeting. To obtain directions to the meeting, please contact our Corporate Secretary at 713-629-7600.
If you hold your shares in “street name” (that is, through a broker, bank or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting.
Who is entitled to vote at the meeting?
Holders of record of (i) our Common Stock, par value $0.00001 per share, (ii) our Series F Preferred Stock, par value $0.00001 per share, and (iii) our Series G Preferred Stock, par value $0.00001 per share, respectively, at the close of business on March 23, 2015, the record date for the meeting, are entitled to notice of and to vote at the annual meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the meeting, or at any adjournments or postponements of the meeting, unless a new record date is then set.
As of March 23, 2015, there were 204,430,017 shares of our Common Stock, one share of our Series F Preferred Stock, and one share of our Series G Preferred Stock, respectively, outstanding and entitled to vote.
What are the voting rights of the holders of Common Stock, Series F Preferred Stock and Series G Preferred Stock?
Each share of Common Stock is entitled to one vote on each matter on which it may vote. The share of Series F Preferred Stock is entitled to a number of votes equal to the number of outstanding Class A non-voting exchangeable common shares of our wholly-owned subsidiary, Valard Construction Ltd., a British Columbia corporation, on each matter on which it may vote. Valard Construction Ltd. had 3,500,000 Class A non-voting exchangeable common shares outstanding on March 23, 2015. The share of Series G Preferred Stock is entitled to a number of votes equal to the number of outstanding Class A non-voting exchangeable common shares of our wholly-owned subsidiary, Northstar Energy Services Inc., an Alberta corporation, on each matter on which it may vote. Northstar Energy Services Inc. had 899,858 Class A non-voting exchangeable common shares outstanding on March 23, 2015.
Holders of Common Stock, Series F Preferred Stock and Series G Preferred Stock vote together as a single class on all matters. The required vote to approve each item to be voted on at the meeting is described below.
What vote is required to approve each item to be voted on at the meeting?
Directors are elected by a majority of the votes cast with respect to such director in uncontested elections, such that a nominee for director will be elected to the Board if the votes cast FOR the nominee’s election exceed the votes cast AGAINST such nominee’s election. Abstentions and broker non-votes are not counted as votes
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cast for purposes of the election of directors and, therefore, will have no effect on the outcome of such election. Even if a nominee is not re-elected, he or she will remain in office as a director until his or her earlier resignation or removal. Each of the current director nominees has signed a letter of resignation that will be effective if the nominee is not re-elected at the meeting and the Board accepts his or resignation following the meeting. If a nominee is not re-elected, the Board will decide whether to accept the director’s resignation in accordance with the procedures listed in Quanta’s Corporate Governance Guidelines, which are available on our website atwww.quantaservices.com.
Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm requires the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on that proposal. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect on the outcome of the vote on such proposal.
Advisory approval of the resolution on Quanta’s executive compensation requires the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on that proposal. Abstentions will have the same effect as a vote against the resolution. Broker non-votes will have no effect on the outcome of the advisory vote. The results of this vote are not binding on the Board, whether or not the proposal is adopted by the aforementioned voting standard. In evaluating the vote on this resolution, the Board intends to consider the voting results in their entirety.
Any other matter properly brought before the meeting will be decided by the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on the matter.
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
In accordance with SEC rules, we are providing access to our proxy materials over the Internet. As a result, we have sent to most of our stockholders a Notice instead of a paper copy of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet and how to request a paper copy. In addition, stockholders may request to receive future proxy materials in printed form by mail or electronically by e-mail. A stockholder’s election to receive proxy materials by mail or e-mail will remain in effect until the stockholder terminates it.
Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials?
We are providing certain stockholders, including those who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a Notice. If you would like to reduce the costs incurred by Quanta in mailing proxy materials, you can consent to receive 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 provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When prompted, indicate that you agree to receive or access stockholder communications electronically in the future.
Can I vote my stock by completing and returning the Notice?
No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, by requesting and returning a paper proxy card, or by submitting a ballot in person at the annual meeting.
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General Information
How can I access the proxy materials over the Internet?
Your Notice or proxy card will contain instructions on how to view our proxy materials for the annual meeting on the Internet. Our proxy materials are available atwww.proxyvote.com.
How do I vote?
You may vote by any of the following methods:
(i) Internet. Vote on the Internet atwww.proxyvote.com. This website also allows electronic proxy voting using smartphones, tablets and other web-connected mobile devices (additional charges may apply pursuant to your service provider plan). Simply follow the instructions on the Notice, or if you received a proxy card by mail, follow the instructions on the proxy card and you can confirm that your vote has been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials. Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Time) on May 20, 2015.
(ii) Telephone. Vote by telephone by following the instructions on the Notice or, if you received a proxy card, by following the instructions on the proxy card. Easy-to-follow voice prompts allow you to vote your stock and confirm that your vote has been properly recorded. Telephone voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Time) on May 20, 2015.
(iii) Mail. If you received a proxy card by mail, vote by mail by completing, signing, dating and returning your proxy card in the pre-addressed, postage-paid envelope provided. If you vote by mail and your proxy card is returned unsigned, then your vote cannot be counted. If you vote by mail and the returned proxy card is signed without indicating how you want to vote, then your proxy will be voted as recommended by the Board. If mailed, your completed and signed proxy card must be received by May 20, 2015.
(iv) Meeting. You may attend and vote at the annual meeting. The Board recommends that you vote using one of the first three methods discussed above, as it is not practical for most stockholders to attend and vote at the annual meeting. Using one of the first three methods discussed above to vote will not limit your right to vote at the annual meeting if you later decide to attend in person. If your stock is held in street name (for example, held in the name of a bank, broker, or other nominee), you must obtain a proxy executed in your favor from your bank, broker or other holder of record to be able to vote in person at the annual meeting.
If I vote by telephone or Internet and received a proxy card in the mail, do I need to return my proxy card?
No, you do not need to return your proxy card if you vote by telephone or Internet.
If I vote by mail, telephone or Internet, may I still attend the annual meeting?
Yes, you may attend the annual meeting even if you have voted by mail, telephone or Internet.
Can I change my vote?
Yes. You may revoke your proxy before the voting polls are closed at the annual meeting, by the following methods:
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voting at a later time by telephone, following the instructions included with your Notice or proxy card, until 11:59 p.m. (Eastern Time) on May 20, 2015 (not available to the holders of Series F Preferred Stock or Series G Preferred Stock);
voting in person, or giving notice to the inspector of elections, at the annual meeting; or
signing, dating and delivering to Quanta’s Corporate Secretary a proxy with a later date or a written revocation of your most recent proxy.
The powers of the proxy holders will be revoked with respect to your shares if you attend the meeting in person and vote your shares in person by completing a written ballot. Attendance at the meeting will not by itself revoke a previously granted proxy. If you are a street name stockholder and you vote by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures.
What is the effect of an advisory vote?
Because your vote with respect to approval of our named executive officer compensation is advisory, it will not be binding upon the Board. However, our Compensation Committee and the Board will take the outcome of the vote into account when considering future compensation arrangements for our executive officers.
What constitutes a quorum?
The holders of shares representing both (i) a majority of the aggregate outstanding shares entitled to vote, and (ii) a majority of the aggregate voting power of Common Stock, Series F Preferred Stock and Series G Preferred Stock entitled to vote must be present, in person or by proxy, to constitute a quorum to transact business at the annual meeting.
As of March 23, 2015, there were 204,430,017 shares of our Common Stock with aggregate voting power of 204,430,017 votes, one share of our Series F Preferred Stock with aggregate voting power of 3,500,000 votes, and one share of our Series G Preferred Stock with aggregate voting power of 899,858 votes, respectively, outstanding and entitled to vote.
Your stock is counted as present at the annual meeting if you attend the annual meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. Abstentions and broker non-votes will be counted as present for purposes of establishing a quorum at the meeting.
What are broker non-votes?
The New York Stock Exchange (“NYSE”) permits brokers to vote their customers’ stock held in street name on routine matters, such as the ratification of the appointment of our independent registered public accounting firm, when the brokers have not received voting instructions from their customers. However, the NYSE does not allow brokers to vote their customers’ shares held in street name on non-routine matters unless they have received voting instructions from their customers. In such cases, the uninstructed shares for which the broker is unable to vote are called broker non-votes.
What routine matters will be voted on at the annual meeting?
Ratification of the appointment of our independent registered public accounting firm is the only matter to be voted on at the meeting on which brokers may vote in their discretion on behalf of customers who have not provided voting instructions.
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General Information
What non-routine matters will be voted on at the annual meeting?
The election of directors and the advisory vote on executive compensation are non-routine matters on which brokers are not allowed to vote unless they have received voting instructions from their customers.
What is the effect of not casting a vote?
If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the matters that properly come before the meeting. If you hold your shares in street name, and you do not instruct your broker, bank or other nominee how to vote in the election of directors, the advisory vote to approve executive compensation or any other non-routine matter, no votes will be cast on your behalf on such matters, but your broker, bank or other nominee will continue to have discretion to vote any uninstructed shares on the ratification of the appointment of our independent registered public accounting firm.
Where can I find the voting results of the annual meeting?
We plan to announce preliminary voting results at the meeting and publish final results in a Current Report on Form 8-K or an amendment thereto timely filed with the SEC. You may access or obtain a copy of this and other reports free of charge on the Company’s website atwww.quantaservices.com or by contacting our investor relations department atinvestors@quantaservices.com. Also, the referenced Current Report on Form 8-K, any amendments thereto and other reports filed by Quanta with the SEC are available to you on the SEC’s website atwww.sec.gov.
Who pays for the proxy solicitation related to the annual meeting?
The proxies being solicited hereby are being solicited by Quanta. The costs of soliciting proxies hereby, which may include the cost of preparing, printing and mailing the proxy materials, will be borne by Quanta. Our officers, directors and employees may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, facsimile, postings on our website or other electronic means. We will also request banks, brokers and other custodians, nominees and fiduciaries to forward proxy materials to beneficial owners of our Common Stock and obtain their voting instructions. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation materials to beneficial owners of our Common Stock. Quanta has not engaged an outside proxy solicitor for the annual meeting.
Can I get more than one copy of the proxy materials if multiple stockholders are located at my address?
In some instances, only one proxy statement and annual report is being delivered to multiple stockholders sharing an address unless we have received contrary instructions from one of those stockholders. Quanta undertakes to promptly deliver upon request a separate copy of such materials to any stockholder at a shared address to which a single copy of the documents was delivered. Stockholders sharing an address may also request delivery of a single copy of the proxy materials, but in such event will still receive separate proxies for each account. To request separate or single delivery of these materials now or in the future, stockholders should notify Quanta by contacting the Corporate Secretary in writing at Quanta Services, Inc., 2800 Post Oak Blvd., Suite 2600, Houston, Texas 77056 or by phone at 713-629-7600.
What if I receive more than one proxy card?
If you hold your shares in more than one type of account or your shares are registered differently, you may receive more than one proxy card. We encourage you to vote each proxy card that you receive.
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Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of April 1, 2015, unless otherwise indicated, with respect to each person known by us to be the beneficial owner of more than five percent (5%) of the outstanding shares of our Common Stock, Series F Preferred Stock or Series G Preferred Stock. Except as indicated otherwise, the beneficial owners named below have sole voting and investment power with respect to the shares indicated as beneficially owned.
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The following table sets forth, as of April 1, 2015, the number of shares of Common Stock beneficially owned by (i) each of our directors and director nominees, (ii) each of our named executive officers listed in the 2014 Summary Compensation Table (collectively, the “NEOs”), and (iii) all of our directors and executive officers as a group.
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Quanta Board of Directors
ELECTION OF DIRECTORS
The Board currently consists of ten directors, whose current terms of office all expire at the 20152017 annual meeting. Bruce Ranck, currently the Chairman of the Board, will not stand for re-election at the 2017 annual meeting. Having considered the size, structure and composition of the Board, and based on the recommendation of the Governance and Nominating Committee, the Board approved a decrease in the number of directors constituting the Board by one, effective as of May 24, 2017, so that the Board shall thereafter consist of nine directors until otherwise determined in accordance with Quanta’s bylaws.
The Board proposes that the following tennine nominees be elected for a new term of one year or until their successors are duly elected and qualified or until their earlier death, resignation or removal. Each of the nominees has consented to serve if elected. If a nominee becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board. Proxies cannot be voted for a greater number of persons than the number of nominees named below.
The director nominees standing for election are:
Name | Age | Position(s) with Quanta | Director Since | |||||||||||||
Earl C. (Duke) Austin, Jr. | 47 | President, Chief Executive Officer, | 2016 | |||||||||||||
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Name | Age | Position(s) with Quanta | Director Since | |||||||||||||
James R. Ball | 72 | Director | 1998 | |||||||||||||
Doyle N. Beneby | 57 | Director | 2016 | |||||||||||||
J. Michal Conaway | 66 | Director | 2007 | 68 | Director | 2007 | ||||||||||
Vincent D. Foster | 58 | Director | 1998 | 60 | Director | 1998 | ||||||||||
Bernard Fried | 58 | Director | 2004 | 60 | Director | 2004 | ||||||||||
Louis C. Golm | 73 | Director | 2002 | |||||||||||||
Worthing F. Jackman | 50 | Director | 2005 | 52 | Director | 2005 | ||||||||||
James F. O’Neil III | 56 | President, Chief Executive Officer and Director | 2011 | |||||||||||||
Bruce Ranck | 66 | Chairman of the Board | 2005 | |||||||||||||
David M. McClanahan | 67 | Director | 2016 | |||||||||||||
Margaret B. Shannon | 65 | Director | 2012 | 67 | Director | 2012 | ||||||||||
Pat Wood, III | 52 | Director | 2006 | 54 | Director | 2006 |
Earl C. (Duke) Austin, Jr.has served as a member of the Board of Directors and President and Chief Executive Officer since March 2016 and as our Chief Operating Officer since January 2013. He previously served as President of the Electric Power Division and Oil and Gas Division from May 2011 to December 2012 and had responsibility for oversight of power and pipeline operations since January 2011. He served as President of the Oil and Gas Division from October 2009 to May 2011 and as President of North Houston Pole Line, L.P., an electric and natural gas specialty contractor and subsidiary of Quanta, from 2001 until September 2009. He is currently a director of the Southwest Line Chapter of NECA. Mr. Austin holds a Bachelor of Arts in Business Management degree. The Board believes Mr. Austin’s qualifications to serve on the Board include his significant contributions to Quanta in strategy and operational and safety leadership, including as our Chief Operating Officer, as well as his extensive technical expertise and knowledge of the industries Quanta serves. Mr. Austin also brings extensive knowledge of all aspects of the Company’s operations as a result of his service as Chief Executive Officer. |
James R. Ball8has been a memberQuanta Services, Inc.
J. Michal ConawayQUANTA BOARD OF DIRECTORS has been a member of the Board of Directors since August 2007. He has served as the Chief Executive Officer of Peregrine Group, LLC, an executive consulting firm, since 2002. Mr. Conaway has been providing consulting and advisory services since 2000. Prior to 2000, Mr. Conaway held various management and executive positions, including serving as Chief Financial Officer of Fluor Corporation, an engineering, procurement, construction and maintenance services provider. Since 2008, Mr. Conaway has served as a director of GT Advanced Technologies, Inc., formerly known as GT Solar International, Inc. He previously served as a director of InfraSource Services, Inc. from February 2006 to August 2007 and Cherokee International Corporation from April 2008 to November 2008. Mr. Conaway holds an M.B.A. degree and is a Certified Public Accountant. The Board believes Mr. Conaway’s qualifications to serve on the Board include his prior service as the chief financial officer of multiple public corporations, including those within Quanta’s line of business, his years of service on boards of other public and private companies, his extensive financial and accounting expertise, and his advisory experience in strategic, operational and financial matters.
Doyle N. Benebyhas been a member of the Board of Directors since March 2016. Mr. Beneby previously served as the Chief Executive Officer of New Generation Power International from October 2015 until May 2016. He also previously served as President and Chief Executive Officer of CPS Energy from August 2010 until September 2015. Mr. Beneby has served as a director of Korn/Ferry International since September 2015 and as a director of Capital Power Corp. since May 2012. Mr. Beneby holds a Bachelor of Science degree in Engineering and an M.B.A. degree. The Board believes Mr. Beneby’s qualifications to serve on the Board include his extensive executive-level experience at a municipal electric and gas utility and his service as a chief executive officer and director of other public companies, as well as his operational, safety and financial expertise and knowledge of the industries Quanta serves. |
J. Michal Conawayhas been a member of the Board of Directors since August 2007. Mr. Conaway has been providing consulting and advisory services since 2000. He previously served as the Chief Executive Officer of Peregrine Group, LLC, an executive consulting firm, from 2002 to 2016. Prior to 2000, Mr. Conaway held various management and executive positions, including serving as Chief Financial Officer of Fluor Corporation, an engineering, procurement, construction and maintenance services provider. Mr. Conaway previously served as a director of GT Advanced Technologies, Inc., formerly known as GT Solar International, Inc., from 2008 until March 2016. Mr. Conaway holds an M.B.A. degree and is a Certified Public Accountant. The Board believes Mr. Conaway’s qualifications to serve on the Board include his prior service as the chief financial officer of multiple public corporations, including those within Quanta’s line of business, his years of service on boards of other public and private companies, his extensive financial and accounting expertise, and his advisory experience in strategic, operational and financial matters. |
Vincent D. Fosterhas been a member of the Board of Directors since 1998. He has served as Chairman of the Board and Chief Executive Officer of Main Street Capital Corporation, a specialty investment company, since March 2007. He also has served as Senior Managing Director of Main Street Capital Partners, LLC (and its predecessor firms), a private investment firm, since 1997. Mr. Foster has served as a director of Team Industrial Services, Inc. since 2005. Mr. Foster previously served as a director of U.S. Concrete, Inc. from 1999 to 2010, Carriage Services, Inc. from 1999 to 2011, and HMS Income Fund, Inc. from June 2012 to March 2013. Mr. Foster holds a J.D. degree and is a Certified Public Accountant. The Board believes Mr. Foster’s qualifications to serve on the Board include his significant contributions and service to Quanta since its inception, his experience as chief executive officer of a public corporation, his many years of service on boards of other public companies and his extensive tax, accounting, merger and acquisitions, financial and corporate governance expertise. |
Bernard Friedhas been a member of the Board of Directors since March 2004. He has served as Chief Executive Officer and as a director of Plastikon Industries, Inc., a plastic manufacturing company, since April 2016. He has also served as Principal of BF Consulting, a provider of management consulting services, since September 2011. Mr. Fried previously served as the Executive Chairman of OpTerra Energy Group, an energy conservation measures services provider, from June 2012 to February 2016, and as the Executive Chairman of Energy Solutions International, a software provider to the pipeline industry, from March 2011 to May 2015. Mr. Fried also served as Chief Executive Officer and President of Siterra Corporation, a software services provider, from May 2005 to March 2011, as Chief Executive Officer and President of Citadon, Inc., a software services provider, from 2001 until November 2003, and as Chief Financial Officer and Managing Director of Bechtel Enterprises, Inc. from 1997 until 2000. Mr. Fried holds a Bachelor of Engineering degree and an M.B.A. degree. The Board believes Mr. Fried’s qualifications to serve on the Board include his executive management experience, including at companies within Quanta’s line of business, his years of service on boards of public and private companies, and his extensive executive-level experience in operations, engineering, construction, project management, finance and international business. |
Worthing F. Jackmanhas been a member of the Board of Directors since May 2005. He has served as Executive Vice President and Chief Financial Officer of Waste Connections, Inc., an integrated solid waste services company, since September 2004 and served as its Vice President - Finance and Investor Relations from April 2003 until August 2004. From 1991 until April 2003, Mr. Jackman held various positions with Deutsche Bank Securities, Inc., an investment banking firm, most recently serving as a Managing Director, Global Industrial and Environmental Services Group. Mr. Jackman holds an M.B.A. degree. The Board believes Mr. Jackman’s qualifications to serve on the Board include his experience as the chief financial officer of a public corporation and his investment banking experience, as well as his extensive financial and accounting expertise. |
2017 Proxy Statement9
QUANTA BOARD OF DIRECTORS
David M. McClanahan has been a member of the Board of Directors since March 2016. He previously served as President and Chief Executive Officer of CenterPoint Energy, Inc. from October 2002 until December 2013 and as Special Advisor to the Chief Executive Officer of CenterPoint Energy, Inc. from January 2014 until July 2014. From 1999 until 2002, Mr. McClanahan served as President and Chief Operating Officer of all regulated operations for Reliant Energy, Inc. He also previously served as a director of CenterPoint Energy, Inc. from 2002 until 2013. Mr. McClanahan holds a Bachelor of Science degree in Mathematics and an M.B.A. degree and is a Certified Public Accountant. The Board believes Mr. McClanahan’s qualifications to serve on the Board include his extensive experience, including as a chief executive officer of a public company, in the electric power and natural gas industries and his prior service on the boards of other public companies, as well as his technical expertise and knowledge of the industries Quanta serves and his financial and accounting expertise. | ||||
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Margaret B. Shannon has been a member of the Board of Directors since December 2012. She served as Vice President and General Counsel of BJ Services Company, an international oilfield services company, from 1994 to 2010, when it was acquired by Baker Hughes Incorporated. Prior to 1994, she was a partner with the law firm of Andrews Kurth LLP. Ms. Shannon served on the board of directors of Matador Resources Company, an exploration and production company, from June 2011 to December 2016. In addition, she is active in several not-for-profit organizations in Houston. Ms. Shannon received her J.D. cum laude from Southern Methodist University Dedman School of Law in 1976 and her Bachelor of Arts degree from Baylor University in 1971. The Board believes Ms. Shannon’s qualifications to serve on the Board include vast experience in the energy industry, as well as in corporate governance, and her years of service on boards of other public and private companies. | ||||
Pat Wood, III has been a member of the Board of Directors since May 2006. He has served as a Principal of Wood3 Resources, an energy infrastructure developer, since July 2005. From 2001 until July 2005, Mr. Wood served as Chairman of the Federal Energy Regulatory Commission, and from 1995 until 2001, he chaired the Public Utility Commission of Texas. Prior to 1995, Mr. Wood was an attorney with Baker Botts L.L.P. and an associate project engineer with Arco Indonesia, an oil and gas company, in Jakarta. Mr. Wood has served as a director of SunPower Corporation since 2005 and non-executive chairman of the board of directors of Dynegy, Inc. since October 2012. Mr. Wood also served as a director of Memorial Resource Development from June 2014 until September 2016. He also serves as a strategic advisor for Hunt Power, InfraREIT, Inc. and Sharyland Utilities, L.P. Mr. Wood holds a Bachelor of Science in Civil Engineering degree from Texas A&M University and a J.D. degree from Harvard University. The Board believes Mr. Wood’s qualifications to serve on the Board include his significant strategic and operational management experience, his unique perspective and extensive knowledge with regard to the legal and regulatory process and policy development at the government level, his years of service as a director of other public and private companies, and his energy infrastructure development expertise. |
Quanta Board of Directors
Vincent D. Fosterhas been a member of the Board of Directors since 1998. He has served as Chairman of the Board and Chief Executive Officer of Main Street Capital Corporation, a specialty investment company, since March 2007. He also has served as Senior Managing Director of Main Street Capital Partners, LLC (and its predecessor firms), a private investment firm, since 1997. Mr. Foster has served as a director of Team Industrial Services, Inc. since 2005. Mr. Foster previously served as a director of U.S. Concrete, Inc. from 1999 to 2010, Carriage Services, Inc. from 1999 to 2011, and HMS Income Fund, Inc. from June 2012 to March 2013. Mr. Foster holds a J.D. degree and is a Certified Public Accountant. The Board believes Mr. Foster’s qualifications to serve on the Board include his significant contributions and service to Quanta since its inception, his experience as chief executive officer of a public corporation, his many years of service on boards of other public companies and his extensive tax, accounting, merger and acquisitions, financial and corporate governance expertise.
Bernard Friedhas been a member of the Board of Directors since March 2004. Since June 2012, he has served as the Executive Chairman of OpTerra Energy Group, an energy conservation measures services provider. Mr. Fried continues to serve, since March 2011, as the Executive Chairman of Energy Solutions International, a software provider to the pipeline industry, and he has also been an independent consultant. He previously served as Chief Executive Officer and President of Siterra Corporation, a software services provider, from May 2005 to March 2011. Mr. Fried served as Chief Executive Officer and President of Citadon, Inc., a software services provider, from 2001 until November 2003, and Chief Financial Officer and Managing Director of Bechtel Enterprises, Inc. from 1997 until 2000. Mr. Fried holds a Bachelor of Engineering degree and an M.B.A. degree. The Board believes Mr. Fried’s qualifications to serve on the Board include his executive management experience, including at companies within Quanta’s line of business, his years of service on boards of public and private companies, and his extensive executive-level experience in operations, engineering, construction, project management, finance and international business.
Louis C. Golmhas been a member of the Board of Directors since July 2002 and from May 2001 until May 2002. He has been an independent consultant and senior advisor to the telecommunications and information management industries since 1999. Mr. Golm holds a Master of Science in Management degree and an M.B.A. degree. The Board believes Mr. Golm’s qualifications to serve on the Board include his numerous years of executive management experience, including as chief executive officer of a large telecommunications company, his years of service as a director of other public and private companies, and his insight regarding sales and marketing, accounting/finance, risk mitigation and strategic development.
Worthing F. Jackman has been a member of the Board of Directors since May 2005. He has served as Executive Vice President - Chief Financial Officer of Waste Connections, Inc., an integrated solid waste services company, since September 2004 and served as its Vice President - Finance and Investor Relations from April 2003 until August 2004. From 1991 until April 2003, Mr. Jackman held various positions with Deutsche Bank Securities, Inc., an investment banking firm, most recently serving as a Managing Director, Global Industrial and Environmental Services Group. Mr. Jackman holds an M.B.A. degree. The Board believes Mr. Jackman’s qualifications to serve on the Board include his experience as the chief financial officer of a public corporation and his investment banking experience, as well as his extensive financial and accounting expertise.
James F. O’Neil IIIhas been a member of the Board of Directors and has served as our President and Chief Executive Officer since May 2011. He previously served as our President and Chief Operating Officer from October 2008 to May 2011, our Senior Vice President of Operations Integration and Audit from December 2002 to October 2008, and our Vice President of Operations Integration from August 1999 to December 2002. Mr. O’Neil holds a Bachelor of Science in Civil Engineering degree. The Board believes Mr. O’Neil’s qualifications to serve on the Board include his significant contributions to Quanta in strategy, mergers and acquisitions and internal audit, his operational and safety leadership service with Quanta, including as its President and Chief Executive Officer, his technical expertise, and his extensive knowledge of the industries Quanta serves.
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Quanta Board of Directors
Bruce Ranck has been a member of the Board of Directors since May 2005 and Chairman of the Board since May 2013. He has been a partner with Bayou City Partners, a venture capital firm, since 1999. Mr. Ranck served as Chief Executive Officer of Tartan Textile Services, Inc., a healthcare linen services provider, from August 2003 until April 2006. From 1970 until 1999, he held various positions with Browning-Ferris Industries, Inc., a provider of waste management services, most recently as Chief Executive Officer and President. Mr. Ranck served as a director of Dynamex Inc. from 2002 until February 2011. He received a Bachelor of Arts degree from Michigan State University in 1970. The Board believes Mr. Ranck’s qualifications to serve on the Board include his executive management experience, including as chief executive officer of a large public corporation, his extensive acquisition integration experience, and his years of service on boards of other public and private companies.
Margaret B. Shannon has been a member of the Board of Directors since December 2012. She served as Vice President and General Counsel of BJ Services Company, an international oilfield services company, from 1994 to 2010, when it was acquired by Baker Hughes Incorporated. Prior to 1994, she was a partner with the law firm of Andrews Kurth LLP. Ms. Shannon has served on the board of directors of Matador Resources Company, an exploration and production company, since June 2011. In addition, she is active in several not-for-profit organizations in Houston. Ms. Shannon received her J.D. cum laude from Southern Methodist University Dedman School of Law in 1976 and her Bachelor of Arts degree from Baylor University in 1971. The Board believes Ms. Shannon’s qualifications to serve on the Board include vast experience in the energy industry, as well as in corporate governance, and her years of service on boards of other public and private companies.
Pat Wood, IIIhas been a member of the Board of Directors since May 2006. He has served as a Principal of Wood3 Resources, an energy infrastructure developer, since July 2005. From 2001 until July 2005, Mr. Wood served as Chairman of the Federal Energy Regulatory Commission. From 1995 until 2001, he chaired the Public Utility Commission of Texas. Prior to 1995, Mr. Wood was an attorney with Baker Botts L.L.P., a global law firm, and an associate project engineer with Arco Indonesia, an oil and gas company, in Jakarta. Mr. Wood has served as a director of SunPower Corporation since 2005, non-executive chairman of the board of directors of Dynegy, Inc. since October 2012 and director of Memorial Resource Development since June 2014. Mr. Wood previously served as a director of First Wind Holdings Inc. from 2010 to June 2012. Mr. Wood holds a Bachelor of Science in Civil Engineering degree and a J.D. degree. The Board believes Mr. Wood’s qualifications to serve on the Board include his significant strategic and operational management experience, his unique perspective and extensive knowledge with regard to the legal and regulatory process and policy development at the government level, his years of service as a director of other public and private companies, and his energy infrastructure development expertise.
The Board of Directors unanimously recommends a voteFOR the election of each of the director nominees.
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10Quanta Services, Inc.
We are committed to having sound corporate governance practices that maximize stockholder value in a manner consistent with legal requirements and the highest standardstandards of integrity. In that regard, the Board has adopted guidelines that provide a framework for the governance of Quanta. In addition,Quanta, and we continually review these guidelines and regularly monitor developments in the area of corporate governance. Our Corporate Governance Guidelines are posted onin the “Investors & Media / Governance” section of our website atwww.quantaservices.com under the heading “Investors & Media / Corporate Governance.”.
Board Leadership StructureBOARD LEADERSHIP STRUCTURE
The Board believes that the leadership structure of Quanta’s Board should include either an independent non-executive Chairman of the Board or a Lead Director who satisfies Quanta’s standards for independence. The Board believes that the appointment of a Lead Director achieves many of the benefits claimed to result from the separation of the Chairman of the Board and the CEOChief Executive Officer roles. The Board reviews its leadership structure from time to time to assess whether it continues to serve the best interests of Quanta and its stockholders. The Board believes that this approach provides flexibility to adapt to changing circumstances, enabling the Board to fulfill its oversight role and allowing the Board to review the manner in which its leadership is configured with a view toward maintaining a structure that best serves Quanta and its stockholders.
Chairman of the Board
Chairman of the Board |
Quanta’s Corporate Governance Guidelines provide that the Board will appoint a Chairman of the Board, who may but need not be an employee of Quanta. The Chairman of the Board presides over all regular sessions of the Board and Quanta’s annual meetings of stockholders. With input from the CEOChief Executive Officer (if the Chairman is an independent director), or in consultation with the Lead Director (if the Chairman is not an independent director), the Chairman sets the agenda for Board meetings, subject to the right of each Board member to suggest the inclusion of item(s)items on any agenda. The Chairman of the Board may vote at any meeting of the Board on any matter called to a vote, subject to the legal, fiduciary and governance requirements applicable to all members of the Board. If the Chairman of the Board is an independent director, the duties and responsibilities of the Chairman of the Board generally include the following:
working with the CEO to ensure directors receive timely, accurate, and complete information to enable sound decision making, effective monitoring and advice;
● | working with the Chief Executive Officer to ensure directors receive timely, accurate, and complete information to enable sound decision making, effective monitoring and advice; |
● | encouraging active engagement of all directors; |
● | directing discussions toward a consensus view and summarizing discussions for a complete understanding of what has been agreed; |
● | encouraging the Board’s involvement in strategic planning and monitoring the Chief Executive Officer’s implementation; |
2017 Proxy Statement11
directing discussions toward a consensus view and summarizing discussions for a complete understanding of what has been agreed;
encouraging the Board’s involvement in strategic planning and monitoring the CEO’s implementation;
coordinating, monitoring and maintaining a record of all meetings of independent directors and discussing Board executive session results with the CEO;
promoting effective relationships and open communication between the independent directors and the management team;
coordinating, together with the Compensation Committee, the formal evaluation of the CEO on an annual basis;
coordinating, together with the Governance and Nominating Committee, the succession plans for the CEO;
CORPORATE GOVERNANCE
● | coordinating, monitoring and maintaining a record of all meetings of independent directors and discussing Board executive session results with the Chief Executive Officer; | |||||
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● | coordinating, together with the Compensation Committee, the formal evaluation of the Chief Executive Officer on an annual basis; | |||||
● | coordinating, together with the Governance and Nominating Committee, the succession plans for the Chief Executive Officer; | |||||
● | identifying matters specificallyreserved for the decision of the Board and ensuring that the Board sets appropriate levels of authorityfor management; | |||||
● | coordinating, together with the Governance and Nominating Committee, a process for the annual evaluation of the Board, its members and its committees; and | |||||
● | reviewing management’s investor relations strategy and participating, where appropriate, in its implementation. |
Corporate Governance
identifying matters specifically reserved for the decision of the Board and ensuring that the Board sets appropriate levels of authority for management;
coordinating, together with the Governance and Nominating Committee, a process for the annual evaluation of the Board, its members and its committees; and
reviewing management’s investor relations strategy and participating, where appropriate, in its implementation.
Additional duties and responsibilities of the Chairman of the Board may be established from time to time by the Board and the Governance and Nominating Committee of the Board.
In May 2014,Mr. Ranck is not standing for re-election to the Board re-appointed Bruce Ranck, an independent director, as non-executive Chairman of the Board to serve as such until his successor is duly elected and qualified at the next2017 annual meeting of the Board or until his earlier resignation or removal. Mr. Ranckmeeting. He has served as Quanta’s non-executive Chairman of the Board since his initial appointmentMay 2013. The Board considered alternative approaches for its leadership in May 2013.light of this development, and determined that continuing to have a Chairman of the Board who is independent from management would be the most effective structure for Quanta. Following the 2017 annual meeting, the Board intends to appoint a new non-executive, independent Chairman of the Board to replace Mr. Ranck. Except for an earlier resignation or removal, the new Chairman of the Board will serve until the next annual meeting of the Board, at which point such person may be reappointed or a successor may be duly elected and qualified. The Board may modify this structure in the future to ensure that the Board leadership structure for Quanta remains effective and advances the best interests of our stockholders.
Lead Director
Lead Director |
In the event the Chairman of the Board is not an independent director, our Corporate Governance Guidelines provide that a Lead Director will be elected exclusively by the independent directors. The Lead Director must be an independent director and will assist the Chairman of the Board and the remainder of the Board in assuring effective corporate governance in managing the affairs of the Board. A Lead Director is responsible for ensuring that the quality, quantity and timeliness of the flow of information between management and the Company and the Board enables the Board to fulfill its functions and fiduciary duties in an efficient and effective manner. In addition, the Lead Director will coordinate the activities of the other independent directors, preside over the Board when the Chairman of the Board is not present, consult with the Chairman of the Board as to agenda items for Board and committee meetings, and perform such other duties and responsibilities as the Board deems appropriate.
The Board’s Role in Risk OversightTHE BOARD’S ROLE IN RISK OVERSIGHT
The Board oversees an enterprise-wide approach to risk management, designed to support the achievement of long-term organizational objectives and enhance stockholder value. The annual enterprise risk management assessment, led by Quanta’s PresidentChief Executive Officer and Chief ExecutiveFinancial Officer, provides visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. In this process, risk is assessed throughout the business, including operational, financial, legal, regulatory, strategic and reputational risks. A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company.Quanta. The involvement of the full Board in setting Quanta’s business strategy, both short-term and long-term, is a key part of its understanding of Quanta’s risks and what constitutes an appropriate level of risk for Quanta as well as how such risks are managed.
While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. Specifically, the Audit Committee focuses on risks relating to financial reporting, internal controls and compliance with legal and regulatory requirements. In addition, the Compensation Committee focuses on risks relating to Quanta’s compensation policies and programs and, in setting compensation, strives to create incentives that are aligned with Quanta’s
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Corporate Governance
risk management profile. Quanta’s Governance and Nominating Committee focuses on risks relating to Quanta’s corporate governance and Board membership and structure and also conducts an annual assessment of the risk management process and reports its findings to the Board. Finally, Quanta’s Investment Committee focuses on risks associated with prospective acquisitions, dispositions and investments, as well as capital investment strategies.
12Quanta Services, Inc.
CORPORATE GOVERNANCE
Board IndependenceBOARD INDEPENDENCE
As of the date of this Proxy Statement, the Board is composed of ten directors. The Board has determined that Messrs. Ball, Conaway, Foster, Fried, Golm, Jackman, Ranck and Wood and Ms. Shannon haveeach of our current directors, other than our Chief Executive Officer, Mr. Austin, has no material relationship with Quanta (either directly or as a partner, stockholder or officer of an organization that has a relationship with Quanta) and areis “independent” within the meaning of the NYSE’sNew York Stock Exchange (“NYSE”) corporate governance listing standards. The Board also determined that each of our two former directors who served during a portion of fiscal year 2016, Messrs. Ball and Golm, had no material relationship with Quanta (either directly or as a partner, stockholder or officer of an organization that has a relationship with Quanta) and was “independent” within the meaning of the NYSE corporate governance listing standards.
The Board has made this determinationthese determinations based in part on its finding that these independent directors meet the categorical standards for director independence set forth in our Corporate Governance Guidelines and in the NYSE corporate governance listing standards. With each current director other than Mr. Austin deemed independent, the Board exceeds the NYSE requirement that a majority of directors be independent.
When evaluating the independence of Mr. Ball, the Board considered Quanta’s employment of his son, as more fully described in “Certain Transactions — Related Party Transactions — Transactions Involving Executive Officers and Directors.” When evaluating the independence of Mr. Wood, the Board considered his service as a director of SunPower Corporation, his service as non-executive chairman of the board of directors of Dynegy, Inc. and his service as a strategic adviser to Sharyland Utilities, all of which are customers or potential customers of Quanta. The Board determined that these relationships were not material and that Mr. Wood’s positions and the amounts involved did not prevent a finding of independence under the NYSE standards or our Corporate Governance Guidelines.
Our Corporate Governance Guidelines, which include our categorical standards for director independence, are posted on our website atwww.quantaservices.com underin the heading “Investors & Media / Corporate Governance.” With nine directors deemed independent, the Board maintains a percentageGovernance” section of independent directors serving on the Board substantially above the NYSE requirement that a majority of directors be independent.our website atwww.quantaservices.com.
Executive Sessions of Non-Management DirectorsEXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
In accordance with the NYSE corporate governance listing standards, our non-management directors, each of whom is “independent” within the meaning of NYSE corporate governance listing standards and our Corporate Governance Guidelines, meet in executive session without management at each regularly scheduled Board meeting.
Director MeetingsDIRECTOR MEETINGS
During the year ended December 31, 2014,2016, the Board held eight meetings. All directors attended at least 75% of the meetings of the Board and the committees of the Board, if any, on which they served during the periods for which they have served as a director. We encourage, but do not require, the members of the Board to attend the annual meeting of stockholders. Last year, alleleven of the twelve current directors attended the annual meeting of stockholders.
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Corporate Governance
Committees of the BoardCOMMITTEES OF THE BOARD
The Board has four standing committees: the Audit Committee, the Compensation Committee, the Governance and Nominating Committee, and the Investment Committee. The Board has examined the composition of each standing committee and has determined that each member of these committees is “independent” within the meaning of SEC regulations, NYSE corporate governance listing standards and our Corporate Governance Guidelines. Each standing committee operates under a formal charter adopted by the Board that governs its responsibilities. The committee charters are posted onin the “Investors & Media / Governance” section of our website atwww.quantaservices.com under the heading “Investors & Media / Corporate Governance.”. The current membership and the number of meetings held during the last fiscal year and the primary responsibilities of each standing committee are set forth below:
2017 Proxy Statement13
CORPORATE GOVERNANCE
Audit Committee |
●Appointing, compensating and overseeing the independent registered public accounting firm and reviewing and approving audit and non-audit services performed ●Reviewing and approving the scope and procedures of the accounting firm’s annual audit, and reviewing the final audit, including any comments, recommendations or problems encountered ●Reviewing and discussing quarterly reports from the accounting firm on, among other things, critical accounting policies and practices and any alternative treatments of financial information within generally accepted accounting principles ●Conducting an annual review of the accounting firm’s internal quality control measures and all relationships between the accounting firm and Quanta ●Reviewing management’s report on internal control over financial reporting and the accounting firm’s attestation of Quanta’s internal control over financial reporting ●Reviewing any significant deficiencies or material weaknesses in the design or operation of Quanta’s internal control over financial reporting and any fraud involving management or other financial reporting personnel ●Monitoring the quality and integrity of
●Reviewing the performance of Quanta’s internal audit function, including the internal audit director, and the ●Establishing and maintaining procedures for receipt, retention and treatment of complaints regarding accounting, ●Considering policies with respect to risk assessment and risk management ●Reviewing and approving, as appropriate, related party transactions |
Meetings During 2016: 8 | |||
Committee Members | |||
Vincent D. Foster | (I)(F) | ||
Bernard Fried | (I)(F) | ||
(C)(I)(F) | |||
David M. McClanahan | (I)(F) | ||
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●Overseeing the administration of Quanta’s incentive compensation plans, including the issuance of awards pursuant to equity-based incentive plans
●Evaluating the Chief Executive Officer’s performance annually in light of Quanta’s compensation goals and objectives, determining Chief Executive Officer compensation based on this evaluation and taking into account the results of the most recent stockholder advisory vote on Quanta’s executive compensation ●Reviewing and approving salaries, bonuses, equity-based awards and other compensation of all other executive officers
●Reviewing and approving executive officer employment agreements and other compensation arrangements |
Meetings During 2016: 6 | |||
Committee Members | |||
Bernard Fried | (C)(I) | ||
David M. McClanahan | (I) | ||
(I) | |||
Pat Wood, III | (I) | ||
Governance and Nominating Committee |
●Developing, recommending and periodically reviewing corporate governance principles applicable to the Board and Quanta ●Establishing qualifications for membership on the Board and its committees and evaluating the structure of the Board ●Making recommendations to the Board regarding persons to be nominated for election or reelection to the Board and appointment of directors to Board committees ●Evaluating policies regarding the recruitment of directors ●Making recommendations to the Board regarding persons proposed by the Chief Executive Officer to be elected as executive officers of Quanta ●Periodically reviewing the development of executive officers and succession planning ●Making recommendations to the Board regarding compensation and benefits for non-employee directors |
Meetings During 2016: 9 | |||
Committee Members | |||
Doyle N. Beneby | (I) | ||
J. Michal Conaway | (I) | ||
Margaret B. Shannon | (C)(I) | ||
Pat Wood, III | (I) | ||
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(C) | Chairman of the Committee |
(F) | Audit Committee Financial Expert within the meaning of SEC regulations, as determined by the Board |
(I) | Independent within the meaning of SEC regulations, NYSE corporate governance listing standards and our Corporate Governance Guidelines |
14Quanta Services, Inc.
CORPORATE GOVERNANCE
Investment Committee |
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●Considering and approving certain acquisitions, investments and dispositions by Quanta, including the terms, transaction structure, and
●Evaluating certain capital expenditures by Quanta
●Monitoring ongoing activities in connection with certain investments and acquisitions
●Tracking certain completed acquisitions and investments
●Conducting a qualitative and quantitative review of certain historical
●Assessing policies regarding transactions that hedge certain commodity, interest rate, currency, and other business risks |
Meetings During 2016: 6 | |||
Committee Members | |||
Doyle N. Beneby | (I) | ||
J. Michal Conaway | (C)(I) | ||
(I) | |||
Worthing F. Jackman | (I) | ||
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(C) | Chairman of the Committee |
(I) | Independent within the meaning of SEC regulations, NYSE corporate governance listing standards and our Corporate Governance Guidelines |
Compensation Committee Interlocks and Insider ParticipationCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee served as an employee or officer of Quanta or any of its subsidiaries during 2014,2016, was formerly an officer of Quanta or any of its subsidiaries, or had any relationship with Quanta requiring disclosure herein as a related party transaction. Additionally, no executive officers served on the compensation committee or as a director of another company, one of whose executive officers served on Quanta’s Compensation Committee or as a director of Quanta.
Code of Ethics and Business ConductCODE OF ETHICS AND BUSINESS CONDUCT
The Board has adopted a Code of Ethics and Business Conduct that applies to all directors, officers and employees of Quanta and its subsidiaries, including the principal executive officer, principal financial officer and
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Corporate Governance
principal accounting officer or controller. The Code of Ethics and Business Conduct is posted onin the “Investors & Media / Governance” section of our website atwww.quantaservices.com under the heading “Investors & Media / Corporate Governance.”. We intend to post at the above location on our website any amendments or waivers to the Code of Ethics and Business Conduct that are required to be disclosed pursuant to Item 5.05 of Form 8-K.
CommunicationsSTOCKHOLDER ENGAGEMENT AND COMMUNICATIONS WITH THE BOARD
The Board believes that effective corporate governance includes constructive conversations with our stockholders. We value such engagement and believe it is important to address any questions or concerns and consider all input on Company policies and practices. During 2016, the Board engaged with stockholders on a variety of topics, including board refreshment and diversity and executive compensation. We welcome additional dialogue on these and other matters, and we have incorporated some of the feedback we received into this proxy statement
Stockholders and other interested parties may communicate with one or more of our directors, including our non-management directors or independent directors as a group, a committee or the full Board by writing to Corporate Secretary, Quanta Services, Inc., 2800 Post Oak Blvd., Suite 2600, Houston, Texas 77056. All communications will be reviewed by the Corporate Secretary and forwarded to one or more of our directors, as appropriate.
Identifying and Evaluating Nominees for DirectorIDENTIFYING AND EVALUATING NOMINEES FOR DIRECTOR
The Governance and Nominating Committee regularly evaluates the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Governance and Nominating Committee will consider candidates for Board membership suggested by incumbent directors, management, third-party search firms and others. The Governance and Nominating Committee will also consider director nominations by stockholders that are made in compliance with the notice provisions and procedures set forth in our bylaws. For a discussion of these requirements, see“Additional Information – Stockholder Proposals and Nomination of Directors for the 20162018 Annual Meeting.”” All applications, recommendations or proposed nominations for Board membership received by Quanta will be referred to the Governance and Nominating Committee. The manner in which the Governance and Nominating Committee evaluates the qualifications of a nominee for director does not differ if the nominee is recommended by a stockholder.
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CORPORATE GOVERNANCE
As discussed above, Mr. Ranck will not stand for re-election at the 2017 annual meeting. In connection with Mr. Ranck’s determination not to stand for re-election, the Governance and Nominating Committee recommended and the Board approved a decrease in the number of directors constituting the Board by one, effective as of May 24, 2017, so that the Board shall thereafter consist of nine directors until otherwise determined in accordance with Quanta’s bylaws.
The Governance and Nominating Committee has the authority to retain, at Quanta’s expense, a third-party search firm to help identify and facilitate the screening and interview process of potential director nominees, and the third-party firm may, among other things, conduct reference checks, prepare a biography of each candidate for the Governance and Nominating Committee to review and help coordinate interviews.
nominees. Once the Governance and Nominating Committee has identified a potential director nominee is identified, the committee makes an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the committee with the recommendation of the candidate as well asand the committee’s own knowledge of the candidate, which may be supplemented by inquiries to the recommending person making the recommendation or others. The committee also may engage a third party to conductothers or by a background check of the candidate.check. If the committee determines to further pursue the candidate, the committeeit then will evaluate the extent to which the candidate meets the Board membership qualifications described in “Director Qualifications” below.
In addition, theThe Governance and Nominating Committee also considers other relevant factors it deems appropriate, including the current composition of the Board (including its diversity in experience, background, gender and ethnicity), the balance of management and independent directors, the need for a certain Board committee expertise, and the nature and extent of a candidate’s activities unrelated to Quanta, including service as a director on the boards of other public companies. In connection withAfter this evaluation, the committee determines whether to interview the candidate and if warranted, the committee interviews the candidate in person or by telephone. The committee may also ask the candidate to meet with members of Quanta’s management or other Board members. After completing this evaluation, if the committee believes the candidate would be a valuable addition to the Board, it will recommend to the Board the candidate’s nomination for appointment or election as a director.
The Board values diversity in its broadest sense. The Board endeavors to have a group of directors representing diverse experience at policy-making levels that may come from business, government, education, technology and non-profit organizations, with expertise in areas that are relevant to Quanta’s activities, and who have demonstrated leadership skills in the organizations with which they are or have been affiliated. The Board also endeavors to have a group of directors representing diverse backgrounds, including with respect to gender, ethnicity and geography.
As part of its refreshment process in 2012 and 2016, in anticipation of the departure of certain long-tenured directors, the Board took steps to increase its diversity. The Board engaged a nationally recognized executive recruiting firm to identify potential candidates who met the director qualifications set forth below. The Board also requested that the firm include women and persons with diverse ethnicities in the candidates presented for consideration.
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Corporate Governance
As a result of these searches, Ms. Shannon was appointed to the Board in December 2012, and Messrs. Beneby and McClanahan were appointed to the Board in March 2016. For more information about the experience and qualifications of Ms. Shannon and Messrs. Beneby and McClanahan, see “Quanta Board of Directors.” Our Board is pleased with the progress made to date in connection with its diversity objectives.
Director QualificationsDIRECTOR QUALIFICATIONS
Our Corporate Governance Guidelines contain Board membership qualifications that the Governance and Nominating Committee considers in selecting nominees for our Board. Pursuant to these qualifications,The Corporate Governance Guidelines state that members of the Board should possess the highest standards of personal and professional ethics, integrity and values, and be committed to representing the long-term interests of our stockholders. They must also have an inquisitive and objective perspective, practical wisdom, mature judgment, the willingness to speak their mind and the ability to challenge and stimulate management in a constructive manner. In addition,As mentioned above, our Corporate Governance Guidelines also provide that Board members should collectively have diverse experience at policy-making levels that may include business, government, education, technology or non-profitof different types of organizations as well asand should individually have experience in areas that are relevant to our business. Further, they should haveQuanta’s business and demonstrated leadership skills in the organizations with which they are or have been affiliated. As discussed above, the Board wants its members to represent a broad range of viewpoints and backgrounds, and our Corporate Governance Guidelines expressly mention seeking candidates with the requisite qualifications who would add gender and ethnic diversity to our Board.
Members of the Board must also be willing to devote sufficient time to carrying out their duties and responsibilities effectively and should be committed to serve on the Board for an extended period of time. As such, our Corporate Governance Guidelines provide that Board members should not serve on more than three additional public company boards, and Board members that are chief executive officers (or hold an equivalent position) with another public company should not serve on more than one public company board in addition to Quanta’s Board and their own company board. Board members will not be nominated for election to the Board if the election would occur after their 73rd73rd birthday; however, the full Board may make exceptions to the mandatory retirement age in special circumstances. In February 2015, the Governance and Nominating Committee considered the nomination
16Quanta Services, Inc.
The Governance and Nominating Committee seeks directors representing a broad range of viewpoints and diverse backgrounds, including women and minorities that meet the above qualifications.Contents
CORPORATE GOVERNANCE
Director CompensationDIRECTOR COMPENSATION
The Governance and Nominating Committee has the responsibility of recommending to the Board compensation and benefits for non-employee directors. The committee is guided by certain director compensation principles set forth in our Corporate Governance Guidelines.
Current Director Compensation |
Current Director Compensation
Effective May 23, 2013, atAt every annual meeting of stockholders at which a non-employee director is elected or re-elected, each such director receives (i) an annual award of RSUsrestricted stock units (“RSUs”) having a value of $140,000 and (ii) the annual cash retainer(s) set forth below for board membership, committee membership, and board/committee leadership to which such non-employee director is appointed:
Annual Membership Cash Retainer | Annual Cash Retainer Supplement For Committee Chairmanship | |||
Board of Directors | $65,000 | N/A | ||
Audit Committee | $15,000 | $15,000 | ||
Compensation Committee | $10,000 | $10,000 | ||
Governance and Nominating Committee | $10,000 | $10,000 | ||
Investment Committee | $10,000 | $10,000 |
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Corporate Governance
Annual Membership Cash Retainer | Annual Cash Retainer Supplement For Committee Chairmanship | |||
Board of Directors | $75,000 | N/A | ||
Audit Committee | $15,000 | $15,000 | ||
Compensation Committee | $10,000 | $15,000 | ||
Governance and Nominating Committee | $10,000 | $10,000 | ||
Investment Committee | $10,000 | $10,000 |
Upon initial appointment to the Board other than at an annual meeting of stockholders, each non-employee director receives (for the period from the appointment through the end of the current director service year) a pro rata portion of the equity award and applicable cash amounts.
Our non-employee Chairman of the Board receives additional annual compensation in the amount of $163,800,$180,000, of which 50% is payable in cash and 50% is payable in RSUs. Upon the initial appointment of a non-employee Chairman of the Board, other than immediately following the annual meeting of stockholders, such director receives (for the period from the appointment through the end of the current director service year) a pro rata portion of the additional annual compensation.
Unless the non-employee director’s Board service is terminated earlier, restricted stock or RSUs awarded to non-employee directors generally vest shortly after conclusion of the director service year. Subject to the terms of applicable award agreements, unvested restricted stock or RSUs held by (i) any non-employee director who is not nominated for or elected to a new term, including for example, due to a reduction in the size of the Board, age precluding a re-nomination, the identification of a new nominee, or the desire to retire at the end of a term, or (ii) any non-employee director who resigns at Quanta’s convenience, including any resignation resulting from the non-employee director’s failure to receive a majority of the votes cast in an election for directors as required by Quanta’s Bylaws, vest in full on the earlier of (a) May 28th28th following conclusion of the director service year or (b) the date of such non-employee director’s termination of service. RSUs granted to non-employee directors are generally settled in shares of Quanta Common Stock.Stock, provided that non-employee directors may elect to settle up to 50% of any award in cash if he or she is in compliance with Quanta’s stock ownership guidelines as of the date of settlement and is expected to remain in compliance immediately following settlement.
Generally, meeting fees are not paid. However, in order to compensate for the time required to accommodate extraordinary meeting activity, each non-employee director (or committee member, as applicable) receives a fee for attendance at the tenth and any subsequent Board meeting of the Board or the tenth and any subsequent committee meeting, of such committee, in each case during a single director service year, as follows: $2,000 for attendance at a board meeting in person; $1,000 for participation at a board meeting by telephone; $1,000 for attendance at a committee meeting in person; and $500 for participation at a committee meeting by telephone. Additionally, during 2014 the Board approved a special one-time $25,000 payment to Mr. Fried in recognition of the significant incremental time and effort required as chairman of our Audit Committee during 2014.
Directors are also reimbursed for reasonable out-of-pocket expenses incurred to attend meetings of the Board or the committees thereof, and for other expenses reasonably incurred in their capacity as directors of Quanta. Directors who also are employees of Quanta or any of its subsidiaries do not receive additional compensation for serving as directors. Currently, nineeight non-employee director nominees are standing for election at the annual meeting. As President and Chief Executive Officer of Quanta James F. O’Neil IIIduring 2016, Mr. Austin received no compensation for his service as a director of Quanta. The compensation received by Mr. O’NeilAustin as an employee of Quanta is set forth in the 20142016 Summary Compensation Table.
2017 Proxy StatementProspective Changes in Director Compensation17
CORPORATE GOVERNANCE
Prospective Changes in Director Compensation |
During the fourth quarter of 2014,2016, the Governance and Nominating Committee retained Deloitte Consulting LLP (“Deloitte”) to, among other things, review Quanta’s non-employee director compensation,and provide observations and recommendations regarding Quanta’s non-employee director compensation program, and highlight relevant trends in director compensation. Deloitte examined director compensation data for the same peer group used for theits named executive officer compensation review, namely 1714 companies similar to Quanta in terms of industry, revenue size and market capitalization, as well as director compensation survey data, and presented its findings and observations to the Governance and Nominating Committee. Further information about the peer group is disclosed in“Compensation Discussion & Analysis – Compensation Philosophy and Process – Role of Compensation Consultant.”
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Corporate Governance
In March 2015,December 2016, after review of the information presented by Deloitte and upon recommendation by the Governance and Nominating Committee, the Board approved the following changes to the non-employee director compensation program, effective as of May 21, 2015,24, 2017, in order to better align with competitive peer group practices:
● | increased the annual Board membership cash retainer to $85,000; |
● | increased the annual award of RSUs to a value of $150,000; |
● | increased the annual Audit Committee chairmanship retainer to $20,000; and |
● | increased the annual Governance and Nominating Committee and Investment Committee chairmanship retainers to $15,000. |
Annual Limit on Non-Employee Director Compensation |
During 2016, as approved by the Company’s stockholders, Quanta amended its 2011 Omnibus Equity Incentive Plan (the “Omnibus Plan”) to establish an annual Board membership retainer from $65,000limit on the compensation, inclusive of all cash compensation and any awards under the Omnibus Plan that may be paid to $75,000;
increased the annual Compensation Committee chairmanship retainer from $10,000 to $15,000; and
increased the additional annual compensationa non-employee director for a non-executiveservice during any calendar year. The maximum limit is $400,000, except that for any non-employee director who is serving as Chairman of the Board from $163,800 to $180,000.
Additionally, upon recommendation by the Governance and Nominating Committee,or Lead Director of the Board approved revised settlement terms for RSU awards to non-employee directors. Specifically, non-employee directors may elect to settle up to 50% ofor any RSU award in cash if the non-employee director who is serving in compliance with Quanta’s stock ownership guidelines ashis or her first calendar year on the Board such compensation is capped at 200% of the date of settlement and is expected to remain in compliance immediately following settlement.foregoing limit.
Deferred Compensation Plan for Non-Employee Directors
Deferred Compensation Plan for Non-Employee Directors |
Non-employee directors are eligible to participate in a deferred compensation plan maintained by Quanta. No later than December 31 of each year, each non-employee director may voluntarily elect to defer all or a portion (in 5% increments) of his or her annual cash retainers, including but not limited to, compensation for board membership, committee membership and board/committee leadership, and RSUs to be earned with respect to services performed in the following year. Deferral elections are irrevocable and if no deferral election is made, no compensation is deferred.
Deferred cash amounts are allocated to a separate recordkeeping account maintained for the non-employee director that reflects the amounts deferred and any earnings (positive or negative). The account is credited with returns according to the performance of thecertain deemed investment choices selected by the non-employee director from time to time, from among the deemed investment choices made available by Quanta.time. However, Quanta has no obligation to provide any deemed investment choice other than a cash account deemed invested in cash equivalents based on the mid-term annual applicable federal rate, as adjusted on the first day of each subsequent year. The interest rate earned on the deferred cash amounts is not above-market or preferential. Deferred RSUs are recorded in an account maintained for the non-employee director that reflects the number of shares deferred.
In general, deferred compensation is distributed to the non-employee director (or his or her beneficiary) upon the director leaving the Board or at a date elected in advance by the director. Additionally, deferred amounts can be distributed upon certain unforeseen emergencies suffered by the non-employee director or upon a change in control of Quanta.
Messrs. Ball, Foster, Fried, and Golm elected to defer all or a portion of their cash compensation during 2014. Messrs. Ball, Conaway, Foster, Fried, Golm, Jackman and Wood elected to defer all or a portion of their cash compensation and/or RSU awards during 2014.
2016.
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| Stock Ownership Guidelines for Non-Employee Directors |
Corporate Governance
Stock Ownership Guidelines for Non-Employee Directors
Non-employee directors are required to hold stock with a value equivalent to five times the annual cash retainer for Board membership (excluding the annual cash retainer for committee membership or any supplement for serving as a committee chairman or as chairman of the Board). Non-employee directors have five years from the fiscal year-end following initial election to the Board to accumulate the stock ownership prescribed by the guidelines. As of December 31, 2014,2016, all non-employee directors exceeded the ownership level prescribed byrequirements of the stock ownership guidelines.guidelines, either by exceeding the prescribed ownership level or being expected to exceed the prescribed ownership level within five years of appointment.
18Quanta Services, Inc.
CORPORATE GOVERNANCE
2014 Director Compensation Table2016 DIRECTOR COMPENSATION TABLE
The following table sets forth the compensation for each non-employee director during the 20142016 fiscal year.
Name | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
James R. Ball | 101,000 | 135,564 | — | — | — | — | 236,564 | |||||||||||||||||||||
J. Michal Conaway | 95,000 | 135,564 | — | — | — | — | 230,564 | |||||||||||||||||||||
Vincent D. Foster | 91,000 | 135,564 | — | — | — | — | 226,564 | |||||||||||||||||||||
Bernard Fried(2) | 131,000 | 135,564 | — | — | — | — | 266,564 | |||||||||||||||||||||
Louis C. Golm | 95,000 | 135,564 | — | — | — | — | 230,564 | |||||||||||||||||||||
Worthing F. Jackman | 91,000 | 135,564 | — | — | — | — | 226,564 | |||||||||||||||||||||
Bruce Ranck | 146,900 | 214,863 | — | — | — | — | 361,763 | |||||||||||||||||||||
Margaret B. Shannon | 85,000 | 135,564 | — | — | — | — | 220,564 | |||||||||||||||||||||
Pat Wood, III | 85,000 | 135,564 | — | — | — | — | 220,564 |
Name | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||
Doyle N. Beneby | 109,344 | 169,922 | - | - | - | - | 279,266 | |||||||
J. Michal Conaway | 113,000 | 142,245 | - | - | - | - | 255,245 | |||||||
Vincent D. Foster | 106,000 | 142,245 | - | - | - | - | 248,245 | |||||||
Bernard Fried | 121,000 | 142,245 | - | - | - | - | 263,245 | |||||||
Worthing F. Jackman | 121,000 | 142,245 | - | - | - | - | 263,245 | |||||||
David M. McClanahan | 114,344 | 169,922 | - | - | - | - | 284,266 | |||||||
Bruce Ranck | 171,000 | 233,673 | - | - | - | - | 404,673 | |||||||
Margaret B. Shannon | 113,000 | 142,245 | - | - | - | - | 255,245 | |||||||
Pat Wood, III | 103,000 | 142,245 | - | - | - | - | 245,245 | |||||||
James R. Ball(2) | 6,000 | - | - | - | - | - | 6,000 | |||||||
Louis C. Golm(2) | 8,000 | - | - | - | - | - | 8,000 |
(1) | The amounts shown reflect the aggregate grant date fair value (based on the closing price of Quanta’s Common Stock on the date of grant) of RSUs granted during the fiscal year ended December 31, |
(2) |
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2017 Proxy Statement19
Table of ContentsExecutive Officers
The current executive officers of Quanta are as follows:
Name | Age | |||
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| Position(s) with Quanta | ||
| President, Chief Executive Officer, Chief Operating Officer and Director | |||
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Derrick A. Jensen | Chief Financial Officer | |||
Paul C. Gregory | 53 | President – Oil and Gas Division and Chief Strategy Officer | ||
Dale L. Querrey | 52 | President – Electric Power Division | ||
Jesse E. Morris | President – Infrastructure Solutions and Executive Vice President – Corporate Development | |||
| Executive Vice President | |||
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Nicholas M. Grindstaff | Vice President – Finance and Treasurer | |||
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| Vice President – Tax | |||
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For a description of the business background of Mr. O’Neil,Austin, see“Proposal No. 1 – ElectionQuanta Board of Directors” above.
Earl C. (Duke) Austin, Jr. has served as our Chief Operating Officer since January 2013. He previously served as President of the Electric Power Division and Natural Gas and Pipeline Division from May 2011 to December 2012 and had responsibility for oversight of power and pipeline operations since January 2011. He served as President of the Natural Gas and Pipeline Division from October 2009 to May 2011 and as President of North Houston Pole Line, L.P., an electric and natural gas specialty contractor and now a subsidiary of Quanta, from 2001 until September 2009. He is currently a director of the Southwest Line Chapter of NECA. Mr. Austin holds a Bachelor of Arts in Business Management degree.
Derrick A. Jensen has served as our Chief Financial Officer since May 2012. He previously served as our Senior Vice President – Finance, Administration and Chief Accounting Officer from March 2011 to May 2012, as our Vice President and Chief Accounting Officer from March 1999 to March 2011, and as our Controller from December 1997 until March 2009. Mr. Jensen holds a Bachelor of Science in Business Administration degree in Accounting and became a Certified Public Accountant in the State of Texas in 1997.
Jesse E. MorrisPaul C. Gregory has served as our Executive Vice President – Corporate DevelopmentOil and Gas Division and Chief Strategy Officer since January 2014.2017. He previously provided consulting services to Quanta from 2014 until December 2016, focusing on Quanta’s oil and gas operations, corporate strategy and mergers and acquisitions activity, and served in various rolesas an executive of a private operating company with Sysco Corporation, including Viceoil and gas interests. He also served as President and Chief FinancialExecutive Officer – Foodservice Operationsof Gregory & Cook Construction, Inc., a pipeline and related infrastructure construction company, from September 2013 to December 2013, Vice President of Finance and Chief Financial Officer – Broadline Operations from February 2012 to August 2013, Vice President, Business Process Management from May 2011 to January 2012, and Vice President, Business Transformation from January 2009 to April 2011. Mr. Morris holds a Bachelor of Business Administration in Finance and Accounting and a Masters in Professional Accounting.
Steven J. Kemps has served as our Executive Vice President and General Counsel since September 2014. Prior to joining Quanta, he served as General Counsel for Hess Retail Corporation from September 2013 to September 20141998 until it was sold to Marathon Petroleum. He previously served in various executive management roles with Dean Foods Company, including Executive Vice President, General Counsel and Corporate Secretary from 2008 to 2013 and Senior Vice President and Deputy General Counsel from 2006 to 2008. Mr. Kemps held various legal positions with increasing responsibility at Kimberly-Clark Corporation from 1997 to 2006. From 1993 to 1997, he was an attorney with Dorsey & Whitney, LLP, and from 1991 to 1993, he served as a law clerk to Judge Paul A. Magnuson of the United States District Court, Minnesota. Mr. KempsGregory holds a Bachelor of Business Administration degree in AccountingFinance and a Juris Doctorate degree, and he holds a Certified Public Accountant certificate.
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Executive Officers
an M.B.A. degree.
Dale L. Querreyhas served as our President – Electric Power since March 2015. He previously served as president of PAR Electrical Contractors, Inc. (PAR), a wholly owned subsidiary of Quanta, from January 2011 to March 2015, and in various other roles with Quanta and PAR from November 2004 to January 2011, including Chief Operating Officer of PAR from August 2008 to January 2011. Prior to joining Quanta,PAR, he served in various roles with ABB Inc. and its affiliates, including Vice President of Operations from April 2002 to October 2004. Mr. Querrey holds a Bachelor of Science in Electrical Engineering and Mechanical Engineering degree and a Master of Science in Electrical Engineering degree.
Jesse E. Morris has served as our President – Infrastructure Solutions since March 2017 and as our Executive Vice President – Corporate Development since January 2014. He previously served in various financial and accounting positions of increasing responsibility with Sysco Corporation from 2002 through 2014, including as Vice President and Chief Financial Officer – Foodservice Operations from September 2013 to December 2013 and Vice President of Finance and Chief Financial Officer – Broadline Operations from February 2012 to August 2013. His responsibilities in those positions included the oversight of financial and accounting matters for field operations and corporate financial planning and analysis matters. Mr. Morris holds a Bachelor of Business Administration in Finance and Accounting and a Masters in Professional Accounting.
Randall C. Wisenbaker has served as our Executive Vice President – Operations since November 2016 and from June 2010 to May 2015, and he previously served as our Executive Vice President – Operations and Health/Safety and Environmental from May 2015 to October 2016. He also previously served as president of two wholly owned subsidiaries in Quanta’s Electric Power Infrastructure Services Division from May 2005 to June 2010. Mr. Wisenbaker holds a Bachelor of Science degree in Construction Science.
Nicholas M. Grindstaffhas served as our Vice President – Finance since May 2011 and our Treasurer since October 1999. He previously served in other roles with Quanta, including as a Vice President from March 2010 to May 2011 and as Assistant Treasurer from March 1999 until September 1999. He also previously served as Assistant Treasurer for American Residential Services, a consolidator of HVAC, plumbing and electrical services industries, from 1996 to 1999 and in various financial roles with IBM Corporation from 1989 to 1996. Mr. Grindstaff holds a Master of Science degree in Accounting degree.Accounting.
Peter B. O’Brien has served as our Vice President – Mergers and Acquisitions since January 2014. He previously served as Vice President – Tax from May 2012 to January 2014 and as Tax Director from June 2000 to May 2012. Mr. O’Brien holds a Bachelor of Business Administration in Accounting degree and a Master in Professional Accounting degree and became a Certified Public Accountant in the State of Texas in 1995.
Dorothy Upperman has served as our Vice President – Tax since October 2014. She previously served in various tax management roles with Wal-Mart Stores, Inc., including Sr. Director, Income Tax from 2008 to October 2014 and Director of Federal Audits & SOX Controls from 2007 to 2008. From 1998 to 2004, Ms. Upperman held various positions with Ernst & Young, LLP, most recently serving as Sr. Manager. Ms. Upperman holds a Bachelor of Business Administration degree in Accounting and is a Certified Public Accountant in the State of Texas.
Wilson M. Yancey, Jr.20 has served asQuanta Services, Inc.
COMPENSATION DISCUSSION & ANALYSIS
We have reviewed and discussed the following Compensation Discussion and Analysis with management. Based on our Vice President – Health/Safetyreview and Environmental since April 2010. He previously served asdiscussions with management, we have recommended to Quanta’s DirectorBoard of Health/SafetyDirectors that the Compensation Discussion and Environmental from June 1999 to April 2010. Mr. Yancey holds a BachelorAnalysis be included in this Proxy Statement.
This report is furnished by the Compensation Committee of Science in Business Management and has over thirty yearsthe Board of experience as a safety professional.Directors.
Bernard Fried, Chairman | ||||||
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Margaret B. Shannon | ||||||
| Pat Wood, III |
Compensation Discussion & Analysis
Executive SummaryEXECUTIVE SUMMARY
This Compensation Discussion and Analysis describes Quanta’s executive compensation program for 2014.2016. We use this program to attract, motivate and retain the employees who lead our business.Company. In particular, this section explains how the Compensation Committee made its compensation decisions for our named executive officers, or NEOs, for 20142016 and describes how this compensation fits within the Compensation Committee’s guiding principles with respect to NEO compensation.
Named Executive Officers
Named Executive Officers |
Our NEOs for 20142016 include five executive officers who are sometimes referred to herein as “continuing NEOs,” as well as oneand a former executive officer as follows:
Name | ||
| Current Position(s) with Quanta | |
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Earl C. (Duke) Austin, Jr. | President, Chief Executive Officer and Chief Operating Officer | |
Derrick A. Jensen | Chief Financial Officer | |
Dale L. Querrey | President – Electric Power Division | |
Jesse E. Morris | President – Infrastructure Solutions and Executive Vice President – Corporate Development | |
| Executive Vice President | |
| Former |
2014 Business HighlightsOn March 14, 2016, Mr. O’Neil resigned as President and OverallChief Executive Officer and as a director of Quanta, and the Board appointed Mr. Austin as President and Chief Executive Officer and as a director of Quanta. Mr. Austin also retained his title of Chief Operating Officer. Mr. O’Neil, though no longer an officer of the Company, is included in this proxy statement as an NEO pursuant to applicable SEC disclosure requirements. For a discussion of the separation agreement entered into with Mr. O’Neil in connection with resignation, see “Executive Compensation Decisions for 2016 – Chief Executive Officer Transition” below. Additionally, effective March 20, 2017, Mr. Morris was appointed as President – Infrastructure Solutions. Mr. Morris retained his title of Executive Vice President – Corporate Development.
2016 Business Highlights and Overall Compensation Decisions |
Overall, the Compensation Committee believes that the total compensation paid to Quanta’s NEOs in 20142016 is reasonable and appropriate. Quanta completed another successful year in 2014 despiteDespite continuing to operate in a challengingfluid business environment. Notably,environment, Quanta achievedproduced substantially improved financial results in 2016 and finished the following in 2014:
generated record revenues of $7.85 billion, driven by organic revenue growth plusyear with strong operational momentum for the contribution from companies that we acquired during the year;
generated nearly 17% revenue growth in the electric power infrastructure segment and 31% revenue growth in the oil and gas infrastructure segment;
achieved record backlog of $9.76 billion at year-end 2014, an increase of approximately 12% from year-end 2013;
established programs to improve safety, leadership development, operational performance standards and results;
completed nine acquisitions, significantly enhancing our electric power infrastructure and oil and gas infrastructure service offerings in the United States and Canada and expanding our capabilities in Australia to include electric power service offerings; and
was awarded the two largest electric transmission projects in the history of the company.
future, including:
● | revenues of $7.65 billion; | |||||
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● | record oil & gas infrastructure services segment full year revenues; | |||||
● | record 12-month backlog of $5.85 billion at year-end; |
2017 Proxy Statement21
Compensation DiscussionTable of Contents
COMPENSATION DISCUSSION & AnalysisANALYSIS
● | improved operating income margins in electric power infrastructure services segment; |
● | net cash provided by operating activities of continuing operations of $381.2 million; and |
● | total liquidity of $1.27 billion at year-end (includes cash, cash equivalents and availability under Quanta’s credit facility). |
Additionally, during 2016, Quanta completed a $750 million accelerated share repurchase arrangement, bringing the total number of shares repurchased since the second quarter of 2014 to approximately 71.7 million shares, or approximately one third of our then-outstanding common stock, at an average purchase price of $23.72 per share and returning significant value to stockholders. With respect to safety, Quanta was able to reduce its Total Injury and Illness Rate and maintain a similar Total Lost Time Incident Rate despite a greater number of employees and exposure hours in 2016, and both rates remained markedly below industry averages. Quanta also continued to invest in workforce development through expansion of its state-of-the-art training facility and partnering with a local university to identify and train potential employees. Finally, Quanta successfully implemented several new elements in its talent management program designed to create a sustainable succession plan and enhance talent development.
However, despite these accomplishments,While the Company’s financial performance improved in 2016 and management accomplished important organizational performance objectives aimed at creating stockholder value, the level of achievement forunder the 2014 company performance metrics2016 annual incentive plan failed to reach the target levels and fell below the achievement level attainedset for the 2013 performance year. As a result, with respect to all NEOs, total cash compensation paid for the 2014 performance year was below target cash compensation, andeach of our NEOs. Further, with respect to the three NEOs who were also NEOscompany performance component of the annual incentive plan, while actual performance resulted in 2013, totalan achievement percentage of 79%, the Compensation Committee decided that an achievement of only 75% was warranted. As a result, cash compensation paid forunder the 2014 performance year decreased2016 annual incentive plan was less than target cash compensation.
2016 Annual Incentive Plan |
Moreover, while Mr. Austin’s total long-term incentive plan target was increased in connection with his appointment as compared to the 2013 performance year. The following table details the decrease in cash awardsPresident and total cash compensation for these three NEOs:
Named Executive Officer | 2013 Cash Incentive Award(1) | 2014 Cash Incentive Award(2) | Decrease | 2013 Total Cash Compensation(3) | 2014 Total Cash Compensation(3) | Decrease | ||||||||||||||||||
Mr. O’Neil | $ | 1,748,000 | $ | 775,885 | 55.6 | % | $ | 2,666,750 | $ | 1,763,385 | 33.9 | % | ||||||||||||
Mr. Austin | $ | 1,334,000 | $ | 564,280 | 57.7 | % | $ | 2,027,750 | $ | 1,345,530 | 33.6 | % | ||||||||||||
Mr. Jensen | $ | 828,000 | $ | 384,093 | 53.6 | % | $ | 1,308,000 | $ | 921,593 | 29.5 | % |
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Furthermore, while we increasedChief Executive Officer, the target dollar amountamounts of the long-term equity incentives awardedincentive awards for all other NEOs were not increased in 2016. With respect to our NEOs under our redesigned 2014such long-term equity incentive plan,awards, 50% to 55% of those awards are subject to company performance conditions that have yet to be evaluated and remain subject to a 3-year performance period ending December 31, 2016. The remaining 50% of2018, and the awardsremainder vest over a 3-year period and are designedin order to promote retention of our NEOs.
The transition to our redesigned long-term equity awards also resulted in 2014 reportable compensation for Messrs. O’Neil, Austin and Jensen under bothalign the 2014 long-term incentive plan and the 2013 supplemental incentive plan. Recognizing that awards were made under multiple plans and that the aggregate amount of equity awards granted to these NEOs in 2014 is attributable to multiple performance periods and therefore appears higher than prior years, we have provided further explanationinterests of the transitional disclosure implicationsNEOs and stockholders.
In order to reward strong individual performance, to better align certain aspects of their compensation with executives with similar positions and responsibilities at companies in our peer group, and to take into account new or expanded responsibilities, the resulting increase in reportable compensation in “Changes in Executive Compensation Implemented for 2014 – Recognition of Transitional Disclosure Implications Associated with Changes Implemented” below.Committee also approved increases to certain NEO base salaries.
Say-on-Pay and Executive Compensation Changes
Consideration of Say-on-Pay Vote |
At Quanta’s 20142016 annual meeting of stockholders, over 98%approximately 92% of our stockholders voting on the “say-on-pay” proposal approved the compensation of our NEOs as described in our 20142016 proxy statement. Accordingly, the Compensation Committee did not implement changes to our executive compensation program as a result of the 2016 stockholder advisory vote. However, the Compensation Committee did implement certain changes to Quanta’s compensation program beginning in 2014 based on the comprehensive review of our executive compensation program that began in 2012, with the goal of identifying changes to ensure that our incentive compensation remains consistent with Quanta’s guiding principles on executive compensation. See “Changes to Executive Compensation Implemented for 2014” for additional information about these changes.
As Quanta moves forward into 2015,2017, the Compensation Committee is aware of the difficultfluid business environment, thewith gradual improvement in certain markets but continuing uncertainty in the marketplace overall, and the resulting challenges with respect to executive compensation. The Compensation Committee monitors trends and developments to ensure that Quanta provides the appropriate executive compensation incentives to remain competitively positioned to attract and retain executive talent and to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation, while not encouraging excessive risk-taking.
22Quanta Services, Inc.
COMPENSATION DISCUSSION & ANALYSIS
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Compensation Discussion & Analysis
Good Governance and Best Practices
We are committed to strong governance standards that ensure our executive compensation programs are closely aligned with the interests of our stockholders, as evidenced by the policies and practices described below:
We maintain meaningful stock ownership guidelines that align our executives’ long-term interests with those of our stockholders and discourage excessive risk-taking.
Our employment agreements with NEOs do not provide for gross-ups of excise taxes on severance or other payments in connection with a change of control.
We have a “clawback” policy that permits our Board to recover from our NEOs cash or equity incentive compensation in certain circumstances.
We have a policy that prohibits directors and executive officers from pledging Quanta securities as collateral for a loan absent pre-clearance and demonstration of financial capacity to repay without resorting to the pledged securities.
We have a policy that prohibits directors and executive officers from hedging the economic risk of ownership of Quanta Common Stock.
Our Compensation Committee has engaged its own independent compensation consultant, who performs an annual comprehensive market analysis of our executive compensation programs and pay levels.
We provide our stockholders with an annual opportunity to participate in an advisory vote on the compensation of our NEOs.
How Our Performance is Linked to Pay
● | Stock Ownership Guidelines. We maintain meaningful stock ownership guidelines that align our executives’ long-term interests with those of our stockholders and discourage excessive risk-taking. |
● | Clawback Policy. We maintain a clawback policy that permits our Board to recover from our NEOs cash or equity incentive compensation in certain circumstances. |
● | Anti-Pledging Policy. We maintain a policy that prohibits directors and executive officers from pledging Quanta securities as collateral for a loan absent pre-clearance and demonstration of financial capacity to repay without resorting to the pledged securities. |
● | Anti-Hedging Policy. We maintain a policy that prohibits directors and executive officers from hedging the economic risk of ownership of Quanta Common Stock. |
● | Annual Review. Our Compensation Committee has engaged its own independent compensation consultant, who performs an annual comprehensive market analysis of our executive compensation programs and pay levels. |
● | Annual Say-on-Pay Vote. We provide our stockholders with an annual opportunity to participate in an advisory vote on the compensation of our NEOs. |
● | No Gross-Up. Our employment agreements with NEOs do not provide for gross-ups of excise taxes on severance or other payments in connection with a change of control. |
● | Performance Thresholds and Maximums. All performance-based awards require that our NEOs achieve a threshold level of performance to receive any award and provide for a maximum award in the event the established performance criteria is dramatically exceeded. |
● | Modest Perquisites. Our NEOs receive only a modest amount of perquisites, which are intended to promote wellness, provide convenience in light of the demands of their positions, and assist them in serving necessary business purposes. |
How Our Performance is Linked to Pay |
Quanta’s NEO compensation is primarily comprised of base salary, annual incentives and long-term incentives. Our compensation philosophy links executive compensation to both individual and company performance. Base salaries are generally targeted at or near the median of our competitive market. Target annual incentives generally reflect competitive market levels and practices, with upside opportunity for performance above company and individual performance target levels. Target award levels are designed to achieve total cash compensation slightly above the market median for superior performance, and performance measures are chosen to align the interests of executives with stockholders. Finally, long-term incentives, typically paid with equity, are designed to focus executives on the long-term financial performance of the company, along with achievement of certain strategic initiatives.
2016 Target Compensation Mix | ||
Mr. Austin | Other Continuing NEOs (Total) | |
The Compensation Committee desires to provide target total direct compensation for each NEO within+/-20% ofthat approximates the median for comparable officers in our peer group. Additionally, the Compensation Committee believes that a significant portion of the target compensation of the NEOs should be performance-based and, therefore, at risk. With respect to each of our continuing NEOs, all of thetheir short-term cash incentive and half of the long-term equity incentive associated with the 2014 annual and long-term incentive plans was “at risk” performance-based compensation, as those awards are either variable based on the level of performance against incentive targets pursuantor are subject to the compensation plans described below.
Equity-basedcontinued employment and stock price performance during a 3-year vesting period. Further, equity-based incentive awards under our 20142016 long-term incentive plan represented a substantial portion of each NEO’s compensation as a percentage of total direct compensation (base salary, short-term cash incentive and long-term equity incentive). Equity-based awards play an important role in this challenging economic environment because they provide incentives for the creation of stockholder value and promote executive retention and an ownership culture. For our Chief Executive Officer, 64%
2017 Proxy Statement23
Table of the total target compensation mix
COMPENSATION DISCUSSION & ANALYSIS
COMPENSATION PHILOSOPHY AND PROCESS
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Compensation Discussion & Analysis
under the 2014 annual and long-term incentive plans was payable in equity awards, and for our other continuing NEOs, on average 40% of the total target compensation mix was payable in equity awards. The following graph reflects the mix of target compensation of our CEO and our other continuing NEOs in 2014:
2014 NEO Target Compensation Mix
Compensation Philosophy and Process
Overview
The Compensation Committee administers the compensation programs for all of our NEOs. As described above under “Corporate Governance – Committees of the Board,” the Board has determined that each member of the Compensation Committee is “independent” within the meaning of SEC regulations, the NYSE corporate governance listing standards and our Corporate Governance Guidelines. The Compensation Committee’s guiding principles with respect to NEO compensation are:
to align our NEOs’ incentives with short-term and long-term stockholder value creation;
to attract, motivate and retain the best possible executive officer talent by maintaining competitive compensation programs;
to tie cash incentives to the achievement of measurable company, business unit and individual performance goals that are associated with strategies intended to differentiate Quanta from its peers;to:
to tie stock incentives to the achievement of measurable company goals that are linked to our long-term strategic plans; and
to promote an ownership culture.
● | align NEO incentives with short-term and long-term stockholder value creation; |
● | attract, motivate and retain the best possible executive officer talent by maintaining competitive compensation programs; |
● | tie cash incentives to the achievement of measurable company, business unit and departmental performance goals that are associated with strategies intended to differentiate Quanta from its peers; |
● | tie stock incentives to the achievement of measurable company goals linked to our long-term strategic plans; and |
● | promote an ownership culture. |
In the first quarter of eachthe fiscal year, the Compensation Committee determines the terms of our annual and long-term incentive plans (each of which is described below) and establishes the company and individualother performance metrics that will be used in evaluating the performance of each NEOthe NEOs under the plans. In addition, the Compensation Committee establishes prospective base salary rates and target incentive percentages and amounts for each NEO for the current fiscal year. The Compensation Committee also considers the parameters of our discretionary incentive plan (described below). Following the end of the fiscal year, the Compensation Committee meets to discuss our prior year’s financial performance, to evaluate the performance of our NEOs relative to applicable performance metrics, and to determine the amounts, if any, that will be awarded to each NEO under our annual, long-term and discretionarythe incentive plans for the prior fiscal year.plans.
The Compensation Committee seeks to maintain the competitiveness of our executive compensation levels with those of our peers and competitors and considers various factors in determining overall compensation and the individual
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Compensation Discussion & Analysis
components ofeach compensation of each NEO,component, including (i) the results of compensation benchmarking studies, which includedinclude an analysis of peer group and published compensation survey data;group; (ii) economic and market conditions; (iii) the effects of inflation; (iv) changes in our business operations; (v)(iv) changes in the compensation practices of our competitors; (vi)(v) the executive officer’s position, experience, length of service and performance; (vii)(vi) company performance; and (viii)(vii) the judgment of each member of the Compensation Committee based upon prior experiences with executive compensation matters. The influence of these factors on NEO compensation is discussed further below.
Role of Compensation Consultant
Role of Compensation Consultant |
The Compensation Committee Charter grants to the Compensation Committee the authority to retain, at Quanta’s expense, compensation consultants, outside legal counsel and other advisors, and to approve their fees. These advisors report directly to the Compensation Committee. BeginningDuring 2016, in the fourth quarter of 2012,connection with approving prospective base salary rates and target incentives for certain executive officers, the Compensation Committee independently retained Deloitte Consulting LLP (“Deloitte”) to examine Quanta’sour executive compensation program and pay practices to reviewand the competitiveness of our executive compensation program relative to a public company peer group and survey data and to examine the design of Quanta’s incentive plans for its NEOs.(the “Deloitte Benchmarking Study”). The benchmarking and design studies (collectively the “Deloitte Compensation Studies”) assessed Quanta’s executive compensation program and pay practices, taking into account our compensation strategy and business objectives, as well as market conventions and leading practices. Deloitte utilizedCommittee approved the following companies for the purpose of obtaining competitive data:data for the Deloitte Benchmarking Study:
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These companies were chosen based on (i) market competition, including companies that compete with Quanta for customers, executive talent and investors, (ii) organization size, with financial characteristics such as revenues or market capitalization similar to those of Quanta, and (iii) industry, including companies in the heavy construction industry and companies that serve oil and gas or power transmission companies. The Compensation Committee may periodically update the companies in future compensation studies as a result of mergers, acquisitions, new publicly traded companies and other changes, using the criteria outlined above.
The Deloitte Compensation Studies compared base salary, target total cash compensation, target annual and long-term incentive opportunities, and target total direct compensation to market medians. Deloitte also utilized several sources24Quanta Services, Inc.
Table of published compensation survey data by matching, toContents
COMPENSATION DISCUSSION & ANALYSIS
Following the extent possible, the job titles and responsibilities of our NEOs with those in the surveys to provide additional competitive compensation information. Deloitte did not provide, nor was it asked by2016 fiscal year end, the Compensation Committee evaluated individual performance, as well as a new compensation benchmarking analysis, in order to provide, recommendations as to specific compensation payments to our NEOs. Deloitte reported directly to the Compensation Committee, but was authorized by the Compensation Committee to communicate with executive officers and personnel in the human resources department to obtain information.
During the first quarter of 2014, the Compensation Committee referred to Deloitte’s examination of our executive compensation program and pay practices and the competitiveness of our executive compensation program relative to a public company peer group and survey data (a “Deloitte Benchmarking Study”) in
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Compensation Discussion & Analysis
connection with approvingestablish prospective base salary rates and target annual and long-term incentive percentages and amounts for certain executive officers for 2014. Following the 2014 fiscal year end, the Compensation Committee assessed company financial performance metrics and individual performance metrics, approving the payouts under our 2014 annual incentive plan, and referred to a new Deloitte Benchmarking Study in connection with establishing prospective base salary rates and target incentive percentages anddollar amounts for each NEO under our 20152017 incentive plans.
Compensation studies assist the Compensation Committee in establishing the overall compensation practices that are consistent with our philosophy and guiding principles on executive compensation described above.compensation. Although compensationthese studies provide important data, for establishing our competitive compensation practices and compensation design, the Compensation Committee uses such studies only as a point of reference and not as a determinative factor for structuring and determining the amount of our NEOs’ compensation. The Compensation Committee also exercises discretion in its use of compensationthese studies, and the studies do not supplant the significance of individual and company performance that the Compensation Committee considers when making compensation decisions.
Management’s Role in the Compensation-Setting Process
Management’s Role in the Compensation-Setting Process |
Our Chief Executive Officer plays an important role in setting the compensation of our NEOs (other than with respect to himself). Although our Chief Executive Officer, after taking into account input from other members of management, makes recommendations to the Compensation Committee, the Compensation Committee has final authority and complete discretion in ultimately determining and setting NEO compensation plans, goals, incentive targets, salaries and cash and equity incentive awards.
In the first quarter of eachthe fiscal year, our Chief Executive Officer meets with the Compensation Committee to propose Quanta’s overall financial performance targets and individualorganizational objectives for the incentive plans for the current fiscal year.annual and long-term performance periods. The Compensation Committee reviews these financial performance targets and organizational objectives, considering the appropriate range for potential payment and other factors, and adjusts them as it deems appropriate. Each individual who is expected to be an NEO also proposes objectives for the upcoming fiscal year to our Chief Executive Officer. Our Chief Executive Officer reviews and modifies the submitted individual objectives, as he deems appropriate, and submits them, together with his own proposed individual objectives, to the Compensation Committee for its consideration. The Compensation Committee then reviews, modifies, as necessary,approves the financial performance targets, organizational objectives and approves each NEO’s individual objectivespayment curves for the current fiscal year. If, later during the year it is determined that an individual who was not previously identified as a potential NEO will be an NEO, including if such individual is hired during theand upcoming 3-year performance year, the Compensation Committee promptly reviews, modifies, as necessary, and approves the NEO’s individual objectives. The financial performance targets and individual objectives approved by the Compensation Committee for the 2014 incentive plans are discussed below in “Elements of Executive Compensation” and “Executive Compensation Decisions for 2014.”period.
Following the end of the fiscal year, the Compensation Committee uses Quanta’sevaluates organizational performance relative to the approved financial performance targets along with each NEO’s individualand organizational objectives to determine the payouts under our incentive plans.plans, including with respect to the prior fiscal year’s incentive plans and any earned and vested awards associated with performance periods completed during the prior fiscal year. At the request of the Compensation Committee, our Chief Executive Officer and certain other executive officers also participate in the Compensation Committee’s review. The subject NEO is not present during the Compensation Committee’s discussion of such NEO’s individual performance relative to his respective individual objectives and awards. Our Chief Executive Officer presents to the Compensation Committee his evaluation of organizational performance relative to the applicable financial performance targets. Our Chief Executive Officer also presents his performance evaluation of, the other NEOs, taking into account each of their individual objectives, and his compensation recommendations asfor, each individual NEO (other than himself) with respect to each of them.their organizational objectives. The Compensation Committee considers these evaluations in determining payouts to be made, if any, pursuant to ourthe incentive plans for the completed fiscal year under consideration, as well as salaries and incentive targets of the NEOs for the current fiscal year.
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Compensation Discussion & Analysis
year’s incentive plans.
To assist the Compensation Committee as it makes its compensation decisions, management also provides detailed spreadsheetsreports for the NEOs indicating, among other things, actual performance relative to company financial performance targets and individual objectives for the completed fiscal year under consideration.organizational objectives. These spreadsheets combinereports also include the elements of the targeted compensation, so that the Compensation Committee may analyze both the individualeach compensation elements (includingelement included in the compensation mix)mix and the total amount of targeted compensation for each NEO for a particular performance year in connection with the Compensation Committee’s consideration of the factors influencing the various elements of NEO compensation.NEO.
Consideration of Say-on-Pay Results
Consideration of Say-on-Pay Results |
The Compensation Committee considered the results of the 20142016 advisory “say-on-pay” proposal in connection with the discharge of its responsibilities. Because over 98%approximately 92% of our stockholders voting on the “say-on-pay” proposal approved the compensation of our NEOs as described in our proxy statement in 2014,2016, the Compensation Committee did not implement changes to our executive compensation program as a result of the stockholder advisory vote. However, the Compensation Committee did implement certain changeshas continued to evaluate and adjust Quanta’s compensation program beginning in 2014, based on the comprehensive review of our executive compensation program that began in 2012, to ensure that our incentive compensationit remained consistent with Quanta’s guiding principles on executive compensation. See“Changes to Executive Compensation Implemented for 2014” for additional information about these changes.principles.
Exercise of Discretion in Executive Compensation Decisions
Exercise of Discretion in Executive Compensation Decisions |
The Compensation Committee has complete discretion to withhold payment pursuant to any of our incentive compensation plans irrespective of whether we or our NEOs have successfully met the financial performance targets or individualorganizational objectives set under these plans.plans have been successfully met. For example, awards earned pursuant to the annual incentive plan and long-term incentive planplans described below are generally intended to qualify as performance-based compensation and are paid or issued as performance compensation awards under and subject to the terms of the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan (the “Omnibus Plan”).Plan. The Compensation Committee may exercise negative discretion, as permitted by the incentive plans and the Omnibus Plan, to reduce incentive awards to amounts determined by the Committeeit determines to be appropriate.
2017 Proxy Statement“Clawback” Policy25
A “clawback”Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Clawback Policy |
Our clawback policy, embodiedwhich is incorporated in the 2014our 2016 annual and long-term incentive plans, permits the Compensation Committee to recover certain incentive compensation from executive officers and other key employees in accordance with applicable law where the payment was based upon the achievement of certain financial results that were subsequently the subject of a restatement. Based on its review and judgment, the Compensation Committee may seek to recover any amount that it determines was received inappropriately by these individuals.
Equity Award Grant Practices
Equity Award Grant Practices |
The Compensation Committee meets in the first quarter of each fiscal year to, among other things, grant equity awards, including as discussed above, equity awards to our NEOs. ThisThe timing of this meeting occurs after our earnings release for the fourth quarter of the prior fiscal year to allowallows the Compensation Committee to review complete financial results for the prior fiscal year when evaluating company and NEO performance. The Compensation Committee may, in its discretion, also grant awards throughout the year, including in connection with the hiring of a new executive officer or the promotion of an employee to an executive officer position.
During 2014,2016, the Compensation Committee granted (i) RSUs associated with the achievement of 2013 performance goals, (ii) RSUs associated with 2013 special transaction bonuses, (iii) RSUs in connection with the hiring of Messrs. Morris, Kemps and Brown,
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Compensation Discussion & Analysis
and (iv) performance units and time-vested RSUs pursuant to our 20142016 long-term incentive plan, all of which were granted under the Omnibus Plan and are set forth in the 20142016 Grants of Plan-Based Awards Table.
All equity-based awards granted during 2014 pursuant to our incentive plans for executive officers were made under the Omnibus Plan. Generally, the number of RSUs and performance units we grant is determined by dividing the aggregate dollar amount intended to be awarded by the average of the closing pricesprice of Quanta’s Common Stock for the twenty consecutive trading days immediately preceding the date of grant. RSUs and performance units are generally settled in our Common Stock upon vesting. It is not the intention of the Compensation Committee to time the granting of any awards under our incentive plans, including those made to newly hired or newly promoted executive officers, with the release of any material, non-public information.
26Quanta Services, Inc.
COMPENSATION DISCUSSION & ANALYSIS
Elements of Executive CompensationELEMENTS OF EXECUTIVE COMPENSATION
The key components of our current compensation programand benefits programs for our NEOs are summarized in the table below. Each component has a critical role in creating compensation payouts that motivatemotivating and rewardrewarding strong performance and retaining the NEOs who deliver such performance. The Compensation Committee considers each compensation component individually and all compensation components in the aggregate when making decisions regarding amounts that may be awarded under each other compensation component.
decisions.
Compensation Element | Form of Compensation |
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Base Salary | Cash | Individual performance and experience in the role are factors | To provide fixed compensation necessary to attract and retain key executives and to offset the cyclicalityin our business that may impact variable pay | |||||
Short-Term Incentive | Cash | Tied to the achievement of | To provide incentives | |||||
Long-Term Incentive | Performance units
| Performance units cliff-vest at the end of a 3-year performance period and are tied to the achievement of 3-year financialperformance targets and strategic initiatives, in each case established by theCompensation
| To create a strong incentive | |||||
RSUs | RSUs vest over three years in equal annual installments | To attract and retain key executives and align NEO and stockholder interests | ||||||
Retirement Benefits | 401(k) Matching Non-Qualified Deferred Compensation Plan | N/A | To provide a competitive compensation | |||||
Perquisites | Executive Physical Program
/ Relocation | N/A | To provide a competitive compensation package and, in certain cases, to optimize |
2017 Proxy Statement27
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Compensation Discussion & Analysis
Changes to Executive Compensation Implemented for 2014COMPENSATION DISCUSSION & ANALYSIS
Comprehensive Review of Executive Compensation ProgramEXECUTIVE COMPENSATION DECISIONS FOR 2016
The Compensation Committee previously undertook a comprehensive review of our executive compensation program with the goal of identifying and implementing prospective changes to ensure that our incentive compensation remains consistent with Quanta’s guiding principles on executive compensation. In accordance with the authority and responsibilities of the Compensation Committee as set forth in its charter, and reflecting on Quanta’s continued growth, the Compensation Committee focused on overall incentive plan design. In performing its review, the Compensation Committee considered input from Deloitte and senior management. As part of this review, Deloitte assessed Quanta’s executive compensation program and practices in comparison to Quanta’s compensation strategy, business objectives, market practices and leading practices. Deloitte’s observations regarding Quanta’s current executive compensation program, based on its review of Quanta’s public disclosures, Compensation Committee meeting materials, compensation plan documents, historical compensation awards, proxy advisory firm reports and discussions with key members of management and the Compensation Committee, were reflected in a 2012 report (the “2012 Deloitte Comprehensive Review”).
This effort focused on the more senior personnel within corporate management and operating unit management, while still allowing the Compensation Committee to exercise its authority on a summary level of aggregated amounts with respect to broader management groups. This initiative resulted in modification of the design of awards under the 2014 annual and long-term (formerly referred to as supplemental) incentive plans for Quanta’s senior leadership team, consisting of approximately 20 individuals, including the NEOs, other executive officers, corporate vice presidents and functional leads.
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Compensation Discussion & Analysis
Summary of Changes Implemented
Based on the 2012 Deloitte Comprehensive Review, Deloitte’s report of Quanta’s competitiveness of our executive compensation program relative to a public company peer group and survey data in the fourth quarter of 2012 and information contained in the Deloitte Compensation Studies, the Compensation Committee decided to implement changes to our executive compensation program beginning in 2014, which are described below and summarized in the following table.
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Compensation Discussion & Analysis
With respect to awards for the 2014 performance year under the annual incentive plan, the Compensation Committee considered the number of metrics that would be appropriate and concluded that measuring performance against at least two metrics would better facilitate strategic growth while maintaining Quanta’s entrepreneurial culture. The Compensation Committee recognized the benefit of evaluating more than one performance measure and applying different weights to each measure. With respect to the type of performance metric, the Compensation Committee acknowledged the merits of utilizing a financial performance metric tied to profit, as well as performance metrics tied to strategic measures. The Compensation Committee believed that evaluating individual performance in the annual incentive plan, rather than in the long-term incentive plan, would better achieve its objectives and further, that adjusted organic EPS growth would be a more comprehensive measure for evaluating NEO performance than operating income. See “Executive Compensation Decisions for 2014 – Annual Incentive Plan” for detailed information about the components of the annual incentive plan.
With respect to awards under the 2014 long-term incentive plan, the Compensation Committee considered both the number and type of vehicles utilized and the performance metrics employed for purposes of compensating senior management. Previously, awards under the supplemental incentive plan for senior management consisted of performance-based grants of restricted stock or RSUs that vested in equal annual installments over a 3-year period, with 50% of the award opportunity based on achievement of an adjusted return on equity target and the remaining 50% of the award opportunity based on attaining individual strategic objectives. The Compensation Committee considered the fact that many companies in Quanta’s peer group recognize long-term performance through grants of two types of equity vehicles, most commonly performance based awards and time-vested restricted stock or RSUs. The Compensation Committee concluded that providing time-vested RSUs as the equity vehicle for a portion of the long-term incentive would foster retention and enhance the competitiveness of Quanta’s compensation program for senior management. The Compensation Committee decided to employ a “portfolio approach” to long-term incentives in order to diversify the types of incentives and enable Quanta to achieve multiple parallel objectives. The Compensation Committee believed that a combination of multiple award types could simultaneously foster retention, emphasize pay-for-performance, and link compensation to stock price appreciation. See “Executive Compensation Decisions for 2014 – Long-Term Incentive Plan” for further information about the components of the long-term incentive plan.
Additionally, in January 2014 the Compensation Committee approved a nonqualified deferred compensation plan for certain employees, including the NEOs. See“Executive Compensation Decisions for 2014 – Deferred Compensation Plan” for additional information about the deferred compensation plan and the 2014 Nonqualified Deferred Compensation Table for additional information about contributions to the plan, earnings/losses under the plan and aggregate balances for our NEOs under the plan.
Recognition of Transitional Disclosure Implications Associated with Changes Implemented
With the redesign of our long-term equity-based awards in 2014, the Compensation Committee recognized that, in this transition year, the 2014 Summary Compensation Table on page 51 and the 2014 Grants of Plan-Based Awards Table on page 54 would reflect compensation decisions and equity awards under two distinct plan designs, one associated with a completed one-year performance period and the other relating to a prospective multi-year performance period. Consequently, the total compensation shown in the 2014 Summary Compensation Table and the equity-based awards shown in the 2014 Grants of Plan-Based Awards Table for Messrs. O’Neil, Austin and Jensen can be viewed asoverstated. This overstatement results from reporting in our 2014 compensation tables, as required by the SEC proxy disclosure rules, the value of both (i) awards granted in March 2014 relating to achievement of performance objectives under the 2013 supplemental incentive plan and special transaction bonuses associated with 2013 performance, and (ii) awards granted in March 2014 under the newly designed 2014 long-term incentive plan relating to a 3-year performance period ending December 31, 2016.
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Compensation Discussion & Analysis
To illustrate the transition year implications, we have provided the Supplemental Table for 2014 Executive Compensation within footnote (13) to the 2014 Summary Compensation Table, which excludes equity-based awards granted under the 2013 supplemental incentive plan and other awards based on 2013 performance. Additionally, the table below provides a summary of the effect on the total compensation reported in 2014 for Messrs. O’Neil, Austin and Jensen that was attributable to equity-based awards associated with 2013 performance:
Named Executive Officer | Total Compensation Reported in 2014(1) | Total Compensation Reported in 2014 Attributable to 2013 Performance(2) | Total Compensation Reported in 2014 (Excluding Compensation Attributable to 2013 Performance)(3) | |||||||||
Mr. O’Neil | $ | 10,362,179 | $ | 4,606,821 | $ | 5,755,358 | ||||||
Mr. Austin | $ | 4,787,423 | $ | 2,040,014 | $ | 2,747,409 | ||||||
Mr. Jensen | $ | 3,275,018 | $ | 1,273,085 | $ | 2,001,933 |
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Base Salary
Base salary is a critical element of our NEO compensation because it provides NEOs with a base level of monthly income that is consistent with competitive practices. Base salaries for NEOs are determined annually by the Compensation Committee during the first quarter of the fiscal year, taking into account such factors as competitive industry salaries (especially the salary practices of companies in our peer group), a subjective assessment of the nature of the position, and the contribution, experience, level of responsibility and length of service of the NEO. While base salaries provide a basic level of economic security for our NEOs, a significant portion of an NEO’s target total direct compensation is performance-based compensation pursuant to the incentive compensation plans described below. The following table reflects the increases in base salaries approved by the Compensation Committee during 2014:
Named Executive Officer | 2013 Base Salary Rate (through March 30, 2014) | 2014 Base Salary Rate (effective April 1, 2014) | Percentage Increase | |||||||||
Mr. O’Neil | $ | 950,000 | $ | 1,000,000 | 5.3% | |||||||
Mr. Austin | $ | 725,000 | $ | 800,000 | 10.3% | |||||||
Mr. Jensen | $ | 500,000 | $ | 550,000 | 10.0% | |||||||
Mr. Morris | $ | 425,000 | $ | 437,500 | 3.0% | |||||||
Mr. Kemps | $ | — | $ | 450,000(1) | — | |||||||
Mr. Brown | $ | 390,000 | $ | 390,000(2) | 0.0% |
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Compensation Discussion & Analysis
The Compensation Committee, approvedafter taking into account, among other things, the results of the Deloitte Benchmarking Study and recommendations from Mr. Austin (other than with respect to himself) concluded that the following base salary increases of 5.3%, 10.3% and 10.0% for Messrs. O’Neil, Austin and Jensen, respectively, concluding that a higher percentage increase than the othercertain NEOs and Quanta’s other corporate employees waswere warranted due in part to strong individual performance and alsoduring 2015, to better align their base salaries with those of executives with similar positions and responsibilities at companies in our peer group. Based on published compensation survey datagroup, and the 3% base salary raise generally approved for Quanta’s other corporate employees, the Compensation Committee decidedwith respect to approve a 3% increase in base salary for Mr. Morris. No increase in the base salary for Mr. Kemps or Mr. Brown was approved because the decisions were made priorAustin, his promotion to the commencement of Mr. Kemps’ employmentPresident and shortly after the commencement of Mr. Brown’s employment.Chief Executive Officer:
Annual Incentive Plan
Named Executive Officer | 2015 Base Salary Rate (through March 31, 2016) | 2016 Base Salary Rate (effective April 1, 2016) | Percentage Increase | |||
Mr. Austin | $900,000 | $1,000,000 | 11.1% | |||
Mr. Jensen | $600,000 | $600,000 | - | |||
Mr. Querrey | $500,000 | $600,000 | 20.0% | |||
Mr. Morris | $460,000 | $469,200 | 2.0% | |||
Mr. Wisenbaker | $475,000 | $475,000 | - |
Annual Incentive Plan |
Our annual incentive plan for senior leadership is designed to provide our NEOs with performance awards payable annually in recognition of Quanta achieving a specified financial performance target and the NEONEOs achieving specified individualorganizational performance objectives, which are approved by the Compensation Committee.Committee at the beginning of the fiscal year. The Compensation Committee elects to pay such performance awards in cash. The NEO must be employed by Quanta on the date any bonus is paid under the annual incentive plan, and any NEO not employed forfeits any and all rights to such bonus.
Awards for an eligible NEO that begins employment during the performance year will be pro-rated from the date of hire; however, in any event, an NEO must be employed by October 1st of the performance year to be eligible foreligible. Generally, an award.NEO must be employed by Quanta on the date any bonus is paid, as he otherwise forfeits any and all rights to such bonus unless contractual provisions entitle the NEO to a full or pro-rated bonus. See “Executive Compensation – Potential Payments Upon Termination or Change in Control.”
28Quanta Services, Inc.
COMPENSATION DISCUSSION & ANALYSIS
The payout for each NEO under the annual incentive plan is calculated as a percentage of such NEO’s base salary (the “AIP Target Incentive”TargetIncentive”), a portion of which is then multiplied by the achievement percentage associated with the company performance component and the balance of which is multiplied by the achievement percentage associated with the individualorganizational performance component, as set forth in the following calculation:
Weighting | Achievement | Payouts | ||||||||
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| Company Performance Component (65%) | Achievement Percentage | Company Performance Payout | |||||||
Base Salary | AIP Target Incentive (%) | AIP Target Incentive (Amount) | ||||||||
Organizational Performance Component (35%) | Achievement Percentage | Organizational Performance Payout | ||||||||
Total AIP Incentive Award |
Compensation Discussion & Analysis
The Compensation Committee, after taking into account, among other things, the results of the Deloitte Benchmarking Study, and recommendations from the Chief Executive OfficerMr. Austin (other than with respect to himself), as well as the individualeach NEO’s position, experience, level of responsibility and length of service, and with respect to Mr. Austin, his appointment as President and Chief Executive Officer, established the following AIP Target Incentives for the 20142016 performance year:
Named Executive Officer | Base Salary | AIP Target Incentive (% of Base Salary) | AIP Target Incentive (Amount) | Pro-Rated AIP Target Incentive (Amount) | ||||||||||
Mr. O’Neil | $ | 1,000,000 | 110% | $ | 1,100,000 | N/A | ||||||||
Mr. Austin | $ | 800,000 | 100% | $ | 800,000 | N/A | ||||||||
Mr. Jensen | $ | 550,000 | 100% | $ | 550,000 | N/A | ||||||||
Mr. Morris(1) | $ | 437,500 | 90% | $ | 393,975 | $ | 387,499 | |||||||
Mr. Kemps(2) | $ | 450,000 | 90% | $ | 405,000 | $ | 114,288 | |||||||
Mr. Brown(3) | $ | 390,000 | 90% | $ | 351,000 | $ | 248,157 |
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Named Executive Officer | Base Salary | AIP Target Incentive (% of Base Salary) | AIP Target Incentive (Amount) | |||
Mr. Austin | $1,000,000 | 120% | $1,200,000 | |||
Mr. Jensen | $600,000 | 100% | $600,000 | |||
Mr. Querrey | $600,000 | 90% | $540,000 | |||
Mr. Morris | $469,200 | 90% | $422,280 | |||
Mr. Wisenbaker | $475,000 | 90% | $427,500 |
AIP Company Performance Component
The company performance component, of the annual incentive plan, which accounts for 65% of a participant’s annual incentive opportunity under the plan, is based on Quanta’s achievement of annual adjusted organic EPS growth (the “AIP Company Performance Component”). Generally, short-term incentives motivate and reward achievement of, and performance in excess of Quanta’s annual business goals. The Compensation Committee also believes this metric rewards our NEOs for improving financial results for stockholders of Quanta and provides a means to connect cash compensation directly to Quanta’s short-term performance. Specifically, theThe Compensation Committee also believes adjusted organic EPS growth encourages our NEOs to grow the Company profitably, without taking excessive risk.
To measure adjusted organic EPS growth under the annual incentive plan, the Company’s actual adjusted organic EPS for the performance year is compared to a baseline adjusted organic EPS amount, and a payout begins to accrue only if adjusted organic EPS for the performance year is greater than the baseline amount. The baseline adjusted organic EPS amount is calculated as the prior year’s net income attributable to our Common Stock,plusthe full-year effect of acquisitions made during the year, andadjustedfor the full-year effect of depreciation, amortization, interest income/expense and compensation expense related to the acquisitions. Actual adjusted organic EPS for the performance year is calculated similarly, except that budgeted post-acquisition contributions by businesses acquired during the performance year are deducted in order to calculate adjusted organic EPS that isan amount comparable to the baseline.
2017 Proxy Statement29
COMPENSATION DISCUSSION & ANALYSIS
For both the baseline and performance year adjusted organic EPS, certain other adjustments may be considered and approved by the Compensation Committee for company results and pre-acquisition results of any acquired companies, including but not limited to, currency fluctuations, unbudgeted legal costs and expenses, charges associated with long-term contract receivables,restructuring costs, transaction costs and impairment charges,charges. Baseline and stock repurchase activities.
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target adjusted organic EPS were also subject to equitable adjustments in the Compensation Discussion & Analysis
Committee’s discretion to account for events that significantly impact, positively or negatively, Quanta’s ability to achieve the established target.
Based upon the performance/payout scale and adjusted organic EPS growth target adopted by the Compensation Committee, NEOs could earn cash awards under the AIP Company Performance Component as follows (when performance falls between the designated payout points, the cash awards are determined by interpolation):
Percentage of Target Adjusted Organic EPS Growth Obtained | Percentage of Target Payout Under AIP Company Performance Component Earned | |
0% | 0% | |
22% | 12.5% | |
48% | 25% | |
65% | 50% | |
83% | 75% | |
100% | 100% | |
113% | 125% | |
126% | 150% | |
152% | 200% |
Percentage of Target | Percentage of Target Payout Under AIP Company | |
0% | 0% | |
36% | 25% | |
61% | 50% | |
82% | 75% | |
100% | 100% | |
116% | 125% | |
131% | 150% | |
145% | 175% | |
158% | 200% |
The target adjusted organic EPS growth was subject to equitable adjustments in the Compensation Committee’s discretion to account for events that significantly impact, positively or negatively, Quanta’s ability to achieve the established target; however, no adjustments were made for the 2014 performance year. Additionally, ifIf adjusted organic EPS growth exceeded 158%152% of the goal, resulting in a 200% payout pursuant to the above scale, participants would be eligible to receive an exemplary award equal toof up to an additional 200%100% of the AIP Target IncentiveCompany Performance Component amount, payable in RSUs that vest in equal annual installments over a 3-year period.
For the 20142016 performance year, the Compensation Committee concluded that the Company earnedestablished a baseline adjusted organic EPS of $1.71, against a baseline of $1.67$1.14 and a target of $1.78, thereby attaining approximately 35% of the adjusted organic EPS of $1.41. The Compensation Committee concluded that actual adjusted organic EPS for the 2016 performance year was $1.37, which represents approximately 85% of the targeted EPS growth target and resulting in an achievement percentage of 22.9%approximately 79%. However, based on the Compensation Committee’s review and concurrence with management’s assessment of Company performance for the 2016 performance year, the Compensation Committee exercised its discretion and determined that an achievement percentage of 75% was warranted. For a reconciliation of actual adjusted organic EPS to diluted EPS from continuing operations attributable to common stock for the year ended 2016 determined in accordance with generally accepted accounting principles (“GAAP”) see “Appendix A – Reconciliation of Non-GAAP Financial Measure.” In addition to the adjustments set forth in Annex A, the Compensation Committee considered an adjustment related to $54.8 million of project losses related to performance issues on a power plant construction project in Alaska, which significantly impacted Quanta’s ability to achieve the established target for EPS growth. However, the Compensation Committee ultimately determined that such an adjustment was not appropriate.
The following table details the potential and actual payouts associated with the AIP Company Performance Component:
Named Executive Officer | Total AIP Target Incentive | AIP Company Performance Component (Weighted %) | Target Payout Under AIP Company Performance Component (Amount) | Achievement Percentage | AIP Company Performance Component Incentive Award Earned | |||||
Mr. Austin | $1,200,000 | 65% | $780,000 | 75% | $585,000 | |||||
Mr. Jensen | $600,000 | 65% | $390,000 | 75% | $292,500 | |||||
Mr. Querrey | $540,000 | 65% | $351,000 | 75% | $263,250 | |||||
Mr. Morris | $422,280 | 65% | $274,482 | 75% | $205,862 | |||||
Mr. Wisenbaker | $427,500 | 65% | $277,875 | 75% | $208,406 |
30Quanta Services, Inc.
Named Executive Officer | Total AIP Target Incentive | AIP Company Performance Component (Weighted %) | Target Payout Under AIP Company Performance Component (Amount) | Achievement Percentage | AIP Company Performance Component Incentive Award Earned | |||||||||||
Mr. O’Neil | $ | 1,100,000 | 65% | $ | 715,000 | 22.9% | $ | 163,735 | ||||||||
Mr. Austin | $ | 800,000 | 65% | $ | 520,000 | 22.9% | $ | 119,080 | ||||||||
Mr. Jensen | $ | 550,000 | 65% | $ | 357,500 | 22.9% | $ | 81,868 | ||||||||
Mr. Morris(1) | $ | 387,499 | 65% | $ | 251,874 | 22.9% | $ | 57,679 | ||||||||
Mr. Kemps(1) | $ | 114,288 | 65% | $ | 74,287 | 22.9% | $ | 17,012 | ||||||||
Mr. Brown(1) | $ | 248,157 | 65% | $ | 161,302 | 22.9% | $ | 36,938 |
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Compensation Discussion & Analysis
COMPENSATION DISCUSSION & ANALYSIS
AIP IndividualOrganizational Performance Component
The second component of the annual incentive plan, which accounts for the remaining 35% of a participant’s annual incentive opportunity, under the plan, is based on the NEO’sNEOs’ achievement of individualorganizational performance objectives established for the 20142016 performance year (the “AIP IndividualOrganizational Performance Component”). Generally, these objectives may consistwere developed at the executive level of the organization and support the company-wide thematic goals of safety, statistics, return metrics, segment performance, safety leadership activitiestalent management and other strategic initiatives, among others.property, which influence the goals of all departments in the organization. The Compensation Committee believes achievement of thethese objectives by the NEOs relates to both quantitative and qualitative measures of performance that createand results in the creation of stockholder value. The individualorganizational performance objectives for the 2016 performance year, along with the related key initiatives and supporting metrics, for each NEO for the 2014 performance yearoverall thematic goals supported by those objectives, were as follows:
Thematic Goals | Organizational Performance Objective | ||
Strengthen Quanta’s industry safety leadership position |
| Root Cause Analysis. Perform a root cause analysis on each lost time injury during 2016. | |
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● | Injury Reduction. Reduce the total number of lost time injuries from 2015. | ||
Talent Identify, develop and |
| Succession Planning. Complete a sustainable plan and
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● | Leadership Development. Develop a talent management network and leadership development framework across all levels of the organization. | ||
● | Employee Engagement. Establish key initiatives to augment employee engagement and business results. | ||
Property Continue to build a data- and information-centered approach to management of |
| Data. Optimize specific equipment data and | |
● | Fleet Composition. Utilize equipment data to | ||
● | Location. Expand global position system technology to equipment fleet and utilize data. |
Based upon achievement of individual performance objectives as reflected below inUnder the performance/payout scale adopted by the Compensation Committee,AIP Organizational Performance Component, each NEO is eligible to receive a payout under the AIP Individual Performance Componentof up to a maximum payout equal to 200% of the target payout under the AIP Individual Performance Component. Therepayout; however, there is no exemplary award opportunity for the AIP Individual Performance Component. Thus,opportunity. Specifically, the NEOs could earn cash awards under the AIP IndividualOrganizational Performance Component as follows (when the attainment falls between the designated percentages in the table below, the cash awards are determined by interpolation):
| Percentage of Target Payout | |
Does Not Meet | 0% | |
Partially Meets | 50% | |
Meets | 100% | |
Exceeds | 150% | |
Far Exceeds | 200% |
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During 2016, our executive management and human resources department provided the Compensation Discussion & Analysis
After an evaluationCommittee with updates on the status of each NEO’s achievementthe performance objectives. At the beginning of his individual2017, our executive management conducted a final review of the performance objectives, duringwith input from our human resources and other applicable departments, and provided a report and recommendation to the 2014Compensation Committee.
2017 Proxy Statement31
COMPENSATION DISCUSSION & ANALYSIS
For the 2016 performance year, the Compensation Committee concluded, that Messrs. O’Neil, Austin and Morris each attained 133%, 160% and 185%after considering both achievement of their safety, talent and property individualcertain performance objectives resultingand the progress toward achievement of certain other performance objectives subsequent to the Company’s Chief Executive Officer transition in March 2016, that an overall achievement percentage of 159%, while Messrs. Jensen, Kemps and Brown each attained 125%, 160% and 185% of their safety, talent and property individual performance objectives, resulting in an overall achievement percentage of 157%.93% was warranted. The following table details the target and actual payouts associated with the AIP IndividualOrganizational Performance Component:
Named Executive Officer | Total AIP Target Incentive | AIP Organizational Performance Component (Weighted %) | Target Payout Under AIP Organizational Performance Component (Amount) | Achievement Percentage | Organizational Performance Component Incentive Award Earned | |||||
Mr. Austin | $1,200,000 | 35% | $420,000 | 93% | $390,600 | |||||
Mr. Jensen | $600,000 | 35% | $210,000 | 93% | $195,300 | |||||
Mr. Querrey | $540,000 | 35% | $189,000 | 93% | $175,770 | |||||
Mr. Morris | $422,280 | 35% | $147,798 | 93% | $137,452 | |||||
Mr. Wisenbaker | $427,500 | 35% | $149,625 | 93% | $139,151 |
As a result, the total payout to each NEO under the 2016 annual incentive plan, representing approximately 81% of the target payout, was as follows:
Named Executive Officer | Total AIP Target Incentive | AIP Individual Performance Component (Weighted %) | Target Payout Under AIP Individual Performance Component (Amount) | Achievement Percentage | AIP Individual Performance Component Incentive Award Earned | |||||||||||
Mr. O’Neil | $ | 1,100,000 | 35% | $ | 385,000 | 159% | $ | 612,150 | ||||||||
Mr. Austin | $ | 800,000 | 35% | $ | 280,000 | 159% | $ | 445,200 | ||||||||
Mr. Jensen | $ | 550,000 | 35% | $ | 192,500 | 157% | $ | 302,225 | ||||||||
Mr. Morris(1) | $ | 387,499 | 35% | $ | 135,625 | 159% | $ | 215,643 | ||||||||
Mr. Kemps(1) | $ | 114,288 | 35% | $ | 40,001 | 157% | $ | 62,801 | ||||||||
Mr. Brown(1) | $ | 248,157 | 35% | $ | 86,855 | 157% | $ | 136,362 |
Named Executive Officer | AIP Company Performance Component Incentive Award Earned | AIP Organizational Performance Component Incentive Award Earned | Total AIP Incentive Award Earned | |||
Mr. Austin | $585,000 | $390,600 | $975,600 | |||
Mr. Jensen | $292,500 | $195,300 | $487,800 | |||
Mr. Querrey | $263,250 | $175,770 | $439,020 | |||
Mr. Morris | $205,862 | $137,452 | $343,314 | |||
Mr. Wisenbaker | $208,406 | $139,151 | $347,558 |
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Long-Term Incentive Plan
Our long-term incentive plan for senior leadership is designed to provide our NEOs with long-term incentive awards payable annually in equity-based awards.equity. The total payouttargeted incentive amount for each NEO under the long-term incentive plan is dependent on a specified dollar amount for each NEO determined annually by the Compensation Committee (the “Long-Term Target Incentive”). The Compensation Committee, after taking into account, among other things, the results of the Deloitte Benchmarking Study, and recommendations from the Chief Executive OfficerMr. Austin (other than with respect to himself), as well as the individualeach NEO’s position, experience, level of responsibility and length of service, established the following totaland with respect to Mr. Austin his promotion to President and Chief Executive Officer, approved Long-Term Target Incentives for the NEOs in 2014:2016 as follows:
Named Executive Officer | Total Long-Term Target Incentive | |||
Mr. O’Neil | $ | 3,800,000 | ||
Mr. Austin | $ | 1,300,000 | ||
Mr. Jensen | $ | 1,000,000 | ||
Mr. Morris | $ | 350,000 | ||
Mr. Kemps(1) | $ | 550,000 | ||
Mr. Brown | $ | 300,000 |
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Named Executive Officer | 2015 Total Long-Term Target Incentive | 2016 Total Long-Term Target Incentive | ||
Mr. Austin | $1,800,000 | $4,000,000 | ||
Mr. Jensen | $1,300,000 | $1,300,000 | ||
Mr. Querrey | $300,000 | $300,000 | ||
Mr. Morris | $350,000 | $350,000 | ||
Mr. Wisenbaker | $325,000 | $325,000 |
Generally, an NEO must be employed by Quanta on the date an award vests or is earned under the long-term incentive plan and any NEO not employedor otherwise forfeits any and all rights to such award. However, an NEO who ceased to be employed by Quanta prior to the completion of the 3-year performance period described below has the potential to receive an award (or some portion thereof) represented by the equity award for that period, at the discretion of the Chief Executive Officer and with the approval of the Compensation Committee. Awards for an
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Compensation Discussion & Analysis
NEO added to the long-term incentive plan during the performance period are pro-rated from the date of hire; however, in any event, an NEO must be employed by October 1st1st of the first year of the 3-year performance period to be eligible for awards under the plan.eligible.
32Quanta Services, Inc.
COMPENSATION DISCUSSION & ANALYSIS
Long-Term Performance Unit Component
The first component of the long-term incentive plan, which accounts for 50% (or with respect to Mr. Austin, 55%) of a participant’s target incentive opportunity, under the plan, is payable in performance units that cliff-vest at the end of a 3-year performance period based on achievement of 3-year company performance goals determined by the Compensation Committee (the “Long-Term Performance Unit Component”). Under the 20142016 long-term incentive plan, in March 20142016 the Compensation Committee approved the following performance unit awards:
Named Executive Officer | Total Long-Term Target Incentive | Long-Term Performance Unit Component (Weighted %) | Target Long-Term Performance Unit Component (Amount) | Performance Units Granted(1) | ||||||||||
Mr. O’Neil | $ | 3,800,000 | 50% | $ | 1,900,000 | 55,345 | ||||||||
Mr. Austin | $ | 1,300,000 | 50% | $ | 650,000 | 18,934 | ||||||||
Mr. Jensen | $ | 1,000,000 | 50% | $ | 500,000 | 14,565 | ||||||||
Mr. Morris | $ | 350,000 | 50% | $ | 175,000 | 5,098 | ||||||||
Mr. Kemps(2) | $ | 418,612 | 50% | $ | 209,306 | 6,366 | ||||||||
Mr. Brown(3) | $ | 300,000 | 50% | $ | 150,000 | 4,369 |
Named Executive Officer | Total Long-Term Target Incentive | Long-Term Performance Unit Component (Weighted %) | Target Long-Term Performance Unit Component (Amount) | Performance Units Granted(1) | ||||
Mr. Austin | $4,000,000 | 55% | $2,200,000 | 99,417 | ||||
Mr. Jensen | $1,300,000 | 50% | $650,000 | 29,373 | ||||
Mr. Querrey | $300,000 | 50% | $150,000 | 6,778 | ||||
Mr. Morris | $350,000 | 50% | $175,000 | 7,908 | ||||
Mr. Wisenbaker | $325,000 | 50% | $162,500 | 7,343 |
(1) | The number of performance units granted is determined by dividing the dollar amount of the target Long-Term Performance Unit Component by the average of the closing prices of Quanta’s Common Stock for the twenty consecutive trading days immediately preceding the date of grant. |
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Though performance units representing the Long-Term Performance Unit Component target amount were granted to the NEOs in 2014,2016, the number of performance units that will ultimately be earned and vest will be adjusted upward or downward (if necessary) based on company performance during the 3-year performance period ending December 31, 2016.2018. The number of performance units that can become earned at the end of the performance period ranges from 0% to a maximum of 200% of the amount of performance units granted in 2014.granted. Any earned performance units will vest immediately and will be settled by the issuance ofin Common Stock.
For the 3-year performance period, the Compensation Committee established company performance goals relating to (i) the achievement of certain strategic initiatives, as measured by pre-tax income contributions, and (ii) improvement of return on invested capital (“ROIC”). Each goal has a 0% to 200% performance scale and is equally weighted when calculating overall company performance for purposes of determining the number of earned performance units for each NEO. The performance targets and results for these goals may be adjusted as appropriate, at the discretion of the Compensation Committee, to take into account any acquisitions or dispositions during the relevant performance period.
Strategic Initiatives.Initiatives
For the strategic initiatives goal, the Compensation Committee established targeted pre-tax income contribution amounts (including contributions of certain acquisitions and investments) from growth initiatives relating to certain customers, service markets, industry sectors and geographic regions. Total pre-tax income for the strategic initiatives goal may take into account trailing twelve month pro forma contributions, 2017certain estimated contributions or other measurements deemed appropriate by the Compensation Committee, excluding items deemed to be non-recurring. The Compensation Committee believes that
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Compensation Discussion & Analysis
achievement of these strategic initiatives supports the Company’s growth objectives and strategic intent to diversify into new markets and services.
The Compensation Committee established the following performance/payout scale for the strategic initiatives goal (when attainment of the goal falls between the designated percentages in the table, the percentage of target incentive earned is determined by interpolation):
Percentage of Target Pre-Tax Income Goal Attained | Percentage of Target Incentive Earned | |
Less than 75% | 0% | |
81% | 12.5% | |
87% | 50% | |
94% | 75% | |
100% | 100% | |
106% | 125% | |
113% | 150% | |
119% | 175% | |
125% or greater | 200% |
2017 Proxy Statement33
Percentage of Target Pre-Tax Income Goal Attained | Percentage of Target Incentive Earned | |
Less than 67% | 0% | |
83% | 50% | |
100% | 100% | |
117% | 150% | |
133% or greater | 200% |
ROIC. Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
ROIC
For the ROIC improvement goal, the Compensation Committee established a targeted increase in ROIC over the 3-year performance period. ROIC is designed to assess the Company’s efficiency at allocating capital under its control to profitable investments and is generally defined as net operating profit after tax,divided by average invested capital (which(and average invested capital is determined by taking the average of invested capital at the end of the performance period and invested capital at the end of the prior year). The Compensation Committee believes improvement of ROIC is strongly connected to stockholder value creation and improved capital allocation decisions.
The Compensation Committee established the following performance/payout scale for the ROIC improvement goal (when attainment of the goal falls between the designated percentages in the table, the percentage of target incentive earned is determined by interpolation):
Percentage of Target | Percentage of Target Incentive Earned | Percentage of Target Incentive Earned | ||
0% | 0% | 0% | ||
50% | 50% | 50% | ||
100% | 100% | 100% | ||
117% | 150% | |||
134% | 200% | |||
143% | 150% | |||
177% | 200% |
As soon as administratively practicable following the endconclusion of 2016,the 3-year performance period on December 31, 2018, the percentage attained and the percentage of target incentive earned for the strategic initiatives goal and the ROIC goal will be determined, and the combined weighted percentage will then be multiplied by the number of performance units granted in 2014.2016. This will result in a final number of earned and vested performance units, which will be settled in shares of our Common Stock.
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Compensation Discussion & Analysis
Long-Term RSU Component
The second component of the long-term incentive plan, which accounts for the remaining 45% or 50% of a participant’s target incentive opportunity under the plan, is payable in RSUs that vest in equal annual installments over the 3-year period following the date of grant subject to attainment of a threshold company performance goal established by the Compensation Committee (the “Long-Term RSU Component”). The Compensation Committee believes these time-based awards provide a concrete link between our NEOs’ compensation and the creation of stockholder value and encourage retention of our NEOs. Under the 20142016 long-term incentive plan, the Compensation Committee approved the following award amounts, which were granted in March 2014:2016:
Named Executive Officer | Total Long-Term Target Incentive | Long-Term RSU Component (Weighted %) | Target Long-Term RSU Component (Amount) | RSUs Granted(1) | ||||||||||
Mr. O’Neil | $ | 3,800,000 | 50% | $ | 1,900,000 | 55,345 | ||||||||
Mr. Austin | $ | 1,300,000 | 50% | $ | 650,000 | 18,934 | ||||||||
Mr. Jensen | $ | 1,000,000 | 50% | $ | 500,000 | 14,565 | ||||||||
Mr. Morris | $ | 350,000 | 50% | $ | 175,000 | 5,098 | ||||||||
Mr. Kemps(2) | $ | 418,612 | 50% | $ | 209,306 | 6,366 | ||||||||
Mr. Brown(3) | $ | 300,000 | 50% | $ | 150,000 | 4,369 |
Named Executive Officer | Total Long-Term Target Incentive | Long-Term RSU Component (Weighted %) | Target Long-Term RSU Component (Amount) | RSUs Granted(1) | ||||
Mr. Austin | $4,000,000 | 45% | $1,800,000 | 81,341 | ||||
Mr. Jensen | $1,300,000 | 50% | $650,000 | 29,373 | ||||
Mr. Querrey | $300,000 | 50% | $150,000 | 6,778 | ||||
Mr. Morris | $350,000 | 50% | $175,000 | 7,908 | ||||
Mr. Wisenbaker | $325,000 | 50% | $162,500 | 7,343 |
(1) | The number of RSUs granted |
Results for the 2014-2016 Performance Period |
In February 2017, the Compensation Committee certified the results of the performance units granted under our 2014 long-term incentive plan (the “2014 Performance Units”). The 2014 Performance Units were subject to a 3-year performance period (ending December 31, 2016), and the number of units that could have become earned and vested ranged from 0% to a maximum of 200% of the amount granted in 2014.
34Quanta Services, Inc.
COMPENSATION DISCUSSION & ANALYSIS
Performance measures for the 2014 Performance Units included: (i) the achievement of certain strategic initiatives, as measured by pre-tax income contributions, and (ii) improvement of ROIC. Each goal was judged on a 0% to 200% performance scale and was equally weighted when calculating overall company performance for purposes of determining the number of earned performance units. The strategic initiatives measure included targeted pre-tax income contribution amounts (including contributions of certain acquisitions and investments) from growth initiatives relating to certain customers, service markets, industry sectors and geographic regions. The ROIC improvement measure included a targeted increase in ROIC over the 3-year performance period. ROIC was generally defined as net operating profit after tax, divided by average invested capital (and average invested capital is determined by taking the average of invested capital at the end of the performance period and invested capital at the end of the prior year).
The percentage earned for each performance measure and the final number of earned and vested 2014 Performance Units for each of our 2014 NEOs that are also NEOs for 2016 was as follows:
2014 Named Executive Officer | Performance Units Granted in 2014 (Target Amount) | Percentage Earned of Strategic Initiatives Target | Percentage Earned of ROIC Target | Combined Weighted Percentage Achievement | Performance Units Earned & Vested | |||||
Mr. Austin | 18,934 | 200% | 0% | 100% | 18,934 | |||||
Mr. Jensen | 14,565 | 200% | 0% | 100% | 14,565 | |||||
Mr. Morris | 5,098 | 200% | 0% | 100% | 5,098 | |||||
Mr. O’Neil(1) | 55,345 | 200% | 0% | 100% | 41,509 |
(1) |
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Discretionary Incentive Plan
Awards under the discretionary incentive plan are presented to the Compensation Committee for approval at the recommendation of our Chief Executive Officer. These awards are payable in cash, restricted stock, RSUs, or a combination thereof. These awards provide the flexibility to, among other things, reward exceptional performance. For the 2014 performance year, the Chief Executive Officer did not recommend, and the Compensation Committee did not approve, awards to any NEO under the discretionary incentive plan.
Transaction Bonuses
On December 6, 2013, we soldWe have provided all of our equity ownership interest in Howard Midstream Energy Partners, LLC (“HEP”) for proceeds of approximately $220.9 million in cash which resulted in a pre-tax gain of approximately $112.7 million. Acknowledging the significant contribution to Quanta’s 2013 results from the gain on the sale of Quanta’s investment in HEP, the Compensation Committee decided to award to certain executive officers a special transaction bonus in recognition of their contributions in connection with the Company’s strategic investment in HEP. Accordingly, in March 2014, the Compensation Committee awarded transaction bonuses to certain of our NEOs as follows: Mr. O’Neil, $400,000; Mr. Austin, $500,000; and Mr. Jensen, $200,000. The transaction bonuses were paid in RSUs that vest in three equal annual installments, with the initial vesting occurring in March 2014, and are reflected in the “Stock Awards – Restricted Stock & RSUs” column of the 2014 Summary Compensation Table and in the “All Other Stock Awards: Number of Shares of Stock or Units” in the 2014 Grants of Plan Based Awards Table. The number of RSUs granted to each recipient was determined by dividing the amount of the award by the average of the closing prices of Quanta’s Common Stock for the twenty consecutive trading days immediately preceding the date of grant.
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Compensation Discussion & Analysis
Other Compensation
We have provided our NEOs with certain perquisites, including an annual executive physical program and a $25,000 annual allowance that may be used for certain pre-approved perquisites, including tax planning, financial services or club membership dues, and other perquisites that may be approved by the Compensation Committee. During 2016, certain other perquisites and compensation was approved for our continuing NEOs, including occasional use of a corporate apartment, reimbursement of certain legal expenses, relocation expenses and an executive financial counseling programautomobile allowance. The dollar value of the perquisites provided to our NEOs is are set forth in the 2016 All Other Compensation Table.
The Compensation Committee believes the annual perquisite package and with respectother approved amounts for 2016 were reasonable and provide additional compensation to Mr. Kempsour NEOs by making available benefits that provide convenience in connection with his hiring, certain relocation and commuting expenses. We believe these perquisites assist executives in dealing withlight of the demands of their positions. The limited personal use of partially-owned aircraft by our NEOspositions or that assist them in 2014 consisted solely of spouses accompanying executives as additional passengers on certainserving a necessary business flights.purpose. The Compensation Committee reviews our policies with respect tothe Company’s perquisites policy on a regular basis to consider whether the perquisites should be maintained and whether, and to what extent, it may be appropriate to revise the treatment of or limit or discontinue particular perquisites.
Our NEOs also receive matching contributions from Quanta to their 401(k) accounts, consistent with all other employees participating in Quanta’s 401(k) plan. Quanta matches 100% of an NEO’s pre-tax contributions up to the first 3% of such NEO’s base salary. Thereafter, Quanta matches 50% of an NEO’s pre-tax contributions up to the next 3% of such NEO’s base salary. All matching contributions are subject to certain limits as determined by law.
Deferred Compensation Plan
Deferred Compensation Plan |
Under thea nonqualified deferred compensation plan approvedmaintained by the Compensation Committee in January 2014,Quanta, certain employees, including the NEOs, are permitted to voluntarily defer receipt of up to 75% of base salary and up to 100% of other cash compensation and/or settlement of RSUs awarded pursuant to our incentive plans.performance units and RSUs. In addition, with respect tofor each plan year, a plan participant who defers the maximum amount permitted by law under theQuanta’s 401(k) plan maintained by Quanta is credited with an employer matching contribution in the deferred compensation plan equal to the difference between (i) 100% of the first 3% of the compensation deferred under the plan, plus 50% of the next 3% of the compensation deferred under the plan, and (ii) the maximum matching contribution that could be contributed on behalf of the participant under theQuanta’s 401(k) plan maintained by Quanta.plan. Matching contributions vest immediately. Quanta may also make discretionary employer contributions to the deferred compensation plan. Discretionary employer contributions will beplan, subject to a vesting schedule determined by Quanta at the time of the contribution, provided that vesting accelerates upon a change in control and the participant’s death or retirement. All matching and discretionary employer contributions, whether vested or not, are forfeited upon a participant’s termination of employment for cause or upon the participant engaging in competition with Quanta or anyQuanta.
2017 Proxy Statement35
Table of its affiliates, predecessors, designees or successors.Contents
COMPENSATION DISCUSSION & ANALYSIS
Performance units and RSUs that are deferred may be settled only in Quanta Common Stock. The deferred compensation plan permits participants to allocate deferred cash amounts among a group of notional accounts that mirror the gains and/or losses of various investment alternatives. These notional accounts do not provide for above-market or preferential earnings. Each participant may direct investments of the individual accounts set up for the participant under the plan and may make changes in the investments as often as daily. Since each executive officer may choose the investment alternative (which may include a selection of funds ranging from fixed income to emerging markets, as well as other equity, debt and mixed investment strategies) and may change their allocations from time to time, the return on the investment depends on how well each underlying investment fund performed during the time the executive officer chose it as an investment vehicle. The obligation to pay the balance of each participant’s account is at all times an unfunded and unsecured obligation of the Company.
Generally, participants receive distributions of deferred amounts upon the earlier of separation from service, the occurrence of a disability, or a specified date (selected at the time of the deferral). Participants may elect to receive distributions in the form of a lump sum or installments, and, in some cases, may elect to delay distribution upon termination of employment for up to five years. Participants are also permitted to withdraw all or a portion of their deferred amounts under the plan in the event of an unforeseeable financial emergency.
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Compensation Discussion & Analysis
Quanta reserves the right to amend or terminate the plan at any time and for any reason. Each NEO will be entitled to the amount credited to his account (if any) immediately prior to any amendment or termination.
A participant’s deferral elections must be renewed each year, and elections cannot be revoked or changed during the year. During 2014, Messrs. O’Neil, Austin, Jensen, Morris and Brown2016, all of the NEOs elected to defer a portion of their base salary, and/or any award earned under our annual incentive plan. Also during 2014,plan awards (if any), and/or long-term incentive plan awards. During 2016, Quanta made matching contributions but no discretionary contributions. For additional information on these contributions, see the 20142016 Nonqualified Deferred Compensation Table.
Chief Executive Officer Transition |
On March 14, 2016, Mr. O’Neil resigned as President, Chief Executive Appointment Matters
Effective January 6, 2014,Officer and director of Quanta as part of the Company’s ongoing leadership succession planning. The Board named Mr. Austin as President and Chief Executive Officer and appointed Mr. MorrisAustin as Executive Vice President – Corporate Development. a director to fill the vacancy on the Board. Mr. Austin also retained his title of Chief Operating Officer. Mr. O’Neil remained an employee of Quanta until April 1, 2016.
In connection with hisMr. O’Neil’s resignation, he entered into a separation agreement with the Company. The separation agreement provided Mr. O’Neil with the following, among other things: (i) a lump-sum payment in the amount of $2,200,000, less applicable withholding taxes, (ii) continued vesting of unvested time-based RSUs according to the vesting schedule established upon grant, (iii) the settlement and vesting of unearned or unvested performance units based on actual Company performance measured at the end of the applicable 3-year performance period, on a pro rata basis according to the number of months of service relative to the 3-year performance period, and (iv) continued payment of insurance premiums for 18 months. The separation agreement also contained a mutual release of claims and certain restrictive covenants, including a covenant not to compete and a non-solicitation agreement for a period of two years following the separation of employment, and an agreement to refrain from disclosure of confidential and/or proprietary information of Quanta.
In connection with Mr. Austin’s appointment, the Compensation Committee approved an annual base salary of $425,000, an AIP Target Incentive of 90% of his base salary rate, and a Long-Term Target Incentive in the amount of $350,000 for Mr. Morris. The Compensation Committee also approved the grant of an equity award to Mr. Morris on January 22, 2014,Austin consisting of the number of RSUs equal to the number of shares of Quanta’s Common Stock having a fair market value (based on the average of the closing prices of Quanta’s Common Stock for the twenty consecutive trading days immediately preceding the date of grant) equal to $500,000,of $250,000, which shall vestvests in equal annual installments over a 3-year period following the date of grant.
Effective February 20, 2014, Quanta appointed Mr. Brown as Vice President and General Counsel. In connection with his appointment, the Compensation Committee approved an annual base salary of $390,000, an AIP Target Incentive of 90% of his base salary rate, and a Long-Term Target Incentive in the amount of $300,000 for Mr. Brown. The Compensation Committee also approved the grant, of an equity awardsubject to Mr. Brown on March 4, 2014, consisting of the number of RSUs equal to the number of shares of Quanta’s Common Stock having a fair market value (based on the average of the closing prices of Quanta’s Common Stock for the twenty consecutive trading days immediately preceding the date of grant) equal to $150,000, which was forfeited upon the termination of Mr. Brown’s employment on September 15, 2014.
Effective September 19, 2014, Quanta appointed Mr. Kemps as Executive Vice President and General Counsel. In connection with his appointment, the Compensation Committee approved an annual base salary of $450,000, an AIP Target Incentive of 90% of his base salary rate, and a Long-Term Target Incentive in the amount of $550,000 for Mr. Kemps. The Compensation Committee also approved the grant of an equity award to Mr. Kemps on September 19, 2014, consisting of the number of RSUs equal to the number of shares of Quanta’s Common Stock having a fair market value (based on the average of the closing prices of Quanta’s Common Stock for the twenty consecutive trading days immediately preceding the date of grant) equal to $300,000, which shall vest in equal annual installments over a 3-year period following the date of grant.
Executive Separation Matters
Pursuant to a severance agreement between Quanta and Mr. Brown, our then Vice President and General Counsel, effective as of September 15, 2014, Quanta made a lump-sum payment to Mr. Brown in the amount of $292,500, less applicable taxes, representing 9-months’ salary, in consideration for his execution of a release of all claims against Quanta. Mr. Brown also remained eligible to receive a pro rata amount of the cash bonus, if any, that would be payable to him in respect of the annual incentive plan for the 2014 performance year. As discussed in “Executive Compensation Decisions for 2014 – Annual Incentive Plan,” Mr. Brown was awarded a pro rata amount of $173,300 under the annual incentive plan. The Company determined that the terms of the severance agreement were warranted in light of Mr. Brown’s contributions during 2014 and his execution of the release.
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Compensation Discussion & Analysis
award agreement.
Changes to 2015 Executive Compensation
Quanta’s executive compensation program will remain substantially similar in 2015; however, the Compensation Committee approved the following modifications to our 2015 annual and long-term incentive plans.
2014 | 2015 | |||
AIP Company Performance Component Exemplary Award | An exemplary award is payable in time-vested RSUs for adjusted organic EPS growth exceeding 158% of the goal.
An exemplary award cannot exceed an incremental amount equal to200% of the target incentive amount. | An exemplary award is payable in time-vested RSUs for adjusted organic EPS growth exceeding 158% of the goal.
An exemplary award cannot exceed an incremental amount equal to100% of the target incentive amount. | ||
Long-Term Target Incentive Structure | For all NEOs: (i)50% of the target amount is awarded in performance units and (ii)50% of the target amount is awarded in time-vested RSUs. | For our Chief Executive Officer: (i)53% of the target amount is awarded in performance units and (ii)47% of the target amount is awarded in time-vested RSUs.
For all other NEOs: (i)50% of the target amount is awarded in performance units and (ii)50% of the target amount is awarded in time-vested RSUs. |
Stock Ownership GuidelinesSTOCK OWNERSHIP GUIDELINES
Our Governance and Nominating Committee has established minimum stock ownership guidelines for executive officers, with the goal of promoting equity ownership and aligning our executive officers’ interests with our stockholders. The ownership guidelines are currently established at the following minimum levels:
Position | Guideline | |||
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Chief Executive Officer | 5 x base salary | |||
Chief Operating Officer | 4 x base salary | |||
Chief Financial Officer | 3 x base salary | |||
General Counsel | 3 x base salary | |||
Other Executive Officers | 1 x base salary |
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COMPENSATION DISCUSSION & ANALYSIS
The productdollar value obtained as described above is then divided by the average closing price of Quanta Common Stock during the immediately preceding 12 months as reported by the NYSE to calculate the number of shares to be held by each executive officer under the guidelines.officer. For purposes of determining compliance, with the guidelines, the number of shares of Quanta’s Common Stock that an individual is expected to own is calculated as of December 31st31st of each year, using the individual’s then current base salary and the stock ownership multiple applicable to such executive officer as of such date. Once calculated, the number of shares that an individual is expected to own remains in effect, regardless of intervening compensation increases, promotions or stock price fluctuations, until December 31st31st of the following year, at which time a new calculation and compliance assessment will be made. Once an individual is determined to be in compliance with the ownership guidelines as of the annual assessment date, the individual is deemed to remain in compliance regardless of any subsequent stock price fluctuations, as long as he maintains ownership of at least the same number of shares required as of the previous annual assessment date at which he was previously compliant.date.
Each executive officer is expected to attain the applicable stock ownership under the guidelines within five years following the later of (i) the first annual assessment with respect to such individual or (ii) the first annual
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Compensation Discussion & Analysis
compliance assessment at which a higher stock ownership multiple becomes applicable to such individual (due to a promotion or otherwise).individual. The five-year phase-in period is intended to permit gradual accumulation of the required ownership associated with a new or higher multiple, and ratable forward progress is expected during the five-year period. Under the stock ownership guidelines, shares held by a person or entity related to or controlled by the executive officer, as well as unvested shares of restricted stock or unvested RSUs held by an executive officer, and vested RSUs deposited into a deferred compensation plan or arrangement, are included in the calculation of the amount of such individual’s ownership.
As of December 31, 2014,2016, all of our executive officers were in compliance with the requirements of our stock ownership guidelines, either by exceeding the prescribed ownership level or being expected to exceed the prescribed ownership level within five years of its applicability.
Pledging, Hedging and Other Transactions in Quanta SecuritiesPLEDGING, HEDGING AND OTHER TRANSACTIONS IN QUANTA SECURITIES
Effective as of April 1, 2014, the Board approved an amended and restated Quanta Services, Inc. Insider Trading Policy, whichOur insider trading policy (among other things) prohibits directors and executive officers of Quanta from pledging Quanta securities as collateral for a loan unless the individual provides reasonable assurance of the financial capacity to repay the loan without resorting to the pledged securities and obtains pre-clearance of the pledge by a management committee or the Governance and Nominating Committee of the Board. Transactions by directors and executive officers in Quanta’s securities involving short sales, puts, calls or other derivative securities, on an exchange or in any other organized market, are prohibited. Directors and executive officers are also prohibited from entering into hedging, monetization transactions or similar arrangements involving Quanta securities, such as prepaid variable forwards, forward sale contracts, equity swaps, collars, zero-cost collars and other derivative transactions. We believe these prohibitions ensure that levels of stock ownership in accordance with our stock ownership guidelines are effective in aligning each individual’s interests with those of our stockholders.
Employment AgreementsEMPLOYMENT AGREEMENTS
Quanta is (or was, in the case of one former executive)currently a party to employment agreements with Messrs. Austin, Jensen and Morris (each an employment agreement with each of our NEOs.“Employment Agreement”). Under the terms of our employment agreements,Employment Agreements, the executive is entitled to payments and benefits upon the occurrence of specified events, including termination of employment or change in control of Quanta. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of fiscal year-end, are described in ““Executive Compensation – Potential Payments upon Termination or Change in Control.” The termination provisions of the employment agreements provide these individuals with a fixed amount of compensation upon termination as an inducement to offset the potential risk of leaving their prior employer or foregoing other opportunities in order to join or maintain employment with us, as applicable.us. At the time of entering into these agreements, the Compensation Committee considered our aggregate potential obligations in the context of the desirability of hiring or maintaining the employment of the individual as applicable, and the expected compensation upon joining or maintaining employment with us, as applicable.us. The employment agreements entered into with our NEOsEmployment Agreements do not contain excise tax gross-up provisions. In connection with the appointment of Mr. Morris as Executive Vice President – Corporate Development, the appointment of Mr. Brown as Vice President and General Counsel, and the appointment of Mr. Kemps as Executive Vice President and General Counsel in 2014, the Compensation Committee approved the terms reflected in their employment agreements, as described in “Executive Compensation Decisions for 2014 – Executive Appointment Matters.”
Indemnification AgreementsINDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with each of our directors and executive officers, in part to enable us to attract and retain qualified directors and executive officers. These agreements require us, among
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Compensation Discussion & Analysis
other things, to indemnify such persons against certain liabilities that may arise by reason of their status or service as directors or officers, to advance their expenses for proceedings for which they may be indemnified, and to cover such person under any directors’ and officers’ liability insurance policy that we may maintain from time to time. These agreements are intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and are in addition to any other rights our directors and executive officers may have under our Certificate of Incorporation and Bylaws and applicable law.
2017 Proxy Statement37
Table of ContentsRisk Considerations in our Compensation Program
COMPENSATION DISCUSSION & ANALYSIS
RISK CONSIDERATIONS IN OUR COMPENSATION PROGRAM
The Compensation Committee has discussed the concept of risk as it relates to our compensation program for 2014,2016 and the Compensation Committee does not believe our compensation program encourages excessive or inappropriate risk taking for the following reasons:
The Compensation Committee structures executive compensation at the senior leadership level to consist of both fixed and variable compensation. The fixed or base salary portion of compensation is typically set at market levels and is designed to provide a steady income regardless of Quanta’s stock price performance so that senior leadership do
● | The Compensation Committee structures executive compensation at the senior leadership level to consist of both fixed and variable compensation. The fixed or base salary portion of compensation is typically set at market levels and is designed to provide a steady income so that senior leadership does not feel pressured to focus exclusively on stock price performance to the detriment of other important business metrics. The variable portions of compensation are generally designed to reward both short-term and long-term performance as measured under several company and organizational performance metrics.
The Compensation Committee considers accounting and tax implications of its compensation decisions as one factor among many. Section 162(m) of the Internal Revenue Code limits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain executive officers unless the compensation is “performance-based” as defined under federal tax laws. We believe our total executive compensation program is designed to pay for performance. It aligns the interests of our executive officers with those of our stockholders and provides executive officers with the necessary motivation to maximize the long-term operational and financial performance of Quanta, while using sound financial controls and high standards of integrity. We also believe that total compensation for each executive officer should be, and is, commensurate with the execution of specified short- and long-term operational, financial and strategic objectives. We believe that the quality of our executive compensation program will continue to be reflected in positive long-term operational, financial and stock-price performance. 38Quanta Services, Inc.
The following table sets forth the compensation paid or accrued by Quanta in the last three fiscal years to our NEOs:
2017 Proxy Statement39 EXECUTIVE COMPENSATION
40Quanta Services, Inc. EXECUTIVE COMPENSATION
The following table sets forth information concerning annual cash incentive awards for
2017 Proxy Statement41 EXECUTIVE COMPENSATION
The following table reflects outstanding option awards classified as exercisable or unexercisable, as well as
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EXECUTIVE COMPENSATION
The following table reflects certain information regarding the exercise of options and the vesting of stock awards by each of our NEOs during the
2017 Proxy Statement43 EXECUTIVE COMPENSATION 2016 NONQUALIFIED DEFERRED COMPENSATION TABLE Quanta maintains a nonqualified deferred compensation plan under which our NEOs are permitted to defer base salary, other cash compensation and/or settlement of equity awards. This plan is described in detail under “Compensation Discussion & Analysis – Executive Compensation
Plan.” The following table describes the nonqualified deferred compensation activity for each of our NEOs during fiscal year
44Quanta Services, Inc. EXECUTIVE COMPENSATION
2017 Proxy Statement45 EXECUTIVE COMPENSATION POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Quanta is The Employment Agreements The Employment Agreements generally terminate upon the Upon termination of employment, each 46Quanta Services, Inc.
EXECUTIVE COMPENSATION Additionally, termination of employment and change in control events entitle applicable
2017 Proxy Statement47 EXECUTIVE COMPENSATION Change in Under the Employment Agreements, a change in control generally occurs when (i) any person or entity acquires, directly or indirectly, the beneficial ownership of securities representing 50% or more (or with respect to Mr. Austin, greater than 50%) of the total fair market value or total voting power of Quanta’s then outstanding voting securities, (ii) any person or entity acquires, directly or indirectly, within a 12-month period, the beneficial ownership of 30% or more of the total voting power of Quanta’s then outstanding voting securities, (iii) certain incumbent (and subsequently approved) directors cease to constitute a majority of the members of the Board within a 12-month period, or (iv) any person or entity acquires, directly or indirectly, within a 12-month period, assets representing 40% or more of the total gross fair market value of Quanta’s assets. Cause
Good The Employment Agreements generally define good reason as follows:
On March 14, 2016, Mr. O’Neil resigned as President, Chief Executive Officer and director of Quanta as part of the Company’s ongoing leadership succession planning, and the Board named Mr. Austin as President and Chief Executive Officer and appointed Mr. Austin as a director to fill the vacancy on the Board. Mr. Austin also retained his title of Chief Operating Officer. In connection with Mr. O’Neil’s resignation, he entered into a separation agreement with the Company that provided him with the following, among other things: (i) a lump-sum payment in the amount of $2,200,000, less applicable withholding taxes, (ii) continued vesting of unvested time-based RSUs according to the 48Quanta Services, Inc. EXECUTIVE COMPENSATION payment of insurance premiums for 18 months. Additionally, Mr. O’Neil agreed to furnish information and provide assistance in connection with
Generally, subject to the provisions of the particular award agreement, unvested Under the Stock Plan, a change in control is generally defined as the occurrence of any of the following events: (i) any person or entity becomes the beneficial owner, directly or indirectly, of securities representing 50% or more of the voting power of Quanta’s then outstanding securities, (ii) as a result of, or in connection with, any tender offer, exchange offer, merger or other business combination, a majority of the Board as of the
date immediately preceding such transaction is replaced, (iii) Quanta is merged with another corporation, and as a result, less than 75% of the outstanding securities of the surviving entity is owned in the aggregate by Quanta’s former stockholders, (iv) a tender or exchange offer is consummated for 50% or more of the voting power of Quanta’s then outstanding securities, or (v) Quanta transfers substantially all of its assets to an entity that is not controlled by Quanta. Under the Omnibus Plan, a change in control is generally deemed to occur upon (i) any sale, lease, exchange or other transfer of all or substantially all of the assets of Quanta, (ii) any person or entity becoming the beneficial owner, directly or indirectly, of securities representing more than 50% of the voting power of Quanta’s then outstanding securities, (iii) certain incumbent (and subsequently approved) directors ceasing to constitute a majority of the members of the Board within a two-year period, (iv) consummation of a merger or other business combination, unless all or substantially all of the beneficial owners of outstanding voting securities of Quanta immediately prior to the transaction beneficially own, directly or indirectly, more than 50% of the voting power of the resulting entity immediately following the transaction, or (v) stockholder approval of a complete liquidation of Quanta.
Generally, participants will receive distributions of deferred amounts under Quanta’s deferred compensation plan upon 2017 Proxy Statement49 EXECUTIVE COMPENSATION
The tables below reflect the estimated amounts that would be paid to each NEO upon termination of employment or change in control in varying circumstances identified below. Except as otherwise indicated, the amounts shown assume that termination or change in control occurred on December 31,
50Quanta Services, Inc.
EXECUTIVE COMPENSATION
2017 Proxy Statement51
EXECUTIVE COMPENSATION
The material features of our equity compensation plans are described in Note 12 to the consolidated financial statements included in Item 8 of Part II of Quanta’s Annual Report on Form 10-K for the fiscal year ended December 31,
52Quanta Services, Inc. EXECUTIVE COMPENSATION FEES OF THE COMPENSATION COMMITTEE CONSULTANT As discussed in “Compensation Discussion & Analysis – Compensation Philosophy and Process – Role of Compensation Consultant,” the Compensation Committee independently retained Deloitte in 2016 to provide benchmarking data, review the competitiveness of Quanta’s executive compensation for the NEOs, and provide advice on the amount and form of executive compensation. Management supported, but did not make or recommend, the decision to engage Deloitte. Deloitte was also engaged to provide certain additional services to Quanta. Management has engaged Deloitte from time to time to provide tax, transaction and management advisory services and valuation assessments. The aggregate fees billed by Deloitte and its affiliates for services performed during 2016 were as follows:
To prevent the perception of a potential conflict of interest involving Deloitte and its affiliates, (i) the individuals from Deloitte Tax LLP and Deloitte & Touche LLP who provided the tax and valuation services, respectively, to Quanta were not the same individuals who provided the consulting services to the Compensation Committee, (ii) the Deloitte consultants who provided services to the Compensation Committee assured the Committee that no portion of their compensation would be based on the amount or level of services provided by Deloitte Tax LLP or Deloitte & Touche LLP, or any other services provided by Deloitte’s affiliates, to Quanta, (iii) the Deloitte consultants who provided services to the Compensation Committee do not own any stock in Quanta or otherwise provide any other services to Quanta other than consulting services to the Compensation Committee and the Governance and Nominating Committee, (iv) Deloitte maintains conflict of interest policies that require objectivity of all its professionals, and (v) the Deloitte consultants have no business or personal relationships with members of the Compensation Committee or Quanta’s executive officers. The Compensation Committee approved the services and related fees above to the extent related to executive compensation and concluded that Deloitte did not have any conflicts of interest that would impair the Deloitte consultants’ independence. The Compensation Committee did not review or approve the other services provided by Deloitte and its affiliates to Quanta, as the decision to engage Deloitte to perform these other services was made by another Board committee or by management in the normal course of business. 2017 Proxy Statement53 ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
Section
At the 2016 annual meeting of The Compensation Committee establishes, recommends and
Consistent with our compensation philosophy, Quanta’s executive compensation program links a substantial portion of compensation to both individual and company performance, with a significant portion of target total direct compensation of NEOs each year being “at-risk,” and therefore dependent upon performance against performance metrics and targets. Moreover, equity-based awards provide an important role in our Overall, the Compensation Committee believes that the total compensation paid and awarded to Quanta’s NEOs in 2016 is reasonable and appropriate. Annual cash incentives for the 2016 performance year were aligned with company performance and the NEOs’ achievement of organizational objectives. With respect to long-term equity incentive awards, 50% (or 55% in the case of Mr. Austin) of those awards remain subject to a 3-year performance period requiring achievement of certain strategic initiatives designed to support Company growth and diversification and an improvement in return on 54Quanta Services, Inc. ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION “RESOLVED, that the compensation paid to
The Board of
ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
As required by the Section 14A(a)(2) of the Exchange Act, we are providing our stockholders with an opportunity to provide an advisory vote to determine whether the stockholder vote on executive compensation should occur every one, two or three years. We believe holding an advisory vote on executive compensation every year would allow Quanta to conduct a meaningful and detailed review of its pay practices in response to stockholder feedback. To that end, we believe that stockholders should have a frequent opportunity to express their views on our executive compensation program, consistent with our efforts to engage in an ongoing dialogue with our stockholders on executive compensation and other matters. For the reasons discussed above, our Board 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. With respect to the advisory vote on the frequency of future advisory votes on Quanta’s executive compensation, the voting option (1 year, 2 years or 3 years), if any, that receives the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on this proposal will be adopted by the stockholders, in accordance with our bylaws. Because this vote is advisory, the results are not binding on our Board. Nonetheless, our Board values the opinions that stockholders express in their votes and in any additional dialogue. In evaluating the vote on this advisory resolution, the Board will consider the voting results in their entirety. If one of the voting options is not adopted by the required vote of the stockholders, our Board will evaluate the votes cast for each of the voting options and will deem the voting option receiving the greatest number of votes to be the voting option approved by the stockholders. Our Board may decide, however, that it is in the best interests of our stockholders and Quanta to hold a non-binding advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by our stockholders. The Board of Directors unanimously recommends a vote to conduct an advisory vote on executive compensation everyYEAR. 56Quanta Services, Inc. The Audit Committee Prior to selecting an independent registered public accounting firm, the Audit Committee considers the firm’s qualifications, independence and performance, as well as the advisability and potential impact of selecting a new independent registered public accounting firm. At least annually the Audit Committee also obtains and reviews a report from its current independent registered public accounting firm describing (1) its internal quality control procedures, (2) any material issues raised by their most recent quality-control review (whether internal or peer review) or by any governmental or professional authority inquiry or investigation, within the preceding five years and with respect to an independent audit carried out by the firm, along with any steps taken to deal with any such issues, and (3) all relationships between the firm and Quanta. Additionally, when assessing the public accounting firm’s independence, the Audit Committee reviews all audit and non-audit services provided by the firm in the prior fiscal year. For further information regarding the services provided by PricewaterhouseCoopers LLP during fiscal year 2016, see “Independent Auditor – Audit Fees.” In accordance with SEC rules, audit partners for independent registered public accounting firms are also subject to rotation requirements that limit the number of consecutive years an individual partner may serve in certain roles. For lead and concurring audit partners, the maximum is five consecutive years of service. We select the lead partner from our independent registered public accounting firm pursuant to this rotation policy following meetings with potential candidates and discussions between the Audit Committee and management. We are asking our stockholders to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. Although ratification is not required by our bylaws or otherwise, the Audit Committee is submitting the appointment of PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of good corporate practice. In the event the stockholders do not ratify the appointment, the Audit Committee will reconsider the appointment. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the fiscal year if it determines that such a change would be in the best interests of Quanta and its stockholders. Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting and will be provided an opportunity to make a statement, if they choose, and to respond to appropriate questions. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm requires the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, voting together as a single class, present at the meeting in person or by proxy and entitled to vote on this proposal. The Board of Directors unanimously recommends a voteFOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. 2017 Proxy Statement57 INDEPENDENT AUDITOR The Audit Committee is composed of four independent directors and operates under a formal written charter adopted by the Board of Directors. As members of the Audit Committee, our primary purpose is to assist with the Board of Directors’ oversight of (1) the integrity of Quanta’s financial statements, (2) Quanta’s compliance with applicable legal and regulatory requirements, (3) the independent registered public accounting firm’s qualifications and independence, and (4) the performance of Quanta’s internal audit function and independent auditors. The Audit Committee is solely responsible for the appointment and compensation of Quanta’s independent registered public accounting firm. Management is responsible for Quanta’s financial reporting processes, including its system of internal controls, and for the preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States. Quanta’s independent registered public accounting firm is responsible for expressing an opinion as to whether the consolidated financial statements are free of material misstatements based on their audit. Our responsibility is to monitor and review these processes. In carrying out our role, we rely on Quanta’s management and independent registered public accounting firm. We have reviewed and discussed Quanta’s audited consolidated financial statements with management. Management has confirmed to us that the financial statements have been prepared in conformity with accounting principles generally accepted in the United States. In addition, we have discussed with PricewaterhouseCoopers LLP, Quanta’s independent registered public accounting firm, the matters required to be discussed by Auditing Standard No. We have received written disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with us concerning independence, and we have discussed with PricewaterhouseCoopers LLP its independence from Quanta. Based on our review and discussions referred to above, we recommended to Quanta’s Board of Directors that Quanta’s audited consolidated financial statements be included in Quanta’s Annual Report on Form 10-K for the fiscal year ended December 31,
58Quanta Services, Inc. Table of Contents INDEPENDENT AUDITOR The Audit Committee of the Board has adopted a policy requiring pre-approval by the Audit Committee of all audit and permissible non-audit services to be provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. On an annual basis, the Audit Committee reviews and, as it deems appropriate, pre-approves the particular services to be provided by our independent registered public accounting firm and establishes specific budgets for each service. The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee must be informed promptly of the provision by our independent registered public accounting firm of each service that is pre-approved by the Audit Committee. In addition, the Audit Committee may periodically revise the list of pre-approved services and related fee levels, based on subsequent determinations. Any services expected to exceed pre-approved fee levels require the specific pre-approval of the Audit Committee. The Audit Committee may delegate pre-approval authority to one or more of its members. The following table details the aggregate fees billed by PricewaterhouseCoopers LLP, our independent registered public accounting firm, for fiscal years
The Audit Committee has reviewed the services performed by PricewaterhouseCoopers LLP and the related fees and has considered whether the provision of non-audit services by PricewaterhouseCoopers LLP is compatible with maintaining independence of PricewaterhouseCoopers LLP. During 2017 Proxy Statement59
Stockholders who desire to submit a proposal for inclusion in Quanta’s proxy materials for the Under our bylaws, with respect to any stockholder proposal that is not submitted for inclusion in next year’s proxy statement under Rule 14a-8, but instead is proposed to be presented directly at our Any such stockholder proposal and director nomination must comply in all respects with the specific requirements included in our bylaws. Our bylaws are available 60Quanta Services, Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth information, as of April 3, 2017, unless otherwise indicated, with respect to each person known by us to be the beneficial owner of more than five percent (5%) of the outstanding shares of our Common Stock, Series F Preferred Stock or Series G Preferred Stock. Except as indicated otherwise, the beneficial owners named below have sole voting and investment power with respect to the shares indicated as beneficially owned.
2017 Proxy Statement61 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth, as of April 3, 2017, the number of shares of Common Stock beneficially owned by (i) each of our directors and director nominees, (ii) each of our NEOs listed in the 2016 Summary Compensation Table and (iii) all of our directors and executive officers as a group.
62Quanta Services, Inc.
North Houston Pole Line, L.P. (“North Houston”), a wholly-owned subsidiary of Quanta, is a party to certain facility leases with Properties, Etc., the general partner and 50% owner of which is Earl C. (Duke) Austin, Jr., who is our President, Chief Executive Officer, Chief Operating Officer and a director. During 2016, North Houston paid an aggregate of $416,989 to Properties, Etc. in rent expense related to these leases. These leases have various terms through August 2021, and as of December 31, 2016, provided for aggregate remaining lease obligations of $2,214,128 through the conclusion of the lease terms. In addition, North Houston is a party to a facility lease with Mr. Austin and paid Mr. Austin $149,458 in rent expense for 2016 related to this lease. As of December 31, 2016, the aggregate remaining lease obligations under this lease were $739,200 through the conclusion of the lease term in August 2021. Further, North Houston is a party to a facility lease with Mr. Austin’s father and paid Mr. Austin’s father $186,000 in rent expense for 2016 related to this lease. As of December 31, 2016, the aggregate remaining lease obligations under this lease were $924,000 through the conclusion of the lease term in August 2021. These leases relate primarily to facilities that were occupied by North Houston when Quanta acquired North Houston in 2001. Based upon an independent market valuation, we believe that the rental rates of these leases do not exceed fair market value. Quanta employed Dean McInnis, the brother-in-law of Randall C. Wisenbaker, one of our executive officers, during 2016. Quanta paid him an aggregate of $121,679 in salary, non-equity incentive bonus, health and welfare coverage and 401(k) plan matching contributions for 2016. In addition, during 2016, we granted 245 RSUs to Dean McInnis, with a grant date fair value of $5,368, vesting in three equal annual installments beginning in the first quarter of 2017. The RSUs were granted on the same terms and conditions as RSUs granted to other U.S. employees in 2016. Quanta employed Travis Grindstaff, the brother of Nicholas M. Grindstaff, one of our executive officers, during 2016. Quanta paid him an aggregate of $240,911 in salary, non-equity incentive bonus, health and welfare coverage and 401(k) plan matching contributions for 2016. In addition, during 2016, we granted 978 RSUs to Travis Grindstaff, with a grant date fair value of $21,428, vesting in three equal annual installments beginning in the first quarter of 2016. The RSUs were granted on the same terms and conditions as RSUs granted to other U.S. employees in 2016. During 2016, Quanta also employed David J. Ball, the son of James R. Ball, a former member of our Board that did not stand for re-election in 2016. Quanta paid him an aggregate of $202,881 in salary, non-equity incentive bonus, health and welfare coverage and 401(k) plan matching contributions for 2016. In addition, during 2016, we granted 1,163 RSUs to David J. Ball, with a grant date fair value of $25,481, vesting in three equal annual installments beginning in the first quarter of 2017. The RSUs were granted on the same terms and conditions as RSUs granted to other U.S. employees in 2016.
Valard Construction LP (“Valard”), a wholly-owned subsidiary of Quanta, and Valard Construction Ltd. (“Valard Ltd.”), an affiliate of Valard and also a wholly-owned subsidiary of Quanta, are parties to certain facility leases with 964125 Alberta Ltd., a corporation controlled by the spouse of Victor Budzinski, holder in a trustee capacity of the single outstanding share of Quanta’s Series F Preferred Stock. Valard and Valard Ltd. paid an aggregate of $1,418,570 to 964125 Alberta Ltd. in rent expense for 2016 related to these leases. These leases have various terms through October 2020, and as of December 31, 2016, provided for aggregate remaining lease obligations of $3,900,313 through the conclusion of the lease terms. These leases relate primarily to facilities that were occupied by Valard and Valard Ltd. when Quanta acquired Valard Ltd. in 2010. Based upon an independent market valuation, we believe that the rental rates of these leases do not exceed fair market value. Valard Construction 2008 Ltd. (“Valard 2008”), a wholly-owned subsidiary of Valard Ltd., employed Victor Budzinski during 2016 and paid him an aggregate of $372,956 in salary, bonus and health and welfare coverage in 2016. Valard 2008 also employed Adam Budzinski, the son of Victor Budzinski, and paid him an aggregate of $434,348 in salary, bonus, health and welfare coverage and retirement plan contributions. Also during 2016, Valard employed (i) Maureen Budzinski, the sister of Victor Budzinski, and paid her an aggregate of $137,233 in salary, bonus, health and welfare coverage and retirement plan contributions, (ii) William Budzinski, the brother of Victor Budzinski, and paid him an aggregate of $133,666 in salary, bonus, health and welfare coverage and retirement plan contributions and (iii) Alexander Budzinski, the son of Victor Budzinski, and paid him an aggregate of $126,696 in salary, bonus, health and welfare 2017 Proxy Statement63 CERTAIN TRANSACTIONS coverage and other compensation. In addition, during 2016, Quanta granted (i) 12,103 RSUs to Victor Budzinski, with a grant date fair value of $265,177, (ii) 10,758 RSUs to Adam Budzinski, with a grant date fair value of $235,708 and (iii) 705 RSUs to Maureen Budzinski, with a grant date fair value of $16,205. Each of the awards vest in three equal annual installments beginning in the first quarter of 2016 for Victor and Adam Budzinski and in May 2017 for Maureen Budzinski. The RSUs were granted on the same terms and conditions as RSUs granted to other Canadian employees in 2016. The employment of Victor Budzinski, Adam Budzinski, Maureen Budzinski and Alexander Budzinski, as well as William Budzinski’s service as an independent contractor for Valard, predated Quanta’s acquisition of Valard and its affiliates in 2010, and William Budzinski was hired as an employee in 2014. All amounts associated with Valard and its affiliates, other than the grant date fair value of RSU awards, were paid in local (foreign) currency. The amounts reflected above represent the U.S. dollar equivalent of the aggregate amounts reportable during 2016, based on the spot exchange rate for such foreign currency to the U.S. Dollar on December 31, 2016, as reported by theWall Street Journal.
Northstar Energy Services Inc. (“Northstar”), a wholly-owned subsidiary of Quanta, is party to a facility lease with Kehr Developments Inc., a corporation controlled by Jay Gunnarson, beneficial holder of the single outstanding share of Quanta’s Series G Preferred Stock. Northstar paid $420,417 to Kehr Developments, Inc. in rental expense for 2016 related to the facility lease, and the lease has a term through January 2024. As of December 31, 2016, the remaining lease obligations were $2,945,537. This lease relates to a property occupied by Northstar when Quanta acquired Northstar in January 2014. Based upon an independent market valuation, the current rental rate of this lease does not exceed fair market value. All amounts associated with Northstar were paid in local (foreign) currency. The amounts reflected above represent the U.S. dollar equivalent of the amounts reportable during 2016, based on the spot exchange rate for such foreign currency to the U.S. Dollar on December 31, 2016, as reported by theWall Street Journal. REVIEW OF RELATED PARTY TRANSACTIONS We have a written policy and procedures for the review, approval and ratification of transactions with related persons. Under our policy, related persons include, among others, our executive officers and corporate employees, certain employees of our subsidiaries, directors, principal stockholders, and immediate family members of such persons. The transactions covered under our policy generally include any business transaction between Quanta and a related person, including, among others, the lease of real property from a related person, the employment of a related person, the sale of inventory or supplies to or the purchase of inventory or supplies from a related person, and the supply of services to or receipt of services from a related person. Related party transactions involving an amount exceeding $120,000 and in which any of our directors, director nominees, executive officers, beneficial owners of greater than five percent (5%) of any class of our voting securities, or any immediate family members of the foregoing may have an interest require the approval of the Audit Committee. In considering the approval of any related party transaction, a legitimate business case must be presented that includes, among other things, whether the transaction terms are no less favorable than the terms generally available to an unaffiliated third party, the materiality of the transaction and the reasons that the transaction is beneficial to Quanta. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file various reports with the SEC concerning their holdings of, and transactions in, our securities. Copies of these filings must be furnished to us. Based solely on our review of the copies of those forms furnished to us and written certifications from our directors and executive officers, we believe that, during 2016, all of our directors and executive officers were in compliance with the applicable filing requirements. 64Quanta Services, Inc. QUESTIONS AND ANSWERS ABOUT THE MEETING What is the purpose of the meeting? The meeting will be Quanta’s regular annual meeting of stockholders, and stockholders will be asked to vote on the following matters:
How does the Board recommend that stockholders vote? The Board recommends that stockholders vote as follows:
When and where is the annual meeting? The annual meeting will be held in the Williams Tower, 2nd Floor Conference Center, Auditorium No. 1, located at 2800 Post Oak Boulevard, Houston, Texas 77056, on May 24, 2017 at 8:30 a.m. local time. Who can attend the meeting? All stockholders of record as of March 27, 2017, or their duly appointed proxies, may attend the meeting, and each may be accompanied by one guest. Seating, however, is limited. Admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 8:00 a.m. on May 24, 2017. Each stockholder will be asked to present valid picture identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not be permitted at the meeting. To obtain directions to the meeting, please contact our Corporate Secretary at (713) 629-7600. If you hold your shares in “street name” (that is, through a broker, bank or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Who is entitled to vote at the meeting? Holders of record of (i) our Common Stock, par value $0.00001 per share, (ii) our Series F Preferred Stock, par value $0.00001 per share, and (iii) our Series G Preferred Stock, par value $0.00001 per share, respectively, at the close of business on March 27, 2017, the record date for the meeting, are entitled to notice of and to vote at the annual meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the meeting, or at any adjournments or postponements of the meeting, unless a new record date is then set. As of March 27, 2017, there were 148,476,083 shares of our Common Stock, one share of our Series F Preferred Stock, and one share of our Series G Preferred Stock, respectively, outstanding and entitled to vote. 2017 Proxy Statement65 GENERAL INFORMATION What are the voting rights of the holders of Common Stock, Series F Preferred Stock and Series G Preferred Stock? Each share of Common Stock is entitled to one vote on each matter on which it may vote. The share of Series F Preferred Stock is entitled to a number of votes equal to the number of outstanding Class A non-voting exchangeable common shares of our wholly-owned subsidiary, Valard Construction Ltd., a British Columbia corporation, on each matter on which it may vote. Valard Construction Ltd. had 3,500,000 Class A non-voting exchangeable common shares outstanding on March 27, 2017. The share of Series G Preferred Stock is entitled to a number of votes equal to the number of outstanding Class A non-voting exchangeable common shares of our wholly-owned subsidiary, Northstar Energy Services Inc., an Alberta corporation, on each matter on which it may vote. Northstar Energy Services Inc. had 449,929 Class A non-voting exchangeable common shares outstanding on March 27, 2017. Holders of Common Stock, Series F Preferred Stock and Series G Preferred Stock vote together as a single class on all matters. The required vote to approve each item to be voted on at the meeting is described below. What vote is required to approve each item to be voted on at the meeting? Directors are elected by a majority of the votes cast with respect to such director in uncontested elections, such that a nominee for director will be elected to the Board if the votes cast FOR the nominee’s election exceed the votes cast AGAINST such nominee’s election. Abstentions and broker non-votes are not counted as votes cast for purposes of the election of directors and, therefore, will have no effect on the outcome of such election. Even if a nominee is not re-elected, he or she will remain in office as a director until his or her earlier resignation or removal. Each of the current director nominees has signed a letter of resignation that will be effective if the nominee is not re-elected at the meeting and the Board accepts the resignation following the meeting. If a nominee is not re-elected, the Board will decide whether to accept the director’s resignation in accordance with the procedures listed in Quanta’s Corporate Governance Guidelines, which are available in the “Investors & Media / Governance” section of our website atwww.quantaservices.com. Advisory approval of the resolution on Quanta’s executive compensation and ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, and each require the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on that proposal. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect on the outcome of the vote on such proposal. Additionally, with respect to approval of the resolution on Quanta’s executive compensation, the results of the vote are not binding on the Board, whether or not the proposal is adopted by the aforementioned voting standard. In evaluating the vote on this resolution, the Board intends to consider the voting results in their entirety. With respect to the advisory vote on the frequency of future advisory votes on Quanta’s executive compensation, the voting option (1 year, 2 years or 3 years), if any, that receives the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on that proposal will be adopted by the stockholders, in accordance with Quanta’s bylaws. Abstentions will have the same effect as a vote against each of the voting options. Broker non-votes will have no effect on the outcome of the advisory vote. The results of this vote are not binding on the Board, whether or not it is adopted by the aforementioned voting standard. In evaluating the vote on this advisory resolution, the Board will consider the voting results in their entirety. If one of the voting options is not adopted by the required vote of the stockholders, the Board will evaluate the votes cast for each of the voting options and will deem the voting option receiving the greatest number of votes to be the voting option approved by the stockholders. Any other matter properly brought before the meeting will be decided by the affirmative vote of a majority of the voting power of the shares of Common Stock, Series F Preferred Stock and Series G Preferred Stock, considered together as a single class, present at the meeting in person or by proxy and entitled to vote on the matter. Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials? In accordance with SEC rules, we are providing access to our proxy materials over the Internet. As a result, we have sent to most of our stockholders a Notice instead of a paper copy of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet and how to request a paper copy. In addition, stockholders may request to receive future proxy materials in printed form by mail or electronically by e-mail. A stockholder’s election to receive proxy materials by mail or e-mail will remain in effect until the stockholder terminates it. 66Quanta Services, Inc. GENERAL INFORMATION Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials? We are providing certain stockholders, including those who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a Notice. If you would like to reduce the costs incurred by Quanta in mailing proxy materials, you can consent to receive 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 provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When prompted, indicate that you agree to receive or access stockholder communications electronically in the future. Can I vote my stock by completing and returning the Notice? No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, by requesting and returning a paper proxy card, or by submitting a ballot in person at the annual meeting. How can I access the proxy materials over the Internet? Your Notice or proxy card will contain instructions on how to view our proxy materials for the annual meeting on the Internet. Our proxy materials are available atwww.proxyvote.com. How do I vote? You may vote by any of the following methods: (i)Internet. Vote on the Internet atwww.proxyvote.com. This website also allows electronic proxy voting using smartphones, tablets and other web-connected mobile devices (additional charges may apply pursuant to your service provider plan). Simply follow the instructions on the Notice, or if you received a proxy card by mail, follow the instructions on the proxy card and you can confirm that your vote has been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials. Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Time) on May 23, 2017. (ii)Telephone. Vote by telephone by following the instructions on the Notice or, if you received a proxy card, by following the instructions on the proxy card. Easy-to-follow voice prompts allow you to vote your stock and confirm that your vote has been properly recorded. Telephone voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Time) on May 23, 2017. (iii)Mail. If you received a proxy card by mail, vote by mail by completing, signing, dating and returning your proxy card in the pre-addressed, postage-paid envelope provided. If you vote by mail and your proxy card is returned unsigned, then your vote cannot be counted. If you vote by mail and the returned proxy card is signed without indicating how you want to vote, then your proxy will be voted as recommended by the Board. If mailed, your completed and signed proxy card must be received by May 23, 2017. (iv)Meeting. You may attend and vote at the annual meeting. The Board recommends that you vote using one of the first three methods discussed above, as it is not practical for most stockholders to attend and vote at the annual meeting. Using one of the first three methods discussed above to vote will not limit your right to vote at the annual meeting if you later decide to attend in person. If your stock is held in street name (for example, held in the name of a bank, broker, or other nominee), you must obtain a proxy executed in your favor from your bank, broker or other holder of record to be able to vote in person at the annual meeting. If I vote by telephone or Internet and received a proxy card in the mail, do I need to return my proxy card? No, you do not need to return your proxy card if you vote by telephone or Internet. If I vote by mail, telephone or Internet, may I still attend the annual meeting? Yes, you may attend the annual meeting even if you have voted by mail, telephone or Internet. 2017 Proxy Statement67 GENERAL INFORMATION Can I change my vote? Yes. You may revoke your proxy before the voting polls are closed at the annual meeting, by the following methods:
The powers of the proxy holders will be revoked with respect to your shares if you attend the meeting in person and vote your shares in person by completing a written ballot. Attendance at the meeting will not by itself revoke a previously granted proxy. If you are a street name stockholder and you vote by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures. What is the effect of an advisory vote? Because your votes with respect to approval of our named executive officer compensation and with respect to the frequency of future advisory votes on Quanta’s executive compensation are advisory, they will not be binding upon the Board. However, our Compensation Committee and the Board will take the outcome of each vote into account when considering future compensation arrangements for our executive officers and when determining the frequency of future advisory votes on executive compensation. What constitutes a quorum? The holders of shares representing both (i) a majority of the aggregate outstanding shares entitled to vote, and (ii) a majority of the aggregate voting power of Common Stock, Series F Preferred Stock and Series G Preferred Stock entitled to vote must be present, in person or by proxy, to constitute a quorum to transact business at the annual meeting. As of March 27, 2017, there were 148,476,083 shares of our Common Stock with aggregate voting power of 148,476,083 votes, one share of our Series F Preferred Stock with aggregate voting power of 3,500,000 votes, and one share of our Series G Preferred Stock with aggregate voting power of 449,929 votes, respectively, outstanding and entitled to vote. Your stock is counted as present at the annual meeting if you attend the annual meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. Abstentions and broker non-votes will be counted as present for purposes of establishing a quorum at the meeting. What are broker non-votes? The NYSE permits brokers to vote their customers’ stock held in street name on routine matters, such as the ratification of the appointment of our independent registered public accounting firm, when the brokers have not received voting instructions from their customers. However, the NYSE does not allow brokers to vote their customers’ shares held in street name on non-routine matters unless they have received voting instructions from their customers. In such cases, the uninstructed shares for which the broker is unable to vote are called broker non-votes. What routine matters will be voted on at the annual meeting? Ratification of the appointment of our independent registered public accounting firm is the only matter to be voted on at the meeting on which brokers may vote in their discretion on behalf of customers who have not provided voting instructions. What non-routine matters will be voted on at the annual meeting? The election of directors, the advisory vote on executive compensation and the advisory vote on the frequency of future advisory votes on executive compensation are non-routine matters on which brokers are not allowed to vote unless they have received voting instructions from their customers. 68Quanta Services, Inc. GENERAL INFORMATION What is the effect of not casting a vote? If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the matters that properly come before the meeting. If you hold your shares in street name, and you do not instruct your broker, bank or other nominee how to vote in the election of directors, the advisory vote to approve executive compensation or any other non-routine matter, no votes will be cast on your behalf on such matters, but your broker, bank or other nominee will continue to have discretion to vote any uninstructed shares on the ratification of the appointment of our independent registered public accounting firm. Where can I find the voting results of the annual meeting? We plan to announce preliminary voting results at the meeting and publish final results in a Current Report on Form 8-K or an amendment thereto timely filed with the SEC. You may access or obtain a copy of this and other reports free of charge on the Company’s website atwww.quantaservices.com or by contacting our investor relations department atinvestors@quantaservices.com. Also, the referenced Current Report on Form 8-K, any amendments thereto and other reports filed by Quanta with the SEC are available to you on the SEC’s website atwww.sec.gov. Who pays for the proxy solicitation related to the annual meeting? The proxies being solicited hereby are being solicited by Quanta. The costs of soliciting proxies hereby, which may include the cost of preparing, printing and mailing the proxy materials, will be borne by Quanta. Our officers, directors and employees may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, facsimile, postings on our website or other electronic means. We will also request banks, brokers and other custodians, nominees and fiduciaries to forward proxy materials to beneficial owners of our Common Stock and obtain their voting instructions. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation materials to beneficial owners of our Common Stock. Quanta has not engaged an outside proxy solicitor for the annual meeting. Can I get more than one copy of the proxy materials if multiple stockholders are located at my address? In some instances, only one proxy statement and annual report is being delivered to multiple stockholders sharing an address unless we have received contrary instructions from one of those stockholders. Quanta undertakes to promptly deliver upon request a separate copy of such materials to any stockholder at a shared address to which a single copy of the documents was delivered. Stockholders sharing an address may also request delivery of a single copy of the proxy materials, but in such event will still receive separate proxies for each account. To request separate or single delivery of these materials now or in the future, stockholders should notify Quanta by contacting the Corporate Secretary in writing at Quanta Services, Inc., 2800 Post Oak Blvd., Suite 2600, Houston, Texas 77056 or by phone at (713) 629-7600. What if I receive more than one proxy card? If you hold your shares in more than one type of account or your shares are registered differently, you may receive more than one proxy card. We encourage you to vote each proxy card that you receive. 2017 Proxy Statement69 As of the date of this proxy statement, the Board does not know of any other matter that will be brought before the annual meeting. Pursuant to Quanta’s bylaws, additional matters may be brought only by or at the direction of the Board. However, if any other matter properly comes before the annual meeting, or any adjournment or postponement thereof, the person or persons voting the proxies will vote on such matters as recommended by the Board or, if no recommendation is given, in accordance with their best judgment and discretion.
Houston, Texas 70Quanta Services, Inc. APPENDIX A – RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Adjusted Organic Diluted Earnings Per Share from Continuing Operations
2017 Proxy StatementA-1 ANNUAL MEETING OF STOCKHOLDERS OF
May Please date, sign and mail your proxy card in the
The Notice, Proxy Statement, 2016 Annual Report to Stockholders and 2016 Form 10-K are available atwww.proxyvote.com. ↓ Please Detach and Mail in the Envelope Provided
QUANTA SERVICES, INC.
24, 2017 The undersigned hereby appoints Derrick A. Jensen and ALL SHARES OF COMMON STOCK REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF YOU SIGN AND RETURN THIS PROXY BUT DO NOT MAKE ANY VOTING SPECIFICATIONS, SUCH SHARES WILL BE VOTED“FOR” THE NOMINEES LISTED IN PROPOSAL NO. 1, 1 YEAR ONPROPOSAL NO. 3, AND “FOR” PROPOSAL NO. 4.
(Continued and to be signed on the reverse side) ANNUAL MEETING OF STOCKHOLDERS OF
May VOTE BY INTERNET - www.proxyvote.com
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
VOTE BY PHONE - 1-800-690-6903
VOTE BY MAIL
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by duly authorized officer. QUANTA SERVICES, INC.
24, 2017 The undersigned hereby appoints Derrick A. Jensen and THE SHARE OF SERIES F PREFERRED STOCK REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF YOU SIGN AND RETURN THIS PROXY BUT DO NOT MAKE ANY VOTING SPECIFICATIONS, SUCH SHARE WILL BE VOTED “FOR” THE NOMINEES LISTED IN PROPOSAL NO. 1, Important Notice Regarding the Availability of Proxy Materials for the
The Notice, Proxy Statement, SERIES F PREFERRED STOCK
NOTE: In their discretion, the Proxies are authorized to vote on such other business as may properly come before the meeting or any adjournment or postponement thereof.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by duly authorized officer. QUANTA SERVICES, INC.
24, 2017 The undersigned hereby appoints Derrick A. Jensen and THE SHARE OF SERIES G PREFERRED STOCK REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF YOU SIGN AND RETURN THIS PROXY BUT DO NOT MAKE ANY VOTING SPECIFICATIONS, SUCH SHARE WILL BE VOTED “FOR” THE NOMINEES LISTED IN PROPOSAL NO. 1, Important Notice Regarding the Availability of Proxy Materials for the
The Notice, Proxy Statement, SERIES G PREFERRED STOCK
NOTE: In their discretion, the Proxies are authorized to vote on such other business as may properly come before the meeting or any adjournment or postponement thereof.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by duly authorized officer. |