UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

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Watsco, Inc.

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Watsco, Inc.

2665 South Bayshore Drive, Suite 901

Miami, Florida 33133

NOTICE OF THE 20192020 ANNUAL MEETING OF SHAREHOLDERS

By order of the Board of Directors,

BARRY S. LOGAN

SeniorExecutive Vice President and Secretary

April 26, 201924, 2020

This is an important meeting, and all shareholders of record as of April 5, 20193, 2020 are invited to attend the meeting and vote in person. We respectfully urge those shareholders who are unable to attend the meeting in person to execute and return the enclosed proxy card as promptly as possible in the enclosed return envelope. No postage is required if mailed in the United States. Any shareholder who executes a proxy card may nevertheless attend the meeting, revoke his or her proxy and vote his or her shares in person.

NOTICE: Brokers are not permitted to vote on Proposals 1 or 2 in this Proxy Statement without instructions from the beneficial owner of shares entitled to vote at the meeting. Therefore, if you hold your shares through a broker, bank or other nominee and you do not vote your shares in one of the ways described in this Proxy Statement, then your shares will not be voted in respect of Proposals 1 or 2 contained in this Proxy Statement.

TABLE OF CONTENTS

WATSCO, INC.

2665 South Bayshore Drive, Suite 901

Miami, Florida 33133

PROXY STATEMENT

The Company’s 20182019 Annual Report and this Proxy Statement are available at:

www.watsco.com

You are receiving this Proxy Statement because you owned shares of Watsco, Inc. Common stock or Class B common stock as of April 5, 2019,3, 2020, which entitles you to vote those shares at our 20192020 annual meeting of shareholders. Our Board of Directors (referred to as the Board), is soliciting proxies from shareholders who wish to vote their shares at the meeting. By using a proxy, you can vote even if you do not attend the meeting. This Proxy Statement describes and provides information about the matters on which you are being asked to vote so that you can make an informed decision. Watsco, Inc. is referred to in this document as Watsco, we, us, our and the Company.

This Proxy Statement and the enclosed form of proxy are first being mailed to our shareholders on or about April 26, 2019.24, 2020. Shareholders should review the information contained in this Proxy Statement together with our 20182019 Annual Report, which accompanies this Proxy Statement.

Our Internet website and the information contained therein or linked thereto are not incorporated by reference or otherwise made a part of this Proxy Statement.

Please note that, as part of our concern regarding the health and safety of our shareholders, directors, officers, employees, and meeting attendees in light of the current coronavirus (COVID-19) outbreak, we may elect to change the date, time or location of the Annual Meeting. If we decide to make such a change, we will provide you notice promptly after making such determination via a press release and a filing with the Securities and Exchange Commission, as well as a posting on the investor relations section of our website,www.watsco.com.

INFORMATION ABOUT OUR ANNUAL MEETING

When and where is the annual meeting?

The annual meeting will be held on Monday, June 3, 2019,1, 2020, at 9:00 a.m., Eastern Daylight Time at the University Club, 1 West 54^th Street, New York, New York 10019.Watsco, Inc. Corporate Office, 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.

Who may attend the annual meeting?

Shareholders of record as of April 5, 20193, 2020 (which we refer to as the record date), or their duly appointed proxies, and our invited guests are permitted to attend the annual meeting. To gain admittance, you must bring valid photo identification to the meeting, and we will verify your name against our shareholder list. If a broker or other nominee holds your shares and you plan to attend the meeting, you must bring (1) a brokerage statement evidencing your share ownership as of the record date, (2) a legal proxy from the broker to vote the shares that are held for your benefit and (3) valid photo identification.

What is the purpose of the annual meeting?

Our 20192020 annual meeting will be held for the following purposes:

Who may vote?

The Board set April 5, 20193, 2020 as the record date for the annual meeting. Holders of Watsco Common stock or Class B common stock at the close of business on the record date are entitled to vote their shares at the annual meeting, or any postponements or adjournments of the annual meeting.

There were 32,224,96232,756,082 shares of our Common stock and 5,408,0195,592,886 of Class B common stock issued and outstanding as of the record date, all of which are entitled to be voted at the annual meeting.

A list of shareholders will be available at our corporate office at 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133 during the ten days immediately preceding the annual meeting, and this list will be available at the annual meeting itself for examination by any shareholder entitled to attend the annual meeting.

What are the voting rights of Watsco shareholders?

Holders of our Common stock are entitled to one (1) vote per share, and holders of our Class B common stock are entitled to ten (10) votes per share on each matter that is submitted to shareholders for approval.approval, except with respect to the election of directors as described below.

Election of Directors

Holders of our Common stock vote separately to elect 25% of our number of directors (rounded up to the next whole number), which is presently three (3) directors. Holders of our Class B common stock vote separately to elect 75% of our number of directors (rounded down to the next whole number), which is presently six (6) directors.

Other Matters

Other than with respect to the election of directors, holders of our Common stock and our Class B common stock vote on a combined basis on all other matters or as otherwise required by applicable law.

How do I vote?

Shareholders of Record.You are a shareholder of record if you are registered as a shareholder with our transfer agent, American Stock Transfer & Trust Company, LLC. To vote by mail, simply mark, sign and date your proxy card, and return it in the enclosed, postage-paid envelope. To vote in person, you must attend our annual meeting, bring valid photo identification, and deliver your completed proxy card in person.

Beneficial Shareholders.You are a beneficial shareholder if a brokerage firm, bank, trustee or other agent, referred to as a “nominee,” holds your shares. This is often called ownership in “street name” because your name does not appear on the list of our registered shareholders maintained by our transfer agent. If you hold shares in

How do I revoke my proxy and change my vote?

A shareholder of record may revoke a proxy by giving written notice of revocation to our Secretary at our corporate office before the meeting, by delivering a duly executed proxy bearing a later date or by voting in person at the annual meeting. If you are a beneficial shareholder, you may revoke your proxy and change your vote by following your nominee’s procedures for revoking or changing your proxy.

What are the voting recommendations of the Board?

The Board recommends that you vote:

What happens if I submit or return my proxy card without voting?

When you properly submit your proxy, the shares it represents will be voted at the annual meeting in accordance with your directions. If you properly submit your proxy with no directions, the proxy will be voted:

What constitutes a quorum?

The presence at the meeting, in person or by proxy, of the holders of a majority of our outstanding shares of Common stock and Class B common stock (referred to as common stock) as of the record date will constitute a quorum, permitting the conduct of business at the annual meeting.

If less than a majority of the outstanding shares of common stock is represented at the annual meeting, a majority of the shares so represented may adjourn the annual meeting to another date, time or place. Notice need not be given of the new date, time or place if announced at the annual meeting before an adjournment is taken, unless the Board, after adjournment, fixes a new record date for the annual meeting (in which case a notice of the adjourned meeting will be given to shareholders of record on such new record date, each of whom would be entitled to vote at the adjourned meeting).

Approval of aNon-Binding Advisory Resolution Regarding the Compensation of our Named Executive Officers

If a quorum is present, approval requires that a majority of the votes cast at the annual meeting are cast “FOR” approval.

Ratification of KPMG as our independent auditor

If a quorum is present, ratification of the appointment of our independent registered public accounting firm requires that a majority of the votes cast at the annual meeting are cast “FOR” ratification.

What is the effect of abstentions?

Proxies received but marked “ABSTAIN” will be included in the calculation of the number of shares considered to be present at the meeting for purposes of determining a quorum, but abstentions will not have an effect on the outcome of any proposal. As noted above, however, a properly executed proxy marked “WITHHOLD VOTE” with respect to the election of a director nominee will have the effect of a vote AGAINST the election of such nominee.

What are “brokernon-votes” and what effect do they have on the proposals?

Brokernon-votes occur when a broker, bank, or other nominee holds shares in “street name” for a beneficial owner and that nominee does not vote the shares because it (i) has not received voting instructions from the beneficial owner and (ii) lacks discretionary voting power to vote those shares with respect to a particular proposal. Brokernon-votes are counted for purposes of determining whether or not a quorum exists for the transaction of business but will not be counted as votes cast “for” or “against” any proposal and will have no effect on the voting results for any proposal.

A broker is entitled to vote shares held for a beneficial owner on “routine” matters without instructions from the beneficial owner of those shares, which include the proposal to ratify KPMG as our independent public accounting firm for the 20192020 fiscal year. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on“non-routine” “non-routine” matters, which include ProposalsProposal No. 1 and Proposal No. 2 described in this Proxy Statement.

If you hold your shares in street name, it is critical that you provide your broker, bank, or other nominee with instructions on how to cast your vote if you want it to count in the election of directors (Proposal No. 1) and with respect to thenon-binding advisory resolution (Proposal No. 2) described in this Proxy Statement. If you hold your shares in street name, and you do not instruct your broker, bank, or other nominee how to vote, then it will not be voted for the election of directors or with respect to thenon-binding advisory resolutions.

If any other routine matters are properly brought before the annual meeting in addition to Proposal No. 3, then brokers holding shares in street name may vote those shares in their discretion for any such routine matters.

DIRECTORS & EXECUTIVE OFFICERS

Directors & Executive Officers

Our Amended and Restated Articles of Incorporation and Amended and Restatedour By-laws provide that our Board shall consist of no fewer than three nor more than nine members, and that it shall be divided, as nearly as possible into three equal divisions, each of which serves for a three-year term. We refer to directors elected by holders of our Common stock as Common Directors and we refer to directors elected by holders of our Class B common stock as Class B Directors.

The names of our directors, executive officers and director nominees and their respective ages, positions (including designation as a Common Director or Class B Director), biographies and, in the case of directors, their qualifications to serve as directors, are set forth below.

Cesar L. AlvarezJ. Michael Custer rejoinedjoined the Board in 2017 after having previously servedDecember 2018. Mr. Custer currently leads the tax services practice as a Watsco director from 1997 to 2015. Mr. Alvarez is Senior Chairman of the international law firm of Greenberg Traurig, P.A. (“Greenberg”). He previously served as Greenberg’s Executive Chairman beginning in 2012, and as Greenberg’s Chief Executive Officer from 1997 until his election as Executive Chairman. During his15-year tenure as Chief Executive Officer and Executive Chairman, he led the firm to becomePrincipal at Kaufman Rossin, one of the nation’s top ten law100 accounting firms, which he joined in 2001. Prior to his tenure at Kaufman Rossin, Mr. Custer was a partner at Deloitte, which he joined in 1985. Mr. Custer brings financial, accounting, and tax skills along with leadership development and management expertise to the United States by leading its growth from 260 lawyers to approximately 1,850 lawyers in more than 36 locations in the United States, Europe, Asia and Latin America.Board. Mr. Alvarez brings significant entrepreneurial expertise, management experience and knowledge from his many years of corporate governance experience, both counseling and serving on the boards of directors of other publicly traded companies. He serves on the boards of Mednax, Inc. (chairman of the board and member of the executive committee), Fairholme Funds, Inc., Intrexon Corporation (chair of the nominating and governance committee), and the St. Joe Company.Custer is a Certified Public Accountant. Mr. Alvarez serves as ourCo-Vice Chairman of the Board andCuster is a member of the Strategy Committee.

Dr. Denise Dickins has served as a Board member since 2007. Since 2006, she has been employed by East Carolina University where she is a Professor of Accounting and Auditing, teaching courses in Auditing and Corporate Governance. From 2002 to 2006, while earning her Ph.D., she was an instructor of various accounting courses at Florida Atlantic University. Prior to that, she served in varying capacities with Arthur Andersen LLP from 1983 to 2002, including Partner in Charge of the South Florida Audit Division. Dr. Dickins is a certified public accountant and certified internal auditor and has served on the board of several publicly traded companies. Dr. Dickins brings auditing, accounting, and corporate governance skills to the Board. She is the Lead

Bob L. Moss rejoined the Board in 2014 after having previously served as a director from 1992 to 2012. Mr. Moss is a dynamic leader and has built a successful career in the construction industry over the span of approximately 50 years. He is the Founder, Chairman, and Chief Executive Officer of Moss & Associates LLC, which is one of the largest general contractors in the Southern United States with managed revenues of more than $5 billion. Mr. Moss previously served as chairman of the board and Chief Executive Officer of Centex Construction Group (“Centex”), where he spent 23 years building Centex into the largest domestic general building contractor in the nation. Mr. Moss is the Lead Independent Director and serves as our Co-Vice Chairman of the Board and chair of the Nominating & Governance Committee. Mr. Moss brings entrepreneurial skills, business-building abilities, leadership development experience and a wealth of knowledge of the construction industry to our Board.

Aaron J. (A.J.) Nahmad has served as the President of the Company since January 2016 and as a director since 2011. He served as Vice President of Strategy & Innovation from July 2010 until January 2016 and as Director of Global Business Development beginning in 2005. He holds a B.A. from the University of Pennsylvania and a M.B.A. from New York University’s Leonard N. Stern School of Business. He is the son of Albert H. Nahmad. A.J. Nahmad has led the transformation of Watsco into a technology-enabled business. His promotion to President in January 2016 recognized this leadership and acknowledged the importance of the successful execution and adoption of these innovations across the Watsco enterprise. He is a member of the Strategy Committee.

Albert H. Nahmad has been the visionary founder and leader of Watsco for overmore than 40 years, having served as our Chairman and Chief Executive Officer since 1972. Among his many contributions, Mr. Nahmad has been instrumental in the scaling of our business through acquisitions, the cultivation of strategic vendor relationships, and the development of Watsco’s entrepreneurial culture. In 1988 Mr. Nahmad made the decision to pivot the Company’s strategic focus from manufacturing to distribution of HVAC/R products. Since that time, Watsco’s market capitalization has grown from $22 million to $5.2$6.9 billion, and its30-year compounded annual growth rate of total shareholder return has been 18%. With revenues exceeding $4of $4.8 billion in 2019, Watsco has solidified its place as the industry leader and now has approximately 5,2005,800 employees serving approximately 90,000100,000 contractor customers through a branch network of 571606 locations. He serves as chair of the Strategy Committee.

Steven (Slava) Rubin was appointed to the Board in March 2018. Mr. Rubin is co-founder of humbition, an early stage operators venture fund built by founders, for founders. He is also co-founder of Vincent, an online platform to discover and diligence the vast world of alternative investments. Mr. Rubin previously founded Indiegogo, Inc. (“Indiegogo”), a company dedicated to empowering people from all over the world to make their ideas a reality. As Chief Executive Officer for more than 10 years since inception in 2006, Mr. Rubin grew Indiegogo from an idea to over 500,000 campaigns and more than $1 billion distributed around the world. Prior to Indiegogo, he was a strategy consultant working on behalf of clients such as MasterCard, Goldman Sachs and FedEx. He is also the founder of “Music Against Myeloma,” a charity that raises funds and awareness for cancer research in partnership with the International Myeloma Foundation. Mr. Rubin is a graduate of The Wharton School at the University of Pennsylvania. He currently serves as a member of the board for Indiegogo. Mr. Rubin is an innovative technologist who brings entrepreneurial, management, and strategic insights to the Board. He is a member of the Compensation Committee and Strategy Committee.

Stephen F. Rushwas promoted to serve as Executive Vice President and Chief Operating Officer (“COO”) of the Company on April 1, 2019. Mr. Rush joined the Company in 2001 and served in various leadership roles at several operating subsidiaries of the Company through 2016, when he assumed anon-executive advisory role in the Office of the President. As COO, Mr. Rush will overseeoversees the Company’s primary operating subsidiaries, while assuming other operational responsibilities of the Company. He brings core leadership skills from his more than 40 years of experience in the HVAC/R distribution industry.

George P. Sape rejoined the Board in 2015 and previously served as a Watsco director from 2003 to 2014. Mr. Sape retired in 2015 as the Managing Partner of Epstein Becker and Green, P.C., a New York-based law firm, after 29 years. Mr. Sape previously served as Vice President and General Counsel for Organizations Resources Counselors, Inc., a consulting services provider to a number ofseveral Fortune 500 companies and has served as

counsel or as an advisor to various congressional committees related to labor, education and public welfare. Mr. Sape also serves on the board of the University of Colorado School of Business. Mr. Sape is a member of the

CORPORATE GOVERNANCE

Overall Role of the Board

Our business and affairs are managed under the direction of our Board, which is the Company’s ultimate decision-making body, except with respect to those matters reserved to our shareholders. The Board’s mission is to maximize long-term shareholder value. Our Board oversees our business strategy and risk management process, establishes our overall corporate policies, selects and evaluates our executive management team, which is charged with the conduct of our business, and acts as an advisor and counselor to executive management. Our Board also oversees our business strategy and planning,

Watsco is a “controlled company” as welldefined by the New York Stock Exchange (referred to as the performanceNYSE) because as a group our Chairman & CEO and our President maintain effective voting control of management51.7% of the combined voting power of our outstanding common stock as of April 3, 2020, the record date for the annual meeting. Our Chairman & CEO’s effective voting control has decreased from 62.0% in executing our business strategy2005 to 49.4% as of the record date. As a controlled company, Watsco is not required to comply with certain corporate governance policies required of other publicly traded companies. For example, the Board is not required to be composed of a majority of independent directors, and assessingthe Company is not required to have a Compensation Committee or a Nominating & Governance Committee. However, the Board strives to establish policies and managing risks.procedures that it believes are in the best interests of the Company’s shareholders and therefore generally complies with the corporate governance policies applicable to all publicly traded NYSE-listed companies.

Board Leadership Structure

Role of Chairman & CEO. Our Board regularly reviews its structure and composition taking into consideration the Company’s performance and expectations for the future. Under the leadership of Albert H. Nahmad, Watsco’s annual total shareholder returns (the measurement of stock appreciation, including the reinvestment of dividends) on a compounded basis in comparison to the S&P 500 Index for each of the respective time periods were:

The Board believes this track record of success reflects Mr. Nahmad’s effective leadership and creativity in devising and executing the Company’s strategic initiatives and in confronting its challenges. As Chairman and CEO, he facilitates a strong collaboration between management and the independent members of the Board. The Board believes that the Company and its shareholders are best served by having Mr. Nahmad continue to serve as Chairman and CEO.

Co-Vice Chairman of the Board.Currently Messrs. Alvarez and Moss serve as theCo-Vice Chairmen of the Board. The primary responsibility of this role is to preside at all Board meetings at which the Chairman is not present, including regularly scheduled mandatory executive sessions of the independent directors held at least once a year, and apprise the Chairman of the issues considered. The development of more senior members of the Board as Vice Chairs is considered an important element of succession planning at the Board level.

Lead Independent Director. To facilitate and strengthen the Board’s independent oversight of the Company’s strategies, performance and succession planning, and to uphold effective governance standards, the Board has developed the role of a lead independent director. The position of lead independent director is currently held by Dr. Dickins.Mr. Moss. As Lead Independent Director, Dr. DickinsMr. Moss has the following duties and responsibilities:

Risk Oversight.As part of regular Board and committee meetings, our directors consider important external and internal risks that may impact the Company. The full Board regularly reviews reports from management on various aspects of our business, including relatedthe risks disclosed in our most recent annual report filed on Form 10-K, and strategies and tactics to address identified risks. At

The Audit, Compensation, and Nominating & Governance Committees operate under formal charters that govern their respective duties and conduct. All such charters are reviewed and evaluated annually by the applicable committee. Any recommended changes to the charters are submitted to the Board for its approval. Copies of the current committee charters are available on our website atwww.investors.watsco.com,, under the caption “Committees of the Board of Directors” within the Governance section. The charters are also available in print to any shareholder who requests them in writing to our Investor Relations department at Watsco, Inc., Investor Relations, 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133. Information contained on or accessible through our website is not a part of this Proxy Statement.

The table below provides current committee membership information and the number of meetings held in 2018:2019:

Audit Committee.The Audit Committee’s functions include overseeing the preparation, presentation, and integrity of our financial statements and internal control over financial reporting, the qualifications of our independent registered public accounting firm, compliance with legal and regulatory requirements, and the performance of our internal audit function and controls regarding finance, accounting, legal compliance and ethics that management and our Board have established. The Audit Committee’s responsibilities additionally include, but are not limited to:

The Report of the Audit Committee, which is set forth in this Proxy Statement, further describes the Audit Committee’s responsibilities and its recommendation with respect to our audited consolidated financial statements for the year ended December 31, 2018.2019.

Compensation Committee. The Compensation Committee oversees our compensation programs, including our equity-based compensation plans. The Compensation Committee’s responsibilities, which may not be delegated, include, but are not limited to:

Nominating & Governance Committee.Our Nominating & Governance Committee’s purpose is to assist the Board in identifying individuals qualified to become members of our Board consistent with the criteria set forth in our Corporate Governance Guidelines, to help in the evaluation of the effectiveness of our Board and its individual members, and to review and update our corporate governance principles. The Board may assume, change or add additional activities fromtime-to-time to assure the effective operation of the Board. The Nominating & Governance Committee’s activities include, but are not limited to:

Director Nominations.The Board considers candidates for director who are recommended by the Nominating & Governance Committee, by other Board members, and by management. The Nominating & Governance Committee annually reviews the performance and contributions of individual Board members. If a Board member is a candidate forre-election, then the Nominating & Governance Committee considers all aspects of such candidate’s qualifications and skills in the context of the Company’s needs at that point in time, as well as such person’s diversity of experience, unique perspectives, and individual perspectives.social diversity. When considering candidates as potential new Board members, the Board and the Nominating & Governance Committee evaluate a candidate’s ability to contribute to such diversity. While not an exclusive list, the Nominating & Governance Committee considers the following important qualifications when evaluating a director candidate:

When evaluatingre-nomination of existing directors, the Nominating & Governance Committee also considers the nominees’ past and ongoing effectiveness on the Board and, withexcept for the exception of the employeemanagement directors, their independence.

The Nominating & Governance Committee will consider candidates recommended by Watsco’sour shareholders pursuant to written applications submitted to the Nominating & Governance Committee, c/o Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133. The information required to be included in any such recommendation is set forth in our Second Amended and Restated Bylaws,By-laws, and the general qualification and specific qualities and skills established by the committee for directors are described above. Although we have not adopted a formal policy regarding the consideration of candidates recommended by our shareholders, the Board believes that the procedures set forth in our By-laws are currently sufficient and that the establishment of a formal policy is not necessary.

Director Election – Majority Vote. Director nominees are elected by our shareholders based on a majority vote, voting as separate classes.

Director Compensation Philosophy. Consistent with our executive compensation philosophy described below, we measure success by our ability to create shareholder value over significantly long periods of time. Accordingly, our director compensation program is primarily designed to align director compensation with long-term shareholder returns. We also recognize that the required amount of Board member effort depends on several variables, including committee membership, and therefore varies among members. Fromtime-to-time, independent compensation consulting firm, Pearl Meyer, provides the Compensation Committee with advice, various peer comparisons, and best practices with respect to director compensation.

Our designated Lead Director is also the chairperson of our Audit, Compensation and Nominating & Governance Committees is our Lead DirectorCommittee and therefore receives no additional compensation in this role. We do not provide any taxgross-ups to ournon-management directors, all of whom are solely responsible for their respective tax obligations as a result of their equity and cash compensation for Board service. Directors are reimbursed for reasonable expenses incurred in connection with their activities as directors, including attendance at director-education seminars and conferences. EmployeeManagement directors do not receive any compensation for their service on the Board. The Nominating & Governance Committee reviews director remuneration along with the Compensation Committee and recommends to the Board any proposed changes to director compensation.

The following table sets forth the total compensation received by ournon-management directors in 2018:2019:

number of shares held by each director and officer and the average closing price of those shares during the preceding month. As of December 31, 2018,2019, all of our directors and NEOs satisfied these minimum requirements. The number of shares (or other equity instruments) held by our directors and NEOs as of December 31, 20182019 is summarized in the Stock Ownership Table below.

Director Tenure & Refreshment. Directors may bere-elected at the end of each term.their respective terms. The Board has not established term limits as we believe that directors who have developed insight into Watsco and its operations over time provide an increasing contribution to the Board as a whole. To ensure the Board continues to generate new ideas and operate effectively, the Nominating & Governance Committee evaluates individual Board member performance and takes steps as necessary regarding continuing director tenure. With respect to ournon-management directors and director nominees, as of the date of this Proxy Statement, four have served on the Board for more than five years (Mr. Alvarez, Dr. Dickins, Mr. Moss, and Mr. Sape), and three have served on the Board for less than five years.years (Mr. Custer, Mr. Keeley, and Mr. Rubin).

Management Succession. As reflected in our Corporate Governance Guidelines, one of the Board’s primary responsibilities includes planning for CEO succession and monitoring and advising on management’s succession planning for other NEOs, with the goal of establishing an effective succession plan. The Board routinely discusses management succession during the course of its meetings, including during sessions held by the Company’snon-management directors.

Shareholder Proposals.Shareholders interested in submitting a proposal for inclusion in our proxy materials for our 20202021 annual meeting of shareholders may do so by following the procedures set forth in Rule14a-8 promulgated by the SEC under the Exchange Act. To be eligible for inclusion in such proxy materials, our Corporate Secretary must receive shareholder proposals no later than December 28, 2019.25, 2020. Any shareholder

Corporate Governance Documents.Our website is atwww.watsco.com. Please visit our investor relations website atwww.investors.watsco.com under the section captioned “Governance” for the following:

These materials may also be requested in print by writing to our Investor Relations Department at Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.

Environmental and Social Policies. Please visit our investor relations website atwww.investors.watsco.com under the section captioned “Governance” for the following:

Advisory Board.OnIn March 11, 2019, the Board formed an Advisory Board to provide thoughts, advice, andnon-binding recommendations to our Board. The Advisory Board is viewed as a resource that supports the Board by providing expert insight which complements the knowledge, understanding, and strategic thinking of the Board. The Advisory Board is not a Board committee or otherwise a part of the Board.

The Board may appoint up to six members to the Advisory Board with terms of three years. Advisory Board members shall receive compensation for their services as determined by the Board in its sole discretion. Members of the Advisory Board may include possible future Board members, former Board members, and other individuals whom the Board determines may be able to provide valuable insight. TheMembers of the Advisory Board include:

Matt Ehrlichman

Mr. Ehrlichman was appointed Albert Nahmad’s daughter, Valerie Schimel, age 41, to the Advisory Board in March 2020. He is the co-founder, CEO and Chairman of Porch, a consumer and social internet marketplace that connects homeowners with local home service professionals. Prior to Porch, Mr. Ehrlichman was the co-founder and CEO of Thriva until it was acquired by Active Network, where he served as the Chief Strategy Officer from 2007 to 2012. Mr. Ehrlichman received options to purchase 3,000 shares of Common stock upon his appointment to the Advisory Board. Our subsidiary Watsco Ventures, LLC, has invested $2,500,000 in Porch in connection with its goal of helping contractor customers grow and become more profitable.

John Macdonald

Mr. Macdonald was appointed to the Advisory Board in September 2019. He is the former President and CEO of Enercare, Inc., one of the largest home service companies in North America. Mr. Macdonald retired from Enercare in 2018 after it was acquired by Brookfield Infrastructure. He presently serves as Chairman of the Board of Parity, Inc., a Toronto-based computer software company using AI to reduce carbon emissions for multi-tenant buildings. Mr. Macdonald received options to purchase 3,000 shares of Common stock upon his appointment to the Advisory Board.

Terry Myerson

Mr. Myerson was appointed to the Advisory Board in June 2019. He was previously a member of the Senior Leadership Team at Microsoft Corporation, leading the development of Windows, Surface, Xbox and Microsoft Exchange over his 21-year career there. Mr. Myerson is currently an Operating Executive with The Carlyle Group, a leading private equity firm assisting portfolio companies with the design and execution of their technology strategies. He is also a Venture Partner at Madrona Venture Capital, the Pacific Northwest’s leading venture capital group, where he works with entrepreneurs on March 11,the next generation of innovation. Mr. Myerson received options to purchase 3,000 shares of Common stock upon his appointment to the Advisory Board.

Rachel Wilson

Ms. Wilson was appointed to the Advisory Board in July 2019. She has served as Head of Cybersecurity for Morgan Stanley Wealth Management and Investment Technology since April 2017. She is responsible for the cybersecurity of wealth and investment management systems and the integrity and confidentiality of client data. Prior to Morgan Stanley, Ms. Wilson spent 15 years at the National Security Agency (NSA), holding several key senior executive level leadership positions. Upon her appointment to the Advisory Board, Ms. Wilson received options to purchase 3,000 shares of Common stock.

Valerie Schimel

Ms. Schimel was appointed to the Advisory Board in March 2019. She is founder and Chief Executive Officer of Munchkin Fun LLC, a digital media company launched in 2012 to help Florida families spend quality time together. Ms. Schimel also serves as President of the Albert H. and Jane D. Nahmad Foundation, which supports education and youth development in Miami-Dade County, Florida. The BoardShe is currently considering additional persons for appointment to the Advisory Board.daughter of Albert H. Nahmad.

STOCK OWNERSHIP

The following table sets forth information regarding the beneficial ownership of our Common stock and Class B common stock by (i) each shareholder known by us to beneficially own more than 5% of either class of our voting securities;securities, (ii) each of our directors and director nominees;nominees, (iii) each of our named executive officers;officers, and (iv) our directors and executive officers as a group.

The table also contains, in the final column, the combined voting power of the voting securities on all matters presented to the shareholders for their approval, except for the election of directors and for such separate class votes as are required by Florida law. Holders of our Common stock are entitled to one (1) vote per share on each matter that is submitted to shareholders for approval and holders of our Class B common stock are entitled to ten (10) votes per share on each matter that is submitted to shareholders for approval. All information is as of the record date, April 5, 2019.3, 2020. As of the record date, we had 32,224,96232,756,082 shares of Common stock and 5,408,0195,592,886 shares of Class B common stock issued and outstanding.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC reports of ownership of, and transactions in, our equity securities. To our knowledge, based solely on a review of copies of such reports that we received, our records and written representations received from our directors, executive officers and certain of those persons who own greater than 10% of any class of our equity securities, for the year ended December 31, 2018,2019, all applicable Section 16(a) filing requirements were complied with on a timely basis.basis, except that a Form 4 in respect of 5,000 restricted shares of Class B common stock granted to Mr. Rush on April 1, 2019 and a Form 4 in respect of 837 shares of Common stock purchased by Mr. Keeley in December 2019 were not timely filed.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table contains information as of December 31, 20182019 with respect to compensation plans (including individual compensation arrangements) under which any of our equity securities are authorized for issuance.

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

Our executive compensation program is grounded in the principle that compensation should be highly dependent upononlong-term shareholder returns. This key tenet of our compensation philosophy has driven the unique design of our program for many years and has enabled our executive leadership team to remain solidly focused on long-term performance. Watsco’s entry into the HVAC/R distribution industry began in 1989 and, over the last 30 years,since that time, we have generated an 18% compounded annual growth rate forof total shareholder return.

Our compensation philosophyapproach to long-term incentives is unique in comparison to other companies. Unlike most companies because of our approach to long-term incentives. Allthat award their officers and employees restricted shares that we have granted to 59 leaders throughout the Company, includingvest over a period of a few years, our NEOs, vest onlyrestricted share awards cliff-vest toward the end of their careersan employee’s career (usually age 62 or older). Vesting may occur even later for those who extendFor employees extending their careers beyond age 62.62, vesting may occur even later.This means that our key leaders willdo not know the value and cannot realize the value of their equityrestricted share awards until they have spent their respective careers with the Company. Restricted share awards are subject to significant market, performance, and forfeiture risks.

The Company began granting restricted shares in 1997. As of the record date, 89 of the Company’s key leaders hold restricted share awards that cliff-vest between 2020 and 2045. If, for any reason other than death or disability, a holder of restricted shares leaves the Company, his or her restricted shares are forfeited.

We believe granting long-duration restricted stock effectivelyshares balances strategic risk-taking and long-term performance, creates an ownership culture, and aligns the interests of high-performing leaders with the interests of our shareholders. Additionally, we believe these awards help build a sustainable future by ensuring that our executives make the right long-term business decisions that will survive well past their retirement.

The Company began granting restricted stock awards to a variety of leaders in 1997. As it relates to our NEOs,97% of their restricted share awards have not yet vested.On a weighted-average basis, our NEO’s respective restricted share awards have been outstanding for approximately 1213 years and will not begin to vest until 2022 for the Chairman & CEO and not until 2043 for the President. This long-term vesting demonstrates the program’s distinct nature and the long-term perspective that is at the core of the Company’s compensation philosophy, which is unique to Watsco.

This compensation discussion and analysis (referred to as CD&A) explains our executive compensation program for our NEOs listed below. It also describes the Compensation Committee’s process for making pay decisions in 2018.2019.

20182019 Business Performance. Watsco produced another year of record performance. As compared to 2017:2018:

Philosophy, Culture & Performance

Executive Compensation Philosophy.We measure success by our ability to create shareholder returns over significantly long periods of time.Thetime. The vision and leadership of our entrepreneurial business leaders are at the core of our performance and it is their continued commitment to drive sustainable growth that we believe will contribute to our ongoing success. To this end, we must attract, motivate andretain high-caliber talent.

Pay-For-Performance & Ownership Culture. For employees throughout Watsco, including our NEOs, we maintain apay-for-performance culture that provides for a variety of potential rewards. Our equity-based plans include 401(k) matching contributions to eligible employees, a voluntary employee stock purchase plan, and the granting of stock options and restricted stock awards based on individual merit and performance. The equity-based compensation plans are intended to promote long-term performance and foster an “ownership culture” whereby management and employees think and act as owners of the Company. As described above, our restricted stock program is unique because an employee’s restricted shares vest entirely toward the end of his or her career (age 62 or later), subjecting such awards to significant market, performance, and forfeiture risks.

Concentrated Use of Long-Term Incentives Using Restricted Stock. For our Chairman & CEO, the President, and other NEOs, the primary component of long-term incentive compensation is restricted stock that cliff-vests.cliff-vests at retirement. Long-term incentive compensation grants of restricted stock are subject to significant market, performance, and forfeiture risks, which means thatour key leaders do not know and cannot realize the value of their restricted share awards until they have spent their respective careers with the Company. This method has been consistent over the Company’s history and is rooted in the principle that long-term, equity-based compensation is the most effective method to balance the management of long-term opportunities along with long-term risks and to align the interests of executives with those of our shareholders. Due to the unusually long vesting periods and associated risks of forfeiture, the present value of such awards is likely significantly less than theirthe “face value” atwhen issued as reported in the timeSummary Compensation Table below. As of issuance. This program also extends beyondthe record date, 89 of the Company’s key leaders, including the NEOs, to 55 other key leaders.hold restricted share awards that cliff-vest between 2020 and 2045.

The Company believes this balance of risk and reward over long periods is more effective than more conventional equity-based programs that provide considerably shorter-term vesting and payouts, and effectively aligns the development ofemployee wealthandshareholder wealth. The program also serves as an important method to retain key leaders for the duration of their careers.

Overall Performance.Total shareholder return (referred to as TSR) measures share price appreciation plus the reinvestment of dividends. The Company views total shareholder return as the simplest and most fundamental method of measuring long-term value creation for shareholders and considers it as a metric in determining long-term incentive awards. Based on data provided by FactSet Research Systems Inc. (referred to as FactSet), the Company’s compounded annual growth rate (referred to as CAGR) in comparison to a variety of public-company market indices as of December 31, 20182019 was as follows:

Our5-year,10-year,15-year 5-year, 10-year, 15-year and20-year TSR, and our25-year TSR of 18.2% in particular,18.3%, demonstrates the sustained level of performance of our Company over long periods of time. These results are also important in assessing the Company’s business strategy, quality of leadership, culture and the relative effectiveness of our compensation practices. Based on further analysis of data from FactSet, the Company’s performance ranks as follows:

Governance, Compensation Actions & Summary of Details

Compensation Governance Practices.We believe that our executive compensation program promotes sound governance standards and includes many shareholder-friendly features, such as:

Determination of Executive Compensation. The Board delegates responsibility for determining the compensation structure of our Chairman & CEO and our President to the Compensation Committee. For our other NEOs, our Chairman & CEO determines their compensation after review and consultation with the Compensation Committee. The Compensation Committee currently consists of three independent directors appointed by the Board. In providing input regarding the other NEOs’ compensation, the Compensation Committee considers each NEO’s responsibilities, the overall financial performance of the Company, the performance of the department or function that such NEO leads, and their collective success in meeting the Company’s strategic priorities. The Compensation Committee has the opportunity to meet with the NEOs at various times during the year, which allows the Compensation Committee to form its own independent evaluation of each individual’s performance.

The Compensation Committee has engaged Pearl Meyer, an independent compensation consulting firm, to provide advice, relevant market data, various peer group comparisons, and best practices with respect to the compensation of our Chairman & CEO and President. The Compensation Committee assessed the independence of Pearl Meyer based on the specific criteria under applicable SEC and NYSE rules and determined that no conflict of interest is raised by Pearl Meyer’s work for the Compensation Committee.

Elements of Executive Compensation.NEO compensation may consist of base salary, an annual cash incentive, and restricted share awards, the composition of which is determined annually. As described above, our core executive compensation philosophy focuses on long-term performance which typically results in base salaries that may be considered by some to be below market, and in long-term restricted stock based-incentivesstock-based incentives that may be considered by some to be above market. We believe such comparisons are not meaningful as: (1) our long-term incentive awards are highly-aligned with shareholder returns, while many other companies’ are not, (2) long-term incentives are required to be reported in the Summary Compensation Table at their values on the date of grant, not on their cliff-vesting dates, and (3) resulting operational outcomes such as the long-term tenure of our executive team and long-term shareholder returns are often ignored.

Base Salary. Base salary is designed to adequately compensate and reward the NEOs for theirday-to-day performance. The Compensation Committee determines base salary for our Chairman & CEO and for our President. Our Chairman & CEO determines base salaries for our other NEOs after review and consultation with the Compensation Committee. When setting and adjusting each NEO’s salary level, the executive’s roles and responsibilities, experience, potential, and performance are considered. Other factors are considered such as the annual merit increase, if any, paid to all other Company employees, demand in the labor market for the particular executive, general business conditions, and succession planning. These factors are not weighted. Adjustments to base salary are discretionary and based on an overall collective assessment of all these factors.

2018 Salary Reductions Continued in 2019. In 2018, our NEOs accepted salary reductions in response to a broader Company-wide strategy to reduce overall costs. These reduced levels continued throughout 2019. The base salary of Mr. Rush, who was promoted to COO on April 1, 2019, was voluntarily reduced 50% to $150,000 effective April 1, 2020 as a measure of response to the COVID-19 pandemic.

Peer Comparisons. Given the uniqueness and concentration of compensation related to the long-term vesting periods of our restricted stock program, the Compensation Committee has determined that neither base

Annual Cash Incentives.In 2018,2019, our President was eligible to receive an annual cash incentive of up to $450,000 based on the achievement of specified performance criteria established by the Compensation Committee, which included: (a) a targetedrun-rate fore-commerce sales; (b) improvement of inventory turns to a stated goal following the launch of various supply-chain technologies; (c) a sales growth target for certain product lines; (d) operating income growth of 10%; and (e) progress on certain longer-range technology initiatives associated with Watsco Ventures. In early 2019,The performance criteria was not achieved, therefore the Compensation Committee awardeddid not award our President $100,000an annual cash incentive under this arrangement. Mr. A.J. Nahmad elected to waive receipt of the incentive payment in response to a broader Company-wide strategy to reduce overall costs.arrangement for 2019.

Our SVPEVP, COO and CFO may receive a discretionary annual cash incentive as determined by our Chairman & CEO after review and consultation with the Compensation Committee. Some of the factors considered include, but are not limited to, the overall financial performance of the Company, the performance of the department or function that person leads, and an assessment of his or her collective achievement of strategic priorities. No cash incentives were paid to our SVPEVP, COO or CFO for 2018.2019.

Long-Term Share-Based Incentive Compensation. Our long-term share-based incentive compensation plan is administered through the 2014 Plan. As of December 31, 2018,2019, the 2014 Plan had approximately 230280 participants, including the NEOs. Awards may consist of:(i) non-qualified stock options that vest in installments over three and four years from the date of grant, and (ii) awards of restricted stock with long-durationlong duration vesting periods (generally age 62 or later). For the NEOs, as described above, our philosophy is heavily weighted toward awards of restricted stock, which create an owner-oriented culture; therefore, the discretionary allocation betweennon-qualified stock options and restricted stock generally favors the latter. For 2018,2019, no stock options were awarded to the NEOs.

Restricted stock awards are subject to forfeiture until certain specified events occur (upon reaching age 62 or later, death, long-term disability, or a change in control of the Company). Shares of restricted stock awarded include the right to vote and the right to receive dividends. Awards of restricted stock may be in either shares of Common stock or Class B common stock, none of which may be sold or disposed of prior to vesting, and which may be forfeited in the event of termination of employment prior to the end of the restriction period. Generally, restricted shares of Class B common stock have been awarded as the Board considers long-term continuity, stability and consistency of culture as important long-term contributors to the Company’s future success. The Company also believes other stakeholders, including its largest vendor partners, are comforted by and have made long-term commitments to the Company as a result of this long-term continuity, stability, and consistency.

The grant date fair value of the awards shown in the Summary Compensation Table is calculated at the date of grant (the NYSE-quoted market price of one share of Class B common stock multiplied by the number of shares awarded) and is amortized, net of estimated forfeitures, ratably over the period from the date of grant through the date of cliff-vesting. Due to the unusually long vesting periods and associated risks of forfeiture, the present value of such awards is likely significantly less. Independent valuations obtained by the Company suggest that, collectively, the present value of such awards is at least 25% less and may be as much as 50% less than the grant date fair value.

Use of Objective, Simple Performance Metrics to Determine Share-Based Compensation.The Company uses simpletwo performance metrics to determine whether share-based compensation is awarded to its Chairman & CEO and its President: (i) growth in earnings per share (EPS) and (ii) growth in stock price. If either increases, then restricted stock is awarded. If neither increases, then there is no restricted stock award in that year. As an example, no restricted stock awards were granted to our Chairman & CEO in 2007 or 2008 due to EPS and stock price performance at that time.

The use of these criteria is centered on the philosophy that total long-term shareholder return is the primary method of determining the success of the Company. We also believe EPS and stock price are objective, simple and require no interpretation. The Compensation Committee recognizes that external factors can impact our stock price in the short-term, but we believe that there is an equal chance that such external factors can be positive or negative. A greater consideration is that the ultimate value an award under our cliff-vesting program is not known on the date of the award – but rather the date they vest, which can be years or decades after an award is made. Short-term external factors become irrelevant over such a long period of vesting, and solely long-term performance will dictate long-term value.

EPS is defined as diluted EPS calculated in accordance with U.S. generally accepted accounting principles, referred to as GAAP. We do not consider any“non-GAAP” “non-GAAP” adjustments to EPS that have the effect of increasing EPS. Common stock price is the closing date price of Watsco’s shares as reported by the New York Stock Exchange.NYSE.

Compensation & Long-Term IncentivesIncentive for Our Chairman & CEO.The Chairman & CEO’s compensation is composed of base salary and a restricted share award contingent upon the attainment of specified performance criteria (hecriteria. He is not eligible to receive any cash incentive).incentive.

Mr. Nahmad’s annual salary was $825,000$580,000 in 2016, which was subject to2019, reflecting a 20% voluntary reduction in response to a broader-based cost reduction effort byversus the Company. In 2017 through July 2018, Mr. Nahmad’s annual salary was $725,000, which was reduced in July 2018 by 20% to an annual rate of $580,000prior level in connection with further cost reduction efforts. Mr. Nahmad’s salary was adjusted to $600,000 effective January 1, 2020. Subsequently, Mr. Nahmad’s salary was voluntarily reduced 50% to $300,000 effective April 1, 2020 as a measure of response to the COVID-19 pandemic.

In terms of his long-term incentive award, the Compensation Committee determines annual performance factors within the first 90 days of each calendar year and formalizes such factors as an amendment to the Chairman & CEO’s employment agreement (such agreement and amendments are referred to as the Employment Agreement). 2018’sThe 2019 amendment to the Employment Agreement was filed with the SEC as Exhibit 10.1 to the Quarterly Report on Form10-Q for the quarter ended March 31, 20182019 and is incorporated herein by reference. We refer to this amendment as the 20182019 Amendment.

Common stock price growth

(i) No incentive is earned if the price of Watsco’s Common stock did not exceed $170.04$139.14⁽³⁾ on December 31, 2018,2019, or

(ii) $1,700 in value awarded for each one cent of increase in the price of Watsco’s Common stock over the prior year (if less than $204.05$166.97⁽⁴⁾), or

(iii) $2,500 in value is awarded for each one cent of increase in the price of Watsco’s Common stock over the prior year (if equal to or greater than $204.05$166.97⁽⁴⁾)

Watsco’s 20182019 EPS was $6.49$6.50 per share and the price of its Common stock decreasedincreased from $170.04$139.14 to $139.14$180.15 as of December 31, 2018.2019. The calculated gross value of the 20182019 award earned by our Chairman & CEO was approximately $8.6 million. However, Mr. Nahmad elected to waive the portion of the award related to the initial adoption of the Tax Cuts and Jobs Act of 2017. Accordingly, his 2018 award was reduced by approximately $2.4$10.3 million to a gross value of approximately $6.2 million (45,752(56,823 restricted Class B Commoncommon shares) as reflected in the Summary Compensation Table. Mr. Nahmad also received $42.00$125.00 in cash in lieu of fractional shares. No restricted stock award was earned by our Chairman & CEO in 2018 for the stock price component of his 2018 long-term incentive program.

Compensation & Long-Term IncentivesIncentive for Our President.On January 15, 2016, A.J. Nahmad was promoted to President. Under his direction and leadership, Watsco began in 2012 to actively increase its investment in a number of scalable technologies to further strengthen its leadership position in the HVAC/R marketplace and to introduce technology strategies that havefar-reaching potential. His promotion to President acknowledged his leadership and recognized the importance of the successful execution and adoption of these technological innovations across the Watsco enterprise. His promotion was also considered an important event for the Company in terms of management succession with the goal of achieving long-term, generational continuity and consistency of Watsco’s unique culture.

Our President’s 20182019 compensation program included: (i) an initial base salary of $650,000, which was reduced in July 2018 by 15% to an annual rate of $552,500 in connection with company-wide cost reduction efforts, (ii) eligibility for an annual cash incentive of up to $450,000 as described above, and (iii) eligibility for a

Common stock price growth

(i) No incentive is earned if the price of Watsco’s Common stock did not exceed $170.04$139.14⁽³⁾ on December 31, 2018,2019, or

(ii) $700 in value is awarded for each one cent of increase in the price of Watsco’s Common stock from the prior year (if less than $204.05$166.97⁽⁴⁾), or

(iii) $1,100 in value is awarded for each one cent of increase in the price of Watsco’s Common stock from the prior year (if equal to or greater than $204.05$166.97⁽⁴⁾)

In 2018, no2019, the Compensation Committee approved an award of 5,000 restricted shares of Class B common stock to Mr. Rush upon his promotion to COO. No restricted shares were awarded to our SVPEVP and CFO.

Consideration of Shareholder Advisory Vote on Executive Compensation

Shareholders are asked annually to castnon-binding advisory votes to approve the executive compensation of our NEOs. In 2018,2019, we presented our shareholders with anon-binding advisory proposal to approve the compensation of our NEOs. A majority of votes cast by our Common shareholders and Class B shareholders

COMPENSATION COMMITTEE REPORT

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into a filing.

The Compensation Committee has reviewed and discussed the CD&A contained in this Proxy Statement with management. Based on that review and discussion, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement.

The following independent directors, who comprise the Compensation Committee, provide this report:

COMPENSATION TABLES

Summary Compensation Table

The following table sets forth the compensation earned by the NEOs for services rendered for the years ended December 31, 2019, 2018 2017 and 2016.2017.

Comparison of CEO Compensation to Total Shareholder Return and EPS Growth Rate.Return. The following chart represents the comparison for the last five calendar years of (i) our Chairman & CEO’s total compensation as summarized in the Summary Compensation Table, (ii) compensation actually paid (consisting of his base salary), and (iii) total shareholder return (share price appreciation plus the reinvestment of dividends) for each of the last five calendar years, and (iv) EPS growth rates for each of the last five calendar years.

20182019 Grants of Plan-Based Restricted Stock Awards

This table discloses the number of restricted stock awards granted to our NEOs during 20182019 and the grant date fair value of these awards. No stock options were granted to our NEOs during 2018.2019.

Outstanding Equity Awards at December 31, 20182019

The following table summarizes stock awards outstanding at December 31, 20182019 for the NEOs. All such awards represent non-vested restricted stock. There were no stock option awards outstanding for the NEOs at December 31, 2018.2019.

Potential Payments upon Termination or Change of Control

Agreements for awards of restricted stock have provisions that provide for accelerated vesting due to a change in control of the Company, or upon the death or disability of the executive. In the event thatIf vesting is accelerated under these agreements, any unrecognized share-based compensation expense would be immediately recognized. There are no other agreements or arrangements with our NEOs that provide for compensation or other benefits upon a change in control of the Company.

The table below illustrates the value of the accelerated vesting of the equity awards for each NEO had Watsco experienced a change in control on December 31, 2018,2019, along with the amount of unrecognized share-based compensation that would be recognized in our consolidated statement of income. The amounts presented in the table below are estimates and do not necessarily reflect the actual value of the benefits that would be received by the NEOs, which would only be known at the time that a change of control occurs.

PAY RATIO

As a result of rules the SEC adopted as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following disclosure about the relationship of the total annual compensation of our CEO to the median total annual compensation of our employees for the year ended December 31, 2018.2019. The methodology used to identify the median employee, as well as compensation measure used for this analysis, are described below.

Identification of Median Employee

As permitted by the SEC rules, the median employee utilized for this pay ratio disclosure for 2018 is the same employee identified and used for the 2017 CEO pay ratio, as there were no significant changes to our employee population, pay plans, or circumstances that would reasonably result in a significant change to the CEO pay ratio.

In 2017,2019, we selected December 31, 20172019 as the date for identifying our median employee. For the purpose of identifying the median employee, we included all active employees (excluding the CEO) as of December 31, 2017,2019, which consisted of 5,2455,766 individuals, with 4,7125,180 employees located in the U.S. and 533586 located outside of the U.S. We then excluded our 206188 non-U.S. employees from Mexico as permitted by the SEC’s de minimis exemption, which allows for exclusion of employees in countries outside of the U.S. where a small number of our employees are located, to identify the median employee.

Compensation Measure

The compensation measure used for employees (excluding the CEO) was total annual cash compensation for 2017,2019, which comprised base salary, bonus, commissions, and other cash payments including overtime pay and auto allowance, if applicable, all of which was gathered from company payroll data. We annualized compensation for active employees who worked only a partial year during 2017.2019. Compensation for employees in Canada was converted into U.S. dollars using the weighted average exchange rate for the year ended December 31, 2017.2019. The compensation measure used for our CEO was total annual compensation as required by the SEC for reporting in the Summary Compensation Table (see page 3428 of this Proxy Statement).

The 20182019 total annual compensation of our CEO was $7,117,698$11,204,097 and the median employee, excluding our CEO, was $47,786,$52,908, resulting in a ratio of 149:212:1. This pay ratio is calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their respective compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported by us, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

Our philosophy is to pay our employees competitively with comparable positions in the applicable labor market. We follow this approach in all of the countries in which we operate whether it be a senior management level position or hourly job at one of our 571606 locations. By doing so, we believe we maintain a high-quality, more stable workforce.

Supplemental Pay Ratio Disclosure

The required compensation measure used for our CEO and included in the pay ratio above does not represent his annual cash compensation. As described in the section titled “Compensation & Long-Term IncentivesIncentive for Our Chairman & CEO” beginning on page 2723 of this Proxy Statement, total compensation includes the grant date fair value of $6,187,958$10,313,375 for a restricted stock award that does not vest until 2028. Excluding this restricted stock award, the annual cash compensation of our CEO was $929,740,$890,722, and the pay ratio of our CEO to our median employee was 19:17:1.

PROPOSAL NO. 1—1 – ELECTION OF DIRECTORS

The Nominating & Governance Committee recommended for nomination, and the Board of Directors nominated the following persons for election as members of our Board of Directors at the 20192020 annual meeting of shareholders.