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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC

Washington, D.C. 20549

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934
(Amendment No.           )

Filed by the Registrant [X]
☒

Filed by a Party other than the Registrant [ ]
☐

Check the appropriate box:

GRANITE CONSTRUCTION INCORPORATED

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Notice of Contents

Notice of 20172019 Annual Meeting of Shareholders and Proxy Statement

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Table of ContentsShareholders

and Proxy Statement

GRANITE CONSTRUCTION INCORPORATED

585 West Beach Street

Watsonville, California 95076

Notice of Annual Meeting of Shareholders

April 25, 201723, 2019

Purposes of the Meeting:

Who May Attend the Meeting:

Only shareholders, persons holding proxies from shareholders and invited representatives of the media and financial community may attend the meeting.

What to Bring:

If you received a Notice of Internet Availability of Proxy Materials, please bring that Notice with you. If your shares are held in the name of a broker, trust, bank, or other nominee, you will need to bring a proxy or letter from that broker, trust, bank, or other nominee that confirms you are the beneficial owner of those shares. If you hold shares through the Granite Construction Profit Sharing and 401(k) Plan, you will need to bring proof of ownership of the shares.

Record Date:

The record date for the 20172019 Annual Meeting of Shareholders is April 12, 2017.2019. This means that if you own Granite stock at the close of business on that date, you are entitled to receive notice of the meeting and vote at the meeting and any adjournments or postponements of the meeting.

Annual Report:

We have included a copy of the Annual Report on Form 10-K for the fiscal year ended December 31, 20162018 with the proxy materials on Granite's website.

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Shareholder List:

For 10 days prior to the meeting, a complete list of shareholders entitled to vote at the meeting will be available for examination by any shareholder for any purpose relativerelated to the meeting during regular business hours at Granite's headquarters located at 585 West Beach Street, Watsonville, CA 95076. The shareholder list will also be available at the annual meeting.

Information about the Notice of Internet Availability of Proxy Materials:

Instead of mailing a printed copy of our proxy materials, including our Annual Report, to each shareholder of record, we will provide access to these materials online. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all shareholders. Accordingly, on or about April 25, 2017,23, 2019, we will begin mailing a Notice of Internet Availability of Proxy Materials to all shareholders of record as of April 12, 2017,2019, other than persons who hold shares in the Granite Construction Profit Sharing and 401(k) Plan (such persons, the "401(k) Participants" and such plan, the "401(k) Plan"). We will also post our proxy materials on the website referenced in the notice(https: (https://www.proxyvote.com)www.proxyvote.com). All 401(k) Participants will receive a package in the mail that includes all proxy materials. The proxy materials will be mailed to all 401(k) Participants on or about April 25, 2017.23, 2019.

All shareholders may choose to access our proxy materials online or may request to receive a printed set of our proxy materials. In addition, the notice and website provide information regarding how you may request to receive proxy materials in printed form by mail on an ongoing basis.

Proxy Voting:

Your vote is important. Please vote your proxy promptly so your shares can be represented at the annual meeting even if you plan to attend the meeting. Shareholders, including 401(k) Participants, can vote by Internet, telephone or mail. Shareholders, other than 401(k) Participants, may revoke a proxy and vote in person if attending the meeting.

To get directions to the 20172019 Annual Meeting of Shareholders, call our Investor Relations Department at 831.724.1011 or visit our website atwww.graniteconstruction.com at the "Investors" site.

By Order of the Board of Directors,

M. Craig Hall

Senior Vice President, General Counsel, Corporate Compliance Officer and Secretary

By Order Table of the Board of Directors,

Contents Richard A. Watts

Senior Vice President, General Counsel and Secretary

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GRANITE CONSTRUCTION INCORPORATED

585 West Beach Street

Watsonville, California 95076

PROXY STATEMENT

As more fully described in the Notice of Internet Availability of Proxy Materials, Granite Construction Incorporated, a Delaware corporation (referred to herein as "we," "us," "our," "Granite" or the "Company"), on behalf of its Board of Directors, has made its proxy materials available to you on the Internet in connection with Granite's 20172019 Annual Meeting of Shareholders, which will take place on June 8, 20176, 2019 at 10:30 a.m., CentralPacific Time, at the Rosewood Mansion on Turtle Creek, 2821 Turtle Creek Boulevard, Dallas, Texas.Carmel Valley Ranch, 1 Old Ranch Road, Carmel, California, 93923. The Notice of Internet Availability of Proxy Materials was mailed to all Granite shareholders of record, except 401(k) Participants, on or about April 25, 2017,23, 2019, and our proxy materials were posted on the website referenced in the Notice of Internet Availability of Proxy Materials and made available to shareholders on April 25, 2017.23, 2019. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. The proxy materials were mailed to all 401(k) Participants on or about April 25, 2017.23, 2019.

Granite, on behalf of its Board of Directors, is soliciting your proxy to vote your shares at the 20172019 Annual Meeting of Shareholders or any subsequent adjournment or postponement. We solicit proxies to give all shareholders of record an opportunity to vote on the matters listed in the accompanying notice and/or any other matters that may be presented at the annual meeting. In this proxy statement you will find information on these matters, which is provided to assist you in voting your shares.

Granite was incorporated in Delaware in January 1990 as the holding company for Granite Construction Company, which was incorporated in California in 1922. All dates in this proxy statement referring to service with Granite also include periods of service with Granite Construction Company, if applicable.

Who Pays for This Solicitation?

Granite pays for the cost of this proxy solicitation. We will request brokers, trusts, banks and other nominees to solicit their customers who own our stock. We will reimburse their reasonable, out-of-pocket expenses for doing this. Our directors, officers and employees may also solicit proxies by mail, telephone, personal contact, or through online methods without additional compensation.

Who Can Vote?

You will have received notice of the annual meeting and can vote if you were a shareholder of record of Granite's common stock as of the close of business on April 12, 2017.2019. You are entitled to one vote for each share of Granite common stock that you own. You may vote all shares owned by you as of the record date, including shares held directly in your name as the shareholder of record and shares held for you as the beneficial owner through a broker, trust, bank or other nominee. As of the close of business on April 12, 2017,2019, there were 39,817,36946,812,424 shares of common stock issued and outstanding.

How Do I Vote and What Is the Deadline for Voting My Shares?

Shareholders, other than 401(k) Participants, have the option to vote by proxy in the following three ways:

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Please refer to the Notice of Internet Availability of Proxy Materials or the information your broker, trust, bank or other nominee provides you for more information on the above options. If you vote your shares over the Internet or by telephone, you should not return a proxy card by mail (unless you are revoking your previous proxy).

All

401(k) Participantshave the option to vote by proxy in the following three ways:

If you vote your shares over the Internet or telephone, you should not return a proxy card by mail (unless you are revoking your previous proxy).

What Is the Voting Requirement To Approve the Proposals?

If there is a quorum, nominees for election to the Board in an uncontested election who receive the affirmative vote of a majority of the votes cast will be elected as members of our Board of Directors for the upcoming three-year term and until his/her successor is elected and qualified or he/she resigns or until his/her death, retirement or removal, or other cause identified in Granite's bylaws. This means that a majority of votes cast "for" the election of a nominee must exceed the number of votes cast "against" the nominee's election. With respect to the advisory vote on the frequency of holding an advisory vote on executive compensation, the option of every one year, every two years or every three years that receives the highest number of votes cast by shareholders voting on the matter will be deemed to be the frequency for the say-on-pay advisory vote that has been selected by shareholders. Each of the other matters identified in the Notice of Meeting will be approved if it receives the affirmative vote of a majority of the votes cast affirmatively or negatively on such matter. Any other matters properly proposed at the meeting, including a motion to adjourn the annual meeting to another time or place (including for the purpose of soliciting additional proxies), will also be determined by a majority of the votes cast affirmatively or negatively, except as otherwise required by law or by Granite's Certificate of Incorporation, as amended, or bylaws.

If you hold shares through a broker, trust, bank or other nominee (i.e., in "street name"), and you do not provide your broker, trust, bank or other nominee with voting instructions, "broker non-votes" may occur. Generally, a broker non-vote occurs when a broker, trust, bank or other nominee who holds shares for a beneficial owner does not vote on a particular matter (i.e., a non-routine matter) because the broker, trust, bank or other nominee does not have discretionary voting power with respect to that matter and has not received instructions on such matter from the beneficial owner. Among our proposals, a broker, trust, bank or other nominee will have discretionary voting power only with respect to the proposal to ratify the appointment by the Audit/Compliance Committee of PricewaterhouseCoopers LLP as Granite's independent registered public accounting firm for the fiscal year ending December 31, 2017.2019.

How Are Votes Counted?

In the election of directors and for all other proposals, except for the proposal on the advisory vote on the frequency of holding an advisory vote on executive compensation you may vote "For," "Against" or "Abstain" with respect to each of the nominees and proposals. For the proposal on the advisory vote on the frequency of holding an advisory vote on executive compensation, you may vote for "Every One Year," "Every Two Years," "Every Three Years" or "Abstain" with respect to such proposal. If you elect to abstain in the election of directors or any of the other matters, except for the proposal on the advisory vote on the frequency of holding an advisory vote on executive compensation identified in the Notice of Meeting, the abstention will not impact the outcome of these matters. For the proposal on the advisory vote on the frequency of holding an advisory vote on executive compensation, only the votes for "Every One Year," "Every Two Years" and "Every Three Years" will be counted for purposes of determining which option receives the highest number of votes cast. In tabulating the voting results for the election of directors and such other matters, only "For" and "Against" votes are counted for purposes of determining whether a majority has been obtained. Abstentions and broker non-votes are not considered to be votes cast affirmatively or negatively and therefore will have no effect on the outcome of the vote on any of these matters.

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If you vote by proxy card, telephone or the Internet, your shares will be voted at the annual meeting in the manner you indicated. James H. Roberts and Laurel J. KrzeminskiJigisha Desai are officers of the Company and were named by our Board of Directors as proxy holders. They will vote all proxies, or record an abstention, in accordance with the directions on the proxy. If no contrary direction is given, the shares will be voted as recommended by the Board of Directors. This proxy statement contains a description of each item that you are to vote on along with our Board's recommendations. Below is a summary of our Board's recommendations:

As to any other matter that may be properly proposed at the annual meeting, including a motion to adjourn the annual meeting to another time or place, the shares will be voted in the discretion of the persons named on your proxy card.

After I Vote by Proxy Can I Change or Revoke My Proxy?

You can change your vote or revoke your proxy at any time before the annual meeting. Shareholders, other than 401(k) Participants, may change their vote by: (i) voting again by Internet at any time prior to 11:59 p.m., Eastern Time, on June 5, 2019, if you originally voted by Internet, (ii) voting again by telephone at any time prior to 11:59 p.m., Eastern Time, on June 7, 2017,5, 2019, if you originally voted by telephone, (ii) voting again by Internet at any time prior to 11:59 p.m., Eastern Time, on June 7, 2017, if you originally voted by Internet, or (iii) returning a later dated proxy card such that it is received prior to 11:59 p.m., Eastern Time, on June 7, 2017,5, 2019, if you voted by mail. Shareholders, other than 401(k) Participants, may also revoke their proxy by filing with our Secretary a written revocation that is received by us before the polls close at the annual meeting. All 401(k) Participants may change their vote by: (i) voting again by Internet at any time prior to 12:00 p.m. (noon), Eastern Time, on June 4, 2019, if you originally voted by Internet, (ii) voting again by telephone at any time prior to 12:00 p.m. (noon), Eastern Time, on June 6, 2017,4, 2019, if you originally voted by telephone, (ii) voting again by Internet at any time prior to 12:00 p.m. (noon), Eastern Time, on June 6, 2017, if you originally voted by Internet, or (iii) returning a later dated proxy card such that it is received prior to 12:00 p.m. (noon), Eastern Time, on June 6, 2017,4, 2019, if you voted by mail. Except for 401(k) Participants, shareholders may also change their vote or revoke their proxy by attending the annual meeting and voting in person if they are a shareholder of record.

If you hold your shares through a broker, bank, trust or other nominee, please refer to the information forwarded by your broker, bank, trust or other nominee for procedures on revoking your proxy.

Can I Vote at the Annual Meeting Instead of Voting by Proxy?

You may attend the annual meeting and, except for 401(k) Participants, vote in person instead of voting by proxy. However, even if you intend to attend the meeting we strongly encourage you to vote by Internet, telephone or mail prior to the meeting to ensure that your shares are voted. Although Granite's 401(k) Participants may attend the meeting, they cannot vote in person at the meeting.

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What Constitutes a Quorum?

Granite's bylaws require a quorum to be present in order to transact business at the meeting. A quorum consists of a majority of the shares entitled to vote, either in person or represented by proxy. In determining a quorum, we count shares voted for or against, abstentions and broker non-votes as being present.

Who Supervises the Voting at the Meeting?

Granite's bylaws and policies specify that, prior to the annual meeting; management will appoint an independent Inspector of Elections to supervise the voting at the meeting and count the votes for each proposal following the closing of the polls at the annual meeting. The Inspector decides all questions as to the qualification of voters, the validity of proxy cards and the acceptance or rejection of votes. Before assuming his or her duties, the Inspector will take and sign an oath that he or she will faithfully perform his or her duties both impartially and to the best of his or her ability.

How Can I Find Out the Voting Results?

We will announce preliminary voting results at the annual meeting, and final results will be published on a Form 8-K to be filed with the Securities and Exchange Commission (the "SEC") within four business days following the annual meeting. If the final results are not available at that time, we will provide preliminary results in the Form 8-K, and we will provide the final results in an amendment to the Form 8-K as soon as they become available.

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Proposal 1: Election of Directors

The Board of Directors is divided into three classes. We keep the classes as equal in number as reasonably possible; however, the number of directors in a class depends on the total number of directors at any given time. Each director serves for a term of three years. The classes are arranged so that the terms of the directors in each class expire at successive annual meetings. This means that shareholders annually elect approximately one-third of the members of the Board. The Board currently consists of eleven directors.

The terms of David C. Darnell, Celeste B. Mastin, James H. Roberts,Claes G. Bjork, Patricia D. Galloway, Alan P. Krusi and Gaddi H. VasquezJeffrey J. Lyash will expire at the 20172019 Annual Meeting. The Board has nominated David C. Darnell, Celeste B. Mastin, James H. Roberts,Claes G. Bjork, Patricia D. Galloway, Alan P. Krusi and Gaddi H. VasquezJeffrey J. Lyash for new terms. If elected, each of the nominees will serve as a director until the 20202022 Annual Meeting and until his or her successor is elected and qualified or he/he or she resigns or until his/his or her death, retirement or removal, or other cause identified in Granite's bylaws.

Following the retirement

James W. Bradford, Jr. was elected to his present term of Gary M. Cusumanooffice at the 20162018 Annual Meeting, Patricia D. Galloway was appointedMeeting. Pursuant to Granite’s retirement policy, Mr. Bradford’s service on the Board of Directors effective February 8, 2017. The Board requests that shareholders ratify her appointment and service as a director for a term expiringwould normally conclude at the 2019this year’s Annual Meeting. However, upon recommendation of the Nominating and Corporate Governance Committee, the Board, at its February 6, 2019 meeting, approved an amendment to its retirement policy that will allow Mr. Bradford to remain on the Board until 2020.

Management knows of no reason why any of these nominees would be unable or unwilling to serve. All nominees have accepted the nomination and agreed to serve as a director if elected by the shareholders. However, if any nominee should for any reason become unable or unwilling to serve between the date of the proxy statement and the annual meeting, the Board may designate a new nominee and the persons named as proxies will vote for that substitute nominee.

Table of ContentsDirectors unanimously recommends a vote "FOR" each of the above-named nominees.

Director Qualifications

The following paragraphs provide information as of the date of this proxy statement about each director and director nominee. The information presented includes information each director or director nominee has given us about his or her age, all positions he or she holds with Granite, his or her principal occupation and business experience for the past five years, and the names of other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each director's and director nominee's specific experience, qualifications, attributes and skills that led our Board to the conclusion thethat he or she should serve as a director, the Board also believes that all of our directors and director nominees have a reputation for integrity, honesty and adherence to high ethical standards. The Board also believes that all of our directors have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to Granite and our Board.

Nominees for Director with Terms Expiring at the 2022 Annual Meeting

Claes G. Bjork                                                                                              Director since 2006 Mr. Bjork retired in 2002 as Chief Executive Officer of Skanska AB, Sweden, one of the world’s largest construction companies, a position he had held since 1997. Prior to such time, Mr. Bjork held various executive and management positions within Skanska and served as Chairman of Scancem Cement. He is also a former Chairman and a current member of the board of directors of the Swedish American Chamber of Commerce, and he previously served on the boards of Consolidated Management Group and Qlik Technologies, Inc. We believe that Mr. Bjork’s past experience as an executive with a major multi-national construction firm and his knowledge and understanding of the construction industry and Granite’s competitors and customers qualify him to serve on our Board. Mr. Bjork studied Civil Engineering in Sweden. Age 73.

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Nominees for Director with Terms Expiring at the 2022 Annual Meeting

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Continuing Directors with Terms Expiring at the 2020 Annual Meeting

		Gaddi H. Vasquez	Director since 2012
	Mr. Vasquez has served as Senior Vice President of Government Affairs of Edison International and Southern California Edison, one of the nation’s largest investor owned utility companies principally serving Southern California, since 2013.from 2013 to February 2019. Prior to that, Mr. Vasquez served as Senior Vice President of Public Affairs andSouthern California Edison from 2009 to 2013. From 1995 to 2002, Mr. Vasquez served as Division Vice President ofin Public Affairs from 1995-2013.of Southern California Edison.  Mr. Vasquez also served as executive Director of the Annenberg Foundation Trust at Sunnylands in 2009, as U.S.AmbassadorU.S. Ambassador to the United Nations Agencies based in Rome, Italy from 2006-2009,2006 to 2009, and as Director of the U.S. Peace Corps from 2002-2006.2002 to 2006. Mr. Vasquez is currently a member of several national advisory boards, a member of the board of directors of the California Public Policy Institute, the National AssociationAdvisory Board of Latino Elected and Appointed Officials Educational Fund andthe Salvation Army, the Pat Brown Policy Institute, a member of the board of governors of the California State University Foundation.Foundation and a member of the board of trustees of Chapman University. We believe that Mr. Vasquez’s executive level experience and his experience in public service, including leading major organizations involved in the development and construction of major public infrastructure and regional facilities, qualify him to serve on our Board. Mr. Vasquez holds a B.A. degree in Public Service Management from the University of Redlands. Age 62.64.

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		David C. Darnell	Director since 2017
	Mr. Darnell served as Vice Chairman of Global Wealth & Investment Management at Bank of America Corporation from September 2014 to December 2015 and served as its Co-Chief Operating Officer from September 2011 to September 2014. From July 2005 to September 2011, he served as the President of Global Commercial Banking at Bank of America Corporation. Prior to that, Mr. Darnell held various leadership positions at Bank of America since joining the company in 1979, including Middle Market Banking group president; Central Banking group president; and Midwest Region president. He also served as an Executive Vice President and Commercial Division Executive for Bank of America in Florida. We believe that Mr. Darnell bringsDarnell’s significant operational, acquisition, governmental, financial, leadership-development capabilities and technology execution skills qualify him to serve on our board.  Mr. Darnell currently serves on the boardsas a director of Watsco, Inc. and the Museum of the American Revolution.Revolution and the United Services Automobile Association boards. Mr. Darnell holds an undergraduate degree from Wake Forest University and an M.B.A. from the University of North Carolina at Chapel Hill. Age 64. 66.

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Continuing Directors with Terms Expiring at the 2020 Annual Meeting

		Celeste B. Mastin	Director since 2017
	Ms. Mastin served asassumed the role of Chief Executive Officer of PetroChoice Lubrication Solutions in March 2018.  PetroChoice is one of the largest petroleum-based lubricant distributors in the United States for passenger and commercial vehicles and industrial applications. Prior to joining PetroChoice, Ms. Mastin was the Chief Executive Officer of Distribution International, Inc., a supplier of certain construction equipment and environmental products from February 2013 to April 2017. From 2007 to 2011, she served as chief executive officerChief Executive Officer and as chief operating officerChief Operating Officer of MMI Products, Inc., a manufacturer and distributor of certain building materials. At Ferro Corporation,From 2004 to 2007, Ms. Mastin held the role of vice presidentVice President of color and glass performance materials and vice presidentVice President of growth and development from 2004 to 2007.at Ferro Corporation. Ms. Mastin started her career in sales at Shell Chemical. She held European and later global sales management positions as well as a management position at Bostik, Inc. We believe that Ms. Mastin’s global chemicals and building materials sectors experience, as well as her operating experience in sales and marketing and proven leadership ability qualify her to serve on our Board.  Ms. Mastin currently serves on the board of directors of Distribution International, Inc. Ms. Mastin holds a bachelor's degreeB.S. in chemical engineeringChemical Engineering from Washington State University and a master's degree in business administrationM.B.A. from the University of Houston. Age 48.50.

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Continuing DirectorsTable of Contents with Terms Expiring at the 2021 Annual Meeting

		David H. Kelsey	Director since 2003
	Mr. Kelsey assumed the role ofserved as Chief Financial Officer of Verdezyne, Inc. in July 2016.from 2016 to 2018. Verdezyne is a privately-owned company that uses synthetic biology to produce high-value chemicals. Prior to joining Verdezyne, Mr. Kelsey was the Chief Financial Officer of Elevance Renewable Sciences, Inc., a privately-owned producer of high performance specialty chemicals. From January 2002 to August 2011, Mr. Kelsey served as Chief Financial Officer of Sealed Air Corporation, an S&P 500 manufacturer of specialty packaging for food and other protective applications. We believe that Mr. Kelsey’s experience as the chief financial officer of a major NYSE-listed company, as well as his in-depth knowledge and understanding of generally accepted accounting principles, experience in preparing, auditing and analyzing financial statements, understanding of internal control over financial reporting, and his understanding of audit committee functions qualify him to serve on our Board. Mr. Kelsey holds a B.S.E. degree in Civil and Geological Engineering from Princeton University and an M.B.A. degree from Harvard University Graduate School of Business. Age 66. 68.

		James W. Bradford, Jr.	Director since 2006
	Mr. Bradford retired in June 2013 as Dean and Ralph Owen Professor for the Practice of Management at Vanderbilt University, Owen School of Management, in which capacities he served since 2005. Upon retirement from Vanderbilt, Mr. Bradford was awarded the title of Dean Emeritus. Between 2002 and March 2005, Mr. Bradford served as Acting Dean, Associate Dean Corporate Relations, Clinical Professor of Management and Adjunct Professor at Vanderbilt University, Owen School of Management. He has also served as President and Chief Executive Officer of United Glass Corporation, and President and Chief Executive Officer of AFG Industries. Mr. Bradford is currently also a member of the boards of directors of Genesco, Inc. and Cracker Barrel Old Country Store, Inc. We believe that Mr. Bradford’s perspective as an academic, his experience in corporate compliance and governance matters and his knowledge of business strategies and financial matters, combined with his executive-level and legal experiences, qualify him to serve on our Board. Mr. Bradford holds a B.A. degree from the University of Florida and a J.D. degree from Vanderbilt University, and he has completed the Harvard Business School Advanced Management Program. Age 69. 71.

		Michael F. McNally	Director since 2016
	Mr. McNally retired in December 2014 as President and Chief Executive Officer of Skanska USA Inc., a subsidiary of Skanska AB, one of the world’s largest construction companies, a position he had held since 2008. During that time, he also served as one of nine members of Skanska AB’s senior executive team.  Prior to his tenure at Skanska, Mr. McNally held various management positions over a 38 year career with Fluor, Marshall Contractors, Mobil Oil and J. Ray McDermott. Mr. McNally is also currently a member of the boards of directors of Limbach Holdings Inc., Terracon, the U.S. Green Building Council and the Rhode Island Commerce Corporation. We believe that Mr.McNally’sMr. McNally’s past experience as an executive with a major multi-national construction firm and his knowledge and understanding of the construction industry and Granite’s customers qualify him to serve on our Board.  Mr. McNally holds a B.S. degree in Civil Engineering from the University of Notre Dame and an M.B.A. from the University of Rhode Island. Age 62.64.

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TableInformation About the Board of ContentsDirectors and Corporate Governance

		William H. Powell	Director since 2004
		Mr. Powell retired in 2006 as Chairman and Chief Executive Officer of National Starch and Chemical Company, a position he had held since 1999, and has served as Chairman of our Board since September 2009. Mr. Powell is also currently a member of the boards of directors of PolyOne Inc. and FMC Corporation. Until June 2009, Mr. Powell was Chairman, Board of Trustees, of State Theatre Performing Arts Center in New Brunswick, New Jersey. We believe that Mr. Powell’s knowledge and experience as chief executive officer of a major global company qualify him to serve on our Board. Mr. Powell holds a B.A. degree in Chemistry and an M.S. in Chemical Engineering from Case Western Reserve University and an M.A. in Business Administration from the University of North Dakota. Age 71.

		Claes G. Bjork	Director since 2006
		Mr. Bjork retired in 2002 as Chief Executive Officer of Skanska AB, Sweden, one of the world’s largest construction companies, a position he had held since 1997. Prior to such time, Mr. Bjork held various executive and management positions within Skanska and served as Chairman of Scancem Cement. He is also a former Chairman and a current member of the board of directors of the Swedish American Chamber of Commerce, and he previously served on the boards of Consolidated Management Group and Qlik Technologies, Inc. We believe that Mr. Bjork’s past experience as an executive with a major multi-national construction firm and his knowledge and understanding of the construction industry and Granite’s competitors and customers qualify him to serve on our Board. Mr. Bjork studied Civil Engineering in Sweden. Age 71.

		Patricia D. Galloway	Director since 2017
		Dr. Galloway serves as Chief Executive Officer of Pegasus Global Holdings, Inc., a firm that performs risk management, management consulting and strategic consulting business services since 2008. From 1981-2008, Dr. Galloway served in various positions at The Nielsen-Wurster Group, Inc. including Chief Executive Officer and Principal, and President and Chief Financial Officer. Dr. Galloway was the first woman President of the American Society of Civil Engineers and served from November 2003 to 2004. Dr. Galloway also serves as an arbitrator on construction and energy litigation cases. Dr. Galloway serves as a Director of the American Arbitration Association and the Pacific Science Center and as a Trustee of the Central Washington University Foundation Board. She served on the National Science Board from 2006 to 2012. We believe that Dr. Galloway’s experience in corporate risk management, combined with her executive-level and dispute resolution experiences, qualify her to serve on our Board. Dr. Galloway holds a Ph.D. in Infrastructure Systems Engineering (Civil) from Kochi University of Technology in Japan, an MBA from the NY Institute of Technology and a Bachelor degree in civil engineering from Purdue University. Age 59.

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Retiring Director

Mr. Dorey retired in August 2010 as the Chief Executive Officer and President of Granite, in which capacities he served since 2004 and 2003, respectively. Mr. Dorey joined Granite in 1968 and, prior to being named Chief Executive Officer and President, held a variety of executive-level positions with Granite throughout his career, including Chief Operating Officer, Executive Vice President, Senior Vice President and Branch Division Manager. During this time, Mr. Dorey developed an intimate knowledge of our business, employees, culture, competitors and the effect on our business of various government policies. Mr. Dorey is also currently a member of the board of directors of Astec Industries, Inc. We believe that his long history and experience with Granite, and his in-depth knowledge of the construction industry, demonstrate that Mr. Dorey is well qualified to serve on our Board. Mr. Dorey holds a B.S. degree in Construction Engineering from Arizona State University. Age 72.

Committees of the Board

The following chart shows the standing committees of the Board of Directors, the current membership of the committees and the number of meetings held by each committee in 2016.2018.

Table of Contentsthe NYSE.

⁽²⁾ Chairman of the Board.

Audit/Compliance Committee

All members of the Audit/Compliance Committee are non-employee directors who are determined by the Board to be independent under the listing standards of the NYSE. Each member also satisfies the independence requirements for audit committee members of public companies established by the SEC. The Board has determined that Mr. Kelsey meets the criteria as an audit committee financial expert as defined by the SEC rules. The Board of Directors has also determined that all members of the Audit/Compliance Committee are financially literate as required by the listing standards of the NYSE. The Audit/Compliance Committee has direct responsibility for risk oversight related to accounting matters, financial reporting, and enterprise, legal and compliance risks. A more complete description of the risk responsibility, functions and activities of the Audit/Compliance Committee can be found under "Board Leadership Structure and its Role in Risk Oversight" on page 1211 of this proxy statement and in "Report of the Audit/Compliance Committee" on page 4140 as well as in the Audit/Compliance Committee charter. You can view and print the Audit/Compliance Committee charter on Granite's website. See "Granite Website" on page 15.below.

Compensation Committee

All members of the Compensation Committee are non-employee directors who are determined by the Board to be independent under the listing standards of the NYSE. The Compensation Committee reviews and approves all aspects of compensation for our directors, our Chief Executive Officer and our other executive officers. In addition, the Compensation Committee is responsible for risks related to employment policies and our compensation and benefit systems, including consideration of whether any risks associated with such policies and systems are likely to have a material adverse effect on Granite. The Compensation Committee also reviews our overall compensation plans and strategies and makes recommendations to the Board for their consideration and approval. The Chief Executive Officer attends Compensation Committee meetings and recommends annual salary levels, incentive compensation and payouts for other executive officers for the Compensation Committee's approval. The Compensation Committee also administers the 2012 Equity Incentive Plan and the Amended and Restated 1999 Equity Incentive Plan, as amended (the "1999 Equity Plan"), with respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In the caseThe Compensation Committee may delegate any of awards intendedits responsibilities to qualify for the performance-based compensation exemption under Section 162(m)a subcommittee composed of one or more members of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), the Annual Incentive Plan, the Long Term Incentive Plan, the 2012 Equity Incentive Plan and the 1999 Equity Plan are administered only by the Compensation Committee, which includes at least two "outside directors" within the meaning of Section 162(m).Committee. If you desire additional information concerning the Compensation Committee, you can read the Compensation Committee charter on Granite's website. See "Granite Website" on page 15.below.

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Nominating and CorporateCorporate Governance Committee

All members of the Nominating and Corporate Governance Committee are non-employee directors who are determined by the Board to be independent under the listing standards of the NYSE. The Nominating and Corporate Governance Committee recommends and nominates persons to serve on the Board. The Nominating and Corporate Governance Committee also develops and recommends corporate governance principles and practices to the Board and oversees the annual evaluations of the Board and certain senior executive officers of the Company. Additionally, the Nominating and Corporate Governance Committee oversees risks associated with our Corporate Governance Guidelines and Policies and Code of Conduct. The Nominating and Corporate Governance Committee's policy for considering director candidates, including shareholder recommendations, is discussed in more detail below under the heading "Board of Directors' Nomination Policy." This policy and the Nominating and Corporate Governance Committee charter are available on Granite's website. See "Granite Website" on page 15.below.

Executive Committee

The Executive Committee's responsibility is to carry out the powers and authority of the Board in the management of Granite's business within limits set by the Board. The Executive Committee also meets regularly to consider the approval of certain large project bidding decisions, as well as to assess and monitor ongoing risks and contingencies related to large projects. The scope of the Executive Committee's authority is determined in accordance with the "Delegation of Authority and Policy" as adopted and revised from time to time by the Board.

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Role of the Compensation Consultant

During 2016, the

The Compensation Committee directly retained the services of Mercer (US)Frederic W. Cook & Co., Inc. ("Mercer"FW Cook"), a wholly owned subsidiary of Marsh & McLennan Companies, Inc., to provide advice and recommendations to the Compensation Committee on executive officer and Board of Director compensation programs. Mercer's fees paid for executive compensation consulting to the Committee in 2016 were $206,724.programs..

During 2016, Mercer2018, FW Cook provided the following services to the Compensation Committee related to executive officer compensation:

During 2016, management retained the servicesCompensation Committee as the Committee’s advisor;

Based in part on the policies and procedures MercerFW Cook and the Compensation Committee have in place, the Compensation Committee believes that the advice it receives from the executive compensation consultant, a MercerFW Cook representative, is objective and not influenced by Mercer'sFW Cook’s or its affiliates' relationships with Granite. These policies and procedures include:

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In retaining Mercer,FW Cook, the Compensation Committee considered the six factors set forth in SectionExchange Act Rule 10C-1(b)(4)(i) through (vi) of the Exchange Act, and concluded that no conflict of interest existsexisted that would prevent MercerFW Cook from serving as an independent compensation consultant to the Compensation Committee.

While it is necessary for the executive compensation consultant to interact with management to gather information, the Compensation Committee has adopted protocols governing if and when the executive compensation consultant's advice and recommendations can be shared with management. These protocols are included in the Compensation Committee’s engagement letterletters with Mercer.FW Cook. The Compensation Committee also determines the appropriate forum for receiving the executive compensation consultant's recommendations. Where appropriate, management invitees are present to provide context for the recommendations.

The Lead Director and Executive Sessions

Our bylaws provide that in the event the Chairman of the Board does not meet the independence requirements of the rules and regulations of the SEC and the listing standards of the NYSE, the directors shall elect a Lead Director to serve for a two-year term or until such time, if earlier, at which an independent Chairman is elected. Because William H. Powell,Claes G. Bjork, the current Chairman of the Board, is an independent director, we currently do not have a Lead Director. In his capacity as Chairman, Mr. PowellBjork chairs all Board meetings and presides over all executive sessions of the non-employee members of the Board.

Board Leadership Structure and Its Role in Risk Oversight

The Board of Directors has determined that having an independent director serve as the Chairman of the Board is in the best interest of Granite and its shareholders at this time. The Board believes that having a strong independent director serve as Chairman promotes greater oversight of Granite by the independent directors and provides for greater management accountability. The structure ensures more active participation by the independent directors in setting the Board's agenda and establishing the Board's priorities. However, the Board, in accordance with its Corporate Governance Guidelines and Policies, retains the flexibility to decide, as new circumstances arise, whether or not to combine or separate the position of Chairman and Chief Executive Officer.

As with all companies, we face a variety of risks in our business. Our Board of Directors is responsible for oversight of our Company's risks, and effective risk management is a top priority of the Board and management. The Board believes that having a system in place for risk management and implementing strategies responsive to our risk profile and exposures will adequately identify our material risks in a timely manner our material risks.manner. In order to more efficiently manage these risks, the Board has delegated certain risk management oversight responsibilities to relevant Board committees, as follows below.committees.

The Audit/Compliance Committee has the direct responsibility for risk oversight relating to accounting matters, financial reporting, and enterprise, legal and compliance risks. Our Chief Financial Officer (who is responsible for managing the risk management function), General Counsel (who serves as our Corporate Compliance Officer), Director of Internal Audit, management, and independent registered public accounting firm, PricewaterhouseCoopers LLP, all report directly to, and meet with, the Audit/Compliance Committee on a regular basis. The Audit/Compliance Committee and the Board also meet periodically with management to review Granite's major financial risk exposures and the steps that management has taken to monitor and control such exposures, which include Granite's risk assessment and risk management policies.

The Executive Committee is responsible for overseeing management's efforts to assess risks related to the decision to bid on large projects, and monitormonitoring ongoing risks and contingencies related to those projects. The Compensation Committee is responsible for overseeing the management of risks related towhich are mitigated by our employment policies and our compensation and benefits systems, and the Nominating and Corporate Governance Committee oversees the management of risks associated withwhich are mitigated by our Corporate

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Governance Guidelines and Policies and Code of Conduct, including compliance with listing standards for independent directors and committee assignments. The committee chairs report on risk related matters to the full Board from time to time as appropriate.

TableBoard of ContentsDirectors' Nomination Policy

Evaluation Criteria and Procedures

Members of the Board of Directors of Granite are divided into three classes and are nominated for election for staggered three-year terms. The Board, its members, its committee structure, its governance performanceplans and its overall performance are continuously reviewed. Included in this review is a careful evaluation of the diversity of skills and experience of Board members weighed against Granite's current and emerging operating and strategic challenges and opportunities. The Board of Directors makes every effort to nominate individuals who bring a variety of complementary skills and, as a group, possess the appropriate skills and experience to oversee our business. Accordingly, although diversity is a consideration in the nominating and evaluation process, the Nominating and Corporate Governance Committee and the Board of Directors do not have a formal policy with respect to the consideration of diversity. Evaluations are made on the basis of observations and interviews with management and with Board members conducted annually by the Nominating and Corporate Governance Committee.

Current Board members whose performance, capabilities, and experience meet Granite's expectations and needs are nominated for re-election in the year of their respective term's completion. In accordance with Granite's Corporate Governance Guidelines and Policies, Board members will not stand for re-nomination and no proposed candidate will be re-nominated if the nominee’s 72^nd birthday occurs prior to the annual meeting of shareholders in the year of re-nomination or nomination. Moreover Directors will retire no later than the first annual meeting of shareholders immediately following their 72^nd birthday. Mr. Dorey is retiring atThe Board granted an exception to this policy for Messrs. Bjork and Bradford upon recommendation of the 2017 Annual Meeting as required by Granite’s bylaws.Nominating and Corporate Governance Committee.

Each member of the Board of Directors must meet a set of core criteria, referred to as the "three C's": Character, Capability and Commitment. Granite was founded by persons of outstanding character, and it is Granite's intention to ensure that it continues to be governed by persons of high integrity and worthy of the trust of its shareholders. Further, Granite intends to recruit and select persons whose capabilities, including their educational background, their work and life experiences, and their demonstrated records of performance will ensure that Granite's Board will have the balance of expertise and judgment required for its long-term performance and growth. Finally, Granite will recruit and select only those persons who demonstrate they have the commitment to devote the time, energy, and effort required to guarantee Granite will have the highest possible level of leadership and governance.

In addition to the three C's, the Board recruitment and selection process assures that the Board composition meets all of the relevant standards for independence and specific expertise. For each new recruitment process, a set of specific criteria is determined by the Nominating and Corporate Governance Committee with the assistance of the Chairman of the Board and an executive search firm, if the Committee deems engagement of such a firm appropriate. These criteria may specify, for example, the type of industry or geographic experience that would be useful to maintain and improve the balance of skills and knowledge on the Board. After the search criteria are established, an executive search firm is typically engaged to use its professional skills and its data sources and contacts, including current Granite Board members and officers, to seekidentify appropriate candidates. The credentials of a set of qualified candidates provided by the search process are submitted for review by the Nominating and Corporate Governance Committee, the Chairman of the Board and senior officers. Based on this review, the Nominating and Corporate Governance Committee invites the top candidates for personal interviews with the Nominating and Corporate Governance Committee and Granite's executive management team.

Normally, the search, review and interview process results in a single nominee to fill a specific vacancy. However, a given search may be aimed at producing more than one nominee, andor the search for a single nominee may result in multiple candidates of such capability and character that multiple candidates might be nominated and the Board may be expanded accordingly.

It is Granite's intention that this search and nomination process consider qualified candidates referred by a wide variety of sources, including all of Granite's constituents - its customers, employees and shareholders and members of the communities in which it operates. The Nominating and Corporate Governance Committee is responsible for assuring that relevant sources of potential candidates have been appropriately canvassed.

The Board used the evaluation criteria and procedures listed in this section to identify, nominate and approveappoint Mr. Bjork, Dr. Galloway, Mr. Krusi and Mr. Lyash for election at the director candidates who joined the Board on February 8, 2017.

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Shareholder Recommendation and DirectDirect Nomination of Board Candidates

Consistent with our bylaws and the Nominating and Corporate Governance Committee charter, Granite will review and consider for nomination any candidate for membership to the Board recommended by a shareholder, utilizing the same evaluation criteria and selection process described in “Evaluation Criteria and Procedures” on page 13.above. The Committee will consider nominees to the Board recommended by shareholders so long asshareholders. Shareholders wishing to recommend a candidate for consideration in connection with an election at a specific annual meeting should notify Granite well in advance of the shareholder gives timely noticemeeting date to allow adequate time for the review process and preparation of the proxy statement, and in writing of his or her recommendation. To be timely, a shareholder recommendation for a directorno event later than December 25, 2019 with respect to be elected at the 2018 Annual Meeting of Shareholders must be received at Granite's principal office, addressed to the Corporate Secretary, on or before December 26, 2017.direct nominations.

In addition, Granite's bylaws provide that any shareholder entitled to vote in the election of directors may directly nominate a candidate or candidates for election at a meeting provided that timely notice of his or her intention to make such nomination is given. To be timely, a shareholder nomination for a director to be elected at an annual meeting must be received at Granite's principal office, addressed to the Corporate Secretary, not less than 120 days prior to the first anniversary of the date the proxy statement for the preceding year's annual meeting of shareholders was released to shareholders and must contain the information specified in our bylaws. If no meeting was held in the previous year, the date of the annual meeting is changed by more than 30 calendar days from the previous year, or in the event of a special meeting, to be on time, the notice must be delivered by the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public announcement of the date of the meeting was made.

To be timely, a shareholder nomination for a director to be elected at the 20182020 Annual Meeting of Shareholders must be received at Granite's principal office, addressed to the Corporate Secretary, on or before December 26, 2017.25, 2019. For further information, see "Shareholder Proposals to be Presented at the 20182020 Annual Meeting of Shareholders" on page 45.Shareholders."

Director Independence

Under the listing standards of the NYSE, a director is considered independent if the Board determines that the director has no material relationship with Granite. In determining independence, the Board considers pertinent facts and circumstances including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The Board follows these guidelines, established by the NYSE, when assessing the independence of a director:

Table of ContentsGranite or whose immediate family member is, or has been within the last three years, an executive officer of Granite, may not be deemed independent until three years after the end of such employment relationship. Employment as an interim Chairman or Chief Executive Officer or other executive officer shall not disqualify a director from being considered independent following that employment.

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The Board reviews the independence of all non-employee directors every year. For the review, the Board relies on information from responses to questionnaires completed by directors and other sources. Directors are required to immediately inform the Nominating and Corporate Governance Committee of any material changes in their or their immediate family members' relationships or circumstances that could impact or change their independence status.

The following non-employee directors are independent under the listing standards of the NYSE: Claes G. Bjork, James W. Bradford, Jr., David C. Darnell, William G Dorey, Patricia D. Galloway, David H. Kelsey, Alan P. Krusi, Jeffrey J. Lyash, Celeste B. Mastin, Michael F. McNally William H. Powell and Gaddi H. Vasquez.

Board and Annual Shareholder Meeting Attendance

During 2016,2018, the Board of Directors held six regular meetings and one telephonic meeting.eight meetings. Each of the directors attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings of any committee(s) on which he or she served. Except for irreconcilable conflicts, directors are expected to attend the annual meeting of shareholders.

The annual meeting attendance policy is a part of Granite's Board of Directors Corporate Governance Guidelines and Policies and is posted on Granite's website. See "Granite Website" below. All nineeleven directors then in office attended Granite's 20162018 Annual Meeting of Shareholders.

Communications with the Board

Any shareholder or other interested party wishing to communicate with the Board of Directors, or any particular director, including the Chairman of the Board or the Lead Director, if there is one, can do so by following the process described in the Communications with the Board of Directors Policy. The policy is posted on Granite's website. See "Granite Website" below.

Corporate Governance Guidelines and Policies

Granite's Board of Directors is subject to the Board of Directors Corporate Governance Guidelines and Policies. The Board of Directors Corporate Governance Guidelines and Policies is available on our website. See "Granite Website" below.

Code of Conduct

Granite's Code of Conduct applies to all Granite employees, including the Chief Executive Officer and the Chief Financial Officer, and to all directors, including the Chairman of the Board. The Code of Conduct is available on Granite's website. We will also post any amendments to the Code of Conduct, or waivers of the application of provisions of the Code of Conduct to any of our directors or executive officers, on our website. See "Granite Website" below.

Granite Website

The following charters and policies are available on Granite's website atwww.graniteconstruction.comat www.graniteconstruction.com at the "Investors" site, then under "Corporate Governance": the Audit/Compliance Committee Charter, the Nominating and Corporate Governance Committee Charter, the Compensation Committee Charter, the Board of Directors Corporate Governance Guidelines and Policies, the Board of Directors' Nomination Policy, and the Communication with the Board of Directors Policy. You can also obtain copies of these charters and policies, without charge, by contacting Granite's Investor Relations Department at 831.724.1011. The Code of Conduct is available on Granite's website atwww.graniteconstruction.comat www.graniteconstruction.com at the "Our Company" site under "Code of Conduct." You can obtain a copy of the Code of Conduct and any amendments to the Code of Conduct, without charge, by contacting Granite's Human Resources Department at 831.724.1011.

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Table of ContentsExecutive and Director Compensation and Other Matters

Objective of the Compensation Program

The market for executive talent is highly competitive and the objective of our executive compensation program is to attract and retain talented, creative, and experienced executives with the skills and leadership qualities necessary to compete in the marketplace, deliver consistent financial performance and grow shareholder value. The Compensation Committee believes that an effective way to enhance Granite's performance is through variable compensation structured to align our executives’ interests with the Company’s short and long-term performance objectives. Key elements of the executive officer program are as follows:

Executive Officer Compensation Program

During fiscal year 2016,2018, we conducted our annual “Say on Pay” shareholder advisory vote, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Securities and Exchange Commission (“SEC”) rules. This resulted in the approval of our 2015the compensation of theour Named Executive Officers for 2017 by approximately 98% of the votes cast. The Compensation Committee considers these voting results when planning compensation for subsequent years and believes the results affirm shareholder approval of the Company’s executive compensation program.pay levels, programs and policies. Accordingly, the Compensation Committee did not adopt any changes to this program as a result of this vote, although the Compensation Committee is continually evaluating our executive compensation to further align the program with shareholders’ interests. In addition to this endorsement by our shareholders of our executive compensation programs and practices, management values the views of our largest institutional shareholders and proxy advisory firms on our compensation practices and disclosures.

The key components of the 20162018 program for compensating our ChiefNamed Executive Officer, Chief Financial Officer and the next three highest paid executive officers during 2016 (the “Named Executive Officers”)Officers are as follows:

The specific provisions of the compensation opportunity, plan design, and performance objectives are described in greater detail in the remainder of this Compensation Discussion and Analysis.

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The following table identifies our 2018 Named Executive Officers:

⁽¹⁾Ms. Desai was appointed Senior Vice President and CFO effective July 9, 2018.

⁽²⁾Ms. Krzeminski retired from the Company effective July 6, 2018.

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Role of the Compensation Committee and Chief Executive Officer in Determining Executive Compensation

The Compensation Committee is actively engaged in the design and approval of all elements of the compensation program for our executive officers. Compensation and potential payouts are determined with assistance and recommendations from the compensation consultant as discussed below. The Compensation Committee determines the compensation of the Chief Executive Officer. The annual salary levels, incentive compensation targets and potential payouts of the other executive officers are reviewed and approved by the Compensation Committee based on recommendations of the Chief Executive OfficerCEO and the compensation consultant. See "InformationThe Compensation Committee determines the compensation of the CEO. For a detailed explanation, please refer to “Information About the Board of Directors and Corporate Governance — Committees of the Board — Compensation Committee" on page 10.Committee.”

Role of the Compensation Consultant

The Compensation Committee has retained Mercerthe services of FW Cook as its compensation consultantCompensation Consultant to provide information, analysis,advice and advice with regard torecommendations on executive officer compensation.and Board of Director compensation programs. Representatives of the compensation consultant attendattended Compensation Committee meetings and provideprovided guidance and expertise on competitive pay practices and plan designs that are consistent with the key objectives of the compensation program. See "InformationFor a detailed explanation, please refer to “Information About the Board of Directors and Corporate Governance — Role of the Compensation Consultant" on page 11.Consultant.”

Annual Risk Assessment

The Compensation Committee annually reviews the balance between risk and reward in the design of the executive officer and employee incentive compensation programs. The AIP and LTIP utilize a portfolio of performance metrics across the company designed to balance short and long-termlong term financial objectives and generate sustainable shareholder value. Performance goals are set as a range for each objective with a maximum payout opportunity assigned to each performance goal. The Compensation Committee carefully reviews incentive plan goals to ensure the appropriate levels of difficulty and reviews the financial performance of Granite and its peer groups’ financial performancepeers to ensure performance goals and payout opportunities are appropriately calibrated. The performance measures, maximum payout opportunities and the calibration of achievability of incentive plan goals are all designed to help ensure that the incentive plans appropriately balance risk and reward, limiting excessive risk-taking and the potential for windfall payouts. Finally, the Company maintains several risk mitigating governance policies such as executive stock ownership guidelines, anti-hedging/pledging policies and an incentive compensation recoupment policy. As a result of the above, the Compensation Committee believes that the compensation program is not reasonably likely to have a material adverse effect on the Company.

Market Data Considered in Determining Executive Compensation for 2018

The Compensation Committee reviews available industry compensation data to establish competitive compensation levels which will reward our executive officers if performance targets are achieved. BenchmarkDuring 2018, benchmark data isfrom 2017 was obtained from a single peer group consisting of eleven public companies representing the construction, engineering, andand/or construction materials industries. The Compensation Committee believes that industry-specific companies are the most appropriate source of benchmark data as they are most representative of Granite’s market for talent. The data from the peer group of eleven public companies is used by the Compensation Committee to establish base salary, target total cash and long-termlong term incentive compensation levels and as the comparative group for measuringto measure relative Total Shareholder Return performance. SeeFor a detailed explanation, please refer to “Long Term Incentive Compensation – Performance Awards” on page 23.Awards.”

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Table of ContentsPeer

Peer Group of Public CompaniesCompanies

The eleven public companies selected for the peer group to inform 2018 target total direct compensation levels are in the construction, engineering, and/or construction materials industries and compete for executive talent in the same market as Granite.

The table below names each of the companies and its respective annual revenues and total assets for its 2016 fiscal year.in the 2018 peer group.

Granite's fiscal 2016 revenues and total assets at December 31, 2016 were $2,514,617,000 and $1,733,453,000 respectively.

Compensation Elements

Base Salaries

Effective January 1, 2016, Mr. Roberts’s

The Compensation Committee reviews and sets the base salary increased from $750,000 to $800,000, Mr. Matheson’s base salary increased from $375,000 to $400,000, and Mr. Richards’ base salary increased from $375,000 to $400,000. Thesesalaries for the Named Executive Officers annually. Salary increases are based on individual performance and tenure in their respective positions, and any increases are supported by the market median data from Granite’s peer group shown in the table abovegroup.

Effective July 9, 2018, Ms. Desai was promoted from Vice President, Corporate Finance and by the peer group median in the following Base Salary Positioning Chart. Salary increases also reflect increased tenureTreasurer to Senior Vice President and performance in respective positions. No other changes to theCFO. In connection with her promotion, Ms. Desai’s base salary was set at $425,000. Named Executive Officer base salaries of ourfor 2018 were 11% below the median data, in aggregate, reflecting a conservative positioning for certain Named Executive Officers that were new to their respective role. Mr. Larkin was promoted to Senior Vice President and California Group Manager effective October 16, 2017 and did not receive an increase to his base salary for 2018 due to his recent promotion.

Base salaries for 2018 and 2017 for the Named Executive Officers were as follows:

Base Salary Chart

⁽¹⁾ Ms. Desai was promoted to Senior Vice President and CFO effective July 9, 2018.

⁽²⁾ Ms. Krzeminski retired from the Company effective July 6, 2018.

2018 Annual Incentive Plan Compensation

Effective January 1, 2018, the Compensation Committee approved changes to the 2018 Annual Incentive Plan to support a heightened focus on the achievement of the Company’s annual financial plan.  The 2018 plan used a goal attainment approach that pays a target award for achieving pre-established target Company Net Income and/or Group Operating Income goals, a change from the funded pool approach used in prior years. Annual profitability forecasts were made for 2016.at the beginning of the year and were used to set the target performance goals. Threshold and maximum goals were also established, and payouts were determined based on achievement versus the goals. As in prior years, performance against Company and/or Operating Group safety objectives served as a modifier to the calculated bonus based on financial performance.

For amounts paid as base salary during 2016, see the Summary Compensation Table appearing on page 30.

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Annual Incentive CompensationIncentive Opportunity

The Named Executive Officers participate in the AIP pursuant to which annual incentive compensation is determined by overall company performance and/or applicable group performance. As describedpresented in more detail below, each Named Executive Officer's targeted annual incentive opportunity is based on external benchmark data for similar positions and is expressed as a percentage of base salary. MaximumPursuant to the terms of the AIP, maximum cash payouts cannot exceed the lesser of threetwo times the target opportunity or $2,500,000.opportunity. The aggregate AIP target opportunities were 3% below peer group median data.

The 2018 AIP opportunities for the Named Executive Officers are presented below:

Annual Incentive Opportunity

⁽¹⁾The “target” is set by the Compensation Committee after a review of annual incentive opportunity is competitive with those offered bytarget awards at Granite’s peer group companies, and is the basis for establishing the threshold and maximum annual incentive.

2016 Annual⁽²⁾ Ms. Desai’s annual incentive target opportunity and payout presented in the table were prorated as a result of her promotion to Senior Vice President and CFO effective July 9, 2018. For additional information regarding Ms. Desai’s incentive compensation plan prior to her promotion, please refer to “2018 Incentive Compensation Plan for Jigisha Desai.”

Individual awards⁽³⁾ In connection with his appointment to Senior Vice President and Large Projects Group Manager, Mr. Swanberg was guaranteed a minimum award of $200,000, provided that if actual performance under the AIP are paid out/determinedresulted in a greater award, the award would be based on a pre-determined percentage (funding ratio) of Company Net Income and/or Group Operating Income.actual performance.

Named Executive Officer AIP awards incorporate two funding ratio levels. The initial funding ratio applies once Company Net Income and/or Group Operating Income achieve “threshold” performance levels. A higher funding ratio level is applied once financial performance is at or above “expectations” performance levels for Company Net Income and/or Group Operating Income. The “expectations” performance levels of Company Net Income and Group Operating Income are typically greater than budgeted amounts and are intended to encourage plan participants to deliver superior financial performance. No funding of individual bonuses will occur if the performance of⁽⁴⁾ Ms. Krzeminski retired from the Company and/or Group is beloweffective July 6, 2018, and in accordance with the specified “threshold” levelterms of her AIP agreement, she was eligible to receive a prorated award based on full-year Company performance.

2016 Annual Incentive Plan

2018 AIP Performance Measure Definitions

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2016 Annual Incentive Plan Performance ObjectivesMeasures

At the beginning of the annual performance period (January 1^st – December 31^st), the Compensation Committee approved the 20162018 AIP weighting and financial performance goals. Named Executive Officer annual incentive bonuses are funded once threshold performance levels are achieved. Higher funding levels are applied once performance is at or above expectations. BonusThe Compensation Committee determined that 2018 AIP payouts are calculated as a percentage of Company pre-bonus net income and Group operating profit.

Company Performance

Group Performance

2016 Annual Incentive Plan Company and Group Funding Ratios

Funding ratios are individualized to account for the Named Executive Officer’s respective roles and responsibilities. Mr. Roberts, Mses. Desai and Ms. Krzeminski’s bonus opportunities areKrzeminski were to be determined based on Company financial performance. Mr. Donnino, Mr. Richards and Mr. Matheson have two funding ratios with a larger ratio tied to their Group’s performance and a smaller ratio tied to overall Company performance. This is intended to relate bonus opportunities for Mr. Donnino, Mr.safety multiplier. For Messrs. Larkin, Richards and Mr. MathesonSwanberg (the Operating Group Named Executive Officers), the Committee established independent measures for the 2018 AIP to bothbe paid out based on Company financial performance and applicable Group financial performance with the respective safety multipliers applied.

The following table illustrates the 2018 AIP performance measures:

⁽¹⁾ Measured based on each individual Group performance, where applicable.

⁽²⁾ Company Net Income is defined as actual consolidated Net Income attributable to Granite Construction Incorporated calculated in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and adjusted for items permitted by the AIP which were primarily related to business acquisitions during 2018.

⁽³⁾ Operating Income is defined as actual operating income for the applicable Group calculated in accordance with U.S. GAAP and adjusted for items permitted by the AIP which were primarily related to business acquisitions during 2018.

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⁽⁴⁾ Granite uses the OSHA Recordable Incident Rate (“ORIR”), a nationally recognized metric, to benchmark its safety performance against the construction industry. ORIR tracks all injuries which require OSHA documentation (i.e., those that result in medical treatment, restricted duty or lost time) and represents the number of events per 100 full-time employees. It is calculated by multiplying the number of OSHA recordable injuries (total injuries or lost time injuries) by 200,000 (2,000 hours per employee per year x 100 employees) and dividing by the total number of hours of employee exposure.

2018 AIP Performance Measure and Results

The Compensation Committee considered the Company's annual operating plan for the year in setting threshold, target and maximum performance goals for 2018 AIP performance metrics. The payout based on Company and/or Group financial performance is zero if Company and/or applicable Group performance, respectively, is below the financial performance threshold. Once threshold requirements are met, Named Executive Officers can earn between 50% and 200% of their Group’s performance, as well asannual target opportunity depending on the overall resultslevel of achievement of the Company. Bonuses are adjusted based onCompany and/or Group financial performance. Linear interpolation applies for performance between threshold/target and target/maximum performance levels. The calculated bonus under Company and/or Group performance components is subject to a safety multiplier ranging from -10%90% to +10%, with safety at target performance resulting in no adjustment.

Company Bonus Funding Ratios
(Percentage of Company Pre-Bonus Net Income)

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Group Bonus Funding Ratios
(Percentage of Group Operating Profit)

Safety Multiplier

2016 Annual Incentive Plan bonus awards are subject to adjustment by a safety multiplier, which is calculated110% based on year-end safety results. Awards for Mr. Roberts and Ms. Krzeminski are subject to adjustment based on the overall safety results of the Company. Awards for Mr. Donnino, Mr. Richards and Mr. Matheson are subject to adjustment based upon both the overall safety results of the Company and of their assigned Groups.

The values of the 2016 AIP awards are subject to adjustment based on safety results as follows:

2016 Company and Group Safety Goals

2016 year-end Company and Group safety performance, resultsas applicable.

The following were as follows:the financial measures set for 2018:

2016

2018 AIP Financial Performance Goals

The following table outlines the safety performance goals and results. Linear interpolation is used to determine the multiplier when actual performance attained falls between threshold/target and target/maximum performance levels:

2018 AIP Safety Performance ResultsMultiplier Goals

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Based on actual performance, individual incentives earned by the Named Executive Officers were as follows:

2016 AIP Company Bonus Payouts

2016 AIP Group Bonus Payouts

2016Summary of Actual 2018 AIP Total Bonus Payouts

⁽¹⁾

⁽¹⁾Represents the sum of 20162018 Company bonus payouts and 2016 Group bonus payouts.

⁽²⁾ Ms. Desai’s annual incentive target opportunity and payout presented in the table above were prorated as a result of her promotion to Senior Vice President and CFO effective July 9, 2018. For additional information regarding Ms. Desai’s incentive compensation plan prior to her promotion, please refer to “2018 Incentive Compensation Plan for Jigisha Desai.”

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⁽³⁾ In connection with his appointment to Senior Vice President and Large Projects Group Manager, Mr. Swanberg was guaranteed a minimum award of $200,000, provided that if actual performance under the AIP resulted in a greater award, the award would be based on actual performance. The amount included under “Other” reflects a payment to Mr. Swanberg as a result of his guaranteed minimum award.

Granite’s three-year TSR rankingperformance as of December 31, 20152017 for the performance period from January 1, 20132015 through December 31, 20152017 was 8 outat the 55th percentile, reflecting a share-based earnout of 13 companies, or 83%109% of the TSR target opportunity.target. See “2013 - 2015“2015 – 2017 TSR Funding Mechanism” on page 24.above. The earned awards for the performance period are presented in the following table.

TSR Performance Period January 1, 20132015 – December 31, 2017

⁽¹⁾ Awards are denominated as a cash value until earned based on performance. The number of RSUs awarded was calculated by dividing the actual long-term incentive value by $35.49, which was the average stock price over the first 30 days of January 2015.

⁽²⁾ Ms. Desai became an Executive Officer effective July 9, 2018 and was not eligible to participate in the 2015 – 2017 LTIP. For a detailed explanation of Ms. Desai’s incentive compensation program, please refer to “2018 Incentive Compensation Plan for Jigisha Desai.”

⁽³⁾ Due to the performance period beginning prior to becoming an Executive Officer, Messrs. Larkin and Swanberg were not eligible to participate in the 2015 – 2017 TSR program.

Service Awards

The Compensation Committee believes granting a portion of equity awards as Restricted Stock Units (“RSUs”) assists in maintaining competitive levels of compensation, encourages the continued retention of key management, and aligns the interest of Named Executive Officers with that of the shareholders. Service Awards vest ratably overin three years.equal annual installments beginning on the date of grant, subject to continued service.

2018 Service Awards