UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
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☒ | Preliminary Proxy Statement |
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☐ | Definitive |
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☐ | Soliciting Material Pursuant to §240.14a-12 |
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)all boxes that apply):
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☐ | Fee paid previously with preliminary |
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Notice of 2019 Annual Meeting of Shareholders
and Proxy Statement
GRANITE CONSTRUCTION INCORPORATED
585 West Beach Street
Watsonville, California 95076
Notice of Annual Meeting of Shareholders
April 23, 201928, 2023
Date: | Thursday, June |
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Purposes of the Meeting:
To elect four (4) directors for the ensuing three-year term;
To hold an advisory vote on executive compensation for the Named Executive Officers;
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, 2019; and
To consider any other matters properly brought before the meeting.
• | To elect three directors of Granite Construction Incorporated (the “Company”) for a term set to expire at the 2026 annual meeting; | |
• | To hold an advisory vote on executive compensation for the Named Executive Officers; | |
• | To hold an advisory vote on frequency of conducting an advisory vote on executive compensation; | |
• | To approve an amendment to the Company’s certificate of incorporation to eliminate personal liability of officers for monetary damages for breach of fiduciary duty as an officer; | |
• | 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, 2023; and | |
• | To consider any other matters properly brought before the meeting. |
Only shareholders, persons holding proxies from shareholders and invited representatives of the media and financial community may attend the meeting.
IfTo participate in the Annual Meeting, you received amust visit [X] and enter the 16-digit control number included in the Notice of Internet Availability of Proxy Materials, please bringon your proxy card, or in the instructions that Notice with you.accompanied your proxy materials. During the Annual Meeting, shareholders may vote their shares virtually and submit questions by following the instructions available on the meeting website. If you are a beneficial shareholder, you may contact the bank, broker or other institution where you hold your shares are held in the name of a broker, trust, bank, or other nominee,if 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.have questions about obtaining your control number.
The record date for the 20192023 Annual Meeting of Shareholders (the “Annual Meeting”) is April 12, 2019.2023. 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.
We have included a copy of theOur Annual Report on Form 10-Kto Shareholders for 2022 will be made available to shareholders at the fiscal year ended December 31, 2018 withsame time as the proxy materials on Granite's website.materials.
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 related 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 23, 2019,28, 2023, we will begin mailing a Notice of Internet Availability of Proxy Materials to all shareholders of record as of April 12, 2019,2023, other than persons who hold shares in the Granite Construction Profit Sharing and 401(k) Plan (such persons, the "401(k) Participants"“401(k) Participants” and such plan, the "401(k) Plan"“401(k) Plan”). We will also post our proxy materials on the website referenced in the noticeNotice (https://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 23, 2019.28, 2023.
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 noticeNotice and website provide information regarding how you may request to receive proxy materials in printed form by mail on an ongoing basis.
Your vote is important. Please vote your proxy promptly so your shares can be represented at the annual meetingAnnual 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 personvirtually if attending the meeting.Annual Meeting.
To get directions to the 2019The Annual Meeting will be held exclusively online via live audio webcast on the above date and time. You or your proxyholder will be able to attend the Annual Meeting online, vote your shares virtually and submit questions during the meeting by visiting [X] and using your 16-digit control number included in the Notice of Shareholders, callInternet Availability of Proxy Materials, on your proxy card, or in the instructions that accompanied your proxy materials.
In the event of a technical malfunction or other situation that the meeting chair determines may affect the ability of the Annual Meeting to satisfy the requirements for a meeting of shareholders to be held by means of remote communication under the Delaware General Corporation Law, or that otherwise makes it advisable to adjourn the Annual Meeting, the chair or secretary of the meeting will convene the meeting at 10:30 a.m. Pacific Time on the date specified above and at our Investor Relations Departmentaddress specified above solely for the purpose of adjourning the meeting to reconvene at 831.724.1011a date, time and physical or visitvirtual location announced by the meeting chair. Under either of the foregoing circumstances, we will post information regarding the adjournment on the investors page of our website at www.graniteconstruction.comw.ww.graniteconstruction.com. Additionally, the Company will display during the time scheduled for the Annual Meeting at [X] the "Investors" site.
By Orderdate, time and physical or virtual location of the Board of Directors,adjourned meeting.
| By Order of the Board of Directors, | |
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M. Craig Hall
Senior Vice President, General Counsel, Corporate Compliance Officer and Secretary |
| TABLE OF CONTENTS | |
| PAGE | |
Payouts for 2019 - 2021 Total Shareholder Return Awards Paid in 2022 | 30 |
Payouts for 2020 - 2022 Total Shareholder Return Awards Paid in 2023 | 30 |
| Time-Based Service Awards | 31 |
Policy Regarding Recovery of Award if Basis Changes Because of Restatement | |
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Impact of Accounting and Tax Treatments of a Particular Form of Compensation | 33 |
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| Director Compensation Table | 46 |
| Pay versus Performance | 48 |
| PROPOSAL 4: APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO ELIMINATE PERSONAL LIABILITY OF OFFICERS FOR MONETARY DAMAGES FOR BREACH OF FIDUCIARY DUTY AS AN OFFICER | 54 |
PROPOSAL 5: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
Audit/Compliance Committee Pre-Approval Policies and Procedures | |
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| PARTICIPATING IN THE 2023 ANNUAL MEETING OF SHAREHOLDERS | 66 |
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SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE |
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TABLE OF CONTENTS | |
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ii
GRANITE CONSTRUCTION INCORPORATED
585 West Beach Street
Watsonville, California 95076
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"“we,” “us,” “our,” “Granite” or the "Company"“Company”), on behalf of its Board of Directors (referred to herein as “Board of Directors” or “Board”), has made its proxy materials available to you on the Internet in connection with Granite's 20192023 Annual Meeting of Shareholders (the "Annual Meeting"), which will take place virtually at [X] on June 6, 2019 at 10:30 a.m., Pacific Time, at the Carmel Valley Ranch, 1 Old Ranch Road, Carmel, California, 93923.8, 2023. The Notice of Internet Availability of Proxy Materials was mailed to all Granite shareholders of record, except 401(k) Participants, on or about April 23, 2019,28, 2023, 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 23, 2019.28, 2023. 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 23, 2019.28, 2023.
After carefully considering the format of our Annual Meeting, our Board concluded to hold the Annual Meeting exclusively online. Our aim is to offer shareholders rights and participation opportunities during our virtual Annual Meeting that are comparable to those that have been provided at our past in-person Annual Meetings. To participate in the Annual Meeting, you must go to [X] and enter the 16-digit control number included in the Notice of Internet Availability of Proxy Materials, on your proxy card, or in the instructions that accompanied your proxy materials. During the Annual Meeting, shareholders may vote their shares virtually and submit questions by following the instructions available on the meeting website. Please refer to the “Participating in the Annual Meeting” section of this Proxy Statement for more details about attending the Annual Meeting online.
Granite, on behalf of its Board of Directors, is soliciting your proxy to vote your shares at the 2019 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.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.
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, 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, 2019, there were 46,812,424 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:
By Internet: You can vote by Internet by following the instructions in the Notice of Internet Availability of Proxy Materials or by accessing the Internet at https://www.proxyvote.com and following the instructions at that website at any time prior to 11:59 p.m., Eastern Time, on June 5, 2019;
By telephone: In the United States and Canada you can vote by telephone by following the instructions in the Notice of Internet Availability of Proxy Materials or by calling 1.800.690.6903 (toll free) and following the instructions at any time prior to 11:59 p.m., Eastern Time, on June 5, 2019; or
By mail: If you have received a paper copy of the proxy card by mail you may submit your proxy by completing, signing and dating your proxy card and mailing it in the accompanying pre-addressed envelope. Instructions are also on the proxy card. Your proxy card must be received prior to 11:59 p.m., Eastern Time, on June 5, 2019.
Page 1PROPOSAL 1: ELECTION OF DIRECTORS
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).
401(k) Participants have the option to vote by proxy in the following three ways:
By Internet: You can vote by Internet by following the instructions on your proxy card or by accessing the Internet at https://www.proxyvote.com and following the instructions at that website at any time prior to 12:00 p.m. (noon), Eastern Time, on June 4, 2019;
By telephone: In the United States and Canada you can vote by telephone by following the instructions on your proxy card or by calling 1.800.690.6903 (toll free) and following the instructions at any time prior to 12:00 p.m. (noon), Eastern Time, on June 4, 2019; or
By mail: You can submit your proxy by completing, signing and dating your proxy card and mailing it in the accompanying pre-addressed envelope. Instructions are also on the proxy card. Your proxy card must be received prior to 12:00 p.m. (noon), Eastern Time, on June 4, 2019.
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. 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, 2019.
In the election of directors and for all other proposals, you may vote "For," "Against" or "Abstain" with respect to each of the nominees and proposals. If you elect to abstain in the election of directors or any of the other matters, the abstention will not impact the outcome of these matters. 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.
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 Jigisha 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:
For the election of each of the four (4) director nominees;
For the approval of the compensation of the Named Executive Officers as disclosed in this proxy statement;
Page 2
For theratification of 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, 2019.
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 5, 2019, if you originally voted by telephone, or (iii) returning a later dated proxy card such that it is received prior to 11:59 p.m., Eastern Time, on June 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 4, 2019, if you originally voted by telephone, or (iii) returning a later dated proxy card such that it is received prior to 12:00 p.m. (noon), Eastern Time, on June 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.
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. ThisTypically, this means that shareholders annually elect approximately one-third of the members of the Board. The Board currently consists of eleven12 directors. Mr. Kelsey and Mr. Vasquez will retire as directors of the Board of Directors at the Annual Meeting. As a result, the Board of Directors has reduced the size of the Board of Directors from 12 to 10 effective upon the retirement of Mr. Kelsey and Mr. Vasquez.
The terms of Claes G. Bjork, Patricia D. Galloway, Alan P. KrusiDavid C. Darnell, Kyle T. Larkin and Jeffrey J. LyashCeleste B. Mastin will expire at the 2019 Annual Meeting. The Board has nominated Claes G. Bjork, Patricia D. Galloway, Alan P. KrusiDavid C. Darnell, Kyle T. Larkin and Jeffrey J. LyashCeleste B. Mastin for new terms. If elected, each of the nominees will serve as a director until the 2022 Annual Meeting2026 annual meeting and until his or her successor is elected and qualified or he or she resigns or until his or her death, retirement or removal, or other cause identified in Granite's bylaws.
James W. Bradford, Jr. was elected to his present term of office at the 2018 Annual Meeting. Pursuant to Granite’s retirement policy, Mr. Bradford’s service on the Board would normally conclude at this 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.removal.
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.
BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR"“FOR” each of the above-named nominees.
The tables below highlight the qualifications, competency, experience and other information of each director, including each nominee for election to our Board, that contributed to the Board’s determination that each individual is qualified to serve on the Board. This high-level summary is not intended to be an exhaustive list of each director’s skills or contributions.
In addition to the tables above, the following paragraphs provide further 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-heldpublicly 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 presentedin the table above and included below regarding each director's and director nominee's specific experience, qualifications, attributes, and skills that led our Board to the conclusion thatthe 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 MeetingNOMINEES FOR DIRECTOR TO BE ELECTED FOR TERMS EXPIRING AT THE 2026 ANNUAL MEETING
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| 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’s significant operational, acquisition, governmental, financial, leadership-development capabilities and technology execution skills qualify him to serve on our board. Mr. Darnell currently serves as a director of the United Services Automobile Association board and United Services Automobile Association Federal Savings Bank board. 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 70. | |||
 | Celeste B. Mastin |
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Ms. Mastin has served as the President and Chief Executive officer of H.B. Fuller Company since December 2022, and served as Executive Vice President and Chief Operating Officer of H.B. Fuller Company from March 2022 to December 2022. H.B. Fuller Company manufactures, develops, and sells adhesives around the world and is headquartered in | |||
 | Kyle T. Larkin | Director since 2021 | |
Mr. Larkin joined Granite in 1996 and has served as President since September 2020 and as Chief Executive Officer since June 2021. He also served as Executive Vice President and Chief Operating Officer from February 2020 to September 2020, Senior Vice President and Manager of Construction and Materials Operations from 2019 to 2020, Senior Vice President and Group Manager from 2017 to 2019, Vice President and Regional Manager in Nevada from 2014 to 2017 and President of Granite’s wholly-owned subsidiary, Intermountain Slurry Seal, Inc. from 2011 to 2014. He served as Manager of Construction at the Reno area office from 2008 to 2011, Chief Estimator from 2004 to 2008 and Project Manager, Project Engineer and Estimator at Granite’s Nevada Branch between 1996 and 2003. We believe that Mr. Larkin’s knowledge of the construction industry, as well as his intimate knowledge of our business, employees, culture, and competitors, his understanding of the challenges and issues facing the Company and his insider’s perspective of the Company’s day-to-day operations and the strategic direction of the Company, qualify him to serve on our Board. Mr. Larkin holds a B.S. in Construction Management from California Polytechnic State University, San Luis Obispo and an M.B.A. from the University of Massachusetts, Amherst. Age 51. | |||
CONTINUING DIRECTORS WITH TERMS EXPIRING AT THE 2024 ANNUAL MEETING
 | Molly C. Campbell | Director since 2019 | |
Ms. Campbell has served as Infrastructure Advisor with the US Treasury, Office of Technical Assistance since May 2020. She has also served as a non-executive advisor for Boston Consulting Group since March 2022. Ms. Campbell was also a 2019 Fellow at Harvard University’s Advanced Leadership Initiative Program. Prior to that, she served as the Director of the Port of New York and New Jersey from 2015 to 2018, the Director of Financial Management Systems for Los Angeles World Airport in 2015, Deputy Executive Director from 2007 to 2015 and Chief Financial Officer from 2000 to 2007 of the Harbor Department of the Port of Los Angeles. Ms. Campbell is also currently a member of the board of directors of East West Bank. We believe Ms. Campbell’s executive leadership experience, expertise in finance, multi-modal logistics, the maritime industry and transportation and infrastructure project experience qualify her to serve on our Board. Ms. Campbell holds a B.A. degree in Political Science from the University of California, Los Angeles and an M.A. degree in Public Policy from Georgetown University. Age 62. | |||
 | Michael F. McNally | Director since 2016 | |
Mr. McNally retired in 2014 as President and Chief Executive Officer of Skanska USA Inc., a subsidiary of Skanska AB, | |||
 | Laura M. Mullen | Director since 2021 | |
Ms. Mullen currently serves as a part-time, independent consultant for KPMG International. From July 1996 to September 30, 2020, she served as an audit partner with KPMG LLP. In her 37-year tenure with KPMG, Ms. Mullen served in various roles, including Global Lead Audit Engagement Partner, SEC Reviewing Partner, Western Regional Practice Partner and National Office Partner. We believe that Ms. Mullen’s experience as a senior audit partner of a Big Four accounting firm, as well as her 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 her understanding of audit committee functions qualify her to serve on our Board. Ms. Mullen holds a B.S. degree in Business Administration from the California State University, Long Beach. She is a certified public accountant in California and a member of the American Institute of Certified Public Accountants and California Society of Certified Public Accountants. Age 62. | |||
Page 4CONTINUING DIRECTORS WITH TERMS EXPIRING AT THE 2025 ANNUAL MEETING
Nominees for Director with Terms Expiring at the 2022 Annual Meeting
 | Patricia D. Galloway | Director since 2017 | |
| Dr. Galloway | |||
 | Alan P. Krusi | Director since 2018 | |
Mr. Krusi served as President, Strategic Development of AECOM Technology Corporation, a | |||
Page 5
CONTINUING DIRECTORS WITH TERMS EXPIRING AT THE 2025 ANNUAL MEETING
 | Jeffrey J. Lyash | Director since 2018 | |
| Mr. Lyash | |||
Continuing Directors with Terms Expiring at the 2020 Annual Meeting
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Mr. | ||||
RETIRING DIRECTORS AT THE 2023ANNUAL MEETING
 | David H. Kelsey | ||
Mr. Kelsey served as Chief Financial Officer of | |||
 | Gaddi H. Vasquez | ||
Mr. Vasquez 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, from 2013 to | |||
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Page 6INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Continuing Directors with Terms Expiring at the 2020 Annual Meeting
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Continuing Directors with Terms Expiring at the 2021 Annual Meeting
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Information About the Board of Directors and Corporate Governance
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 2018.2022.
| Audit / Compliance |
| Compensation |
| Nominating and Corporate Governance |
| Executive |
| ||||
Claes G. Bjork (1) (2) |
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| ✓ |
| ✓ |
| Chair |
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James W. Bradford, Jr. (1) | ✓ |
| Chair |
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| ✓ |
| |||
David C. Darnell(1) | ✓ |
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| ✓ |
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Patricia D. Galloway(1) | ✓ |
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| ✓ |
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David H. Kelsey (1) | Chair |
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| ✓ |
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Alan P. Krusi(1) |
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| ✓ |
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| ✓ |
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Jeffrey J. Lyash(1) | ✓ |
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| ✓ |
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Celeste B. Mastin(1) |
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| ✓ |
| ✓ |
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Michael F. McNally (1) |
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| ✓ |
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| Chair |
| ✓ |
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James H. Roberts |
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| ✓ |
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Gaddi H. Vasquez (1) |
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| ✓ |
| ✓ |
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Number of Meetings in 2018 |
| 8 |
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| 6 |
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| 5 |
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| 7 |
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Audit / Compliance | Compensation | Nominating and Corporate Governance | Risk | |
Louis E. Caldera(1) | ✔ | ✔ | ||
Molly C. Campbell(1) | ✔ | ✔ | ||
David C. Darnell(1) | ✔ | Chair | ||
Patricia D. Galloway(1) | Chair | ✔ | ||
David H. Kelsey(1) | Chair | ✔ | ||
Alan P. Krusi(1) | ✔ | Chair | ||
Kyle T. Larkin | ||||
Jeffrey J. Lyash(1) | ✔ | ✔ | ||
Celeste B. Mastin(1) | ✔ | ✔ | ||
Michael F. McNally(1)(2) | ||||
Laura M. Mullen(1) | ✔ | ✔ | ||
Gaddi H. Vasquez(1) | ✔ | ✔ | ||
Number of Meetings in 2022 | 8 | 8 | 4 | 7 |
(1)(1) Independent directors pursuant to the listing standards of the NYSE.
(2)(2) Chairman of the Board.
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.Securities and Exchange Commission (“SEC”). The Board has determined that Mr. Kelsey meetsand Ms. Mullen meet 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 and cybersecurity risks. A more complete description of the risk responsibility, functions and activities of the Audit/Compliance Committee can be found under "Board“Board Leadership Structure and its Role in Risk Oversight" on page 11 of this proxy statementOversight” and in "Report“Report of the Audit/Compliance Committee" on page 40Committee” as well as in the Audit/Compliance Committee charter. You can view and print theThe Audit/Compliance Committee charter is available on Granite's website. See "Granite Website"“Granite Website” below.
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.officers and recommends any changes to director compensation to the Board. 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 Compensation Committee has determined that the Company’s annual incentive compensation should partially be tied to a social responsibility metric. Granite uses the OSHA Recordable Incident Rate (“ORIR”) and the Days Away, Restricted, or Transferred (“DART”) Rate, which are nationally recognized metrics, to monitor and manage safety performance and to benchmark its safety performance against the construction industry for incentive compensation purposes. For additional information regarding how this safety metric is used in Granite’s annual incentive plan, see “Compensation Discussion and Analysis—2022 AIP Performance Measures.” Our 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 2012our 2021 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").Plan. The Compensation Committee may delegate any of its responsibilities to a subcommittee composed of one or more members of the Committee. If you desire additional information concerning theThe Compensation Committee you can read the Compensation Committee charter is available on Granite's website. See "Granite Website"“Granite Website” 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 has undertaken a thoughtful approach to board refreshment through the Board nomination and evaluation process and retirement policy. Since 2016, the Board has added 10 new directors, four of whom were women and two of whom were racially/ethnically diverse. The Nominating and Corporate Governance Committee is also responsible for overseeing management succession planning and discusses management succession with the Chairman of the Board and Chief Executive Officer and periodically reports to the Board on management succession planning. The Nominating and Corporate Governance Committee also develops and recommends corporate governance principles and practices to the Board. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board recently amended its corporate governance guidelines and policies to incorporate an over boarding policy that limits the number of public company boards that the Company’s directors can serve on to no more than four and the number of public company boards that the Company’s directors who serve as executive officers of public companies can serve on to no more than two. The Nominating and Corporate Governance Committee also oversees the annual evaluations of the Board and certain senior executive officers of the Company. These annual evaluations of the Board are conducted through questionnaires, which include a self-assessment, an assessment of the effectiveness of the Board and committees and a peer evaluation. The Nominating and Corporate Governance Committee is also responsible for overseeing diversity and inclusion matters. For additional information regarding the Company’s inclusive diversity strategy, see “—Inclusive Diversity” below and the Company’s Sustainability Reports. Additionally, the Nominating and Corporate Governance Committee oversees the management of risks associated withwhich are mitigated by our Corporate Governance Guidelines and Policies and Code of Conduct.Policies. 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“Board of Directors' Nomination Policy."” This policy and the Nominating and Corporate Governance Committee charter are available on Granite's website. See "Granite Website"“Granite Website” below.
The Executive Committee's responsibility is to carry out the powers and authorityAll members of the Board in the management of Granite's business within limits setRisk Committee are non-employee directors who are determined by the Board.Board of Directors to be independent under the listing standards of the NYSE. The ExecutiveRisk Committee is responsible for overseeing the Company’s strategic, operational and health, safety and environmental compliance risks. The Risk Committee is also responsible for overseeing Granite’s strategic planning. The Risk Committee also meets regularly to considerprovides oversight of sustainability/ESG-related risks, including those posed by climate change, which are integrated into Granite’s enterprise risk management system. The Risk Committee receives updates on sustainability/ESG performance and related risks periodically during the approvalyear. The Risk Committee oversees the preparation of, certain large project bidding decisions, as well as to assess and monitor ongoing risks and contingencies related to large projects. The scopethe Board of Directors approves, the Executive Committee's authority is determined in accordanceCompany’s annual Sustainability Reports. Beginning with the "Delegation of Authority and Policy" as adopted and revised from time to timeCompany’s 2020 Sustainability Report, Granite has aligned its sustainability reporting with the framework established by the Board.Task Force on Climate-related Financial Disclosures and uses industry specific metrics, including those identified by the Sustainability Accounting Standards Board, to support performance, tracking and reporting. In the Company’s 2020 Sustainability Report, Granite announced its target to reduce total Scope 1 greenhouse gas emissions. Additionally, Granite is collecting baseline data for Scope 2 greenhouse gas emissions and plans to incorporate Scope 2 into future reduction targets. For additional information, see Granite’s Sustainability Reports. The Risk Committee charter and Granite’s Sustainability Reports are available on Granite's website. See “Granite Website” below.
Role of the Compensation Consultant
The Compensation Committee directly retained the services of Frederic W. Cook & Co., Inc. ("(“FW Cook"Cook”) to provide advice and recommendations to the Compensation Committee on executive officer and Board of Director compensation programs..programs.
During 2018, FW Cook provided the following services to the Compensation Committee relatedduring 2022 which included, but were not limited to, executive officer compensation:the following:
Attended meetings of the Compensation Committee as the Committee’s advisor;
• | Attended meetings of the Compensation Committee as the Compensation Committee’s advisor; |
Evaluated the competitive positioning of Granite’s executive officers' base salaries, annual incentive and long-term incentive compensation relative to our market data;
• | Reviewed the Company’s executive compensation benchmarking peer group and recommended changes for the Compensation Committee's consideration; |
Advised on target award levels within the annual and long-term incentive program and, as needed, on actual compensation actions;
• | Evaluated the competitive positioning of Granite’s executive officers' base salaries, annual incentive and long-term incentive compensation and Granite’s director compensation program relative to market data; |
Assessed the alignment of executive officer compensation levels relative to our performance against Granite's peer companies and relative to the Compensation Committee's articulated compensation philosophy;
• | Advised on target award levels within the annual and long-term incentive program and, as needed, on actual compensation actions for the named executive officers; |
Provided advice on the design of Granite's annual and long-term incentive plans;
• | Provided advice on the design of Granite's annual and long-term incentive plans; |
Advised on the performance measures and performance targets for the annual and long-term incentive programs;
• | Advised on the performance measures and performance targets for the annual and long-term incentive programs; |
Assisted with the preparation of the "Compensation Discussion and Analysis" for the 2019 proxy statement;
• | Advised on other executive compensation policies and practices such as change-in-control, severance payments, equity practices, treatment of equity awards upon retirement, and stock ownership guidelines; |
• | Assisted with the preparation of the Company's “Compensation Discussion and Analysis”; |
Assessed the potential for material risk within Granite's compensation policies and practices for all employees, including executive officers.
• | Provided the Compensation Committee with an update on executive compensation trends and regulatory developments to inform the compensation planning process for 2022; |
• | Assessed the potential for material risk within Granite's compensation policies and practices for all employees, including executive officers. |
Based in part on the policies and procedures FW Cook and the Compensation Committee have in place, the Compensation Committee believes that the advice it receives from the executive compensation consultant, a FW Cook representative, is objective and not influenced by FW Cook’s or its affiliates' relationships with Granite.independent. These policies and procedures include:
FW Cook’s professional standards prohibit the executive compensation consultant from considering any other relationships FW Cook or any of its affiliates may have with Granite in rendering his or her advice and recommendations;
• | FW Cook’s professional standards prohibit the executive compensation consultant from considering any other relationships FW Cook or any of its affiliates may have with Granite in rendering his or her advice and recommendations; |
The executive compensation consultant receives no incentive or other compensation based on the fees charged to Granite for other services provided by FW Cook or any of its affiliates;
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• | FW Cook does not provide any services to Granite other than executive and non-employee director compensation advisory work conducted on behalf of the Committee; |
The executive compensation consultant is only responsible for selling compensation consulting services to Granite, not any other services provided by FW Cook or affiliate companies;
• | The Compensation Committee has the sole authority to retain and terminate the executive compensation consultant; |
The Compensation Committee has the sole authority to retain and terminate the executive compensation consultant;
• | The executive compensation consultant has direct access to the Compensation Committee without management intervention; |
The executive compensation consultant has direct access to the Compensation Committee without management intervention;
• | The Compensation Committee evaluates the quality and objectivity of the services provided by the executive compensation consultant each year and determines whether to continue to retain the consultant; and |
The Compensation Committee evaluates the quality and objectivity of the services provided by the executive compensation consultant each year and determines whether to continue to retain the consultant; and
The protocols for the engagement limit how the executive compensation consultant may interact with management.
• | The protocols for the engagement limit how the executive compensation consultant may interact with management. |
In retaining FW Cook, the Compensation Committee considered the six factors set forth in Exchange Act Rule 10C-1(b)(4)(i) through (vi) of the Securities Exchange Act of 1934 (the “Exchange Act”) and its charter and concluded that no conflict of interest existed that would prevent FW 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 letters with 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.
Compensation Committee Interlocks and Insider Participation
During 2022, Ms. Campbell, Mr. Darnell, Ms. Mastin, Ms. Mullen and Mr. Vasquez served as members of the Compensation Committee. No member of the Compensation Committee (1) was, during the fiscal year ended December 31, 2022, or had previously been, an officer or employee of the Company or (2) had any material interest in a transaction of the Company or a business relationship with, or any indebtedness to, the Company. None of our executive officers have served as members of a board of directors or compensation committee of any other entity that has an executive officer serving as a member of our Board of Directors or Compensation Committee.
The Lead Director and Executive Sessions
Our bylaws and Corporate Governance Guidelines 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 independent directors shall elect aan independent director to serve as Lead Director to serve for a two-yearone-year term or until his or her successor is elected or qualified or until such time, if earlier, at which an independent Chairman is elected. Because Claes G. Bjork,Michael F. McNally, the current Chairman of the Board, is an independent director, we currently do not have a Lead Director. In his capacity as Chairman, Mr. BjorkMcNally 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.principal 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. In order to more efficiently manage these risks, the Board has delegated certain risk management oversight responsibilities to relevant Board committees.
In connection with the election of a new Chairman of the Board of Directors in 2020, the Nominating and Corporate Governance Committee evaluated the structure, composition and operations of the committees of Granite’s Board of Directors, including each committee’s respective role in risk oversight and whether a new committee dedicated to risk oversight would bolster the Board of Directors’ risk oversight function. The Board of Directors and Nominating and Corporate Governance Committee completed their review of the Board of Directors’ risk oversight function and on June 11, 2020, formed a Risk Committee. The Risk Committee is responsible for overseeing the Company’s strategic, operational and health, safety and environmental compliance risks as well as ESG risks. Since 2021, the Board of Directors and Nominating and Corporate Governance Committee have continued to focus on enhancing management succession planning efforts and on further developing Board expertise through continuing director education programs and Company sponsored membership in the NACD.
Additionally, the Board of Directors has delegated other risk management oversight responsibilities as follows:
The Audit/Compliance Committee has direct responsibility for risk oversight relating to accounting matters, financial reporting, and enterprise, legal and compliance and cybersecurity risks. Our Chief Financial Officer (who is responsible for managing the risk management function), General Counsel (who serves as our Corporate Compliance Officer), DirectorVice President 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 receive regular reports from our Chief Financial Officer, Chief Accounting Officer, Treasurer, General Counsel (who is responsible for managing our risk management function and who serves as our Corporate Compliance Officer), and Chief Information Officer (who is responsible for managing cybersecurity risk). 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 monitoring ongoing risks and contingencies related to those projects. The Compensation Committee is responsible for overseeing the management of risks which are mitigated by our employment policies and our compensation and benefits systems, and the Nominating and Corporate Governance Committee oversees the management of risks which 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. Additionally, the Nominating and Corporate Governance Committee oversees risk related to diversity and inclusion matters. The committee chairs report on risk relatedrisk-related matters to the full Board from time to time as appropriate.
Board of Directors' Nomination PolicyBOARD OF DIRECTORS' 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 plans and its overall performance are continuously reviewed. Includedreviewed on an annual basis. Evaluations for director nominees are conducted annually by the Nominating and Corporate Governance Committee and are generally made on the basis of observations responses to surveys, questionnaires and evaluation forms circulated to directors annually.
Also 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, althoughThe Company intends to recruit and select director candidates whose capabilities, including their educational background, their work and life experiences, their diversity is a consideration inof experiences and perspectives, including gender and/or racial/ethnic diversity and their demonstrated records of performance will have the nominatingbalance of expertise and evaluation process,judgment required for the Company’s long-term performance and growth. The Nominating and Corporate Governance Committee considers diversity in its broadest sense, including diversity in professional and life experiences, education, skills, perspectives and leadership, as well as other individual qualities and attributes that contribute to Board heterogeneity, such as race, ethnicity, sexual orientation, gender and national origin. The Company believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the Company's goal of creating a Board of Directors do notthat best serves our needs and those of our shareholders. As of March 31, 2023, 33% of our directors are women, 25% are racially or ethnically diverse and one of our four committees is chaired by a woman. Further, four out of the 10 new directors who have a formal policy with respectbeen added to the considerationBoard since 2016 were women and two out 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.10 were racially/ethnically diverse.
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-nominationbe re-nominated and no proposed candidate will be re-nominatednominated if the nominee’s 72nd72nd birthday occurs prior to the annual meeting of shareholders in the year of re-nominationre- nomination or nomination. Moreover, Directors will retire no later than the first annual meeting of shareholders immediately following their 72nd72nd birthday. The Board granted an exception to this policy for Messrs. Bjork and Bradford upon recommendation of the 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"“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, their diversity of experiences and perspectives, including gender and/or racial/ethnic diversity 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,necessary to appropriately discharge their responsibilities and effort required to guarantee Granite will haveprepare for and, to the highestextent possible, levelattend and participate in all meetings of leadershipthe Board and governance.Committees on which they serve.
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 executivein certain circumstances a search firm, if the Committee deems engagement of such a firm appropriate.firm. 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 identify appropriate candidates.candidates are sought out. The credentials of a set of qualified candidates provided by the search process are submitted for reviewscreening by the Nominating and Corporate Governance Committee, the Chairman of the Board and senior officers.the Chief Executive Officer. 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.others as appropriate.
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, or 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 nominate Mr. Darnell, Mr. Larkin and appoint Mr. Bjork, Dr. Galloway, Mr. Krusi and Mr. LyashMs. Mastin for election at the Annual Meeting.
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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” above. The Committee will consider nominees to the Board recommended by shareholders. Shareholders wishing to recommend a candidate for consideration in connection with an election at a specific annual meeting of shareholders should notify Granite well in advance of the meeting date to allow adequate time for the review process and preparation of the proxy statement, and in no event later than December 25, 2019 with respect to direct nominations.statement.
In addition, Granite'sGranite’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 of shareholders must be received at Granite'sGranite’s principal office, addressed to the Corporate Secretary, notno less than 120 days prior to the first anniversary of the date the proxy statement for the preceding year'syear’s annual meeting of shareholders was released to shareholders and must contain the information and comply with the requirements specified in our bylaws. If no meeting was held in the previous year, the date of the annual meeting of shareholders 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 2020 Annual Meeting2024 annual meeting of Shareholdersshareholders must be received at Granite'sGranite’s principal office, addressed to the Corporate Secretary, on or before December 25, 2019.30, 2023. For further information, see "Shareholder“Shareholder Proposals to be Presented at the 20202024 Annual Meeting of Shareholders."”
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:
● | A director who, within the last three years is, or has been, an employee of Granite 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. |
● | A director who has received, or has an immediate family member who has received, during any twelve-month period within the last three years more than $120,000 in direct compensation from Granite, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), may not be deemed independent. Compensation received by a director for former service as an interim Chairman or Chief Executive Officer or other executive officer and compensation received by an immediate family member for service as an employee of Granite (other than an executive officer) will not be considered in determining independence under this test. |
● | The following directors may not be deemed independent: (a) a director who is a current partner or employee of a firm that is Granite's internal or external auditor; (b) a director who has an immediate family member who is a current partner of such a firm; (c) a director who has an immediate family member who is a current employee of such a firm and who personally works on Granite's audit; or (d) a director or immediate family member who was within the last three years a partner or employee of such a firm and personally worked on Granite's audit within that time. |
A director who has received, or has an immediate family member who has received, during any twelve-month period within the last three years more than $120,000 in direct compensation from Granite, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), may not be deemed independent. Compensation received by a director for former service as an interim Chairman or Chief Executive Officer or other executive officer and compensation received by an immediate family member for service as an employee of Granite (other than an executive officer) will not be considered in determining independence under this test.
● | A director who, or whose immediate family member, is or has been within the last three years, employed as an executive officer of another company where any of Granite's present executive officers at the same time serves or served on that company's compensation committee may not be deemed independent. |
The following directors may not be deemed independent: (a) a director who is a current partner or employee of a firm that is Granite's internal or external auditor; (b) a director who has an immediate family member who is a current partner of such a firm; (c) a director who has an immediate family member who is a current employee of such a firm and who personally works on Granite's audit; or (d) a director or immediate family member who was within the last three years a partner or employee of such a firm and personally worked on Granite's audit within that time.
A director who, or whose immediate family member, is or has been within the last three years, employed as an executive officer of another company where any of Granite's present executive officers at the same time serves or served on that company's compensation committee may not be deemed independent.
A director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, Granite for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues for that fiscal year may not be deemed independent.
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● | A director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, Granite for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues for that fiscal year may not be deemed independent. |
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.,Louis E. Caldera, Molly C. Campbell, David C. Darnell, Patricia D. Galloway, David H. Kelsey, Alan P. Krusi, Jeffrey J. Lyash, Celeste B. Mastin, Michael F. McNally, Laura M. Mullen and Gaddi H. Vasquez.
Board and Annual Shareholder Meeting Attendance
During 2018,2022, the Board of Directors held eight9 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"“Granite Website” below. All eleventwelve directors then in office attended Granite's 2018 Annual Meeting2022 annual meeting of Shareholders.shareholders.
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"“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"“Granite Website” below.
Our Corporate Governance Guidelines and Policies include a director resignation policy in the event a Director nominee does not receive a majority of the votes cast in an election of Directors where the number of nominees is equal to the number of Directors to be elected (an “Uncontested Election”). The policy states that promptly after receiving notice that the Director nominee has not received the requisite majority vote in an Uncontested Election, the Director nominee shall tender his or her resignation to the Board of Directors. The Nominating and Corporate Governance Committee (excluding the Director who tendered the resignation) shall then make a recommendation to the Board of Directors on whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors (excluding the Director who tendered the resignation) shall evaluate such recommendation in light of the best interests of the Company and its shareholders and shall decide whether to accept or reject the resignation, or whether other action should be taken. In reaching its decision, the Board of Directors may consider any factors it deems relevant, including but not limited to the resigning Director’s qualifications, past and anticipated future contributions to the Company as well as the overall composition of the Board of Directors and whether accepting the tendered resignation would cause the Company to fail to meet any rule or regulation (inclusive of listing standards and federal securities laws). The Board of Directors shall act on the tendered resignation and publicly disclose its decision and the rationale behind it within 90 days after the inspector’s certification of the election results. If the Board of Directors elects to reject the resignation, the then incumbent Director will continue to serve until the next annual meeting of shareholders at which time his or her term shall expire. Any vacancies in the Board of Directors resulting from a Director not receiving a majority vote and the Board accepting his or her resignation shall be filled in accordance with the Bylaws.
Employee, Officer and Director Hedging
The Company's Insider Trading Policy prohibits employees, officers and directors from engaging in hedging transactions with respect to Company securities. The policy prohibits transactions, other than a current sale transaction, that are designed to protect a holder of securities from a possible decline in the value of such securities, including puts, options, swaps, zero-cost collars, forward sale contracts or similar instruments or arrangements.
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"“Granite Website” below.
Granite’s Board of Directors believes the Company’s culture is underpinned by its core values, including an unwavering commitment to inclusive diversity as exemplified by strategies that address our guiding belief that diverse backgrounds, perspectives, and experiences enhance creativity and innovation. We have established employee resource groups that serve employees from a variety of backgrounds, and we have designated October as Inclusion month throughout our Company. As of December 31, 2022, approximately 12.6% of Granite's workforce were women and 41.3% were racially and ethnically diverse. We periodically conduct pay equity analyses to support our commitment to pay equity, regardless of race, gender, ethnicity or sexual orientation.
The following charters and policies are available on Granite's website at www.graniteconstruction.com at the "Investors"“Investors” site, then under "Corporate Governance"“Corporate Governance”: the Audit/Compliance Committee Charter, the Nominating and Corporate Governance Committee Charter, the Compensation Committee Charter, the Risk 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. The Company’s Sustainability Reports are available on Granite’s website at www.graniteconstruction.com at the “Company” site, then under “Sustainability.” The information included in Granite’s Sustainability Reports is not incorporated into, and is not part of, this proxy statement. You can also obtain copies of these charters and policies and Granite’s Sustainability Reports, without charge, by contacting Granite's Investor Relations Department at 831.724.1011. The Code of Conduct is available on Granite's website at www.graniteconstruction.com at the "Our Company"“Company” site under "Code“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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PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board of Directors is asking shareholders to approve an annual advisory resolution on executive compensation. The Board of Directors is providing such vote pursuant to Section 14A of the Exchange Act. The advisory vote is a non-binding vote on the compensation of our Named Executive Officers. The vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and Director Compensationthe philosophy, policies and Other Matterspractices described in this proxy statement. The text of the resolution to be voted on at the Annual Meeting is as follows:
Resolved,that the shareholders of Granite Construction Incorporated approve, on an advisory basis, the compensation of the Company's Named Executive Officers as disclosed in the proxy statement for the Company's 2023 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities Exchange Act of 1934, as amended (which disclosure includes the Compensation Discussion and Analysis section, the Summary Compensation Table for 2022 and the related compensation tables and narrative disclosure within the Executive and Director Compensation and Other Matters section of the proxy statement).
The Company urges you to read the disclosure under “Compensation Discussion and Analysis,” which discusses how our compensation policies and procedures implement our pay-for-performance compensation philosophy. You should also read the Summary Compensation Table and other related compensation tables and narrative disclosure which provide additional details about the compensation of our Named Executive Officers. We have designed our executive compensation structure to attract, motivate and retain executives with the skills required to formulate and implement the Company's strategic objectives and grow sustainable shareholder value. We believe that our executive compensation program is reasonable, competitive and strongly focused on pay for performance principles, and provides an appropriate balance between risk and incentives. In particular, key elements of our executive compensation program are:
• | Market competitive total direct compensation targeted at the 50th percentile of comparable positions in the market; |
• | A comprehensive benefits program which is also available to all salaried employees and includes: medical, dental, vision, life, accidental death and dismemberment insurance, short-term and long-term disability insurance, 401(k) Plan, Employee Stock Purchase Plan, health and wellness benefits, paid vacation and holiday pay; and |
• | Eligibility, along with other management employees, to participate in our Non-Qualified Deferred Compensation (“NQDC”) Program. |
The vote regarding the compensation of the Named Executive Officers described above, referred to as a “Say on Pay advisory vote,” is advisory, and is therefore not binding on the Company, the Compensation Committee or the Board of Directors. Although non-binding, the Compensation Committee and the Board of Directors value the opinions that shareholders express in their votes and will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs as they deem appropriate. We currently hold an advisory vote on the compensation of our Named Executive Officers every year. This year we are holding an advisory vote on the frequency of the shareholder vote on executive compensation (see Proposal 3 in this proxy statement). We expect to hold our next advisory vote on the compensation of our Named Executive Officers at our 2024 Annual Meeting, subject to the outcome of the vote on Proposal 3.
BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors unanimously recommends a vote “FOR” the approval of the compensation of the Named Executive Officers as disclosed in this proxy statement and as described pursuant to the compensation disclosure rules of the Exchange Act.
PROPOSAL 3: ADVISORY VOTE ON FREQUENCY OF THE SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, the Board of Directors is asking shareholders to vote on the frequency with which the advisory vote on executive compensation set forth above, referred to as the "say-on-pay advisory vote," will be held.
The vote on the frequency of the say-on-pay advisory vote is a non-binding, advisory vote as to how often the say-on-pay advisory vote should occur: (1) Every One Year, (2) Every Two Years or (3) Every Three Years. You may either vote for one of these alternative frequencies or, if you desire, abstain from voting on this matter.
After considering the benefits and consequences of each option for the frequency of the say-on-pay advisory vote, the Board of Directors has determined that an annual advisory vote on executive compensation is the most appropriate alternative for the Company. Therefore, the Board recommends that you vote for having the say-on-pay advisory vote occur Every One Year.
The Board believes that an annual say-on-pay advisory vote provides the highest level of accountability and communication. An annual vote will allow shareholders to provide the Company with direct input on the executive compensation information presented in the proxy statement each year. Additionally, an annual advisory vote is consistent with the Company's policy of engaging in discussions with shareholders on corporate governance and compensation matters. We understand that shareholders may have different views as to what the most desirable frequency is, and we look forward to hearing from shareholders on this matter.
The option of "Every One Year," "Every Two Years" or "Every Three Years" that receives the highest number of votes cast by shareholders will be deemed to be the frequency for the say-on-pay advisory vote that has been selected by shareholders. However, because this vote is advisory and not binding on the Board of Directors or the Company in any way, the Board may decide that it is in the best interests of the shareholders and the Company to hold the say-on-pay advisory vote more or less frequently than the option approved by shareholders.
BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors unanimously recommends a vote for the option of "EVERY ONE YEAR" as the frequency with which shareholders are provided an advisory vote on executive compensation.
EXECUTIVE AND DIRECTOR COMPENSATION AND OTHER MATTERS
COMPENSATION DISCUSSION AND ANALYSIS
Objective of the Compensation Program
The market for executive talent is highly competitive and the objective of our executive compensation program is to attract, motivate and retain talented, creative and experienced executives with the skills and leadership qualities necessary to compete in the marketplace, formulate and implement the Company’s strategic objectives, deliver consistent financial performance and grow sustainable 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:
Total direct compensation generally is targeted within the range of the 50th percentile of comparable positions in the market;
● | Total direct compensation generally is targeted within the range of the 50th percentile of comparable positions in the market; |
Actual pay levels reflecting market data, individual experience, tenure and ability to impact business and financial results;
● | Individual executive pay levels are based on market data, experience, tenure and impact on business and financial results; |
Short-term and long-term goals aligned with interests of shareholders, with cash and stock-based incentives earned upon the attainment of pre-established financial and non-financial goals;
● | Short-term and long-term goals are aligned with interests of shareholders, with cash and stock-based incentives earned upon the attainment of pre- established financial and non-financial goals; |
A comprehensive benefits program which includes: medical, dental, vision, life, accidental death and dismemberment insurance, short-term and long-term disability insurance, 401(k) Plan, Employee Stock Purchase Plan, health and wellness benefits, paid vacation, holiday pay; and
● | A comprehensive benefits program which includes: medical, dental, vision, life, accidental death and dismemberment insurance, short-term and long- term disability insurance, 401(k) Plan, Employee Stock Purchase Plan, health and wellness benefits, paid vacation, holiday pay; and |
Eligibility, along with other management employees, to participate in our Non-Qualified Deferred Compensation Program.
● | Eligibility, along with other management employees, to participate in our NQDC Program. |
Executive Officer Compensation Program
During 2018, we conductedWe conduct 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”)SEC rules. Our Board has determined to hold a Say on Pay vote on an annual basis, consistent with the results of the most recently held advisory vote regarding the frequency of Say on Pay votes. This resulted in the approval of the compensation of our Named Executive Officers for 20172021 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 the Company’s executive compensation 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 20182022 program for compensating our Named Executive Officers are as follows:
Adjustments to align target total direct compensation closer with market median levels if deemed necessary by the Compensation Committee;
● | Adjustments to align target total direct compensation closer with market median levels, as deemed appropriate; |
An Annual Incentive Plan (“AIP”) with Net Income, Operating Income and Safety as the key performance measures to reward our Named Executive Officers for achieving these measures during the current year (for a detailed explanation, please refer to “2018 Annual Incentive Plan Compensation”); and
● | An Annual Incentive Plan (“AIP”) with Earnings before Interest and Tax (“EBIT”), Operating Income, Operating Cash Flow (“OCF”) and Safety as the key performance measures on which we incentivize and reward our Named Executive Officers (for a detailed explanation, please refer to “2022 Annual Incentive Plan Compensation”); and |
A Long Term Incentive Plan (“LTIP”) that includes a performance-based component that is based on relative Total Shareholder Return (“TSR”) and a service based component to reward and sustain long term performance (for a detailed explanation, please refer to “Long Term Incentive Compensation”).
● | A Long-Term Incentive Plan (“LTIP”) that includes a performance-based component that is based on a 3-year relative Total Shareholder Return (“TSR”) (50% weighting) and a 3-year Return on Net Assets (“RONA”) (25% weighting) and a service-based component (25% weighting) to reward and sustain long term performance (for a detailed explanation, please refer to “Long Term Incentive Compensation”). |
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 20182022 Named Executive Officers:
Named Executive Officer | Title |
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Kyle T. Larkin |
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James A. Radich | Executive Vice President and Chief Operating Officer (“COO”) |
Michael G. Tatusko | Senior Vice President and Mountain Group Manager |
Staci Woolsey | Chief Accounting Officer (“CAO”) |
James D. Richards(1) | Former Senior Vice President and Central Group Manager |
(1)Ms. Desai was appointed Senior Vice President and CFO Mr. Richards ceased to serve as an executive officer effective July 9, 2018.
(2)Ms. Krzeminski retired from the Company effective July 6, 2018.June 27, 2022.
Annual Review of Executive Compensation and Practices
The Compensation Committee and its compensation consultant annually conducts a comprehensive review of the Company’s executive compensation programs, policies and practices. The compensation consultant may recommend changes to the Compensation Committee based on market and corporate governance best practices.
In 2022, the Compensation Committee approved the redesign of the 2022 executive officer annual and long-term incentive programs to incorporate metric diversification, improve alignment with the Company’s peers, ensure support of the Company’s strategic plan and align with the best interest of the Company’s shareholders. The Compensation Committee revised the AIP for the CEO, COO and CFO to be based on EBIT and OCF attributable to Granite Construction Incorporated performance while the AIP for the executive officers with financial accountability for the performance of an operating group was based on their individual group’s operating income and an incentive component tied to the Company’s EBIT and OCF.
In 2022, the Compensation Committee also incorporated a capital efficiency metric, RONA into its LTIP, in addition to relative TSR for executive officers. The Compensation Committee also determined that the performance-based component of the LTIP would make up 75% of an executive officer’s long term incentive target opportunity.
Role of the Compensation Committee and Chief Executive OfficerCEO 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. CompensationTarget total direct compensation, incentive program design and potential payouts are determined with assistance and recommendations from the compensation consultant as discussed below. The annual salary levels, incentive compensation targets and potential payouts of the other executive officers other than the CEO are reviewed and approved by the Compensation Committee based on recommendations of the CEO and the compensation consultant. The Compensation Committee determines the compensation of the CEO.CEO and the CEO does not participate in any deliberations regarding his own compensation. For a detailed explanation, please refer to “Information About the Board of Directors and Corporate Governance — Committees of the Board of Directors — Compensation Committee.”
Role of the Compensation Consultant
The Compensation Committee retained the services of FW Cook as its Compensation Consultantcompensation consultant to provide advice and recommendations on executive officer and Board of Director compensation programs. Representatives of theThe compensation consultant attended Compensation Committee meetings and provided guidance and expertise on competitive pay practices and plan designs that are consistent with the key objectives of the compensation program. For a detailed explanation, please refer to “Information About the Board of Directors and Corporate Governance — Role of the Compensation Consultant.”
The Compensation Committee in consultation with its independent compensation consultant, 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 companyCompany designed to balance shortshort- 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 peers to ensure performance goals and payout opportunities are appropriately calibrated. The performance measures, threshold and 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 20182022
TheEach year the Compensation Committee reviews available industry compensation data to establish competitive compensation levels which will reward our executive officers if performance targets are achieved. During 2018, benchmarkBenchmark data from 20172021 was obtained from a single peer group consisting of elevenseventeen public companies representing the construction, engineering, and/or construction materials industries. The Compensation Committee believes that industry-specificindustry- 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 elevenseventeen public companies is used by the Compensation Committee to establish base salary, target total cash and long termlong-term incentive compensation levelslevels. As an additional market reference point, the Compensation Committee reviews national, general industry survey data scoped based on each executive’s functional role and as the comparative group to measure relative Total Shareholder Return performance. For a detailed explanation, please refer to “Long Term Incentive Compensation – Performance Awards.”revenue responsibility.
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Peer Group of Public CompaniesCompanies
The elevenseventeen public companies selected for the peer group to inform 20182022 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. For 2022, the Compensation Committee approved the removal of Quanta Services, Inc. due to it being above the acceptable revenue range and the addition of Great Lakes Dredging and Docks and Sterling Construction. At the time the peer group was approved, Granite’s trailing 4-quarter revenues were at the 67th percentile of the peer group and the Company’s 12-month average market capitalization was at the 39th percentile of the peer group. The median annual revenue of the approved peer group was $2.8 billion (versus $3.6 billion for Granite) and the median 12-month average market capitalization was $2.1 billion (versus $1.2 billion for Granite).
The table below names each of the companies in the 2018 peer group.group that informed 2022 target compensation levels.
| EMCOR Group Inc. | Primoris Services Corporation | US Concrete Inc. |
| Great Lakes Dredging and Docks | Sterling Construction | Valmont Industries, Inc. |
Cornerstore Building Brands | KBR, Inc. | Summit Materials | |
Dycom Industries, Inc. | MasTec, Inc. |
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| MYR Group, Inc. | Tutor Perini Corporation | |
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Compensation ElementsCOMPENSATION ELEMENTS
Base salaries are essential to attract and retain our leadership and provide our Named Executive Officers a stable level of wages as the other components of their compensation are not guaranteed and are based on Company or operating group performance. Annually, the CEO reviews compensation for the executive officers (other than for himself) and makes recommendations to the Compensation Committee based on responsibility, tenure, individual leadership and operating group performance. The Compensation Committee reviewsconsiders these recommendations, as well as benchmarking comparisons prepared by the compensation consultant and sets the base salaries with reference to the peer group market median for the Named Executive Officers annually. Salary increases are based on individual performanceexecutive officers, including the CEO. Following this review for 2022, the Compensation Committee increased the base salaries of Ms. Curtis by 11.1% and tenure in their respective positions, and any increases are supportedMr. Tatusko by the6.3% to bring them into closer alignment with market median data from Granite’s peer group.
Effective July 9, 2018,rates; the base salaries for Messrs. Larkin, Radich and Richards, and Ms. Desai was promoted from Vice President, Corporate Finance and Treasurer to Senior Vice President and CFO. In connection with her promotion, Ms. Desai’s base salary was set at $425,000.Woolsey remained unchanged. The Named Executive Officer base salaries for 20182022 were 11%2% below the peer median data in the aggregate reflecting a conservative positioning for certainour continuing 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.Officers. Outside of its normal course review, the Compensation Committee reviews executive officer compensation in connection with promotions, or other significant events.
Base salaries for 2018 and 20172022 for the Named Executive Officers were as follows:
Base Salary Chart
Named Executive Officer | 2022 Base Salaries |
Kyle T. Larkin | $900,000 |
Elizabeth L. Curtis | $500,000 |
James A. Radich | $500,000 |
Michael G. Tatusko | $425,000 |
Staci Woolsey | $380,000 |
James D. Richards(1) | $480,000 |
Named Executive Officer | 2017 Base Salary | 2018 Base Salary | % of Change |
James H. Roberts | $850,000 | $900,000 | 5.9% |
Jigisha Desai(1) | - | $425,000 | n/a |
Kyle T. Larkin | $350,000 | $350,000 | 0.0% |
James D. Richards | $400,000 | $425,000 | 6.3% |
Dale A. Swanberg | $400,000 | $425,000 | 6.3% |
Laurel J. Krzeminski(2) | $500,000 | $500,000 | 0.0% |
(1) Ms. Desai was promotedMr. Richards ceased to Senior Vice President and CFOserve as an executive officer effective July 9, 2018.
(2) Ms. Krzeminski retired from the Company effective July 6, 2018.June 27, 2022.
20182022 Annual Incentive Plan Compensation
Effective January 1, 2018,The Named Executive Officers participate in the Compensation Committee approved changesAIP pursuant to the 2018 Annual Incentive Planwhich annual incentive compensation is determined by overall company performance and/or applicable operating group performance to support a heightened focus on the achievement of the Company’sincentivize and reward 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.performance. Annual profitability forecasts were madedetermined at the beginning of the year and were used to setestablish 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 Groupoperating group safety objectives served as a modifier to the calculated bonus based on financial performance.
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Annual IncentiveIncentive Opportunity
As part of the 2022 incentive compensation redesign efforts, the Compensation Committee diversified the annual incentive metrics to include EBIT and OCF as it determined those metrics are important to our overall success in achieving our strategic financial goals. The Named Executive Officers participateperformance goal setting process included reviewing peer data and historical performance with assistance from the Compensation Committee’s executive compensation consultant, FW Cook.
Safety is one of our core values and we use this as a metric in our AIP to align our executive officers with our safety strategy. Beginning in 2022, the Compensation Committee modified the Safety performance multiplier to add a severity metric of Days Away, Restricted or Transferred (DART) in addition to the existing frequency metric of OSHA Recordable Incident Rate (ORIR). This multiplier is weighted 50/50% and applied to the Corporate EBIT and OCF payout results. The Operating Group safety results will be calculated in the AIP pursuantsame manner with the weighted safety multiplier applied to which annual incentive compensation is determined by overall company performance and/or applicable group performance. each group’s operating income results.
As presented 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. The target is set by the Compensation Committee after a review of market median annual incentive target awards of Granite’s peer group and survey data which is the basis for establishing the threshold and maximum annual incentive. Pursuant to the terms of the AIP, maximum cash payouts cannot exceed two times the target opportunity. The aggregate AIP target opportunities were 3%4% below peer group median data.data for our continuing Named Executive Officers for 2022. Ms. Curtis’ target increased from 75% to 80% of salary while other NEO targets remained the same. Outside of its normal course review, the Compensation Committee reviews executive officer compensation in connection with promotions or other significant events.
The 20182022 AIP opportunities for the Named Executive Officers are presented below:below.
Annual Incentive Opportunity
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| Annual Incentive Opportunity | |||
2018 Base Salary | Target(1) as % of Base Salary | Threshold | Target | Maximum | |
James H. Roberts | $900,000 | 115% | $517,500 | $1,035,000 | $2,070,000 |
Jigisha Desai(2) | $425,000 | 75% | $159,375 | $318,750 | $637,500 |
Kyle T. Larkin | $350,000 | 75% | $131,250 | $262,500 | $525,000 |
James D. Richards | $425,000 | 75% | $159,375 | $318,750 | $637,500 |
Dale A. Swanberg(3) | $425,000 | 75% | $159,375 | $318,750 | $637,500 |
Laurel J. Krzeminski(4) | $500,000 | 75% | $187,500 | $375,000 | $750,000 |
Named Executive Officer | Target as % of Base Salary | Threshold | Target | Maximum |
Kyle T. Larkin | 100% | $450,000 | $900,000 | $1,800,000 |
Elizabeth L. Curtis | 80% | $200,000 | $400,000 | $800,000 |
James A. Radich | 80% | $200,000 | $400,000 | $800,000 |
Michael G. Tatusko | 65% | $138,125 | $276,250 | $552,500 |
Staci Woolsey | 60% | $114,000 | $228,000 | $456,000 |
James D. Richards(1) | 75% | $180,000 | $360,000 | $720,000 |
(1)The “target” is set by the Compensation Committee after a review of annual incentive opportunity target awards at Granite’s peer group and is the basis for establishing the threshold and maximum annual incentive.
(2) Ms. Desai’s annual incentive target opportunity and payout presented in the table were prorated Mr. Richards ceased to serve as a result of her promotion to Senior Vice President and CFOan executive officer 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.”
(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.
(4) Ms. Krzeminski retired from the Company effective July 6, 2018, and in accordance with the terms of her AIP agreement, she wasJune 27, 2022, however, he remained eligible to receive a prorated award based on full-year Company performance.annual bonus with respect to fiscal year 2022.
20182022 AIP Performance Measures and Results
At the beginning of the annual performance period (January 1st1st – December 31st)31st), the Compensation Committee approved the 20182022 AIP weighting and financial performance goals. The Compensation Committee determined that 20182022 AIP payouts for Mr. Roberts,Messrs. Larkin and Radich, and Mses. DesaiCurtis and KrzeminskiWoolsey were to be determined based on Company financial performance and a Company safety multiplier. For Messrs. Larkin,Tatusko and Richards and Swanberg (the Operating Groupoperating group Named Executive Officers), the Committee established independent measures for the 2018 AIP to be paid out based on a blend of Company and operating group financial performance and applicable Group financial performance with the respective safety multipliers applied.performance.
The following table illustrates the 2018weighting for each AIP performance measures:financial metric for each of our Named Executive Officers:
| Company Performance | Group Performance | ||
Named Executive Officer | Weighting | Performance Measure | Weighting | Performance Measure(1) |
James H. Roberts | 100% | Company Net Income(2) x Company Safety Multiplier(4) | - | Group Operating Income(3) x Group Safety Multiplier(4) |
Jigisha Desai | 100% | - | ||
Kyle T. Larkin | 40% | 60% | ||
James D. Richards | 40% | 60% | ||
Dale A. Swanberg | 40% | 60% | ||
Laurel J. Krzeminski | 100% | - | ||
2022 Performance Measure | Kyle T. Larkin | Elizabeth L. Curtis | James A. Radich | Michael G. Tatusko | Staci Woolsey | James D. Richards(1) |
Company EBIT | 80% | 80% | 80% | 32% | 80% | 32% |
Company Cash Flow from Operations (as % of Revenue) | 20% | 20% | 20% | 20% | 20% | 20% |
Group Operating Income | 0% | 0% | 0% | 48% | 0% | 48% |
(1) Measured based on each individual Group performance, where applicable.Mr. Richards ceased to serve as an executive officer effective June 27, 2022, however, he remained eligible to receive a prorated annual bonus with respect to fiscal year 2022.
(2)
Company Net IncomeEBIT. Company EBIT is defined as actual consolidated Net IncomeEBIT attributable to Granite Construction Incorporated, adjusted for items approved by the Compensation Committee. For 2022, Company EBIT excluded the following items that are not related to the Company’s ongoing core business operations: income, expenses and gains or losses related to discontinued or divested operations, significant litigation fees and settlements and separation costs.
Company OCF. Company OCF is defined as actual operating cash flow attributable to Granite Construction Incorporated calculated in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”)GAAP and adjusted for items permittedapproved by the AIP which were primarilyCompensation Committee as a percentage of revenue. For 2022, Company OCF excluded the following cash impact items that are not related to the Company’s ongoing core business acquisitions during 2018.operations: income, expenses and gains or losses related to discontinued or divested operations, significant litigation fees and settlements and separation costs.
(3)
Group Operating Income. Group Operating Income is defined as actual operating income for the applicable Groupoperating group calculated in accordance with U.S. GAAP and adjusted for items permittedapproved by the AIP which were primarilyCompensation Committee. For 2022, Group Operating Income excluded the following items that are not related to the Company’s ongoing core business acquisitions during 2018.operations: income, expenses and gains or losses related to discontinued or divested operations, significant litigation fees and settlements and separation costs.
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(4) Safety.Granite uses two metrics to measure safety within the incentive program: (1) The OSHA Recordable Incident Rate (“ORIR”), a and (2) Days Away, Restricted, or Transferred (“DART”) Rate, which are nationally recognized metric,metrics, 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 The DART rate is designed to track OSHA recordable workplace injuries or illnesses that results in time away from work, restricted job roles, or an employee's permanent transfer to a new position. The DART rate is calculated by taking the number of OSHA Recordable injuries and Resultsillnesses that resulted in Days Away; Restricted; Transferred x 200,000 (2,000 hours per employee per year x 100 employees) and dividing by the total number of hours of employee exposure. A 50/50% weighting of these two metrics will be calculated to determine the performance and payout multiplier. A safety multiplier ranging from 90% to 115% based on Company and/or operating group safety performance, as applicable, is applied to the financial metric payouts for company and/or operating group results.
The Compensation Committee considered the Company's annual operating plan for the year in setting threshold, target and maximum performance goals for 2018the AIP performance metrics. The payout based on Company and/or Groupoperating group financial performance is zero if Company and/or applicable Groupoperating 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 annual target opportunity depending on the level of achievement of the Company and/or Groupoperating group financial performance. Linear interpolation applies for performance between threshold/target and target/maximum performance levels. The calculated bonus under Company and/or Groupoperating group performance components is subject to a safety multiplier ranging from 90% to 110%115% based on Company and/or Groupoperating group safety performance, as applicable. The target and maximum award amounts have been set at levels our Compensation Committee believes will provide a meaningful incentive to achieve Company and individual goals and contribute to the Company’s financial performance.
The AIP’s Company EBIT performance goal was derived in reliance upon the original 2022 budget (“Original 2022 Budget”). Given the EBIT performance metric was defined as continuing operations, the Company’s Water and Mineral Services (“WMS”) businesses were originally excluded from the EBIT performance goal as they were classified as held for sale and reported as discontinued operations. Upon reclassification of WMS to continuing operations and to ensure alignment, the Compensation Committee increased the threshold, target and maximum performance goals (adjusted for the disposition in the first quarter of 2022) based upon the Original 2022 Budget.
The following were the AIP financial performance measures set for 2018:2022 (in millions):
20182022 AIP Financial Performance Goals
Performance Metric | Threshold (80% of Target) | Target | Maximum (120% of Target) | Actual Performance | Actual Performance % of Target |
Company EBIT | $102.1 | $127.6 | $153.1 | $111.0 | 67% |
Company OCF | 3.0% | 5.0% | 7.0% | 1.9% | 0% |
California Group Operating Income | $98.1 | $122.6 | $147.1 | $111.3 | 77% |
Mountain Group Operating Income | $56.3 | $70.3 | $84.4 | $75.2 | 135% |
Central Group Operating Income | $46.2 | $57.8 | $69.3 | ($28.2) | 0% |
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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:
20182022 AIP Safety Multiplier Goals
Performance Level & Payouts | Threshold 90% | Target 100% | Maximum 110% | Safety ORIR Results | Safety Multiplier |
Company Safety ORIR | 1.6 | 1.0 | 0.8 | 0.95 | 103% |
California Safety ORIR | 1.6 | 1.0 | 0.8 | 0.78 | 110% |
Northwest Safety ORIR | 1.6 | 1.0 | 0.8 | 0.72 | 110% |
Large Projects Safety ORIR | 1.6 | 1.0 | 0.8 | 2.00 | 90% |
ORIR Performance and Multiplier | DART Performance and Multiplier | ||||||||
Performance Level | Threshold | Target | Maximum | ORIR Safety Results | Threshold | Target | Maximum | DART Safety Results | Actual Safety Multiplier(1) |
Company | 1.05 | 0.80 | 0.56 | 0.72 | 0.61 | 0.45 | 0.32 | 0.31 | 113% |
California Operating Group | 1.05 | 0.80 | 0.56 | 0.65 | 0.61 | 0.45 | 0.32 | 0.30 | 114% |
Mountain Operating Group | 1.05 | 0.80 | 0.56 | 0.68 | 0.61 | 0.45 | 0.32 | 0.42 | 112% |
Central Operating Group | 1.05 | 0.80 | 0.56 | 0.88 | 0.61 | 0.45 | 0.32 | 0.23 | 109% |
(1) ORIR & DART actual performance weighted 50/50 to determine safety multiplier.
Based on actual performance, individual incentives earned by the Named Executive Officers were as follows:
Summary of Actual 20182022 AIP Total Bonus Payouts
Named Executive Officer | Total AIP Target Opportunity | Actual Company Bonus Payout | Actual Group Bonus Payout | Other | Total Actual AIP Bonus Payout(1) |
James H. Roberts | $1,035,000 | $628,970 | n/a | - | $628,970 |
Jigisha Desai(2) | $140,294 | $85,257 | n/a | - | $85,257 |
Kyle T. Larkin | $262,500 | $63,810 | $272,003 | - | $335,813 |
James D. Richards | $318,750 | $77,485 | $155,678 | - | $233,163 |
Dale A. Swanberg(3) | $318,750 | $77,485 | - | $122,515 | $200,000 |
Laurel J. Krzeminski(4) | $201,923 | $122,705 | n/a | - | $122,705 |
Named Executive Officer | AIP Target Opportunity | Actual Company Bonus Payout(1) | Actual Operating Group Bonus Payout(1) | Total Payout(2) | Payout as a % of Target |
Kyle T. Larkin | $900,000 | $545,112 | n/a | $545,112 | 60.6% |
Elizabeth L. Curtis | $400,000 | $242,272 | n/a | $242,272 | 60.6% |
James A. Radich | $400,000 | $242,272 | n/a | $242,272 | 60.6% |
Michael G. Tatusko | $276,250 | $66,928 | $200,491 | $267,419 | 96.8% |
Staci Woolsey | $228,000 | $138,095 | n/a | $138,095 | 60.6% |
James D. Richards(3) | $360,000 | $43,609 | - | $43,609 | 12.1% |
(1) Actual company payouts and operating group payouts include safety multiplier.
(2)Represents the sum of 20182022 Company and Groupoperating group bonus payouts.
(2)(3) Ms. Desai’s annual incentive target opportunity and payout presented in the table above were proratedMr. Richards ceased to serve as a result of her promotion to Senior Vice President and CFOan executive officer 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.
(4) Ms. Krzeminski retired from the Company effective July 6, 2018 and in accordance with the terms of her AIP agreement, she wasJune 27, 2022, however, he remained eligible to receive a prorated award based on full-year Company performance.annual bonus with respect to fiscal year 2022.
Long Term Incentive Compensation
To emphasizeEquity incentive awards are a critical component of the Company’s compensation program and reward sustained long termare used to attract and retain talented, highly qualified employees to ensure the long-term continued growth and success of the Company.
As part of the 2022 incentive compensation redesign efforts, the Compensation Committee introduced a capital efficiency metric to support the Company’s long-term strategic plan and further align management’s interest with that of our shareholders. A 3-year RONA performance allmetric was selected to support this initiative.
As presented in detail below, each Named Executive Officers, exceptOfficer's target long-term incentive opportunity is based on external benchmark data for Ms. Desai, participatedsimilar positions and is expressed as a percentage of base salary. The targets are set by the Compensation Committee after a review of market median long-term incentive target awards of Granite’s peer group and survey data at the beginning of the year. Outside of its normal course review, the Compensation Committee reviews executive officer compensation in the 2018 LTIP.connection with promotions or other significant events. The LTIP target opportunity was 10%conservatively positioned at 21% below the median data in the aggregate for our continuing Named Executive Officers and varied by each Named Executive Officer and their role. No changes were made to the LTIP incentive target opportunity for our Named Executive Officers for 2018.
The LTIP incentive target opportunities for the Named Executive Officers under the 20182022 LTIP are presented below:
Named Executive Officer | LTIP Incentive Target Opportunity |
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Kyle T. Larkin | $ |
Elizabeth L. Curtis | $800,000 |
James A. Radich | $650,000 |
Michael G. Tatusko | $400,000 |
Staci Woolsey | $292,600 |
James D. Richards |
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(1)Ms. Desai became Mr. Richards ceased to serve as an Executive Officerexecutive officer effective July 9, 2018 and was not eligible to participate in the 2018 – 2020 LTIP. For additional information regarding Ms. Desai’s incentive compensation plan prior to her promotion, please refer to “2018 Incentive Compensation Plan for Jigisha Desai.”
(2) Ms. Krzeminski retired from the Company effective July 6, 2018 and was notJune 27, 2022. He remained eligible to receive a cash payment based on the actual performance of the LTIP TSR results for the applicable performance periods and prorated award for 2018 - 2020.on the basis of the ratio of the number of whole months of his service during the applicable performance period to the total number of months in the applicable performance period.
Each Named Executive Officer’s target award is divided into two components – Performance Awards and Time-Based Service Awards. The table below reflects the weighting of the two components:
LTIP Components Weighting
| LTIP Component | Weighting |
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3-Year RONA Performance Award | 25% |
Time-Based Service Award |
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Total | 100% |
To emphasize and reward sustained long term performance, all Named Executive Officers participated in the 2022 LTIP. For awards granted after January 1, 2020, the Board of Directors approved the following changes to the LTIP for the benefit of the Company's Named Executive Officers and other executive officers:
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● | Double-trigger vesting of any converted RSUs, requiring both a change in control and termination of employment without cause or for good reason; and |
● | Proration of LTIP awards on termination of employment due to death, disability or retirement based on actual performance through the end of the applicable performance period. |
The Compensation Committee set payouts2022 LTIP is focused on creating long term value for the 2018 – 2020our shareholder’s benefit. The performance incentive is based on relative TSR and a capital efficiency metric, RONA, where both will be measured over a 3-year performance period, toand will be calculatedearned based on Granite’s TSR rank relativeachievement of performance targets, and settled in RSUs at the end of the performance period.
Pursuant to a peer groupthe terms of companies in the Standard & Poor’s Construction Materials and Construction Equipment classification. The higher Granite’s overallLTIP, maximum payouts cannot exceed two times the target performance ranking is, the greater the payout percentage.opportunity. However, the Compensation Committee has the ability to reduce the payout percentage for the performance period in its sole discretion.
The Compensation Committee considered the Company's strategic plan, peer benchmarking data and historical performance in setting threshold, target and maximum performance goals for the RONA performance metric. Performance will be measured over a 3-year period and is defined as adjusted consolidated GAAP Net Income (less tax effected cost of debt) divided by average adjusted net assets. A 3-year average RONA result will determine performance achievement. The payout based on Company financial performance is zero if Company performance is below the financial performance threshold. Once threshold requirements are met, Named Executive Officers can earn between 50% and 200% of their annual target opportunity depending on the level of performance achievement. Linear interpolation applies for performance between threshold/target and target/maximum performance levels. The target and maximum award amounts have been set at levels our Compensation Committee believes will provide a meaningful incentive to achieve long term Company financial performance.
TSR performance is calculated based on Granite’s TSR rank relative to the Russell 3000 companies, including Granite, in the Construction and Engineering or Construction Materials GICS Sub-Industry classification over a 3-year period. The TSR award calculation methodology will remove any acquired peers from the measurement group.group any comparator companies acquired during the performance period. Each 3-year cycle will be calculated using a 20-day trading day average for the beginning and ending stock price to avoid potential unintended consequences of spot prices. The higher Granite’s overall performance ranking is, the greater the payout percentage.
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The following areTSR payout curve was modified by the 2018 – 2020Compensation Committee after a review of Granite’s 2021 peer group companies and funding mechanism. survey market median data to improve alignment with typical market practice. Effective for 2022 and forward, the TSR payout curve has been modified by shifting the threshold performance from the 35th percentile to the 25th percentile with a corresponding payout of 35% and shifting maximum performance from the 80th percentile to the 75th percentile with no change to the maximum payout. See 2022-2024 TSR Payout Curve below.
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2018 – 20202022 -2024 TSR Funding MechanismPayout Curve
(Utilizes a Relative TSR Percentile Ranking System to determine payout as a percentage of Target.)
Relative TSR Percentile Rank | Payout (% of Target)(1) | |
200% | ||
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(1)(1) Linear interpolation applies between performance levels.
Total Shareholder Return Performance Calculation
The following table contains the performance award and payout timing:
TSR is calculated by dividing (i) the sum of the closing price on the last trading day of the performance period and all dividends and per-share cash equivalents paid during the performance period, by (ii) the closing price on the day before the first day of the performance period. The performance awards are calculated at the end of a three-year performance period. The 2015 performance awards were calculated for the three-year period ending December 31, 2017 with vesting and payment in March 2018. The 2016 performance awards were calculated for the three-year period ending December 31, 2018 with vesting and payment in March 2019. The 2017 performance awards will be calculated for the three-year period ending December 31, 2019 with vesting and payment the following year. The 2018 performance awards will be calculated for the three-year period ending December 31, 2020 with vesting and payment the following year.
TSR Performance Period | Award Opportunity | Payout Timing
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January 1, | 0% – 200% of | Q1 |
January 1, | 0% – 200% of | Q1 |
January 1, | 0% – 200% of | Q1 |
(1) Pursuant to his separation arrangement, Mr. Richards remained eligible to receive a cash payout under the LTIP based on actual results through the end of the applicable performance period and prorated for his service. This arrangement applies to his awards for the 2020 - 2022, 2021 - 2023 and 2022 - 2024 performance periods of which there were no modifications to the performance terms.
Payouts for 2015 – 20172019 - 2021 Total Shareholder Return Awards Paid in 20182022
PayoutsThere were no payouts for the 2015 – 20172019 - 2021 TSR performance period areand this is reflected in the 20182022 Summary Compensation Table and 2018 Grantthe 2022 Grants of Plan Based Award tables. TSR performance was calculated based on Granite’s performanceTSR rank relative to the industry peer group of construction, engineering30 Russell 3000 companies in the Construction and construction materials usedEngineering or Construction Materials GICS Sub-Industry classification for benchmarking data as approved by the Compensation Committee effectivethree-year performance period beginning January 1, 2015.2019 through December 31, 2021.
The following are the 2015 – 2017 peer group companies and funding mechanism.
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2015 – 20172019 -2021 TSR Funding MechanismPayout Curve
(Utilizes a Relative Percentile Ranking System to determine payout as a percentage of Target.)
Relative Percentile Ranking | Payout (% of Target)(1) | |
200% | ||
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50th Percentile | 100% | |
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Below | 0% |
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(1)Linear interpolation applies between performance levels.
Granite’s three-year TSR performance as of December 31, 20172021, for the performance period from January 1, 20152019 through December 31, 20172021 was below threshold resulting in no earnout. See “2019 - 2021 TSR Payout Curve” above.
Payouts for 2020 -2022 Total Shareholder Return Awards Paid in 2023
TSR performance was calculated based on Granite’s TSR rank relative to the 28 Russell 3000 companies in the Construction and Engineering or Construction Materials GICS Sub-Industry classification for the three-year performance period beginning January 1, 2020 through December 31, 2022. Granite’s three-year TSR performance ranked at the 55th 46th percentile reflecting a share-based earnoutwhich was above the threshold performance goal resulting in an 88% of 109% of the target.target payout. See “2015 – 2017“2020 - 2022 TSR Funding Mechanism” above. The earned awards for the performance period are presented in the following table.Payout Curve” below.
2020 - 2022 TSR Payout Curve
(Utilizes a Relative Percentile Ranking System to determine payout as a percentage of Target.)
Relative Percentile Ranking | Payout (% of Target)(1) |
80th Percentile or better | 200% |
50th Percentile | 100% |
35th Percentile | 50% |
Below 35th Percentile | 0% |
(1) Linear interpolation applies between performance levels.
TSR Performance Period January 1, 2015 2020 – December 31, 20172022
Named Executive Officer | Target TSR Incentive | Actual TSR Incentive | Restricted Stock Units Awarded(1) |
James H. Roberts | $1,133,333 | $1,235,333 | 34,808 |
Jigisha Desai(2) | n/a | n/a | n/a |
Kyle T. Larkin(3) | n/a | n/a | n/a |
James D. Richards | $300,000 | $327,000 | 9,214 |
Dale A. Swanberg(3) | n/a | n/a | n/a |
Laurel J. Krzeminski | $366,667 | $399,667 | 11,261 |
Named Executive Officer | Target TSR Incentive | Actual TSR Incentive | Restricted Stock Units Awarded(2) |
Kyle T. Larkin | $640,000 | $563,200 | 20,645 |
Elizabeth L. Curtis(1) | n/a | n/a | n/a |
James A. Radich | $280,000 | $246,400 | 9,032 |
Michael G. Tatusko | $280,000 | $246,400 | 9,032 |
Staci Woolsey(1) | n/a | n/a | n/a |
James D. Richards(3) | $400,000 | $283,556 | 10,394 |
(1) Due to the performance period beginning prior to becoming an executive officer, Mses. Curtis and Woolsey were not eligible to participate in the 2020 - 2022 LTIP.
(2)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,$27.28, 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.”2020.
(3) DueMr. Richards ceased to serve as an executive officer effective June 27, 2022. His separation agreement allowed him to receive a prorated award to be settled in a single lump sum cash payment based on the performance period beginning prior to becoming an Executive Officer, Messrs. Larkin and Swanberg were not eligible to participate invalue of the 2015 – 2017 TSR program.number of RSUs he would have received.
The Compensation Committee believes granting a portion of equity awards as Restricted Stock Units (“RSUs”)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 AwardsTypically, time-based service awards vest in three equal annual installments beginning on the one-year anniversary of the date of grant, subject to continued service.
20182022 Time-Based Service Awards
Named Executive Officer | Service Award | RSUs Awarded(1) |
James H. Roberts | $400,028 | 6,513 |
Jigisha Desai(2) | n/a | n/a |
Kyle T. Larkin | $89,980 | 1,465 |
James D. Richards | $89,980 | 1,465 |
Dale A. Swanberg | $89,980 | 1,465 |
Laurel J. Krzeminski(3) | $130,026 | 2,117 |
Named Executive Officer | Time-Based Service Award(1) | RSUs Awarded(1) | |
Kyle T. Larkin | $600,000 | 18,897 | |
Elizabeth L. Curtis | $200,000 | 6,299 | |
James A. Radich | $162,500 | 5,118 | |
Michael G. Tatusko | $100,000 | 3,149 | |
Staci Woolsey | $73,150 | 2,303 | |
James D. Richards(2) | $143,750 | 4,527 | |
(1) The number of RSUs awarded was calculated by dividing the2022 time-based service award by theawards were granted on March 14, 2022 based on a closing stock price of $61.42$31.75. These awards will vest in three annual installments beginning on March 14, 2018.
(2) Ms. Desai became an Executive Officer effective July 9, 2018 and was not eligible to participate in the LTIP at the time the awards were made. For a detailed explanation of Ms. Desai’s incentive compensation program, please refer to “2018 Incentive Compensation Plan for Jigisha Desai.”
(3)2023. Pursuant to the terms of the Granite Construction Incorporated 20122021 Equity Incentive Plan Ms. Krzeminski qualified for(the “2021 Equity Plan”), Mr. Radich qualifies as retirement eligibility on June 30, 2018eligible, and all of her outstandinghis equity awards vested on that date.immediately.
(2) Mr. Richards ceased to serve as an executive officer effective June 27, 2022 and his unvested RSUs were forfeited upon separation.
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2018 Incentive Compensation Prorated Plan for Jigisha Desai
Ms. Desai participated in the Granite 2018 Corporate Incentive Compensation Plan prior to her promotion to Senior Vice President and CFO. As a result of Ms. Desai’s promotion, she began participating in the Executive Officer Compensation Program effective July 9, 2018.
In her role as Vice President, Corporate Finance and Treasurer, Ms. Desai was eligible to participate in the 2018 Corporate Annual Incentive Plan based on applicable Company Net Income and a 2018 LTIP based on the performance of the Company’s Return on Net Operating Assets (“RONA”).
2018 Corporate Annual Incentive Plan
In her role as Vice President, Corporate Finance and Treasurer, Ms. Desai was eligible to receive an award based on the Company’s Net Income for performance at or above a threshold amount. The calculated bonus was subject to a safety multiplier from -10% to +10% based on the Company’s safety performance (for additional information, please refer to “2018 AIP Safety Multiplier Goals”). In addition, the Corporate AIP allows for a discretionary bonus based on individual performance.
2018 Actual Prorated Performance
The Company Net Income performance exceeded threshold, and the Company’s safety performance multiplier was 103%. Ms. Desai’s actual prorated AIP award for January 1, 2018 – July 8, 2018 is as follows:
2018 Incentive Compensation Plan – Corporate AIP Bonus Payouts
| Corporate Bonus Target | Corporate Bonus Payout (before Safety Multiplier) | Company Safety Multiplier | Actual Corporate Payout | AIP Discretionary Award | Total AIP Award |
Jigisha Desai | $60,260 | $29,577 | 103% | $30,464 | $46,000 | $76,464 |
2018 Long Term Incentive Plan
In her role as Vice President, Corporate Finance and Treasurer, Ms. Desai was eligible to participate in the 2018 LTIP with an established incentive target opportunity divided into two components – Performance Awards and Service Awards.
The table below reflects the weighting of the two components:
LTIP Components Weighting
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Under the 2018 LTIP, a performance award is achieved if RONA performance exceeds a pre-established threshold goal for the year. For 2018, performance did not achieve the threshold goal. In recognition of her contributions in her prior role, Ms. Desai received a discretionary RSU award with a fair market value of $75,000 granted on March 14, 2019. This RSU award will vest in three equal annual installments beginning on the date of grant, subject to continued service.
Service Award
Under the 2018 LTIP, Ms. Desai received an RSU service award that vests in three equal annual installments beginning on the date of grant, subject to continued service.
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2018 Service Award
| Service Award | RSUs Awarded (1) |
Jigisha Desai | $35,562 | 579 |
(1) The number of RSUs awarded was calculated by dividing the service award by the closing stock price of $61.42 on March 14, 2018.
Policy Regarding Recovery of Award if Basis Changes Because of Restatement
If the basis upon which a previous compensation award was made is determined to have been in error due to a restatement of a prior year's financial results, it is Granite's policy to either recover the amount overpaid or to offset the overpayment against future incentive compensation earned. This policy applies to AIP and LTIP awards. ThereOther than as discussed below, there were no adjustments to calculations that affected incentive compensation calculated or paid in 2018.2022.
In connection with the SEC’s investigation and settlement and Granite’s previously disclosed restatement of certain periods in 2019 and prior, Granite received payments of $62,900 from Mr. Roberts, $261,115 and 2,364 shares from Ms. Krzeminski and $176,101 from Ms. Desai during 2022. The SEC order provides that Mr. Roberts will pay Granite an additional $566,100 and that Mr. Roberts will return 27,527 shares during 2023.
Our Board of Directors has adopted Stock Ownership Guidelines to align the interests of Granite's Named Executive Officers with the interests of shareholders and to promote Granite's commitment to sound corporate governance. Named Executive Officers are expected to own and hold a minimum number of shares of Granite common stock based on relevant market standards. Stock ownership guidelines are determined as a multiple of the Named Executive Officer's base salary, and are as follows:
Chief Executive Officer: 3 x annual base salary
Other Named Executive Officers: 2 x annual base salary
Minimum stock ownership levels are to be achieved within five years following the later of the May 13, 2009 adoption of the Stock Ownership Guidelines and the date an individual becomes a Named Executive Officer. Compliance with the guidelines is reviewed by the Compensation Committee on an annual basis. The stock ownership guidelines are as follows:
● | CEO: 5x annual base salary |
● | President, COO, and CFO: 3x annual base salary |
● | Other Named Executive Officers: 2x annual base salary |
Shares that count toward the satisfaction of the guidelines include:
● | Shares owned outright by the Named Executive Officer or his or her immediate family members residing in the same household, whether held individually or jointly; |
● | Any vested, unvested and deferred RSUs; |
● | Shares held for the Named Executive Officer's account in the Granite Construction Incorporated Profit Sharing and 401(k) Plan (“401(k) Plan”); and |
● | Shares held in trust for the benefit of the Named Executive Officer or his or her family. |
Unvested or unexercised stock options and unearned performance-based equity awards do not count towards the Named Executive Officer or his or her immediate family members residing in the same household, whether held individually or jointly;
Any vested and deferred RSUs;
Shares held for the Named Executive Officer's account in the Granite Construction Incorporated Profit Sharing and 401(k) Plan (“401(k) Plan”); and
Shares held in trust for the benefit of the Named Executive Officer or his or her family.
guidelines. Until the applicable guideline is achieved,has been satisfied, the Named Executive Officer is required to retain an amount equal to 25%50% of net shares received as a result of the vesting of RSUs through Granite's stock incentive plans.
The following table contains Share ownership is measured as of December 31 using the 2018 percentage of attainment of the Company’s stock ownership guidelines for Named Executive Officers:
Stock Ownership
Named Executive Officer | 2018 Base Salary | Stock Ownership as Multiple of Base | Required Value of Stock Ownership | Date to be Achieved(1) | # Vested Shares Owned(2) | Value of Shares Owned(3) | Percentage of Attainment |
James H. Roberts(4) | $900,000 | 3 | $2,700,000 | May 2014 | 173,008 | $9,188,455 | 340% |
Jigisha Desai | $425,000 | 2 | $850,000 | April 2024 | 29,529 | $1,568,285 | 185% |
Kyle T. Larkin | $350,000 | 2 | $700,000 | April 2023 | 767 | $40,735 | 6% |
James D. Richards | $425,000 | 2 | $850,000 | April 2019 | 34,168 | $1,814,662 | 213% |
Dale A. Swanberg | $425,000 | 2 | $850,000 | April 2023 | 4,049 | $215,042 | 25% |
(1) To be achieved within five years after the later of (a) 2009 or (b) becoming a Named Executive Officer.
(2) As of January 1, 2019.
(3) Based on the 2018 annual average stock price of $53.11.
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(4) Pursuant toover the terms of the Granite Construction Incorporated 2012 Equity Plan, Mr. Roberts qualified as retirement eligible on January 28, 2019 and his outstanding 17,197 RSUs fully vested as of that date.prior year.
As of December 31, 2022, Mses. Curtis and Woolsey and Messrs. Larkin, Radich, and Tatusko are in compliance with the guideline either by virtue of having attained the required number of shares or complying with the 50% retention requirement.
The Company’s Insider Trading Policy, which applies to employees, officers and directors of the Company and their family members and affiliates, provides that such individuals are prohibited from engaging in hedging transactions involving the Company’s securities. For additional information, see “Information About the Board of Directors and Corporate Governance - Employee, Officer, and Director Hedging.”
In accordance with the Company’s Insider Trading Policy, a transaction in which a holder of a security of the Company uses that security as collateral for a loan or other extension of credit or a pledge is prohibited. This policy applies to employees, officers and directors of the Company and their family members and affiliates.
Non-Qualified Deferred Compensation
Granite offers its executive officers, Board of Directors, and other key executives, participation in the Granite Construction Key Management Deferred Compensation Plan II (the “NQDC”),NQDC, which:
Allows executive officers to defer up to 50% of their base compensation and up to 100% of their incentive compensation (cash and equity);
Allows non-employee directors to defer receipt of their annual cash retainer and RSU awards;
Allows participants to choose from a menu of investment options. Granite determines the investment options for the NQDC menu and may add or remove investment options based on a review of the performance of the particular investment;
Includes a Rabbi Trust, which provides participants a measure of added security that benefit obligations will be satisfied;
● | Allows executive officers to defer up to 50% of their base salary and up to 100% of their incentive compensation (cash and equity); |
● | Allows non-employee directors to defer receipt of their annual cash retainer and RSU awards; |
● | Allows participants to choose from a menu of investment options. Granite determines the investment options for the NQDC menu and may add or remove investment options based on a review of the performance of the particular investment; |
● | Allows distribution options of in-service payments for executives and/or upon retirement or termination for all participants; |
● | Includes a Rabbi Trust, which provides participants a measure of added security that benefit obligations will be satisfied; and |
● | Includes an option under which eligible participants can voluntarily direct Granite to purchase life insurance on their behalf and are eligible for a survivor benefit equal to one year's base salary payable in the event of death. The survivor benefit is payable only while the participant is employed with Granite. |
The Compensation Committee has the authority to award discretionary bonuses to employees of the Company. In 2013, our Compensation Committee determined that it would be beneficial to define and limit its authority to award discretionary bonuses and adopted the Flexible Bonus Policy pursuant to which employees of the Company, including our Named Executive Officers, are eligible to receive a discretionary bonus, which may be based on Company performance, individual performance or such other factors as our Compensation Committee may consider appropriate. In determining Company performance, our Compensation Committee may consider the achievement of corporate financial, strategic and operational objectives including, but not limited to, revenue, income, and backlog. In determining individual performance, our Compensation Committee may consider the achievement of personal objectives including, but not limited to, business targets, budgetary targets, succession planning, and safety targets. It is our intention that the discretionary bonuses be fixed and determinable as of year-end; this would require approval prior to year-end. The aggregate amount of any bonus or bonuses payable under the Flexible Bonus Policy to any one participant in any calendar year may not exceed $250,000. Our Compensation Committee believes that the flexible design of this policy is necessary to consider the effects of unanticipated events and circumstances on the Company’s business or on a participant’s performance. The Compensation Committee
In 2022, no discretionary bonuses were awarded a $46,000 cash bonus and an RSU award with a fair market value of $75,000 granted on March 14, 2019 to Ms. Desai in recognition of her contributions in her prior role as Vice President, Corporate Finance and Treasurer in 2018. The Compensation Committee also awarded an RSU award with a fair market value of $200,000 granted on December 17, 2018 to Mr. Swanberg in recognition of his contributions tounder the Large Projects Group in 2018. These RSU awards will vest in three equal annual installments beginning on the date of grant, subject to continued service.Flexible Bonus Policy.
The Named Executive Officers are eligible to participate in the 401(k) Plan. Granite provides matching contributions up to 6% of an employee’s gross pay at the discretion of the Board of Directors. Under the terms of a policy applicable to Mr. Roberts, Mses. Desai and Krzeminski, each are required to maintain a $5,000,000 personal umbrella liability insurance policy to provide
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coverage while conducting company business. They are reimbursed for the costs incurred to purchase and maintain the required insurance. Mr. Roberts, Ms. Desai, and prior to her retirement, Ms. Krzeminski, receive a $1,417 per month vehicle allowance which includes reimbursement for the personal umbrella liability insurance. Messrs. Larkin, Richards,Radich, and Swanberg receiveTatusko and Mses. Curtis and Woolsey received a $1,000 per month vehicle allowance. Granite also offersMr. Richards received a health and wellness program and provides employees rewards$1,000 per month vehicle allowance until his separation. Ms. Woolsey was reimbursed for participation. In 2018, Ms. Desai earned a rewardrelocation costs in the amount of $294,901 during 2022. Although the company allows spousal travel on the Company aircraft, there was no aggregate incremental cost associated with a total grossed-up value of $832 for a total net value of $550.spousal travel in 2022.
Impact of Accounting and Tax Treatments of a Particular Form of Compensation
In connection with its determination of the various elements of compensation for our executive officers, one factor the Compensation Committee has taken into accountconsiders is the impact of Section 162(m) of the Internal Revenue Code (“Section 162(m)”) on the deductibility of compensation for federal income tax purposes. Section 162(m) limits the deductibility of compensation paida publicly held company pays to our CEO, our CFO (for years prior to 2018 our CFO was exempt from the limitation) and our next three highest paid individualscertain covered executive officers to $1 million annually. For years priorper executive officer per year.
While the Compensation Committee generally considers this limit when determining compensation, there are instances in which the Compensation Committee has concluded, and reserves the discretion to 2018, some ofconclude in the elements of our executive compensation package, including certain payments under our AIP and LTIP, were intendedfuture, that it is appropriate to qualify as “performance-based” compensation, which was exempt fromexceed the limitation on deductibility under Section 162(m). The performance-based compensation exemption under Section 162(m) was repealed effective January 1, 2018, except for certain grandfathered arrangements to ensure that executive officers are compensated in effect asa manner that it believes to be consistent with the Company’s best interests and those of November 2, 2017. However, becauseits shareholders. Furthermore, interpretations of ambiguities and uncertainties as tochanges in the applicationtax laws, and interpretationother factors beyond the Compensation Committee’s control, may also affect the deductibility of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exception to the deduction limit for performance-based compensation, we cannot guarantee that future compensation paid to our covered officers will qualify for grandfathered status. Therefore, to the extent that in 2018 or any later year, the aggregate amount of any covered officer’s salary, bonus, and amounts realized from RSUs or other equity awards, including under our AIP and LTIP, and certain other compensation amounts that are recognized as taxable income by the officer exceeds $1 million in any year, we may not be entitled to a U.S. federal income tax deduction for the amount over $1 million in that year.compensation. The Compensation Committee hasalso considers the discretion to designaccounting treatment of the cash and implement elements of executive compensationequity awards that may not be fully deductible for income tax purposes.it grants under the cash and equity plans it maintains.
Change-in-Control Arrangements
All of our Named Executive Officers are participants in the Executive Retention and Severance Plan. The purpose ofPlan III (“ERSP III”) which provides additional payments and other benefits if the planNamed Executive Officer is to:
Provide an incentive toterminated without cause or if the existing management to continue theirNamed Executive Officer terminates employment with Granite during the pendency of a potential change-in-control transaction; and
Attract and retain executives by reducing their concerns regarding future employmentfor “good reason” (as defined further below) following a change-in-control.“change in control” (as defined further below).
The Executive Retention and Severance Plan originally providedERSP III provides that if a participant’s employment with Granite is terminated by Granitethe Company within threetwo years after a “change-in-control” (as defined below)change in control of Granite other than for cause, or if the participant resigns from such employment within threetwo years after a “change-in-control”change in control of Granite for “goodgood reason,” (as defined below) the participant would be entitled to the following benefits:
A lump sum payment equal to three times the participant’s annual base salary rate in effect immediately prior to the participant’s termination;
A lump sum payment equal to three times the average of the aggregate of all annual incentive bonuses earned by the participant for the three fiscal years immediately preceding the fiscal year of the change-in-control;
A lump sum payment equal to three times the average of the aggregate annual employer contribution, less applicable withholding, made on behalf of the participant for the three fiscal years preceding the fiscal year of the change-in-control to the 401(k) Plan, and any other retirement plan in effect immediately prior to the change-in-control;
A lump sum payment equal to three times the average annual premium cost for group health, life, and long-term disability benefits, provided for the three fiscal years preceding the fiscal year of termination;
Accelerated vesting of equity awards in accordance with the provisions contained in such plans; and
Reasonable professional outplacement services for the participant until the earlier of two years following the date of termination or the date on which the participant obtains employment.
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● | A lump sum payment equal to 2 times the participant’s annual base salary rate in effect immediately prior to the participant’s termination; |
● | A lump sum payment equal to 2 times the average of the aggregate of all annual incentive bonuses earned by the participant for the three fiscal years immediately preceding the fiscal year of the change in control; |
● | A lump sum payment equal to 2 times the average of the aggregate annual employer contribution (the “employer contribution”), made on behalf of the participant for the three fiscal years preceding the fiscal year of the change in control to the 401(k) Plan, and any other retirement plan in effect immediately prior to the change in control; |
● | A lump sum payment equal to 2 times the average annual premium cost for group health, life, and long-term disability benefits, provided for the three fiscal years preceding the fiscal year of termination; |
● | Accelerated vesting of equity awards in accordance with the provisions contained in the equity incentive plans (double trigger) (If an equity award is performance-based and a change-in-control occurs in the first year of the performance period, the equity awards will be paid out at target, and if it occurs in the second or third year of the performance period, the equity award will be paid out at actual performance through the change-in-control date); and |
● | Insurance and reasonable professional outplacement services for the participant until the earlier of two years following the date of termination or the date on which the participant obtains employment. |
Payments made to the terminated participant do not include tax gross-up paymentsgross-ups and are capped. The amount of the payment will not exceed and will be reduced if required in order not to exceed the “safe harbor” amount allowable under Section 4999 of the Internal Revenue Code, but only if the reduction would increase the net after-tax amount received by the participant.
In August 2010, The ERSP III includes a non-disparagement provision in favor of the Compensation Committee approved changes to the Executive Retention and Severance Plan for future participants that the Compensation Committee believed to be in alignment with emerging best practices. Benefits to subsequent new participants will be dependent upon their level of responsibility within the organization and will include the following severance multiples:
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Mr. Roberts is entitled to a severance multiple of 3x under the Executive Retention and Severance Plan because he was a participant in the plan before the changes were made to the plan in August 2010. Ms. Desai is entitled to a severance multiple of 2x and Messrs. Larkin, Richards, and Swanberg are entitled to a severance multiple of 1x under the Executive Retention and Severance Plan because they became participants in the plan after the changes were made to the plan in August 2010.Company.
Change in control and good reason have the following meanings under the Executive Retention and Severance Plan:ERSP III:
● | A “change-in-control” is defined as (i) a merger, consolidation or acquisition of Granite where our shareholders do not retain more than 50% of our voting stock or the voting stock in the surviving entity; (ii) the sale or disposition of all or substantially all of our assets to a corporation (other than to one or more subsidiaries of Granite); (iii) the acquisition by affiliated persons of more than 30% of our voting stock; or (iv) a change in the composition of our Board of Directors in any consecutive 12-month period as a result of which fewer than a majority of the directors are “incumbent directors;” and |
● | “Good reason” means (i) a material diminution in the participant's authority, duties or responsibilities, causing the participant's position to be of materially lesser rank or responsibility within Granite or an equivalent business unit of its parent; (ii) a decrease in the participant's base salary rate (except as part of a broad-based reduction plan applicable to substantially all Company group employees); (iii) a geographical relocation of the participant's principal office location by more than 30 miles (one way); or (iv) any material breach of the ERSP III by Granite with respect to the participant. |
A “change-in-control” is defined as (i) a merger, consolidation or acquisition of Granite where our shareholders do not retain a majority interest in the surviving or acquiring corporation; (ii) the transfer of substantially all of our assets to a corporation not controlled by Granite or its shareholders; or (iii) the transfer to affiliated persons of more than 30% of our voting stock, which leads to a change of a majority of the members of the Board of Directors; and
“Good reason” means (i) a material diminution in the participant's authority, duties or responsibilities, causing the participant's position to be of materially lesser rank or responsibility within Granite or an equivalent business unit of its parent; (ii) a decrease in the participant's base salary rate; (iii) relocation of the participant's work place that increases the regular commute distance between the participant's residence and work place by more than 30 miles (one way); or (iv) any material breach of the plan by Granite with respect to the participant during a change-in-control period.
The 2012 Equity Incentive Plan authorizes the Compensation Committee to set the terms of any equity award to provide that there will be no acceleration of the exercisability, vesting or payment of such award upon the occurrence of a change-in-control unless the change-in-control is accompanied by the award recipient’s involuntary termination without cause or the award recipient’s resignation for good reason. However, under the Executive Retention and Severance Plan, RSU awards vest in full upon the consummation of a change-in-control, provided the award recipient remains an employee prior to the change-in-control. In addition, the Executive Retention and Severance Plan provides that if the surviving, successor or acquiring corporation does not either assume, continue or substitute outstanding option awards and the award recipient remains an employee prior to the change-in-control, then the vesting and exercisability of such option awards will be accelerated in full upon the consummation of the change-in-control.
Compensation Committee ReportCOMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the "Compensation“Compensation Discussion and Analysis"Analysis” contained in this proxy statement. Based on such review and discussions, the Committee recommended to the Board of Directors that the "Compensation“Compensation Discussion and Analysis"Analysis” be included in this proxy statement and incorporated by reference into Granite's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2022.
Members of the Compensation Committee:
Members of the Compensation Committee: | |||
| Molly C. Campbell Celeste B. Mastin | ||
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This Report of the Compensation Committee does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other filing made by us under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this Report of the Compensation Committee by reference therein.
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Executive compensation tablesEXECUTIVE COMPENSATION TABLES
Summary Compensation Table
20182022
The following table summarizes, for the fiscal years specified, the compensation for our President and CEO, our CFO, and other Named Executive Officers.
Named Executive Officer and Position (a) | Year (b) | Salary (c) | Bonus(1) (d) | Stock Awards(2) (e) | Non-Equity Incentive Plan Compensation(3) (f) | All Other Compensation(4) (g) | Total (h) |
James H. Roberts | 2018 | $900,000 | - | $2,537,935 | $628,970 | $59,718 | $4,126,623 |
President and CEO | 2017 | $850,000 | - | $2,719,073 | $709,831 | $128,491 | $4,407,395 |
(Principal Executive Officer) | 2016 | $800,000 | - | $1,823,501 | $659,271 | $132,096 | $3,414,868 |
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Jigisha Desai | 2018 | $387,927 | $46,000 | $35,562 | $115,721 | $51,008 | $636,218 |
Senior Vice President and CFO | - | - | - | - | - | - | - |
(Principal Financial | - | - | - | - | - | - | - |
and Accounting Officer) | - | - | - | - | - | - | - |
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Kyle T. Larkin | 2018 | $350,000 | - | $89,980 | $335,813 | $95,395 | $871,188 |
Senior Vice President | 2017 | $260,346 | $100,000 | $25,512 | $266,227 | $40,288 | $692,373 |
and California Group Manager | - | - | - | - | - | - | - |
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James D. Richards | 2018 | $425,000 | - | $655,904 | $233,163 | $47,684 | $1,361,751 |
Senior Vice President | 2017 | $400,000 | - | $669,757 | $560,639 | $50,455 | $1,680,851 |
and Northwest Group Manager | 2016 | $400,000 | - | $422,187 | $438,586 | $50,927 | $1,311,700 |
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Dale A. Swanberg | 2018 | $425,000 | $122,515 | $289,961 | $77,485 | $47,145 | $962,106 |
Senior Vice President and | 2017 | $400,000 | $135,469 | $190,025 | $64,531 | $46,273 | $836,298 |
Large Projects Group Manager | - | - | - | - | - | - | - |
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Laurel J. Krzeminski | 2018 | $269,231 | - | $821,677 | $122,705 | $71,240 | $1,284,853 |
Retired Executive Vice President | 2017 | $500,000 | - | $880,304 | $283,933 | $51,409 | $1,715,646 |
and CFO (Principal Financial | 2016 | $475,000 | - | $590,960 | $263,708 | $52,247 | $1,381,915 |
and Accounting Officer) |
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Name | Stock | Non-Equity Incentive Plan | All Other | ||||
| and Principal Position | Year | Salary | Bonus | Awards(1) | Compensation(2) | Compensation(3) | Total |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
Kyle T. Larkin President and CEO | 2022 2021 2020 | $900,000 $854,615 $584,615 | - - - | $599,980 $1,439,992 $260,010 | $545,112 - - | $77,385 $68,972 $59,920 | $2,122,477 $2,363,579 $904,545 |
Elizabeth L. Curtis Executive Vice President and CFO | 2022 2021 | $500,000 $437,500 | - - | $199,993 $89,995 | $242,272 - | $51,364 $47,072 | $993,629 $574,567 |
James A. Radich Executive Vice President and COO | 2022 2021 2020 | $500,000 $500,000 $381,058 | - - - | $162,497 $119,979 $69,998 | $242,272 - $240,260 | $47,542 $45,359 $48,243 | $952,311 $665,338 $739,559 |
Michael G. Tatusko Senior Vice President and Mountain Group Manager | 2022 2021 2020 | $425,000 $400,000 $375,000 | - - - | $99,981 $74,962 $69,998 | $267,419 $254,748 $121,622 | $52,695 $173,958 $50,012 | $845,095 $903,668 $616,632 |
Staci Woolsey CAO | 2022 | $380,000 | - | $73,120 | $138,095 | $345,262 | $936,477 |
James D. Richards Former Senior Vice President and Central Group Manager | 2022 2021 2020 | $251,077 $480,000 $450,000 | - - $200,000 | $143,732 $104,987 $100,005 | $43,609 - - | $758,426 - $51,501 | $1,196,844 $584,987 $801,506 |
(1)The amounts in column (d) reflect a discretionary bonus award approved by the Compensation Committee in recognition of Ms. Desai’s contributions to the Company in her prior role as Vice President, Corporate Finance and Treasurer. Additionally, 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 reflects a payment to Mr. Swanberg as a result of his guaranteed minimum award.
(2)The awards in column (e) reflect the grant date fair value of stock awards granted pursuant to (i)the time-based service inaward feature of the stated year based onLTIP and the ServicePerformance Award feature of the LTIP, (ii) the grant date fair value of stock awards granted in the stated year based on performance for the three-year performance period, including the prior year pursuant to the performance based component of the LTIP and (iii) the grant date fair value of stock awards granted in the stated year approved by the Compensation Committee.LTIP. For a detailed explanation, regarding RSUs granted during 20182022 to the Named Executive Officers, please refer to the Grants of Plan-Based Awards table. The grant date fair value is determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, without regard to potential forfeitures and is determined using the fair value of the Company’s common stock based on the market price at the date of grant. For additional information about the assumptions used in these calculations, see Note 17 of the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.2022. For a detailed explanation, please refer to the “Compensation Discussion and Analysis — Compensation Elements — Long Term Incentive Compensation”Compensation.”
(3)(2) The amounts in column (f) reflect the cash awards earned for performance in 20182022 and paid in March 2019.2023. For a detailed explanation of cash awards for performance in 2018,2022, please refer to “Compensation Discussion and& Analysis —– Compensation Elements —– Annual Incentive Compensation”.Compensation.”
(4)(3) Please refer to the "All Other Compensation TableTable" below for details with respect to all other compensation.
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All Other Compensation Table
20182022
Named Executive Officer (a) | 401(k) Match(1) (b) | Dividends(2) (c) | Vehicle Allowances(3) (d) | Insurance(4) (e) | Other(5) (f) | Total (g) |
James H. Roberts | $16,500 | $8,908 | $17,004 | $17,306 | - | $59,718 |
Jigisha Desai | $11,638 | $3,549 | $17,004 | $17,985 | $832 | $51,008 |
Kyle T. Larkin | $16,500 | $1,303 | $12,238 | $17,083 | $48,271 | $95,395 |
James D. Richards | $16,500 | $2,004 | $12,000 | $17,180 | - | $47,684 |
Dale A. Swanberg | $16,500 | $3,492 | $12,000 | $15,153 | - | $47,145 |
Laurel J. Krzeminski | $16,500 | $2,167 | $9,919 | $9,063 | $33,591 | $71,240 |
Named Executive Officer (a) | 401(k) Match(1) (b) | Dividends(2) (c) | Vehicle Allowances(3) (d) | Insurance(4) (e) | Other(5) (f) | Total (g) |
Kyle T. Larkin | $18,300 | $27,222 | $12,000 | $19,863 | - | $77,385 |
Elizabeth L. Curtis | $18,300 | $4,390 | $12,000 | $16,674 | - | $51,364 |
James A. Radich | $18,300 | - | $12,000 | $17,242 | - | $47,542 |
Michael G. Tatusko | $18,300 | $3,296 | $12,000 | $19,099 | - | $52,695 |
Staci Woolsey | $17,800 | $1,541 | $12,000 | $19,020 | $294,901 | $345,262 |
James D. Richards(6) | $16,564 | $1,350 | $6,000 | $23,042 | $711,470 | $758,426 |
(1)The amounts in column (b) reflect the company matching contribution, not to exceed 6% on compensation deferred into the 401(k) Plan.
(2)The amounts in column (c) reflect RSU dividend equivalent units.
(3)The amounts in column (d) reflect the vehicle allowances provided to the Named Executive Officers. Mr. Larkin’s vehicle allowance total includes $238 of taxable income related to his 2017 vehicle reimbursement program prior to becoming an Executive Officer.
((4)4)The amounts in column (e) reflect the company expense for medical, dental, vision, life, short and long-term disability insurance, Accidental Deathaccidental death & Dismemberment, Executive Liability Insurance,dismemberment insurance, executive liability insurance, and Employee Assistance Program.employee assistance program.
(5)The amounts in column (f) include;include: (i) Ms. Desai’s healthWoolsey’s relocation of $294,901, and wellness program reward with a total grossed-up value of $832 for a total net value of $550; (ii) relocation expenses incurred on behalf of Mr. Larkin, and (iii) Ms. Krzeminski received a payment by the CompanyRichard’s payments equal to (1) $24,997 for unused accrued vacation, and (2) $686,473 for severance pursuant to the terms of $33,591.his separation and transition agreement.
Page 29(6) Mr. Richards ceased to serve as an executive officer effective June 27, 2022.
Grants of Plan-Based Awards Table
20182022
The following table provides additional information about incentive plan awards and other equity awards granted to our Named Executive Officers during the year ended December 31, 2018.2022.
| Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards(2) | All Other | |||||||
| Stock Awards: | Grant Date | ||||||||
Named | Committee |
| Number of | Fair Value | ||||||
Executive | Approval | Grant | Shares or | of Stock | ||||||
Officer | Date | Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock Units | Awards(3) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) |
| Kyle T. Larkin |
| $450,000 | $900,000 | $1,800,000 | - | - | - | - | - | |
- | - | - | $900,000 | $1,800,000 | $3,600,000 | - | - | |||
3/2/22 | 3/14/22 | - | - | - | - | - | - | 18,897(4) | $599,980 | |
| Elizabeth L. Curtis |
| $200,000 | $400,000 | $800,000 | - | - | - | - | - | |
- | - | - | $300,000 | $600,000 | $1,200,000 | - | - | |||
3/2/22 | 3/14/22 | - | - | - | - | - | - | 6,299(4) | $199,993 | |
| James A. Radich |
| $200,000 | $400,000 | $800,000 | - | - | - | - | - | |
- | - | - | $243,750 | $487,500 | $975,000 | - | - | |||
3/2/22 | 3/14/22 | - | - | - | - | - | - | 5,118(4) | $162,497 | |
| Michael G. Tatusko |
| $138,125 | $276,250 | $552,500 | - | - | - | - | - | |
- | - | - | $150,000 | $300,000 | $600,000 | - | - | |||
3/2/22 | 3/14/22 | - | - | - | - | - | - | 3,149(4) | $99,981 | |
| Staci Woolsey |
| $114,000 | $228,000 | $456,000 | - | - | ||||
$109,725 | $219,450 | $438,900 | - | - | ||||||
3/2/22 | 3/14/22 | 2,303(4) | $73,120 | |||||||
| James D. Richards(5) |
| $180,000 | $360,000 | $720,000 | - | - | ||||
$215,625 | $431,250 | $862,500 | - | - | ||||||
3/2/22 | 3/14/22 | 4,527(4) | $143,732 | |||||||
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| Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards(2) |
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Named Executive Officer (a) | Grant Date (b) | Threshold (c) | Target (d) | Maximum (e) | Threshold (f) | Target (g) | Maximum (h) | All Other Stock Awards: Number of Shares or Stock Units (i) |
| Grant Date Fair Value of Stock Awards(3) (j) |
James H. Roberts | - | $517,500 | $1,035,000 | $2,070,000 | - | - | - | - |
| - |
| - | - | - | - | $800,000 | $1,600,000 | $3,200,000 | - |
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| 03/14/18 | - | - | - | - | - | - | 6,513 | (4) | $400,028 |
| 03/14/18 | - | - | - | - | - | - | 34,808 | (5) | $2,137,907 |
Jigisha Desai | - | $159,375 | $318,750 | $637,500 | - | $143,871 | - | - |
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| - | - | - | - | - | - | - | - |
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| 03/14/18 | - | - | - | - | - | - | 579 | (4) | $35,562 |
Kyle T. Larkin | - | $131,250 | $262,500 | $525,000 | - | - | - | - |
| - |
| - | - | - | - | $180,000 | $360,000 | $720,000 | - |
| - |
| 03/14/18 | - | - | - | - | - | - | 1,465 | (4) | $89,980 |
James D. Richards | - | $159,375 | $318,750 | $637,500 | - | - | - | - |
| - |
| - | - | - | - | $180,000 | $360,000 | $720,000 | - |
| - |
| 03/14/18 | - | - | - | - | - | - | 1,465 | (4) | $89,980 |
| 03/14/18 | - | - | - | - | - | - | 9,214 | (5) | $565,924 |
Dale A. Swanberg | - | $159,375 | $318,750 | $637,500 | - | - | - | - |
| - |
| - | - | - | - | $180,000 | $360,000 | $720,000 | - |
| - |
| 03/14/18 | - | - | - | - | - | - | 1,465 | (4) | $89,980 |
| 12/17/18 | - | - | - | - | - | - | 4,966 | (6) | $199,981 |
Laurel J. Krzeminski | - | $187,500 | $375,000 | $750,000 | - | - | - | - |
| - |
| - | - | - | - | $260,000 | $520,000 | $1,040,000 | - |
| - |
| 03/14/18 | - | - | - | - | - | - | 2,117 | (4) | $130,026 |
| 03/14/18 | - | - | - | - | - | - | 11,261 | (5) | $691,651 |
(1) Amounts in columns (c)(d) through (e)(f) reflect threshold, target and maximum incentives, as applicable, (subject to rounding), under the 20182022 AIP. For a detailed discussion of annual incentive compensation and the payout actually received by each Named Executive Officer under the 20182022 AIP, please refer to “Compensation Discussion and Analysis — Compensation Elements — 20182022 Annual Incentive Compensation”, 2018Plan Compensation,” “2022 AIP Performance Measures and Results,Results” and “2018 Incentivethe 2022 Summary Compensation Plan for Jigisha Desai”.Table.
(2) Amounts in columns (f)(g) through (h)(i) reflect the threshold, target and maximum award amounts applicable to the performance based (TSR) component(TSR and RONA) components of our 20182022 LTIP. Each of our Named Executive Officers has the ability to earn from 0% to 200% of the TSR componentand RONA components of the LTIP target opportunity. Any payouts under the LTIP are made in the form of RSUs. Payouts on the TSR componentand RONA components of the LTIP are made after the end of the performance period. For more detailed discussion of the 2018 LTIP, please refer to “Compensation Discussion and Analysis — Compensation Elements — Long Term Incentive Compensation” and “2018 Incentive Compensation Plan for Jigisha Desai.”
((3)3) Amounts in column (j)(k) reflect all RSU awards granted on March 14, 2018.2022. The grant date fair market value was calculated by multiplying the number of RSUs awarded by the closing price of our common stock of $61.42 on the date of the grant,. $31.75 for March 14, 2022.
(4)The RSUs granted on March 14, 20182022 reflect the time-based service awards granted under the LTIP. The number of RSUs granted for the time-based service award was calculated by dividing the time-based service award by the closing price of our common stock of $61.42$31.75 on the date of the grant. The granted time-based service award RSUs vest in three equal annual installments beginning on March 14, 2019,2023, subject to continued service; unless retirement eligibility per the 20122021 Equity Plan is met, in which case vesting is accelerated. The holders of RSUs are entitled to receive dividend equivalent units in lieu of cash dividends declared by the Board of Directors on the outstanding common stock of the Company.
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(5) The Mr. Richards ceased to serve as an executive officer effective June 27, 2022 and his unvested RSUs granted on March 14, 2018 reflect the performance awards granted under the LTIP. The number of RSUs granted for the 2015 – 2017 Total Shareholder Return performance award was calculated by dividing the performance award by the average stock price over the first 30 days of January 2015 of $35.49. The RSUs granted as performance awards are fully vested on the date of grant. The holders of RSUs are entitled to receive dividend equivalent units in lieu of cash dividends declared by the Board on the outstanding common stock of the Company.
(6) The RSUs granted on December 17, 2018 reflect an award to Mr. Swanberg approved by the Compensation Committee in recognition of his contributions to the Large Projects Group. The number of RSUs granted was determined by dividing $199,981 by $40.27, the fair market value of the Company’s common stock on the date of grant. The RSUs granted to Mr. Swanberg will ratably vest over three years beginning on December 17, 2019, subject to continued service. The holders of RSUs are entitled to receive dividend equivalent units in lieu of cash dividends declared by the Board on the outstanding common stock of the Company.were forfeited upon separation.
Outstanding Equity Awards at Fiscal Year-End Table
20182022
The following table summarizes equity awards made to the Named Executive Officers that were outstanding as of December 31, 2018.2022.
| Stock Awards | ||
Named Executive Officer (a) | Number of Shares or RSUs That Have Not Vested(1)(2) (b) | Market Value of Shares or RSUs That Have Not Vested(3) (c) |
Kyle T. Larkin | 50,621 | $1,775,278 |
Elizabeth L. Curtis | 8,424 | $295,430 |
James A. Radich(4) | 0 | $0 |
Michael G. Tatusko | 6,383 | $223,852 |
Staci Woolsey | 2,854 | $100,090 |
James D. Richards(5) | 0 | $0 |
(1) | Upon death, disability, or achieving retirement eligibility, all equity awards of a Named Executive Officer would vest immediately. |
(2) | Vesting dates for outstanding RSU awards for the Named Executive Officers is set forth in the table below. |
(3) | The amounts shown in column (c) are based on the December 30, 2022 closing price of the Company’s common stock of $35.07. |
(4) | Pursuant to the 2021 Equity Plan, Mr. Radich qualifies as retirement eligible and all of his equity awards vest immediately. |
(5) | Mr. Richards ceased to serve as an executive officer effective June 27, 2022 and his unvested RSUs were forfeited upon separation. |
| Stock Awards | |
Number of Shares or RSUs That Have Not Vested(1)(2) (b) | Market Value of Shares or RSUs That Have Not Vested(3) (c) | |
James H. Roberts | 17,197 | $692,695 |
Jigisha Desai | 2,032 | $81,849 |
Kyle T. Larkin | 2,516 | $101,344 |
James D. Richards | 3,869 | $155,843 |
Dale A. Swanberg | 10,003 | $402,921 |
Laurel J. Krzeminski(4) | - | - |
(1) Upon death or disability, all of the equity awards of a Named Executive Officer would vest immediately.
(2) Vesting dates for each outstanding RSU awards for the Named Executive Officers are set forth in the table below.
(3) The amounts shown in column (c) are based on the December 31, 2018 closing price of the Company’s common stock of $40.28.
(4) Pursuant to the terms of the Granite Construction Incorporated 2012 Equity Plan, Ms. Krzeminski qualified as retirement eligible on June 30, 2018 and all of her outstanding equity awards vested as of that date.
Vesting Dates for Each Outstanding RSU Awards for the Named Executive Officers
|
| Number of RSUs Underlying Vesting Awards | ||||
Vesting Date | Award Type | James H. Roberts(1) | Jigisha Desai | Kyle T. Larkin | James D. Richards | Dale A. Swanberg |
2019 |
|
|
|
|
|
|
01/03/19 | RSU | - | - | - | - | 616 |
01/28/19 | RSU | 17,197 | - | - | - | - |
03/14/19 | RSU | - | 1,413 | 1,362 | 2,285 | 2,222 |
12/17/19 | RSU | - | - | - | - | 1,655 |
2020 |
|
|
|
|
|
|
01/03/20 | RSU | - | - | - | - | 615 |
03/14/20 |
|
| 424 | 662 | 1,092 | 1,092 |
12/17/20 | RSU | - | - | - | - | 1,655 |
2021 |
|
|
|
|
|
|
03/14/21 | RSU | - | 195 | 492 | 492 | 492 |
12/17/21 | RSU | - | - | - | - | 1,656 |
(1) Pursuant to the terms of the Granite Construction Incorporated 2012 Equity Plan, Mr. Roberts qualified as retirement eligible on January 28, 2019 and all of his outstanding equity awards vested as of that date
Number of RSUs That Vest on Each Vesting Date | |||||||||
Named Executive Officer | Award Type | 3/13/2023 | 3/14/2023 | 6/3/2023 | 9/24/2023 | 3/14/2024 | 6/3/2024 | 9/24/2024 | 3/14/2025 |
Kyle T. Larkin | RSU | 7,191 | 10,069 | 8,454 | - | 10,069 | 8,453 | - | 6,385 |
Elizabeth L. Curtis | RSU | 532 | 2,882 | - | - | 2,882 | - | - | 2,128 |
James A. Radich(1) | RSU | - | - | - | - | - | - | - | - |
Michael G. Tatusko | RSU | 1,936 | 1,691 | - | - | 1,692 | - | - | 1,064 |
Staci Woolsey | RSU | - | 778 | - | 260 | 778 | - | 260 | 778 |
James D. Richards(2) | RSU | - | - | - | - | - | - | - | - |
(1) | Pursuant to the terms of the 2021 Equity Plan, Mr. Radich qualifies as retirement eligible and all of his equity awards vest immediately. |
(2) | Mr. Richards ceased to serve as an executive officer effective June 27, 2022 and his unvested RSUs were forfeited upon separation. |
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Stock Vested Table
20182022
The following table summarizes the number of shares our Named Executive Officers acquired upon the vesting of stock awards during 20182022 and the value realized before payment of any applicable withholding tax and broker commissions.tax.
| Stock Awards | |
Number of Shares Acquired on Vesting (b) | Value Realized Upon Vesting(1) (c) | |
James H. Roberts | 48,768 | $2,728,742 |
Jigisha Desai(2) | 1,548 | $95,147 |
Kyle T. Larkin | 1,110 | $68,272 |
James D. Richards | 12,596 | $703,059 |
Dale A. Swanberg | 3,164 | $182,516 |
Laurel J. Krzeminski(3) | 21,351 | $1,193,074 |
| Stock Awards | ||
Named Executive Officer (a) | Number of Shares Acquired on Vesting (b) | Value Realized Upon Vesting(1) (c) |
Kyle T. Larkin | 19,791 | $633,087 |
Elizabeth L. Curtis | 2,002 | $64,004 |
James A. Radich | 5,118 | $167,103 |
Michael G. Tatusko | 2,757 | $87,620 |
Staci Woolsey | 260 | $6,999 |
James D. Richards(2) | 4,283 | $136,080 |
(1)The amounts in column (c) are based on the fair market value of our common stock on the applicable vesting date.
(2) Ms. Desai participates in the NQDC plan and defers 100% of her RSU awards.Mr. Richards ceased to serve as an executive officer effective June 27, 2022.
(3) Pursuant to the terms of the Granite Construction Incorporated 2012 Equity Plan, Ms. Krzeminski qualified as retirement eligible on June 30, 2018 and all of her equity awards vested as of that date. Ms. Krzeminski retired from the Company effective July 6, 2018.
Nonqualified Deferred Compensation Table
2018 2022
The following table summarizes our Named Executive Officers' compensation under our NQDC plan for the year ended December 31, 2018,2022, which is also reflected in the Summary Compensation Table.
Named Executive Officer (a) | Executive Contribution in Last Fiscal Year(1)(2) (b) | Registrant Contributions in Last Fiscal Year (c) | Aggregate Earnings in Last Fiscal Year(3) (d) | Aggregate Withdrawals/ Distributions (e) | Aggregate Balance at Last Fiscal Year End (f) |
$411,678 | - | ($118,908) | - | $1,357,072 | |
Jigisha Desai | $399,788 | - | ($239,000) | - | $2,051,048 |
Kyle T. Larkin(4) | n/a | n/a | n/a | n/a | n/a |
James D. Richards(4) | n/a | n/a | n/a | n/a | n/a |
Dale A. Swanberg(4) | n/a | n/a | n/a | n/a | n/a |
Laurel J. Krzeminski | $56,786 | - | ($27,162) | - | $388,046 |
Executive | Registrant | Aggregate | Aggregate | Aggregate Balance | |
| Contribution in | Contributions in | Earnings in Last | Withdrawals/ | at Last Fiscal |
Named Executive Officer | Last Fiscal Year(1)(2) | Last Fiscal Year | Fiscal Year(3) | Distributions(4) | Year End(5) |
(a) | (b) | (c) | (d) | (e) | (f) |
Kyle T. Larkin(6) | n/a | n/a | n/a | n/a | n/a |
Elizabeth L. Curtis | $24,904 | - | ($9,050) | - | $80,785 |
James A. Radich | - | - | ($17,775) | ($66,574) | $57,587 |
Michael G. Tatusko(6) | n/a | n/a | n/a | n/a | n/a |
Staci Woolsey(6) | n/a | n/a | n/a | n/a | n/a |
James D. Richards(6)(7) | n/a | n/a | n/a | n/a | n/a |
(1)(1) The NQDC plan allows Named Executive Officers to defer base salary and incentive compensation, which includes equity and cash awards. Participants are required to make an election each plan year with respect to the amount to be deferred, future distribution date, and form of distribution. The distribution may consist of in-service distributions while they are actively employed or a future retirement election. A distribution election is irrevocable on the first day of each plan year. For a detailed explanation of the NQDC, please refer to “Compensation Discussion and Analysis — Non-Qualified Deferred Compensation”.
(2) The amounts in column (b) include (i) Mr. Roberts’sMs. Curtis’ base salary deferral of $269,712 and deferred annual cash incentive award of $141,966, (ii) Ms. Desai’s$24,904. The base salary deferral of $193,964, deferred annual cash incentive award of $110,677, 33%, or $20,920, of her deferred service award granted on March 13, 2015 and vested on March 13, 2018, 33%, or $44,099, of her deferred performance award granted on March 14, 2016 and vested on March 14, 2018, 33%, or $16,092, of her deferred service award granted on March 14, 2016 and vested on March 14, 2018, and 33%, or $14,036, of her deferred service award granted March 14, 2017 and vested on March 14, 2018, and (iii)reported in this column (b) is included within the amount reported as salary for Ms. Krzeminski’s deferred annual cash incentive award of $56,786.Curtis in the 2022 Summary Compensation Table.
(3) The amounts in column (d) do not include above market or preferential earnings (of which there were none) and, accordingly, such amounts are not reported in the Summary Compensation Table as above market or preferential earnings.
((4) Pursuant to the terms of the NQDC Plan, and in accordance with his previous in-service account elections, Mr. Radich received a cash distribution of $66,574.
4(5) Amounts reported in this column (f) for each Named Executive Officer include amounts previously reported in the Summary Compensation Table in previous years when earned if that officer’s compensation was required to be disclosed in a previous year. Amounts previously reported in such years include previously earned, but deferred, salary and incentive compensation.
)(6) Messrs. Larkin, Tatusko, Radich and Richards and SwanbergMs. Woolsey elected to not participate in the NQDC Plan in 2018.2022.
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Potential Payments UponUpon Termination or Change-in-Control
Except in the case of a change-in-control, Granite is not obligated to pay severance or other enhanced benefits to any of the Named Executive Officers in connection with a termination of their employment. UponUnder the terms of Granite’s equity plans and award agreements, upon death or disability, or becoming retirement eligible, all of the equity awards of a Named Executive Officer would vest immediately. The amount of equity awards that would vest upon each Named Executive Officer's death, disability, or retirement eligibility (if eligibility was met as of December 31, 2022) is set forth in column (e) below. Under the Company’s ERSP III, each Named Executive Officer is subject to a two-year non-solicitation requirement, and a non-disparagement requirement following termination of employment.
The following table sets forth an example of the potential payments and benefits under Granite's compensation and benefit plans and arrangements to which the Named Executive Officers would be entitled upon a termination of employment without cause or for “good reason” (as defined above under certain circumstances“Change-in-Control Arrangements”) within threetwo years following a change-in-control of Granite.
Mr. Richards was no longer eligible to receive benefits under the Company’s ERSP III as his employment with the Company terminated on June 27, 2022. For a detailed explanation, please see further below. The amounts set forth in the following table are based on the assumption that such termination event occurred on the last business day of fiscal year 2018.2022.
Named Executive Officer (a) | Cash Severance Payment(1) (b) | Insurance Benefits(2) (c) | Other Compensation(3) (d) | Accelerated Equity Awards(4) (e) | Total (f) | Section 280G Safe Harbor Provision(5) (g) | Adjusted Total (h) |
$5,049,524 | $47,883 | $40,050 | $692,695 | $5,830,152 | $0 | $5,830,152 | |
Jigisha Desai | $1,010,657 | $31,816 | $17,204 | $81,849 | $1,141,526 | $0 | $1,141,526 |
Kyle T. Larkin | $591,210 | $15,339 | $12,818 | $101,344 | $720,711 | $0 | $720,711 |
James D. Richards | $830,158 | $15,767 | $13,070 | $155,843 | $1,014,838 | $0 | $1,014,838 |
Dale A. Swanberg | $506,573 | $14,056 | $11,418 | $402,921 | $934,968 | $0 | $934,968 |
Named Executive Officer (a) | Cash Severance Payment(1) (b) | Insurance Benefits(2) (c) | Other Compensation(3) (d) | Accelerated Equity Awards(4) (e) | Total (f) | Section 280G Safe Harbor Provision(5) (g) | Adjusted Total (h) |
Kyle T. Larkin | $1,877,711 | $36,220 | $34,200 | $6,688,585 | $8,636,716 | - | $8,636,716 |
Elizbeth L. Curtis | $1,020,000 | $31,224 | $34,200 | $1,369,764 | $2,455,188 | ($538,150) | $1,917,038 |
James A. Radich | $1,318,107 | $31,186 | $34,200 | $1,456,071 | $2,839,564 | ($584,130) | $2,255,434 |
Michael G. Tatusko | $1,325,389 | $34,952 | $34,200 | $1,248,247 | $2,642,788 | - | $2,642,788 |
Staci Woolsey | $890,000 | $18,262 | - | $305,881 | $1,214,143 | - | $1,214,143 |
(1) The amount in column (b) for Mr. Roberts reflect a lump sum payment equal to (i) three times the annual average of the aggregate annual incentive bonuses earned for the three fiscal years preceding the fiscal year of the change-in-control plus (ii) three times the annual base salary rate in effect immediately prior to the termination. The amount in column (b) for Ms. DesaiMses. Curtis and Woolsey, Messrs. Larkin, Radich and Tatusko reflect a lump sum payment equal to (i) two times the annual average of the aggregate annual incentive bonuses earned for the three fiscal years preceding the fiscal year of the change-in-control plus (ii) two times the annual base salary rate in effect immediately prior to the termination. The amounts in column (b) for Messrs. Larkin, Swanberg and Richards reflect a lump sum payment equal to one times the annual average of the aggregate annual incentive bonuses earned for the three fiscal years preceding the fiscal year of the change-in-control plus (ii) one times the current annual base salary rate in effect immediately prior to the termination. For a detailed explanation, please refer to “Change-in-Control Agreements.Arrangements.”
(2)(2) The amount in column (c) for Mr. Roberts reflect a lump sum payment equal to three times the average annual cost to Granite of the Named Executive Officer's group insurance benefits, such as life, healthMses. Curtis and long-term disability, for the three fiscal years ending before the date of termination. The amount in column (c) for Ms. DesaiWoolsey, Messrs. Larkin, Radich and Tatusko reflect a lump sum payment equal to two times the average annual cost to Granite of the Named Executive Officer's group insurance benefits, such as life, health and long-term disability, for the three fiscal years ending before the date of termination. The amounts in column (c) for Messrs. Larkin, Swanberg and Richards reflect a lump sum payment equal to one times the annual average cost to Granite of their group insurance benefits. For a detailed explanation, please refer to “Change-in-Control Agreements.Arrangements.”
(3)(3) The amount in column (d) for Mr. Roberts reflect a lump sum payment equal to three times the annual average cash equivalent of contributions which were made on behalf of the Named Executive Officer for the three fiscal years ending before the date of termination to the 401(k) PlanMses. Curtis and any other retirement plan provided by GraniteWoolsey, Messrs. Larkin, Radich and in effect as of the date of termination. The amount in column (d) for Ms. DesaiTatusko reflect a lump sum payment equal to two times the annual average cash equivalent of contributions which were made on behalf of the Named Executive Officer for the three fiscal years ending before the date of termination to the 401(k) Plan and any other retirement plan provided by Granite and in effect as of the date of termination. The amounts in column (d) for Messrs. Larkin, Swanberg and Richards reflect a lump sum payment of one times the annual average cash equivalents of such contributions. These amounts do not include additional amounts that may be payable for reasonable professional outplacement services for the Named Executive Officer to which the Named Executive Officer is entitled under the plan until the earlier of (i) two years following the date of termination and (ii) the date on which the Named Executive Officer obtains other employment. For a detailed explanation, please refer to “Change-in-Control Agreements.Arrangements.”
(4) InUnder the terms of Granite’s equity plans, in the event of a change-in-control, if the acquiring person does not assume or replace outstanding equity awards, all non-exercisable, unvested or unpaid portions of the outstanding equity awards would become immediately exercisable and fully vested. If an equity award is performance-based and a change-in-control occurs in the first year of the performance period, the equity awards will be paid out at target, and if it occurs in the second or third year of the performance period, the equity award will be paid out at actual performance through the change-in-control date. The amounts in column (e) reflect the outstanding equity awards valued at the December 31, 201830, 2022 closing price of our common stock of $40.28.$35.07. Pursuant to the terms of the Granite Construction Incorporated 2012 Equity Plan,Granite’s equity plans, Mr. Roberts qualifiedRadich qualifies as retirement eligible on January 28, 2019 and therefore all of his RSUs vested as of that date.equity awards vest immediately.
(5)Payments under the Executive Retention and Severance Plan are subject to reduction to the extent necessary not to exceed the “safe harbor” amount under Section 4999 of the Internal Revenue Code, but only if the reduction would increase the net after-tax amount received by the participant.
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Separation and Transition Agreement with Mr. Richards
In June 2022, Mr. Richards was terminated without cause and entered into a Separation and Transition Agreement (the “Separation Agreement”) with Granite. Pursuant to this Agreement, Mr. Richards: (1) remained an employee of Granite and continued to serve as Senior Vice President and Group Manager through June 27, 2022 (the “Separation Date”) and until the Separation Date, continued to receive his annual base salary at the rate in effect immediately prior to entering into the Agreement, (2) resigned as Senior Vice President and Group Manager and ceased to be an employee of Granite as of the Separation Date, (3) received a one-time lump sum payment of $686,473, (4) remained eligible to receive his prorated 2022 AIP award based on actual results, (5) remained eligible to receive a payout under his LTIP awards based on actual results through the end of the applicable performance period and prorated for his service, payable in cash and (6) received a payment equal to 18 months of COBRA premiums. The Agreement also contained customary non-disparagement, cooperation and general release and waiver provisions.
Director CompensationStock Ownership
AllOn December 8, 2022, the Board of Directors approved revised stock ownership guidelines which require all non-employee directors are required to own and maintain threefive times their Annual Board of Directors Cash Retainer from Granite in Granite common stock within five years after joining the Board.Board of Directors. Until the ownership requirement is reached, directors must hold 75% of the after-tax shares they receive from equity grants. As of December 31, 2018,2022, all non-employee directors are in compliance with 5the guideline either by virtue of having attained the required number of shares or more years of service tocomplying with the Board had achieved the stock ownership levels. For additional information, please refer to “Stock Ownership Guidelines”.retention requirement.
Cash and Equity Compensation Policy
Every other year the compensation consultant conducts a comprehensive review of the Board of Director’s compensation program. The compensation consultant may recommend changes to the cash and equity-based compensation based on benchmarking comparisons or broader market best practices. After reviewing such peer compensation benchmark data in September 2022, the Board of Directors approved a $25,000 increase to each board member’s equity award beginning in 2023 to bring the program into alignment with the median of our executive compensation benchmarking peer group.
Granite's non-employee directors receive annual cash retainers and equity grants as set forth in the table below. Key highlights of the director compensation program are as follows:
● |
|
● |
|
|
|
| Directors, other than the Chairman of the Board, receive an annual grant of RSUs valued at $110,000 on the date of grant. The Chairman of the Board receives an annual grant of RSUs equal to $175,000 in value on the date of grant. All RSUs vest in full on the first anniversary of the date of |
