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  ☐

Check the appropriate box:

Kirby Corporation

(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):

March 5, 2020

DEAR FELLOW STOCKHOLDERS,

On behalf of the Board of Directors (the “Board”), we cordially invite you to attend Kirby Corporation’s 2020 Annual Meeting of Stockholders. Information concerning the matters to be voted upon at the meeting is contained in this Notice of the 2020 Annual Meeting and Proxy Statement.

Looking back on 2019, the year can be characterized by very different market conditions in each of our core businesses. In marine transportation, although inland operations were challenged by historic flooding on the Mississippi River System, improving market conditions and our recent investments in the inland and coastal fleets contributed to significant year-on-year growth in revenues and operating income. This was offset, however, by the impact of a cyclical downturn in our oil and gas related distribution and services businesses. Overall, the Company generated significant free cash flow which was used to fund growth in inland marine and pay down debt.

In marine transportation, we continue to make strategic investments to improve the efficiency and average age of our fleet. In March 2019, we completed the purchase of Cenac Marine Services, LLC’s (“Cenac”) young marine transportation fleet including 63 inland tank barges, 34 inland towboats, and two offshore tugboats. We also invested in new modern horsepower, delivering seven new inland towboats, two of which were constructed in our own shipyard, as well as three new state-of-the-art coastal tugboats. These investments, together with the commencement of operations for our new 155,000 barrel coastal articulated tank barge, have strengthened Kirby’s fleet in our core markets and will enhance future profitability and stockholder returns.

In distribution and services, significant reductions in oilfield activity and customer spending in North America resulted in a challenging year for this segment. In response, we took decisive actions to lower our cost structure, reduce working capital, and streamline our oil and gas related businesses so that we will emerge from the downturn as a stronger and more efficient company. Beyond oil and gas, our commercial and industrial portfolio had a strong year, with growth in the power generation, marine, and on-highway sectors. These diverse businesses are poised for further growth in the coming years and provide a base of stable financial performance.

In our Corporate functions, 2019 was a busy and successful year, with numerous projects completed which strengthen Kirby for future success, including: critical enhancements to our information technology and cybersecurity infrastructure; implementation of a new payroll and benefits tracking system; and improved financial flexibility through an increase in the term and size of our bank credit facility. At the Board level, we enhanced the experience and capabilities of the Board with the election of our tenth director, Tanya S. Beder. Ms. Beder brings a wealth of professional, financial, and academic experience, as well as critical operational and risk management knowledge which will be invaluable to Kirby in the years ahead. We ask that you support the nomination of Ms. Beder in this year’s proxy vote.

Your vote is important to us, regardless of the number of shares you hold or whether you plan to personally attend the meeting. Once you have reviewed the proxy materials and have made your decision, please vote your shares using one of the methods outlined in the Proxy Statement.

Thank you for your continued support and for investing in Kirby Corporation.

		Sincerely,     DAVID W. GRZEBINSKI President and Chief Executive Officer

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Your Vote is Important

Your vote is important. Whether you intend to attend the meeting or not, please ensure that your shares will be represented by completing, signing and returning your proxy card in the envelope provided, or by voting via the phone or internet.

In Person		Telephone 800-690-6903		Internet www.proxyvote.com		Mail Fill out your proxy card and submit by mail.

Sincerely,

AMY D. HUSTED

Vice President, General Counsel and Secretary

PROXY MATERIALS

This booklet contains the notice of the Annual Meeting and the Proxy Statement, which contains information about the proposals to be voted on at the meeting, Kirby’s Board of Directors and its committees and certain executive officers. This year you are being asked to:

General Information

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of Kirby Corporation to be voted at the Annual Meeting of Stockholders to be held at Kirby’s Houston offices, 55 Waugh Drive, 11th Floor, Houston, Texas 77007, on April 28, 2020, at 10:00 a.m. (CDT).

Whenever we refer in this Proxy Statement to the Annual Meeting, we are also referring to any meeting that results from an adjournment or postponement of the Annual Meeting.

Unless the context requires otherwise, the terms “Kirby,” “the Company,” “our,” “we,” “us,” and similar terms refer to Kirby Corporation, together with its consolidated subsidiaries.

BOARD COMPOSITION & EXPERIENCE

*As of March 2020

2019 BUSINESS HIGHLIGHTS

In 2019, consolidated revenues declined 4% to $2.84 billion. The reduction was driven by a 16% decrease in revenues in the distribution and services segment, but was partially offset by a 7% increase in revenues in the marine transportation segment. Growth in the marine transportation segment was primarily related to the inland acquisition of Cenac’s marine transportation fleet in March, improved market conditions and pricing in inland and coastal, and higher barge utilization in coastal. In the distribution and services segment, the revenue decline was driven by a cyclical downturn in the oil and gas market which resulted in reduced orders for new and remanufactured pressure pumping equipment, as well as lower demand for equipment sales, service, and parts. This was partially offset by growth in the commercial and industrial market, particularly for the sale of back-up power systems in power generation.

Despite the overall revenue reduction, operating income, excluding one-time items¹, increased 5% to $282.3 million, with strength in marine transportation and cost reduction efforts in distribution and services more than offsetting the adverse impacts of reduced oilfield-related revenues. Earnings per share, excluding one-time items¹, increased modestly to $2.90.

In 2019, Kirby generated $512 million in cash flow from operations. This cash flow was used to pay down debt and make additional investments in the marine transportation fleet. During the year, Kirby invested more than $300 million in acquisitions and new construction of marine equipment, including 64 inland barges representing 1.9 million barrels capacity, 41 inland towboats, and five coastal tugboats. At the end of 2019, Kirby’s long-term debt balance was $1.37 billion, representing a reduction of more than $40 million compared to 2018, with a debt-to-capitalization ratio of 28.9%.

CORPORATE GOVERNANCE

The Board represents the stockholders’ interest and is responsible for overseeing Company management, including monitoring the effectiveness of management practices and decisions. To that end, the Board has established governance practices including the guidelines and charters described below.

Business Ethics Guidelines

The Board has adopted Business Ethics Guidelines that apply to all directors, officers and employees of the Company. A copy of the Business Ethics Guidelines is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview. The Company is required to make prompt disclosure of any amendment to or waiver of any provision of its Business Ethics Guidelines that applies to any director or executive officer including its chief executive officer, chief financial officer, chief accounting officer or controller, or persons performing similar functions. The Company will make any such disclosure that may be necessary by posting the disclosure on its website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines. A copy of the guidelines is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview.

Communication with Directors

Interested parties, including stockholders, may communicate with the full Board or any individual directors, including the Chairmen of the Audit, Compensation and Governance Committees, the presiding director or the non-management or independent directors as a group, by writing to them c/o Kirby Corporation, P.O. Box 1745, Houston, Texas 77251-1745. The Company will refer the communication to the appropriate addressee(s). Complaints about accounting, internal accounting controls or auditing matters should be directed to the Chairman of the Audit Committee at the same address. All communications will be forwarded to the person(s) to whom they are addressed.

Website Disclosures

The following documents and information are available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview:

GOVERNANCE HIGHLIGHTS

Our Board prides itself on its commitment to high ethical standards, effective governance practices, and expertise within the industries in which we operate.

In October 2019, the Board was expanded from nine to ten directors and enhanced with the election of Tanya S. Beder as the tenth director. Ms. Beder’s extensive background in professional, board, and academic disciplines, as well as her wealth of experience in asset and risk management, finance, and data analytics will be immensely valuable to Kirby’s future success.

COMPENSATION HIGHLIGHTS

Our executive compensation philosophy has been consistent and focused on the creation of value for our stakeholders. A significant portion of our named executive officers’ compensation is tied to “At Risk” or pay-for-performance components. The charts below depict how each element of compensation was weighted for our named executive officers in 2019.

Our executive compensation program is designed to attract and retain talented executive officers, motivate consistent performance over time, and encourage performance that results in increased profitability and stockholder returns. Our executive compensation program has historically received high levels of stockholder support well above 90%. In 2018, while there were no material changes to our executive compensation program, the approval rating declined at the 2019 Annual Meeting as a result of some stockholders voting against a one-time special retirement payment granted by the Board of Directors to our former Executive Chairman. For 2019, we did not have any special one-time payments, and the core of our executive compensation program remained unchanged. Listed below are some of the highlights of our compensation policies and practices:

PRESIDENT AND CEO		EXECUTIVE VP AND CFO		OTHER NEO
COMPENSATION		COMPENSATION		COMPENSATION

NOTE: Includes total direct compensation as referred to in the compensation discussion and analysis on page 29. “Bonus” includes non-equity incentive plan compensation. For additional information, reference the Summary Compensation Table on page 36.

STOCKHOLDER ENGAGEMENT

Throughout 2019, senior management and investor relations engaged with our stockholders and potential stockholders on a regular basis to share information on the Company, listen to their perspectives, and solicit feedback. In 2019, we conducted nearly 200 phone calls and in-house one-on-one meetings which connected us to more than 250 investors and analysts. We attended 12 equity conferences and investor events across the United States, and we hosted several investor events at our key operating facilities in Houston and Oklahoma City.

In October, Kirby’s executive management team hosted our top 50 stockholders and sell-side analysts at a reception with the Board of Directors in New York City. This event was well attended and provided our top stockholders with a valuable opportunity to engage with the Board and the Company’s executive leadership.

CORPORATE SUSTAINABILITY

Kirby has a long history of promoting sustainability as part of our corporate culture, and our “NO HARM” principles – NO HARM to People, to the Environment, and to Equipment is the foundation of our culture. We view sustainability as integral to the continued advancement of our NO HARM culture and strive to integrate it as part of our business strategy. Kirby’s core values of responsible operation, valuing our employees, and acting as stewards of the environment in the communities we operate shape our initiatives and strategies. Kirby has a long-standing history of investing in new equipment and technologies that improve its operations and support its environmental stewardship initiatives. We support our employees through extensive training and development programs, and continuously emphasize our high safety standards.

During 2019, we took concrete steps to improve our sustainability disclosures. In our 2019 Sustainability Report, we provided historical safety statistics which disclose our record on employee injuries, harm to equipment, and cargo spills to the environment. This report is available on the Company’s website at www.kirbycorp.com in the Sustainability section under ESG Presentation. Additionally, we provided new disclosures on our safety programs, management and audit oversight, and best practices which we utilize in operations every day. We also expanded our reporting on social matters, including enhanced disclosures on our employee benefit programs and community involvement. Additionally, we expanded the oversight of our sustainability program beyond executive leadership to include the Board of Directors. Our Governance Committee charter now includes environmental, social, and governance (“ESG”) oversight. Finally, we added dedicated employee resources to further enhance our disclosures and improve our engagement with ESG stakeholders.

In 2020, a key focus is to provide new disclosures on Kirby’s greenhouse gas emissions. We will also be working to align our ESG disclosures with the Sustainability Accounting Standards Board framework and the Task Force on Climate-Related Disclosures.

To learn more about these programs and initiatives, please visit the Corporate Sustainability section of our website at www.kirbycorp.com.

TABLE OF CONTENTS

VOTING ITEMS 1 AND 2:

ELECTION OF DIRECTORS

The Bylaws of the Company provide that the Board shall consist of not fewer than three nor more than fifteen members and that, within those limits, the number of directors shall be determined by the Board. The Bylaws further provide that the Board shall be divided into three classes, with the classes being as nearly equal in number as possible and with one class being elected each year for a three-year term. The size of the Board is currently set at ten. Three Class I directors are to be elected at the 2020 Annual Meeting to serve until the Annual Meeting of Stockholders in 2023 and one Class II director is to be elected at the 2020 Annual Meeting to serve until the Annual Meeting of Stockholders in 2021.

Ms. Beder was elected to the Board in October 2019 as a Class I director. In January 2020, the Board decided to decrease the number of Class I directors from four to three effective in April 2020 and to increase the size of the Class II directors from three to four also effective in April 2020. It was determined that this change would affect Ms. Beder’s directorship. Therefore, Ms. Beder has been nominated for election as a Class II director.

Each nominee named below is currently serving as a director and each has consented to serve for the new term, if elected. If any nominee becomes unable to serve as a director, an event currently not anticipated, the persons named as proxies in the enclosed proxy card intend to vote for a nominee selected by the present Board to fill the vacancy.

In addition to satisfying, individually and collectively, the Company’s Criteria for the Selection of Directors discussed under the “THE BOARD OF DIRECTORS — Governance Committee” below, each of the directors has extensive experience with the Company or in a business similar to one or more of the Company’s principal businesses or the principal businesses of significant customers of the Company. The brief biographies of each of the nominees and continuing directors below include a summary of the particular experience and qualifications that led the Board to conclude that he or she should serve as a director.

NOMINEES FOR ELECTION (PROPOSAL 1)

The Board of Directors of the Company unanimously recommends that you vote “FOR” the election of each of the following nominees as a director.

Nominees for Election as Class I directors, serving until the Annual Meeting of Stockholders in 2023

NOMINEE FOR ELECTION (PROPOSAL 2)

The Board of Directors of the Company unanimously recommends that you vote “FOR” the election the following nominee as a director.

Nominee for Election as Class II director, serving until the Annual Meeting of Stockholders in 2021

Directors Continuing in Office

The following persons are directors of the Company who will continue in office.

Continuing Class II directors, serving until the Annual Meeting of Stockholders in 2021

Continuing Class III directors, serving until the Annual Meeting of Stockholders in 2022

THE BOARD OF DIRECTORS

The Company’s business is managed under the direction of the Board, which is responsible for broad corporate policy and for monitoring the effectiveness of Company management. Members of the Board are kept informed about the Company’s businesses by participating in meetings of the Board and its committees, through operating and financial reports made at Board and committee meetings by Company management, through various reports and documents sent to the directors for their review and by visiting Company facilities. The Board’s development includes onsite meetings at key operating facilities which include interaction with employees at those locations.

Director Independence

The NYSE listing standards require listed companies to have at least a majority of independent directors. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with the Company.

The Board has determined that the following incumbent directors have no relationship with the Company except as directors and stockholders and are independent within the meaning of the NYSE corporate governance rules:

Our Chief Executive Officer, Mr. Grzebinski, has certified to the NYSE that the Company is in compliance with NYSE corporate governance listing standards.

Risk Oversight

The Board carries out its risk oversight function through the Audit Committee and the full Board. Management prepares and reviews with the Audit Committee and the Board semiannually a comprehensive assessment of the identified internal and external risks of the Company that includes evaluations of the potential impact of each identified risk, its probability of occurrence and the effectiveness of the controls that are in place to mitigate the risk. The Audit Committee and the Board also receive regular reports of any events or circumstances involving risks outside the normal course of business of the Company. At times, a particular risk will be monitored and evaluated by another Board committee with primary responsibility in the area of the subject matter involved. For example, the Compensation Committee reviews the risks related to the Company’s compensation policies and practices and the Audit Committee receives regular reports and updates on cybersecurity issues. The Board’s administration of its risk oversight function has not affected the Board’s leadership structure.

Board Leadership Structure

The Board has no set policy concerning the separation of the offices of Chairman of the Board and Chief Executive Officer, but retains the flexibility to decide how the two positions should be filled based on the circumstances existing at any given time. Following Mr. Grzebinski’s succession to the position of President and Chief Executive Officer in 2014, the Board considered it important for Mr. Pyne, with his comprehensive understanding of the Company’s businesses and strategic direction, to continue in the role of an executive Chairman of the Board. During the same time period, the Board was focused on management succession planning, primarily for the role of Chief Executive Officer but also for other senior management positions. The Board determined that having Mr. Pyne continue to serve as an executive Chairman of the Board after relinquishing the role of Chief Executive Officer would facilitate the succession process and provide valuable support to the senior management team. When Mr. Pyne retired as Executive Chairman of the Board in April 2018, the Board considered it important to the Company for Mr. Pyne to continue as Chairman of the Board in a non-executive capacity to continue to take advantage of his knowledge of the Company and its businesses as well as his leadership experience and he continues to serve in such capacity.

The Board does not have a lead director, but has chosen Mr. Alario to be the presiding director to preside at the regular executive sessions of the non-management directors that are held at least quarterly. An executive session with only independent directors is held at least once per year. Mr. Alario also serves as a liaison between the independent directors and management on certain matters that are not within the area of responsibility of a particular committee of the Board.

Board Committees

The Board has established three standing committees, including the Audit Committee, the Compensation Committee and the Governance Committee, each of which is briefly described below.

Audit Committee

All of the members of the Audit Committee are independent, as that term is defined in applicable Securities and Exchange Commission (“SEC”) and NYSE rules. In addition, the Board has determined that all of the members of the Audit Committee are “audit committee financial experts,” as that term is defined in SEC rules. The Audit Committee operates under a written charter adopted by the Board. A copy of the charter is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview.

Compensation Committee

All of the members of the Compensation Committee are independent, as that term is defined in applicable SEC and NYSE rules. In addition, all of the members of the Compensation Committee are “Non-Employee Directors” and “outside directors” as defined in relevant federal securities and tax regulations. The Compensation Committee operates under a written charter adopted by the Board. A copy of the charter is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview.

Governance Committee

All of the members of the Governance Committee are independent, as that term is defined in NYSE rules. The Governance Committee operates under a written charter adopted by the Board. A copy of the charter is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview.

The Governance Committee will consider director candidates recommended by stockholders or proposed by stockholders in accordance with the Company’s Bylaws. Recommendations may be sent to the Chairman of the Governance Committee, Kirby Corporation, P.O. Box 1745, Houston, Texas 77251-1745, accompanied by biographical information for evaluation. The Board of the Company has approved Criteria for the Selection of Directors which the Governance Committee will consider in evaluating director candidates. The criteria address compliance with SEC and NYSE requirements relating to the composition of the Board and its committees, as well as character, integrity, experience, understanding of the Company’s business and willingness to commit sufficient time to the Company’s business. The criteria are available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Overview.

In addition to the criteria, the Governance Committee and the Board will consider diversity in business experience, professional expertise, gender and ethnic background in evaluating potential nominees for director. The Company’s Corporate Governance Guidelines and Governance Committee Charter include provisions concerning the consideration of diversity in business experience, professional skills, gender and ethnic background in selecting nominees for director. The Governance Committee took these provisions into account in expanding the Board last year.

When there is a vacancy on the Board (i.e., in cases other than the nomination of an existing director for reelection), the Board and the Governance Committee have considered candidates identified by executive search firms, candidates recommended by stockholders and candidates recommended by other directors. The Governance Committee will continue to consider candidates from any of those sources when future vacancies occur. The Governance Committee does not evaluate a candidate differently based on whether or not the candidate is recommended by a stockholder.

Attendance at Meetings

It is the Company’s policy that directors are expected to attend Board meetings and meetings of committees on which they serve and are expected to attend the Annual Meeting of Stockholders of the Company. During 2019, the Board met four times, the Audit Committee met eight times, the Compensation Committee met five times and the Governance Committee met four times. Each director attended all of the meetings of the Board and more than 75% of the aggregate number of meetings of the committees on which he or she served. All directors attended the 2019 Annual Meeting of Stockholders of the Company.

Director Compensation

Directors who are employees of the Company receive no additional compensation for their service on the Board. Compensation of nonemployee directors is determined by the full Board, which may consider recommendations of the Compensation Committee. Past practice has been to review director compensation when the Board believes that an adjustment may be necessary in order to remain competitive with director compensation of comparable companies. Management of the Company periodically collects published survey information on director compensation for purposes of comparison.

Each nonemployee director receives an annual fee of $75,000. A director may elect to receive the annual fee in cash, stock options or restricted stock. The Chairman of the Board receives an additional annual fee of $150,000, the Chairman of the Audit Committee receives an additional annual fee of $20,000, the Chairman of the Compensation Committee receives an additional annual fee of $15,000 and the Chairman of the Governance Committee receives an additional annual fee of $10,000. The presiding director at executive sessions of the non-management directors receives an additional annual fee of $20,000. In addition, each director receives an annual fee of $7,500 for each committee of the Board on which he or she serves. All fees are payable in four equal quarterly payments made at the end of each calendar quarter. The annual director fee is prorated for any director elected between annual stockholder meetings and the Chairman of the Board, committee chairman, presiding director and committee member fees are prorated for any director who is elected to such position between annual meetings of the Board. Directors are reimbursed for reasonable expenses incurred in attending meetings.

Each nonemployee director will receive a fee of $3,000 for each board meeting attended, in person or by telephone, in excess of six meetings in any one calendar year. Each member of a committee of the board will receive a fee of $3,000 for each committee meeting attended, in person or by telephone, in excess of ten meetings in any one calendar year in the case of the Audit Committee, in excess of eight meetings in any one calendar year in the case of the Compensation Committee and in excess of eight meetings in any one calendar year in the case of the Governance Committee.

In addition to the fees described above provided to the directors, the Company has a stock award plan for nonemployee directors of the Company which provides for the issuance of stock options and restricted stock. The director plan provides for automatic grants of restricted stock to nonemployee directors after each annual meeting of stockholders. Each director receives restricted shares of the Company’s common stock after each annual meeting of stockholders. The number of shares of restricted stock issued is equal to (a) $167,500 divided by (b) the fair market value of a share of stock on the date of grant multiplied by (c) 1.2. The director plan also provides for discretionary grants of an aggregate of 10,000 shares in the form of stock options or restricted stock. In addition, the director plan allows for the issuance of stock options or restricted stock in lieu of cash for all or part of the annual director fee at the option of the director. A director who elects to receive stock options in lieu of the annual cash fee will be granted an option for a number of shares equal to (a) the amount of the fee for which the election is made divided by (b) the fair market value per share of the common stock on the date of grant multiplied by (c) 3. A director who elects to receive restricted stock in lieu of the annual cash fee will be issued a number of shares of restricted stock equal to (a) the amount of the fee for which the election is made divided by (b) the fair market value per share of the common stock on the date of grant multiplied by (c) 1.2. The exercise price for all stock options granted under the director plan is the fair market value per share of the Company’s common stock on the date of grant. The restricted stock issued after each annual meeting of stockholders vests six months after the date of issuance. Stock options granted and restricted stock issued in lieu of cash director fees vest in equal quarterly increments during the year to which they relate. The stock options generally remain exercisable for ten years after the date of grant.

The Board has established stock ownership guidelines for officers and directors of the Company. Nonemployee directors must be in compliance within five years after first election as a director, but are expected to accumulate the required number of shares ratably over the applicable five-year period. Under the guidelines, nonemployee directors are required to own common stock of the Company having a value equal to four times the annual cash director fee. As of December 31, 2019, all directors were in compliance with the stock ownership guidelines. The Governance Committee of the Board will monitor compliance with the guidelines and may recommend modifications or exceptions to the Board.

The following table summarizes the cash and equity compensation for nonemployee directors for the year ended December 31, 2019:

Director Compensation for 2019

Director Outstanding Equity at December 31, 2019 and Grant Date Fair Value of Equity Awarded During 2019

The following table shows the aggregate number of shares of unvested restricted stock and stock options outstanding for each director as of December 31, 2019, as well as the grant date fair value of restricted stock awards and stock option grants made during 2019:

TRANSACTIONS WITH

RELATED PERSONS

The Board has adopted a written policy on transactions with related persons that provides that certain transactions involving the Company and any of its directors, executive officers, or major stockholders or members of their immediate families, including all transactions that would be required to be disclosed as transactions with related persons in the Company’s Proxy Statement, are subject to approval in advance by the Governance Committee, except that a member of the Committee will not participate in the review of a transaction in which that member has an interest. The Committee has the discretion to approve any transaction which it determines is in, or not inconsistent with, the best interests of the Company and its stockholders. If for any reason a transaction with a related person has not previously been approved, the Committee will review the transaction within a reasonable period of time and either ratify the transaction or recommend other actions, including modification, rescission or termination, taking into consideration the Company’s contractual obligations. If a transaction is ongoing or consists of a series of similar transactions, the Committee will review the transaction at least annually and either ratify the continuation of the transaction or recommend other actions, including modification, rescission or termination, taking into consideration the Company’s contractual obligations. The policy provides certain exceptions, including compensation approved by the Board or its Compensation Committee.

Mr. Grzebinski is a member of the board of directors of American Bureau of Shipping (“ABS”), a not-for-profit that provides global classification services to the marine, offshore and gas industries. The Company paid ABS $1,774,000 in 2019 to perform audits and surveys of Kirby’s vessels in the ordinary course of business of the Company.

In January 2019, Amy D. Husted, Vice President, General Counsel and Secretary of the Company, became a member of the board of directors of Signal Mutual Indemnity Association Ltd (“Signal”), a group self-insurance not-for-profit organization authorized by the U.S. Department of Labor as a longshore worker’s compensation insurance provider. The Company has been a member of Signal since it was established in 1986. The Company paid Signal $1,391,000 in 2019 in the ordinary course of business of the Company.

The husband of Ms. Husted is a partner in the law firm of Clark Hill Strasburger. The Company paid the law firm $1,278,000 in 2019 for legal services. However, Mr. Husted is not involved in any legal matters related to the Company. Further, Mr. Grzebinski approves each engagement of the firm by the Company and the payment of fees billed by the firm.

VOTING ITEM 3:

AUDIT COMMITTEE MATTERS

RATIFICATION OF THE AUDIT COMMITTEE’S SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 3)

The Audit Committee has selected KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. KPMG served as the Company’s independent accounting firm for the fiscal year ending December 31, 2019. Although the Audit Committee has the sole authority and responsibility to select and evaluate the performance of the independent accounting firm for the Company, the Board is requesting, as a matter of good corporate governance, that the Company’s stockholders ratify the selection of KPMG for 2020.

The Board of Directors of the Company unanimously recommends that you vote “FOR” the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2020.

Ratification of the selection of KPMG requires the affirmative vote of a majority of the shares represented at the meeting in person or by proxy. If the stockholders do not ratify the selection of KPMG, the Audit Committee will reconsider the selection. However, because of the difficulty and expense of changing independent auditors at this point in the year, the selection of KPMG will probably be continued for 2020 in the absence of extraordinary reasons for making an immediate change. If the stockholders do ratify the selection of KPMG, the Audit Committee will retain the authority to make a change if warranted in its judgment.

Representatives of KPMG are expected to be present at the 2020 Annual Meeting of Stockholders, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Fees Paid to the Independent Registered Public Accounting Firm

The following table sets forth the fees billed by KPMG, the Company’s independent registered public accounting firm, during the last two fiscal years:

Audit Fees are fees for professional services rendered by KPMG for the audit of the Company’s annual financial statements, audit of internal control over financial reporting, review of the Company’s quarterly financial statements, or services normally provided in connection with statutory or regulatory filings. This category also includes fees for issuance of comfort letters, consents and review of documents filed with the SEC.

Tax Fees are fees for professional services rendered by KPMG for tax compliance, tax advice and tax planning. Services performed by KPMG in this category for 2019 included the review of the Company’s 2018 federal income tax return.

Each engagement of the independent registered public accounting firm to perform audit or non-audit services must be approved in advance by the Company’s Audit Committee or by its Chairman pursuant to delegated authority.

AUDIT COMMITTEE REPORT

The Audit Committee of the Board of Directors of the Company is responsible for monitoring the integrity of the Company’s financial reporting, accounting procedures and internal controls. The Audit Committee is composed of four directors, all of whom are independent within the meaning of SEC and NYSE rules. The Audit Committee operates under a written charter adopted by the Board.

Management is primarily responsible for the Company’s financial reporting process and internal controls. The Company’s independent auditors are responsible for performing an audit of the Company’s financial statements and issuing a report on the conformity of the financial statements with generally accepted accounting principles. The Company’s independent auditors are also responsible for performing an audit of the Company’s internal control over financial reporting. The Audit Committee is responsible for overseeing those processes.

The Audit Committee has reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2019 with management and the independent auditors. The Audit Committee also (a) discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 1301, as adopted by the Public Company Accounting Oversight Board (the “PCAOB”), (b) received the written disclosures and letter from the independent auditors required by the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence and (c) discussed with the independent auditors their independence.

Based on the Audit Committee’s review of the audited financial statements for the year ended December 31, 2019 and the Audit Committee’s discussions with management and the independent auditors, the Audit Committee recommended to the Board of Directors of the Company that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which has been filed with the Securities and Exchange Commission.

Audit Committee

Richard R. Stewart, Chairman

Anne-Marie N. Ainsworth

Richard J. Alario

Barry E. Davis

VOTING ITEM 4:

EXECUTIVE COMPENSATION

ADVISORY VOTE ON EXECUTIVE COMPENSATION (PROPOSAL 4)

In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 and the related rules of the SEC, our stockholders have the opportunity to cast an annual non-binding advisory vote to approve the compensation of the Company’s named executive officers.

The Company is requesting your approval, on a non-binding advisory basis, of the compensation of the Company’s named executive officers as disclosed and discussed under “EXECUTIVE COMPENSATION” on pages 26-42 of this Proxy Statement. We believe that our executive compensation:

For those reasons, we are asking you to approve the following resolution:

RESOLVED that the compensation of the Company’s named executive officers as described under “EXECUTIVE COMPENSATION” in the Company’s Proxy Statement for its 2020 Annual Meeting of Stockholders is approved.

Although the vote on approval of executive compensation is not binding, the Compensation Committee and the Board will consider the result of the vote in making future compensation decisions.

The Board of Directors of the Company unanimously recommends that you vote “FOR” Proposal 4 approving the compensation of the named executive officers as disclosed in this Proxy Statement.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Named Executive Officers

The Company’s “named executive officers” for 2019 and their positions with the Company at the end of the year were:

Compensation for the Company’s named executive officers is provided primarily by three compensation elements:

Base salary is not variable once established for the year, but annual incentive compensation and long-term incentive compensation are variable in that they are based upon current year performance and longer term performance, respectively.

The overall goal of the Company’s compensation program is (1) to pay compensation competitive with similar companies and (2) to align annual incentives and long-term incentives with corporate performance and a return to the Company’s stockholders.

Compensation Objectives

The objectives of the executive compensation program are:

The Company’s executive compensation program is designed to reward:

Company Performance

The Company’s overall performance in 2019 was negatively affected by decreased activity in oil and gas exploration. In the marine transportation segment, revenues increased 7% year-on-year, primarily due to the acquisition of assets from Cenac Marine Services, LLC in March 2019, as well as improved barge utilization in the coastal market and higher spot and term contract pricing in the inland and coastal markets. In the distribution and services segment, revenues decreased 16% year-on-year, driven by reduced activity in the oilfield which resulted in lower customer demand for new and remanufactured pressure pumping equipment and limited sales of new and overhauled transmissions and related parts and service in the distribution businesses. In 2019, the Company continued to generate strong cash flow with EBITDA of $465 million and expanded its marine fleet, investing more than $300 million in acquisitions and new construction of marine transportation equipment. At the end of 2019, the Company had a debt to capital ratio of 28.9%.

The following table summarizes a number of key Company financial measures for the last three years (dollars are in millions except for per share amounts):

The Company’s total cumulative stockholder return was 35% over the last three years.

Incentive Plan Payouts

The 2019 named executive officers received annual incentive compensation plan payouts below target amounts because the Company’s results for 2019 on the key performance measures were below target. In addition, one of the named executive officers (Mr. Grzebinski) received a cash performance award payment slightly below his target amount because results for the 2017-2019 performance period were slightly below target amounts on a cumulative basis. The other four named executive officers (Mr. Harvey, Mr. O’Neil, Mr. Reniers and Mr. Miller) were not previously granted cash performance awards for the 2017-2019 performance period.

Chief Executive Officer Compensation

Mr. Grzebinski’s salary increased from an annual rate of $880,000 at the end of 2018 to an annual rate of $950,000 in April 2019, an 8.0% increase intended to align his base salary with the median base salary for comparable companies. He earned an annual incentive award for 2019 performance and received a cash payment pursuant to his cash performance award for the 2017-2019 performance period for an aggregate of $1,743,185 (a decrease of 25% from 2018). In addition, he received stock options and RSUs with an aggregate grant date fair value of $1,980,017 (an increase of 7% from 2018). A total of 51% of his total compensation (annual incentive compensation payment, cash performance award payment, and stock options) was performance-based.

Compensation Committee

The Compensation Committee (the “Committee”) of the Board has the authority and responsibility to:

During 2019, the Committee was composed of three members, all of whom are “independent directors,” “Non-Employee Directors” and “outside directors” as those terms are defined in relevant SEC and NYSE standards and federal securities and tax regulations.

The Committee does not delegate any of its authority to determine executive compensation. The Committee considers recommendations from the Chief Executive Officer in making its compensation decisions for executive officers other than the Chief Executive Officer. The Committee takes those recommendations into account when setting compensation for other executive officers since the Chief Executive Officer is in the best position to evaluate the contributions of the other executive officers to the success of the Company. The Board undertakes an independent evaluation of the individual performance of the Chief Executive Officer before the Committee sets his compensation. The Committee also engaged a compensation consultant in connection with its compensation decisions for 2019.

In determining the compensation of the named executive officers, the Committee considered all elements of total compensation, including salary, annual incentive compensation, long-term incentive compensation, and projected payouts under the Company’s retirement plans, as applicable. The Committee also relied in part on the marketplace analysis prepared by Longnecker & Associates (the “Consultant”), a compensation consulting firm retained by the Committee, in determining that its compensation decisions, both as to specific elements of compensation and as to aggregate compensation, were in a reasonable range for comparable companies and for the positions held by the named executive officers. The Committee also considered the Consultant’s analysis in evaluating internal pay equity among the named executive officers. From that foundation, the Committee refined individual compensation decisions based on a number of factors, including the prior year’s compensation, the performance of the Company or its business groups, individual performance of the named executive officer, any increased responsibilities assigned to a particular executive officer, the recommendations of the Chief Executive Officer (except as to his own compensation) and considerations of internal pay equity. However, the final decisions of the Committee are to some extent subjective and do not result from a formulaic application of any of those factors.

Say on Pay

At the Company’s 2019 Annual Meeting, stockholders approved the compensation of the Company’s named executive officers by 70% of the votes cast. In 2019, while there were no material changes to the executive compensation program, the approval rating declined as a result of some stockholders voting against a one-time special retirement payment granted in 2018 by the Board to Mr. Pyne, the former Executive Chairman, and not in consideration of the executive compensation program as a whole. The Committee continues to reevaluate the principal elements of the Company’s executive compensation on an ongoing basis.

Compensation Consultant

For 2019, the Committee engaged the Consultant to provide information for the Committee to consider in making compensation decisions. The Consultant was engaged directly by the Committee to:

At the Committee’s request, the Consultant addressed the six independence factors for compensation committee advisors that are identified in SEC regulations. The Committee concluded that there were no conflicts of interest that would affect the work of the Consultant for the Committee. The Consultant performed no services during 2019 for the Company or any of its affiliates other than for the Committee.

Elements of Compensation

General

The Committee and management believe that the Company is a leader in the industries in which it operates and that its employees are frequently targeted by its competitors. Therefore, the Committee generally attempts to set compensation at levels to keep pace with inflation and the competitive employment market to avoid losing valuable employees.

Compensation information for a peer group of comparable companies used by the Committee in making compensation decisions was provided by the Consultant. See “Benchmarking” below for more detail and a listing of the companies in the peer group.

Based on the market analysis provided to the Committee in October 2018 by the Consultant, and reviewed by the Committee in January 2019 when compensation for the year was set, the Consultant determined that, in the aggregate, four of the five named executive officers (excluding Mr. Miller, who became an employee of the Company in April 2019) were positioned below the median for comparable companies in target total cash compensation and target and actual total direct compensation. For purposes of this study and this Compensation Discussion and Analysis, total cash compensation included base salary and annual incentive compensation, and total direct compensation included base salary, annual incentive compensation, and long-term incentive compensation.

Salary

The Committee targets base salaries for the named executive officers at approximately the median for comparable companies. Based on information provided by the Consultant in October 2018, and reviewed by the Committee in January 2019, salaries of Mr. Grzebinski, Mr. Harvey, Mr. O’Neil, and Mr. Reniers were within the range of 90% to 100% of the median for comparable positions with comparable companies. The salaries of all named executive officers, excluding Mr. Miller were increased by amounts intended to keep them within, or bring them up to, the median range for comparable companies.

Mr. Miller became an employee of the Company in April 2019, after the Consultant’s evaluation of the salaries of the other named executive officers. The Committee set his initial salary of $330,000 and annual incentive compensation at levels approximating the median for comparable roles at companies in the Company’s peer group. However, Mr. Miller forfeited equity, a 2019 cash bonus payment, and additional retention payments by leaving his former employer. In order to attract Mr. Miller to join the Company, the Committee approved a one-time cash signing bonus of $150,000, a one-time grant of $300,000 in RSUs, and an annual equity grant, which was valued at $450,000 in 2019 with 33% in the form of stock options and 67% in the form of RSUs.

Annual Incentive Compensation

The Company established a 2019 Annual Incentive Plan (the “AIP”) which is administered by the Committee. The AIP addresses annual incentive compensation for all AIP participants, including the executive officers. A copy of the AIP is filed as Exhibit 10.5 with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. With regard to executive officers, the Committee attempts to set annual incentive compensation targets at a level such that, with target performance by an executive officer and the Company, the total cash compensation (base salary plus annual incentive compensation) for the executive officer will be at approximately the median for comparable companies and positions, but with a superior performance by an executive officer and the Company, the total cash compensation for the executive officer will be above the median. The Committee believes that providing total annual cash compensation above the median for similar corporations and positions is appropriate since a significant portion of each executive officer’s total annual cash compensation is at risk due to both individual performance factors and the Company’s success in achieving the targeted performance measures described below. Annual incentive compensation constitutes a significant portion of direct cash compensation and can vary significantly from year to year depending on the Company’s achievement of the performance measures set forth in the AIP.

Based on the market analysis provided to the Committee by the Consultant, the Committee determined that target total cash compensation for 2019 for Mr. Grzebinski, Mr. Harvey, Mr. O’Neil, and Mr. Reniers would be within the range of 90% to 100% of the median. As described above, the Committee set Mr. Miller’s annual incentive compensation at the commencement of his employment. Based on the Company’s performance in 2019 and information available at the end of the year, total cash compensation for the five named executive officers was at or slightly below the median when compared to peer group and survey information for comparable roles.

AIP targets for 2019 annual incentive compensation were based on the achievement of three equally weighted performance measures for the year, based on the budget for the year that was prepared by management and approved by the Board, which were the basis for determining the total amount to be paid out pursuant to the AIP. Target annual incentive compensation expressed as a percentage of a participant’s base salary was established for each participant in the AIP and a preliminary incentive compensation payment amount was determined for each participant based on the extent to which the three performance measures were achieved by each of the Company’s business units and by the Company as a whole. The aggregate amount of the Company bonus pool for the year was equal to the sum of the preliminary annual incentive compensation payment amounts as so determined for all participants. The preliminary incentive payment amount for each participant served as a guideline for the individual awards, but each individual bonus could be above or below that level. However, in no event would a bonus paid to any participant exceed 200% of the target bonus for that participant.

The three performance measures were EBITDA, return on total capital and earnings per share. EBITDA for the year is calculated by adding the following amounts shown in the Company’s audited financial statements:

Return on total capital for the year is calculated by dividing (i) net earnings attributable to Kirby plus provision for taxes on income plus interest expense by (ii) the average of total equity plus long-term debt for the year. Earnings per share is diluted net earnings per share attributable to the Company’s common stockholders as shown in the Company’s Consolidated Statements of Earnings for 2019.

In addition to the target payment established for each participant in the AIP, the Committee also established a range of possible annual incentive compensation payments, with no payment unless a minimum percentage of the target performance is achieved, which ranged from 60% to 80% depending on the business unit, and a maximum possible award of 200% of the target amount if a maximum percentage of the target performance is achieved, which ranged from 120% to 140% depending on the business unit. Annual incentive compensation payments for most employees of the Company itself (a holding company which conducts operations through its subsidiaries) are based entirely on the performance of the Company and its subsidiaries, as a whole. Payments for the heads of the Company’s business units and for certain management level employees with responsibilities for more than one business unit are generally based partly on the performance of the relevant business units and partly on overall Company performance.

For 2019, the target and actual amounts for the three performance measures for the Company were:

For 2019, the Committee set the individual target AIP payment for the named executive officers at the following percentages of base salary:

The target percentages were set at levels which the Committee determined, based in part on analysis by the Consultant, to be commensurate with the responsibilities of the named executive officers, consistent with the Company’s executive compensation philosophy, and internally equitable and competitive for executives with their qualifications and experience. Payouts under the AIP for 2019 were:

The Committee awarded an amount equal to the preliminary annual incentive compensation payment calculated under the AIP, without adjustment, to each named executive officer for 2019 after determining that the performance of each of the officers met performance expectations for the year. The determination for the Chief Executive Officer was based on the performance evaluation of the Chief Executive Officer conducted by the Board, under the guidance of the Governance Committee, on the extent of the Company’s achievement of its financial, operational, and strategic goals for 2019 and on the Board’s regular interaction with Mr. Grzebinski. The determination for the other named executive officers was based primarily on evaluations and recommendations made by the Chief Executive Officer, as well as on the Board’s interaction with the other named executive officers during the previous year in relation to matters in their areas of responsibility.

Long-Term Incentive Compensation

The Company maintains a long-term incentive compensation program for selected senior executives and key employees that is administered by the Committee. Awards under the long term incentive compensation program are made under the Company’s 2005 Stock and Incentive Plan which allows the grant of incentive stock options, non-incentive stock options, restricted stock, RSUs, performance shares, and performance awards payable in stock, cash, or a combination thereof. Typically, the primary long-term incentive compensation for executive officers are in the form of non-incentive stock options, restricted stock, RSUs, and cash performance awards.

Long-term incentive compensation ties a meaningful portion of total compensation to Company performance, as well as business group and individual performance. The Committee views stock options, restricted stock, and RSU awards as regular components of compensation for executive officers, as well as for managerial level employees generally, because the Committee believes that such awards provide an incentive for key employees to remain with the Company and focus on the Company’s long-term performance. Cash performance awards are tied to the Company performance over a specified period of time and provide similar incentives to key employees. The Committee’s objective for long-term incentive compensation for executive officers is to generally fall between the 50th and 75th percentiles (depending on performance) in long-term incentive compensation of similar companies and positions. The actual value of awards realized will be based on the Company’s performance over a period of approximately three to seven years.

In 2019, the Committee granted non-incentive stock options covering 67,728 shares of common stock and 45,035 RSUs to the named executive officers as a group. Those numbers include stock options and RSUs granted under the long-term incentive compensation program discussed below. The stock options were granted at a price equal to the fair market value of the Company’s common stock on the date of grant, vest in equal increments over three years and have a term of seven years. The RSUs vest in equal increments over five years. The number of RSUs granted is based in part upon the fair market value of the Company’s common stock on the date of grant.

Under the program, the elements of long-term incentive compensation to be awarded, as well as the executives selected to participate, are determined each year by the Committee. For 2019, the Committee determined that Mr. Grzebinski, Mr. Harvey, Mr. O’Neil, and Mr. Reniers would receive awards under the long-term incentive compensation program and that 20% of the target value of the awards for each of them would be in the form of stock options, 40% in the form of RSUs and 40% in the form of cash performance awards. Mr. Miller began employment with the Company in April 2019 and the Committee determined that he should be granted awards under the long-term incentive compensation program with 33% of the target value of the awards in the form of stock options and 67% in the form of RSUs. In addition, Mr. Miller received an additional grant of RSUs in connection with the commencement of his employment with the Company reflective of a portion

of long term compensation forfeited from his prior employer. The target values of the awards, broken down by component, were as follows:

The stock options vest over a three-year period and the RSUs vest over a five-year period. The cash performance awards are based on performance over a three year period from 2019 to 2021, to be paid in 2022. The percentage of the target award paid at the end of the performance period will be based on the Company’s achievement on a cumulative basis for the three-year period of the objective levels of EBITDA, return on total capital and earnings per share established under the AIP, with the three factors equally weighted. The officers will be paid the target amount if 100% of the objective performance measures is achieved over the three-year period. The payment can range from zero if less than 80% of the objective performance measures is achieved to a maximum of 200% of the target award for the achievement of 130% or more of the objective performance measures.

The amount and form of the long-term incentive compensation awards, including the specific mix of long-term incentive compensation elements, were based in part on an analysis of market data on the amounts of awards and recommendations on the form of awards based on peer benchmarking provided by the Consultant to the Committee.

Chief Executive Officer

The base salary of the Company’s President and Chief Executive Officer, David W. Grzebinski, was generally based on the same factors and criteria outlined above, which include compensation paid to chief executives of similar companies, individual as well as Company performance and a general correlation with the compensation of other executive officers of the Company. The Committee set the base salary for Mr. Grzebinski at an annual rate of $950,000 effective April 1, 2019, an increase of 8.0% over his salary at the end of 2018. In setting Mr. Grzebinski’s compensation, the Committee also considered the Company’s success in achieving the financial, operational and strategic corporate goals established for the previous year, as well as the annual evaluation of the Chief Executive Officer’s performance conducted by the Board under the guidance of its Governance Committee. However, neither the achievement of corporate goals, the performance evaluation nor any other particular aspect of Company or individual performance is given any specific weighting or tied by any type of formula to decisions on the Chief Executive Officer’s base salary or long-term incentive compensation awards. The $1,743,185 in non-equity incentive plan compensation shown for Mr. Grzebinski in the Summary Compensation Table consisted of (1) $650,885 determined under the AIP described above and (2) a $1,092,300 payment earned by Mr. Grzebinski for the 2017-2019 performance period under a cash performance award granted as part of the Company’s long-term incentive compensation program based on the formula for the cash performance award established by the Committee when the award was granted at the beginning of 2017. Based on information available at the end of the year, 2019 actual total cash compensation and 2019 actual total direct compensation for Mr. Grzebinski were at the median, compared to peer group and survey data.

Retirement Plans

The Company maintains two primary retirement plans in which the named executive officers are eligible to participate on the same basis as broad categories of employees — a Profit Sharing Plan and a 401(k) Plan. Most of the Company’s shore-based employees are eligible to participate in the Profit Sharing Plan. The aggregate contributions made to the plan by the Company are allocated among the participants according to base salary. All employees of the Company are eligible to participate in the 401(k) Plan, under which the Company matches employee contributions in an amount up to 3% of an employee’s base salary.

The Company maintains an unfunded, nonqualified Deferred Compensation Plan for Key Employees, which is designed primarily to provide additional benefits to eligible employees to restore benefits to which they would be entitled under the Company’s Profit Sharing Plan and 401(k) Plan were it not for certain limits imposed by the Internal Revenue Code. The plan is designed to restore benefits for employees being compensated in excess of certain limits (base salary of $280,000 per annum for 2019). In 2019, the Committee approved contributions for each participant at the maximum amounts allowed by the Plan.

Perquisites and Personal Benefits

The only perquisites or other personal benefits that the Company provides to the named executive officers are an automobile allowance that is given to approximately 220 executive and management employees, payment of the cost of club memberships that are used for both business and personal purposes, and air travel on the Company plane that is considered personal income under Internal Revenue Service regulations for family members to attend business related and customer events. The Committee believes the personal benefits are reasonable in amount and help the Company attract and retain key employees.

Employment/Severance Agreements

Except for accelerated vesting of outstanding stock options, restricted stock and RSUs upon a qualifying termination of employment following a change in control of the Company, and a right to receive a proportionate part of outstanding cash performance awards upon a change in control of the Company, there are no special compensation arrangements related to severance or change in control events. The Company has no employment agreements with any of its executive officers.

Benchmarking

The Committee used information provided by the Consultant to benchmark executive compensation and assist in the design of its incentive plans. Marketplace analysis developed by the Consultant was based in part on a peer group of companies. The companies in the peer group were selected by the Committee, based upon recommendations by the Consultant, because they were of a similar size to the Company in revenues and market capitalization, generated comparable returns on assets, equity and capital and had comparable primary operations in at least one of the same business segments as the Company. In determining competitive market levels for the elements of executive compensation, the Consultant used a combination of peer group proxy data and data from published compensation surveys.

The peer group companies used by the Consultant at the beginning of 2019 were:

Based on information available at the end of the year, total cash compensation was at or above the median and total direct compensation was at or slightly below the median for the five named executive officers in the aggregate for comparable companies based on peer group and survey data.

Other Compensation Matters

Compensation Related Risk

With the assistance of the Consultant, the Committee undertook a review of the Company’s compensation policies and practices and concluded that the Company’s compensation programs do not encourage excessive risk taking and do not present risks that are reasonably likely to have a material adverse effect on the Company.

Tax Considerations

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to the Chief Executive Officer and certain other highly compensated executive officers. Prior to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), certain performance-based compensation was exempt from the deduction limit. The Tax Act eliminated the exemption for performance-based compensation effective for tax years beginning after December 31, 2017. While the Committee takes tax deductibility into account, the Committee retains discretion to award compensation that it believes to be consistent with our executive compensation program, even if not tax deductible.

Timing of Compensation Decisions

The Committee generally makes executive compensation decisions in January of each year. Stock options have always been granted at an exercise price equal to the fair market value of one share of the Company’s stock on the date of grant. Stock options approved to be granted at the regular January meeting of the Committee, which takes place several days before the Company’s public release of earnings information for the previous year, are granted at an exercise price equal to the fair market value of the Company’s stock on a specified date shortly after the earnings release, in which case the later date is considered the date of grant. RSUs are based upon a specific compensation target for each grantee and are determined by dividing the compensation target by the fair market value of one share of the Company’s stock on the date of grant. RSUs are approved and granted at the same time as stock options.

Stock Ownership Guidelines

The Board has established stock ownership guidelines for executive officers of the Company and its subsidiaries. Executive officers must be in compliance within five years after becoming an executive officer, but are expected to accumulate the required number of shares ratably over the applicable five-year period. Under the guidelines, the Chief Executive Officer is required to own common stock of the Company having a value equal to four times base salary. For executive vice presidents of the Company and presidents of the Company’s business units, the requirement is three times base salary. For vice presidents of the Company, the requirement is two times base salary. As of December 31, 2019, all named executive officers were in compliance with the stock ownership guidelines.

Hedging

The Company has adopted a policy prohibiting hedging the economic risk of ownership of Company stock. The policy, which applies to all transactions that establish protection against a decline in the market price of Company stock, provides that Company directors and employees, including named executive officers, may not (a) engage in short sales of Company stock, (b) pledge Company stock as collateral for a loan or hold Company stock in a margin account or (c) engage in transactions involving other financial instruments that are designed to, or have the effect of, hedging or protecting against any decline in the market value of any Company stock held, directly or indirectly, by such person. Hedging transactions include, but are not limited to, prepaid variable forward contracts, equity swaps, exchange funds, short sales and puts, calls, collars or similar options to buy or sell Company stock, but do not include the exercise of stock options granted by the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee are Mr. Davis, Mr. Day, and Mr. Monte Miller. None of such persons is or has been an officer or employee of the Company or any of its subsidiaries. In 2019, no executive officer of the Company served on the board of directors or compensation committee of another entity, any of whose executive officers served on the Board or Compensation Committee of the Company.

COMPENSATION COMMITTEE REPORT

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

Compensation Committee

C. Sean Day, Chairman

Barry E. Davis

Monte J. Miller

COMPENSATION TABLES

Summary Compensation Table

Grants of Plan Based Awards During 2019

Outstanding Equity Awards at December 31, 2019