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SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934



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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to Rule 14a-12

Waste Management, Inc.
(Name of Registrant as Specified In Its Charter)

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

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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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LOGO

1001 Fannin Street
Houston, Texas 77002

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF WASTE MANAGEMENT, INC.

Date and Time:

May 14, 2018 at 4:00 p.m., Central Time

Place:

The Maury Myers Conference Center
Waste Management, Inc.
1021 Main Street
Houston, Texas 77002

Purpose:

          Only stockholders of record on March 19, 2018 may vote at the meeting.

          Your vote is important. We urge you to promptly vote your shares by telephone, by the Internet or, if this Proxy Statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope.

    GRAPHIC

COURTNEY A. TIPPY
Corporate Secretary

March 27, 2018

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14, 2018: This Notice of Annual Meeting and Proxy Statement and the Company's Annual Report on Form 10-K for the year ended December 31, 2017 are available at www.wm.com.


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TABLE OF CONTENTS

 
  Page  

GENERAL INFORMATION

    1  

BOARD OF DIRECTORS

    5  

Leadership Structure

    5  

Role in Risk Oversight

    5  

Independence of Board Members

    6  

Meetings and Board Committees

    7  

Audit Committee

    7  

Audit Committee Report

    9  

Management Development and Compensation Committee

    10  

Compensation Committee Report

    11  

Compensation Committee Interlocks and Insider Participation

    11  

Nominating and Governance Committee

    12  

Related Party Transactions

    13  

Special Committee

    14  

Board of Directors Governing Documents

    14  

Non-Employee Director Compensation

    14  

ELECTION OF DIRECTORS (Item 1 on the Proxy Card)

    16  

DIRECTOR AND OFFICER STOCK OWNERSHIP

    21  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

    23  

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    23  

EXECUTIVE OFFICERS

    24  

EXECUTIVE COMPENSATION

    26  

Compensation Discussion and Analysis

    26  

Executive Summary

    26  

Our Compensation Philosophy for Named Executive Officers

    29  

Overview of Elements of Our 2017 Compensation Program

    30  

How Named Executive Officer Compensation Decisions are Made

    31  

Named Executives' 2017 Compensation Program and Results

    36  

Post-Employment and Change in Control Compensation; Clawback Policies

    41  

Other Compensation Policies and Practices

    42  

Executive Compensation Tables

    44  

Summary Compensation Table

    44  

Grant of Plan-Based Awards in 2017

    46  

Outstanding Equity Awards as of December 31, 2017

    47  

Option Exercises and Stock Vested

    48  

Nonqualified Deferred Compensation in 2017

    49  

Potential Payments Upon Termination or Change in Control

    50  

Chief Executive Officer Pay Ratio

    57  

Equity Compensation Plan Table

    57  

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Item 2 on the Proxy Card)

    58  

ADVISORY VOTE ON EXECUTIVE COMPENSATION (Item 3 on the Proxy Card)

    59  

STOCKHOLDER PROPOSAL (Item 4 on the Proxy Card)

    61  

OTHER MATTERS

    63  

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PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

WASTE MANAGEMENT, INC.
1001 Fannin Street
Houston, Texas 77002

          Waste Management, Inc. is a holding company, and all operations are conducted by its subsidiaries. Our subsidiaries are operated and managed locally and focus on providing services in distinct geographic areas. Through our subsidiaries, we are North America's leading provider of comprehensive waste management environmental services, and we are also a leading developer, operator and owner of landfill gas-to-energy facilities in the United States.

          Our Board of Directors is soliciting your proxy for the 2018 Annual Meeting of Stockholders and at any postponement or adjournment of the meeting. We are furnishing proxy materials to our stockholders primarily via the Internet. On March 27, 2018, we sent an electronic notice of how to access our proxy materials and our Annual Report to stockholders that have previously signed up to receive their proxy materials via the Internet. On March 27, 2018, we began mailing a Notice of Internet Availability of Proxy Materials to those stockholders that previously have not signed up for electronic delivery. The Notice contains instructions on how stockholders can access our proxy materials on the website referred to in the Notice or request that a printed set of the proxy materials be sent to them. Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the costs of the annual meeting, and conserve natural resources.

Record Date   March 19, 2018.

Quorum

 

A majority of shares outstanding on the record date must be present in person or by proxy.

Shares Outstanding

 

There were 432,378,473 shares of our Common Stock outstanding and entitled to vote as of March 19, 2018.

Voting by Proxy

 

Internet, phone, or mail.

Voting at the Meeting

 

Stockholders can vote in person during the meeting. Stockholders of record will be on a list held by the inspector of elections. Beneficial holders must obtain a proxy from their brokerage firm, bank, or other stockholder of record and present it to the inspector of elections with their ballot. Voting in person by a stockholder will replace any previous votes submitted by proxy.

Changing Your Vote

 

Stockholders of record may revoke their proxy at any time before we vote it at the meeting by submitting a later-dated proxy via the Internet, by telephone, by mail, by delivering instructions to our Corporate Secretary before the annual meeting revoking the proxy or by voting in person at the annual meeting. If you hold shares through a bank or brokerage firm, you may revoke any prior voting instructions by contacting that firm.

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Votes Required to Adopt Proposals

 

Each share of our Common Stock outstanding on the record date is entitled to one vote on each of the nine director nominees and one vote on each other matter. To be elected, a director must receive a majority of the votes cast with respect to that director at the meeting. This means that the number of shares voted "for" a director must exceed 50% of the votes cast with respect to that director. Each of the other proposals requires the favorable vote of a majority of the shares present, either by proxy or in person, and entitled to vote.

Effect of Abstentions and Broker Non-Votes

 

Abstentions will have no effect on the election of directors. For each of the other proposals, abstentions will have the same effect as a vote against these matters because they are considered present and entitled to vote.
    If your shares are held by a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, your shares must be voted as you direct. If you do not give instructions, one of two things can happen depending on the type of proposal. For the proposal to ratify selection of the Company's independent registered public accounting firm, the broker may vote your shares at its discretion. But for all other proposals in this Proxy Statement, including the election of directors, the advisory vote on executive compensation and the stockholder proposal, the broker cannot vote your shares at all. When that happens, it is called a "broker non-vote." Broker non-votes are counted in determining the presence of a quorum at the meeting, but they are not counted for purposes of calculating the shares present and entitled to vote on particular proposals at the meeting.

Voting Instructions

 

You may receive more than one proxy card depending on how you hold your shares. If you hold shares through a broker, your ability to vote by phone or over the Internet depends on your broker's voting process. You should complete and return each proxy or other voting instruction request provided to you.
    If you complete and submit your proxy voting instructions, the persons named as proxies will follow your instructions. If you submit your proxy but do not give voting instructions, we will vote your shares as follows:
   

FOR our director candidates;

   

FOR the ratification of the independent registered public accounting firm;

   

FOR approval of our executive compensation; and

   

AGAINST the stockholder proposal regarding a policy restricting accelerated vesting of equity awards upon a change in control.

    If you give us your proxy, any other matters that may properly come before the meeting will be voted at the discretion of the proxy holders.

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Attending in Person

 

Only stockholders, their proxy holders and our invited guests may attend the meeting. If you plan to attend, please bring identification and, if you hold shares in street name, bring your bank or broker statement showing your beneficial ownership of Waste Management, Inc. stock in order to be admitted to the meeting. If you are planning to attend our annual meeting and require directions to the meeting, please contact our Corporate Secretary at 713-512-6200.
    The only items on the agenda for this year's annual meeting are the items set out in the Notice. There will be no presentations.

Stockholder Proposals and Nominees for the 2019 Annual Meeting

 

Eligible stockholders who wish to submit a proposal for inclusion in the proxy statement for our 2019 Annual Meeting should notify our Corporate Secretary at Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002. The written proposal must be received at our offices on or before November 27, 2018, and the stockholder must have been the registered or beneficial owner of (a) at least 1% of our outstanding Common Stock or (b) shares of our Common Stock with a market value of $2,000 for at least one year before submitting the proposal. The proposal must comply with the requirements set forth in the federal securities laws, including Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in order to be included in the Company's proxy statement and proxy card for the 2019 Annual Meeting.
    In addition, the Company's By-laws establish an advance notice procedure with regard to certain matters to be brought before an annual meeting of stockholders, including stockholder proposals that are not included in the Company's proxy materials and nominations of persons for election as directors. In accordance with our By-laws, for a proposal or nominee not included in our proxy materials to be properly brought before the 2019 Annual Meeting, a stockholder's notice must be delivered to or mailed and received by the Company not less than 120 days nor more than 150 days in advance of the first anniversary of the 2018 Annual Meeting. As a result, any such stockholder's notice for the 2019 Annual Meeting shall be received no earlier than December 15, 2018 and no later than January 14, 2019 and must contain certain information specified in the Company's By-laws. The stockholder's notice should be delivered to our Corporate Secretary at Waste Management,  Inc., 1001 Fannin Street, Houston, Texas 77002. A copy of our By-laws may be obtained free of charge by writing to our Corporate Secretary and is available in the "Corporate Governance" section of the "Investor Relations" page on our website at www.wm.com.

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Expenses of Solicitation

 

We pay the cost of preparing, assembling and mailing this proxy-soliciting material. In addition to the use of the mail, proxies may be solicited personally, by Internet or telephone, or by Waste Management officers and employees without additional compensation. We pay all costs of solicitation, including certain expenses of brokers and nominees who mail proxy materials to their customers or principals. Also, Innisfree M&A Incorporated has been hired to help in the solicitation of proxies for the 2018 Annual Meeting for a fee of $15,000 plus associated costs and expenses.

Annual Report

 

A copy of our Annual Report on Form 10-K for the year ended December 31, 2017, which includes our financial statements for fiscal year 2017, is included with this Proxy Statement. The Annual Report on Form 10-K is not incorporated by reference into this Proxy Statement or deemed to be a part of the materials for the solicitation of proxies.

Householding Information

 

We have adopted a procedure approved by the SEC called "householding." Under this procedure, stockholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the Proxy Statement and Annual Report unless we are notified that one or more of these individuals wishes to receive separate copies. This procedure helps reduce our printing costs and postage fees.
    If you wish to receive a separate copy of this Proxy Statement and the Annual Report, please contact: Waste Management, Inc., Corporate Secretary, 1001 Fannin Street, Houston, Texas 77002, telephone 713-512-6200.
    If you do not wish to participate in householding in the future, and prefer to receive separate copies of the proxy materials, please contact: Broadridge Financial Solutions, Attention Householding Department, 51 Mercedes Way, Edgewood, NY 11717, telephone 1-866-540-7095. If you are currently receiving multiple copies of proxy materials and wish to receive only one copy for your household, please contact Broadridge.

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BOARD OF DIRECTORS

          Our Board of Directors currently has nine members. Each member of our Board is elected annually. Mr. Bradbury (Brad) H. Anderson is the Non-Executive Chairman of the Board and presides over all meetings of the Board, including executive sessions that only non-employee directors attend.

          Stockholders and interested parties wishing to communicate with the Board or the non-employee directors should address their communications to Mr. Brad Anderson, Non-Executive Chairman of the Board, c/o Waste Management, Inc., P.O. Box 53569, Houston, Texas 77052-3569.

Leadership Structure

          We separated the roles of Chairman of the Board and Chief Executive Officer at our Company in 2004. We believe that having a Non-Executive Chairman of the Board is in the best interests of the Company and stockholders, due in part to the ever-increasing demands made on boards of directors under federal securities laws, national stock exchange rules and other federal and state regulations. The Non-Executive Chairman's responsibilities include leading full Board meetings and executive sessions and managing the Board function. The Board elected Mr. Brad Anderson to serve as Chairman of the Board effective February 27, 2017, due to his experience serving in board and executive leadership roles at large public companies, as well as his deep understanding of our Company and strategy. Mr. Anderson also serves on all three Board committees.

          The separation of the positions allows our Chairman of the Board to focus on management of Board matters and allows our Chief Executive Officer to focus his attention on managing our business. Additionally, we believe the separation of those roles contributes to the independence of the Board in its oversight role and in assessing the Chief Executive Officer and management generally.

Role in Risk Oversight

          Our executive officers have primary responsibility for risk management within our Company. Our Board of Directors oversees risk management to ensure that the processes designed, implemented and maintained by our executives are functioning as intended and adapted when necessary to respond to changes in our Company's strategy as well as emerging risks. The primary means by which our Board oversees our risk management processes is through its regular communications with management and by regularly reviewing our enterprise risk management, or ERM, framework. We believe that our leadership team's engagement and communication methods are supportive of comprehensive risk management practices and that our Board's involvement is appropriate to ensure effective oversight.

          Our ERM framework and processes are coordinated and led by the Chief Legal Officer and Chief Financial Officer. The ERM process is supported by regular inquiries of our Company's Senior Leadership Team and additional members of management, including operations leadership, as to the risks, including emerging risks, that may affect the execution of our strategic priorities or achievement of our long-term outlook. As a result of this process, we have grouped our risk focus across the following areas:

          In addition to identifying and assessing the risks present, the Senior Leadership Team and designated risk managers work to assess the appropriateness of established risk mitigation strategies and programs, ensuring that risk mitigation activities sufficiently reduce the likelihood or potential impact of key risks. The Company's ERM program and processes are dynamic and evolve as the Company's strategic focuses evolve.

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          Our Board of Directors generally has seven regular meetings per year, five of which are in person, including one meeting that is dedicated specifically to strategic planning, and regular updates are given to our Board of Directors on Company risks. At each of these meetings, our President and Chief Executive Officer; Chief Financial Officer and Chief Legal Officer are asked to report to our Board and, when appropriate, specific committees. Additionally, other members of management and employees are requested to attend meetings and present information, including those responsible for our Internal Audit, Environmental Audit, Business Ethics and Compliance, Human Resources, Government Affairs, Information Technology, Insurance, Safety, Finance and Accounting functions.

          One of the purposes of these presentations is to provide direct communication between members of our Board and members of management. The presentations provide members of our Board with the information necessary to understand our risk profile, including information regarding the specific risk environment, exposures affecting our operations and our plans to address such risks. In addition to communicating general updates of our operational and financial condition, management reports to our Board on a number of specific issues meant to inform our Board about our outlook and forecasts, and any impediments to meeting those or executing our strategies generally. These direct communications between management and our Board of Directors allow our Board to assess management's evaluation and management of risk.

          Management is encouraged to communicate with our Board of Directors with respect to extraordinary risk issues or developments that may require more immediate attention between regularly scheduled Board meetings. Our Non-Executive Chairman of the Board facilitates communications with our Board of Directors as a whole and is integral in initiating the discussions among the independent Board members necessary to ensure management is adequately evaluating and managing our Company's risks. These intra-Board communications are essential to our Board's oversight function. Additionally, all members of our Board are invited to attend all committee meetings, regardless of whether the individual sits on the specific committee, and committee chairs report to the full Board. These practices ensure that all issues affecting our Company are considered in relation to each other; and by doing so, risks that affect one aspect of our Company can be taken into consideration when evaluating other risks.

          In addition, the Audit Committee is responsible for ensuring that an effective risk assessment process is in place, and quarterly reports are made to the Audit Committee on financial and compliance risks in accordance with New York Stock Exchange requirements.

Independence of Board Members

          The Board of Directors has determined that each of the following eight non-employee director candidates is independent in accordance with the New York Stock Exchange listing standards:

Bradbury H. Anderson
Frank M. Clark, Jr.
Andrés R. Gluski
Patrick W. Gross
Victoria M. Holt
Kathleen M. Mazzarella
John C. Pope
Thomas H. Weidemeyer

          Mr. James C. Fish, Jr., our President and Chief Executive Officer, is also a director of the Company. As an employee of the Company, Mr. Fish is not an "independent" director.

          To assist the Board in determining independence, the Board of Directors adopted categorical standards of director independence, which meet or exceed the requirements of the New York Stock Exchange. These standards specify certain relationships that are prohibited in order for the non-employee

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director to be deemed independent. The categorical standards our Board uses in determining independence are included in our Corporate Governance Guidelines, which can be found on our website. In addition to these categorical standards, our Board makes a subjective determination of independence considering relevant facts and circumstances.

          The Board reviewed all commercial and non-profit affiliations of each non-employee director and the dollar amount of all transactions between the Company and each entity with which a non-employee director is affiliated to determine independence. These transactions consisted of the Company, through its subsidiaries, providing waste management services in the ordinary course of business and the Company's subsidiaries purchasing goods and services in the ordinary course of business and included commercial dealings with Graybar Electric Company, Inc., The AES Corporation and Proto Labs, Inc. Ms. Mazzarella, Mr. Gluski and Ms. Holt, respectively, are the chief executive officer of these entities. The Board concluded there are no transactions between the Company and any entity with which a non-employee director is affiliated that (a) are prohibited by our categorical standards of independence, (b) are material individually or in the aggregate or (c) give rise to a material direct or indirect interest for that non-employee director. Accordingly, the Board has determined that each non-employee director candidate meets the categorical standards of independence and that there are no relationships that would affect independence.

Meetings and Board Committees

          Last year the Board held seven regular meetings and two special meetings, and each committee of the Board met independently as set forth below. Each director attended at least 75% of the meetings of the Board and the committees on which he or she served. In addition, all directors attended the 2017 Annual Meeting of Stockholders. Although we do not have a formal policy regarding director attendance at annual meetings, it has been longstanding practice that all directors attend unless there are unavoidable schedule conflicts or unforeseen circumstances.

          The Board appoints committees to help carry out its duties. Committee members take on greater responsibility for key issues, although all members of the Board are invited to attend all committee meetings and the committee reviews the results of its meetings with the full Board. The Board has three separate standing committees: the Audit Committee; the Management Development and Compensation Committee (the "MD&C Committee"); and the Nominating and Governance Committee. Additionally, the Board has the power to appoint additional committees, as it deems necessary. In 2006, the Board appointed a Special Committee, as described below.

          Mr. Gross has been the Chairman of our Audit Committee since May 2010. The other members of our Audit Committee are Messrs. Anderson, Clark, Gluski and Weidemeyer and Ms. Holt. Each member of our Audit Committee satisfies the additional New York Stock Exchange independence standards for audit committees set forth in Section 10A of the Exchange Act. Our Audit Committee held nine meetings in 2017.

          Our Board of Directors has determined that Audit Committee Chairman Mr. Gross, each of Messrs. Anderson, Clark and Gluski and Ms. Holt are audit committee financial experts as defined by the SEC based on a thorough review of their education and financial and public company experience.

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          The Audit Committee's duties are set forth in a written charter that was approved by the Board of Directors. A copy of the charter can be found on our website. The Audit Committee generally is responsible for overseeing all matters relating to our financial statements and reporting, independent auditors and internal audit function. As part of its function, the Audit Committee reports the results of all of its reviews to the full Board. In fulfilling its duties, the Audit Committee, has the following responsibilities:

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Audit Committee Report

          The role of the Audit Committee is, among other things, to oversee the Company's financial reporting process on behalf of the Board of Directors, to recommend to the Board whether the Company's financial statements should be included in the Company's Annual Report on Form 10-K and to select the independent auditor for ratification by stockholders. Company management is responsible for the Company's financial statements as well as for its financial reporting process, accounting principles and internal controls. The Company's independent auditors are responsible for performing an audit of the Company's financial statements and expressing an opinion as to the conformity of such financial statements with accounting principles generally accepted in the United States.

          The Audit Committee has reviewed and discussed the Company's audited financial statements as of and for the year ended December 31, 2017 with management and the independent registered public accounting firm, and has taken the following steps in making its recommendation that the Company's financial statements be included in its annual report:

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          The Committee has also discussed with the Company's internal auditors and independent registered public accounting firm the overall scope and plans of their respective audits. The Committee meets periodically with both the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations and their evaluations of the Company's internal controls over financial reporting.

          The members of the Audit Committee are not engaged in the accounting or auditing profession and, consequently, are not experts in matters involving auditing or accounting. In the performance of their oversight function, the members of the Audit Committee necessarily relied upon the information, opinions, reports and statements presented to them by Company management and by the independent registered public accounting firm.

          Based on the reviews and discussions explained above (and without other independent verification), the Audit Committee recommended to the Board (and the Board approved) that the Company's financial statements be included in its annual report for its fiscal year ended December 31, 2017. The Committee has also approved the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2018.



 

The Audit Committee of the Board of Directors
Patrick W. Gross,
Chairman
Bradbury H. Anderson
Frank M. Clark, Jr.
Andrés R. Gluski
Victoria M. Holt
Thomas H. Weidemeyer

          Mr. Clark has served as the Chairman of our MD&C Committee since May 2011. The other members of the Committee are Ms. Holt, Ms. Mazzarella and Messrs. Anderson, Gluski and Pope. Each member of our MD&C Committee is independent in accordance with the rules and regulations of the New York Stock Exchange. The MD&C Committee held six regular meetings and one special meeting in 2017.

          Our MD&C Committee is responsible for overseeing our executive officer compensation, as well as developing the Company's compensation philosophy generally. The MD&C Committee's written charter, which was approved by the Board of Directors, can be found on our website. In fulfilling its duties, the MD&C Committee has the following responsibilities:

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          In overseeing compensation matters, the MD&C Committee may delegate authority for day-to-day administration and interpretation of the Company's plans, including selection of participants, determination of award levels within plan parameters, and approval of award documents, to Company employees. However, the MD&C Committee may not delegate any authority to Company employees under those plans for matters affecting the compensation and benefits of the executive officers. For additional information on the MD&C Committee, see the Compensation Discussion and Analysis beginning on page 26.

Compensation Committee Report

          The MD&C Committee has reviewed and discussed the Compensation Discussion and Analysis, beginning on page 26, with management. Based on the review and discussions, the MD&C Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Proxy Statement.



 

The Management Development and Compensation
Committee of the Board of Directors
Frank M. Clark, Jr.,
Chairman
Bradbury H. Anderson
Andrés R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
John C. Pope

Compensation Committee Interlocks and Insider Participation

          During 2017, Ms. Holt, Ms. Mazzarella and Messrs. Anderson, Clark, Gluski and Pope served on the MD&C Committee. Mr. W. Robert Reum also served on the MD&C Committee and attended one special meeting in 2017 before he passed away in February 2017. No member of the MD&C Committee was an officer or employee of the Company during 2017; no member of the MD&C Committee is a former officer of the Company; and during 2017, none of our executive officers served as a member of a board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board of Directors or MD&C Committee.

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          Mr. Weidemeyer has served as the Chairman of our Nominating and Governance Committee since May 2011. The other members of the Committee include Ms. Mazzarella and Messrs. Anderson, Gross and Pope. Each member of our Nominating and Governance Committee is independent in accordance with the rules and regulations of the New York Stock Exchange. In 2017, the Nominating and Governance Committee met five times.

          The Nominating and Governance Committee has a written charter that has been approved by the Board of Directors and can be found on our website. It is the duty of the Nominating and Governance Committee to oversee matters regarding corporate governance. In fulfilling its duties, the Nominating and Governance Committee has the following responsibilities:

          Potential new director candidates are identified through various methods; the Nominating and Governance Committee welcomes suggestions from directors, members of management, and stockholders. From time to time, the Nominating and Governance Committee uses outside consultants to assist with identifying potential director candidates. For all potential candidates, the Nominating and Governance Committee considers all factors it deems relevant, such as a candidate's personal and professional integrity and sound judgment, business and professional skills and experience, independence, possible conflicts of interest, diversity, and the potential for effectiveness, in conjunction with the other directors, to serve the long-term interests of the stockholders. While there is no formal policy with regard to consideration of diversity in identifying director nominees, the Committee considers diversity in business experience, professional expertise, gender and ethnic background, along with various other factors when evaluating director nominees. The Committee uses a matrix of functional and industry experiences to develop criteria to select candidates. Before being nominated by the Nominating and Governance Committee, director candidates are interviewed by the Chief Executive Officer and a minimum of two members of the Nominating and Governance Committee, including the Non-Executive Chairman of the Board. Additional interviews typically include other members of the Board, representatives from senior levels of management and an outside consultant.

          The Nominating and Governance Committee will consider all potential nominees on their merits without regard to the source of recommendation. The Nominating and Governance Committee believes that the nominating process will and should continue to involve significant subjective judgments. To suggest a nominee for consideration by the Nominating and Governance Committee, you should submit your candidate's name, together with biographical information and his or her written consent to nomination to the Chairman of the Nominating and Governance Committee, Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002, between October 28, 2018 and November 27, 2018.

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Related Party Transactions

          The Board of Directors has adopted a written Related Party Transactions Policy for the review and approval or ratification of related party transactions. Our policy generally defines related party transactions as current or proposed transactions in excess of $120,000 in which (i) the Company is a participant and (ii) any director, executive officer or immediate family member of any director or executive officer has a direct or indirect material interest. In addition, the policy sets forth certain transactions that will not be considered related party transactions, including (i) executive officer compensation and benefit arrangements; (ii) director compensation arrangements; (iii) business travel and expenses, advances and reimbursements in the ordinary course of business; (iv) indemnification payments and advancement of expenses, and payments under directors' and officers' indemnification insurance policies; (v) any transaction between the Company and any entity in which a related party has a relationship solely as a director, a less than 5% equity holder, or an employee (other than an executive officer); and (vi) purchases of Company debt securities, provided that the related party has a passive ownership of no more than 2% of the principal amount of any outstanding series. The Nominating and Governance Committee is responsible for overseeing the policy.

          All executive officers and directors are required to notify the Chief Legal Officer or the Corporate Secretary as soon as practicable of any proposed transaction that they or their family members are considering entering into that involves the Company. The Chief Legal Officer will determine whether potential transactions or relationships constitute related party transactions that must be referred to the Nominating and Governance Committee.

          The Nominating and Governance Committee will review a detailed description of the transaction, including:

          In determining whether to approve a related party transaction, the Nominating and Governance Committee will consider, among other things, whether:

          Any member of the Nominating and Governance Committee who has an interest in a transaction presented for consideration will abstain from voting on the related party transaction.

          The Nominating and Governance Committee's consideration of related party transactions and its determination of whether to approve such a transaction are reflected in the minutes of the Nominating and Governance Committee's meetings. As discussed above under "Independence of Board Members," the Company reviewed all transactions between the Company and each entity with which a non-employee director is affiliated, as well as all transactions between the Company and each entity with which an executive officer is affiliated, and the Company is not aware of any transactions in 2017 that are required to be disclosed.

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          The Board of Directors appointed a Special Committee in November 2006 to make determinations regarding certain indemnification obligations of the Company, and the Board of Directors disbanded the Special Committee in February 2018. The Special Committee consisted of Mr. Gross and Mr. Weidemeyer. The Special Committee held no meetings in 2017 or 2018.

Board of Directors Governing Documents

          Stockholders may obtain copies of our Corporate Governance Guidelines, the charters of the Audit Committee, the MD&C Committee, and the Nominating and Governance Committee, and our Code of Conduct free of charge by contacting the Corporate Secretary, c/o Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002 or by accessing the "Corporate Governance" section of the "Investor Relations" page on our website at www.wm.com.

Non-Employee Director Compensation

          Our non-employee director compensation program consists of equity awards and cash consideration. Director compensation is recommended annually by the MD&C Committee, with the assistance of an independent third-party consultant, and set by action of the Board of Directors. Non-employee director compensation had been held flat since 2014, until the equity component of our non-employee director compensation was increased in February 2017. The Board's goal in designing directors' compensation is to provide a competitive package that will enable the Company to attract and retain highly skilled individuals with relevant experience. The compensation is also designed to reward the time and talent required to serve on the board of a company of our size and complexity. The Board seeks to provide sufficient flexibility in the form of compensation delivered to meet the needs of different individuals while ensuring that a substantial portion of directors' compensation is linked to the long-term success of the Company.

          Non-employee directors receive an annual grant of shares of Common Stock under the Company's 2014 Stock Incentive Plan. The shares are fully vested at the time of grant; however, non-employee directors are required to hold all net shares until retirement and are subject to ownership guidelines, as discussed below. The grant of shares is generally made in two equal installments, and the number of shares issued is based on the market value of our Common Stock on the dates of grant, which are typically January 15 and July 15 of each year. Each non-employee director received a grant of Common Stock valued at $70,000 in January 2017. In February 2017, the value of the annual stock award granted to non-employee directors was increased from $140,000 to $155,000, with such increase to be effective at the time of the next stock award installment. Accordingly, each non-employee director received a grant of Common Stock valued at $77,500 in July 2017, one half of the annual stock award value of $155,000 approved in February.

          Mr. W. Robert Reum served as our Non-Executive Chairman of the Board until his passing in February 2017. On January 15, 2017, he received an additional grant of Common Stock valued at $50,000 for his service in such role for the first half of 2017. Upon Mr. Anderson's election as Non-Executive Chairman of the Board on February 27, 2017, he received an additional prorated grant of Common Stock valued at $37,500 for his service in such role from the date of his election until July 15, 2017. Mr. Anderson then received an additional grant of Common Stock valued at $50,000 on July 15, 2017 for his service as Non-Executive Chairman of the Board for the remainder of 2017.

          All non-employee directors receive an annual cash retainer for Board service and additional cash retainers for serving as a committee chair. Directors do not receive meeting fees in addition to the

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retainers. The annual cash retainer is generally paid in advance in two equal installments in January and July of each year. The table below sets forth the cash retainers for 2017:

Annual Retainer   $110,000
Annual Chair Retainers   $100,000 for Non-Executive Chairman
    $25,000 for Audit Committee Chair
    $20,000 for MD&C Committee Chair
    $15,000 for Nominating and Governance Committee Chair

          Our non-employee directors are subject to ownership guidelines that establish a minimum ownership level and require that all net shares received in connection with a stock award, after selling shares to pay all applicable taxes, be held during their tenure as a director and for one year following termination of Board service. The MD&C Committee amended the ownership guidelines for employees and directors in November 2016 to increase the assumed stock price from $40 per share to $60 per share, to better reflect more recent sustained market prices for our Common Stock. As a result, non-employee directors are now required to hold 9,000 shares, valued at approximately five times the 2017 annual cash retainer for non-employee directors. There is no deadline set for non-employee directors to reach their ownership guideline; however, the MD&C Committee performs regular reviews to confirm that all non-employee directors are in compliance or are showing sustained progress toward achievement of their ownership guideline. Each of Messrs. Anderson, Clark, Gross, Pope and Weidemeyer and Ms. Holt have reached the ownership guideline. Our two newest directors, Ms. Mazzarella and Mr. Gluski, are making appropriate progress toward the ownership guideline. Additionally, our insider trading policy provides that directors are not permitted to hedge their ownership of Company securities, including trading in options, warrants, puts and calls or similar derivative instruments on any security of the Company or selling any security of the Company "short."

          The table below shows the aggregate cash paid, and stock awards issued, to the non-employee directors in 2017 in accordance with the descriptions set forth above:

Name   Fees Earned
or Paid in
Cash ($)
  Stock
Awards
($)(1)
  Total ($)  

Bradbury H. Anderson(2)

    198,000     234,500     432,500  

Frank M. Clark, Jr. 

    130,000     147,500     277,500  

Andrés R. Gluski

    110,000     147,500     257,500  

Patrick W. Gross

    135,000     147,500     282,500  

Victoria M. Holt

    110,000     147,500     257,500  

Kathleen M. Mazzarella

    110,000     147,500     257,500  

John C. Pope

    110,000     147,500     257,500  

W. Robert Reum(3)

    105,000     120,000     225,000  

Thomas H. Weidemeyer

    125,000     147,500     272,500  

(1)
Amounts in this column represent the grant date fair value of stock awards granted in 2017, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The grant date fair value of the awards is equal to the number of shares issued multiplied by the average of the high and low market price of our Common Stock on each date of grant; there are no assumptions used in the valuation of shares.
(2)
"Fees Earned or Paid in Cash" includes a prorated cash retainer installment of $37,500 for Mr. Anderson's service as Non-Executive Chairman of the Board from his election in February 2017 to July 15, 2017. He received an additional $50,000 cash retainer for his service in such role for the remainder of 2017.
(3)
Mr. Reum served as a director and Non-Executive Chairman of the Board until his passing in February 2017.

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ELECTION OF DIRECTORS

(ITEM 1 ON THE PROXY CARD)

          The first item on the proxy card is the election of nine directors to serve until the 2019 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified. The Board has nominated the nine director candidates named below and recommends that you vote FOR their election. If any nominee is unable or unwilling to serve as a director, which we do not anticipate, the Board, by resolution, may reduce the number of directors that constitute the Board or may choose a substitute. To be elected, a director must receive a majority of the votes cast with respect to that director at the meeting. Our By-laws provide that if the number of shares voted "for" any director nominee does not exceed 50% of the votes cast with respect to that director, he or she will tender his or her resignation to the Board of Directors. The Nominating and Governance Committee will then make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken.

          The table below shows all of our director nominees; their ages, terms of office on our Board; experience within at least the past five years; and qualifications our Board considered when inviting them to serve as a director as well as nominating them for re-election. We believe that, as a general matter, our directors' past five years of experience gives an indication of the wealth of knowledge and experience these individuals have and that our Board considered; however, we have also indicated the specific skills and areas of expertise that makes each of these individuals a valuable member of our Board. Each of the director nominees currently serves on our Board of Directors.


Director Nominees

Director   Qualifications
Bradbury H. Anderson, 68
Director since 2011
Chairman of the Board since February 2017



 
Vice Chairman and Chief Executive Officer — Best Buy Co., Inc. (multinational retailer of technology and entertainment products and services) from 2002 to 2009; President and Chief Operating Officer of Best Buy Co.,  Inc. from 1991 to 2002.

Director of General Mills, Inc. since 2007.

Director of Carlson Company, Inc., a private company, since 2009.

Director of Best Buy Co., Inc. from June 2013 to June 2016.

  Mr. Anderson served in the positions of chief executive officer and chief operating officer of a large public retail company for several years, during a customer segmentation transformation, which provided him with extensive knowledge of management and operations of large public companies, including experience implementing customer-focused strategies. He also has over 20 years of experience as a member of a public company board of directors.

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Director   Qualifications
Frank M. Clark, Jr., 72
Director since 2002


 
Chairman and Chief Executive Officer — ComEd (energy services company and subsidiary of Exelon Corporation) from 2005 to 2012; President — ComEd from 2001 to 2005.

Executive Vice President and Chief of Staff — Exelon Corporation (public utility holding company) from 2004 to 2005; Senior Vice President — Exelon Corporation from 2001 to 2004.

Director of Aetna, Inc. since 2006.

Director of BMO Financial Corp., a private company, from 2005 to December 2016.

  Mr. Clark served in executive positions at a large public utility company for over a decade, providing him with extensive experience and knowledge of large company management, operations and business critical functions. He also brings over 15 years of experience as a member of a public company board of directors.

 

 

 
James C. Fish, Jr., 55
Chief Executive Officer and Director since November 2016;
President since July 2016



 
President and Chief Financial Officer from July 2016 to November 2016.

Executive Vice President and Chief Financial Officer from 2012 to July 2016.

Senior Vice President — Eastern Group from 2011 to 2012.

Area Vice President — Pennsylvania and West Virginia Area from 2009 to 2011.

Market Area General Manager — Western Pennsylvania/West Virginia from 2008 to 2009 and Rhode Island/Southern Massachusetts from 2006 to 2008.

  Mr. Fish is our President and Chief Executive Officer, having been promoted to the position of Chief Executive Officer and elected to our Board of Directors in November 2016. Mr. Fish joined the Company in 2001 and held several key positions with the Company prior to his promotion, including Executive Vice President and Chief Financial Officer, Senior Vice President for the Company's Eastern Group, Area Vice President for the Pennsylvania and West Virginia Area and Vice President of Price Management. As a result, Mr. Fish has a broad and deep understanding of the Company and the strategic actions necessary to deliver stockholder value.

 

 

 
Andrés R. Gluski, 60
Director since January 2015


 
President, Chief Executive Officer and Director — The AES Corporation (global power company) since 2011; Executive Vice President and Chief Operating Officer — The AES Corporation from 2007 to 2011.

Director of AES Gener (Chile) since 2005.

Director of Cliffs Natural Resources from 2011 to July 2014.

  During his tenure as President and CEO of the AES Corporation, a Fortune 200 company in the energy business, Mr. Gluski has led a major reorganization and cost savings program and construction program. Over the past twenty years, Mr. Gluski has served in executive positions in the electricity, telecoms and banking sectors and has been involved in many aspects of acquisitions, sales, financings and debt restructurings. He has served on boards of major corporations, as well as on President Obama's Export Council, and is the Chairman of the Americas Society and Council of the Americas.

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Director   Qualifications
Patrick W. Gross, 73
Director since 2006


 
Chairman — The Lovell Group (private investment and advisory firm) since 2001.

Director of Liquidity Services, Inc. since 2001.

Director of Career Education Corporation since 2005.

Director of Rosetta Stone, Inc. since 2009.

Director of Capital One Financial Corporation from 1995 to July 2017.

  Mr. Gross was a founder of American Management Systems, Inc., a global business and information technology firm, where he was a principal executive officer for over 30 years. Mr. Gross was responsible for major corporate clients in providing IT-based applications and advanced data analytics. As a result, he has extensive experience in applying information technology, advanced analytics and risk management analytics in global companies. He has served on boards of major public and private corporations in distribution, technology and services sectors. His background, education and board service provide him with expertise in finance, accounting and cybersecurity.

 

 

 
Victoria M. Holt, 60
Director since 2013


 
President, Chief Executive Officer and Director — Proto Labs, Inc. (online and technology-enabled quick-turn manufacturer) since February 2014.

President and Chief Executive Officer — Spartech Corporation (a leading producer of plastic sheet, compounds and packaging products) from 2010 to 2013.

Senior Vice President, Glass and Fiber Glass, PPG Industries, Inc. (a coatings and specialty products company) from 2005 to 2010.

Director of Watlow Electric Manufacturing Company, a private company, since 2012.

Director of Spartech Corporation from 2005 to 2013.

  Ms. Holt has served in executive positions at public companies for many years, providing her with extensive knowledge about operations, management, logistical requirements and measuring financial performance of large public companies. Her background and education provide her with expertise in applying environmental solutions critical to our Company's strategy. She also has many years of experience serving on a public company board of directors.

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Director   Qualifications
Kathleen M. Mazzarella, 58
Director since October 2015


 
Chairman, President and Chief Executive Officer — Graybar Electric Company, Inc. (distributor of electrical, communications and data networking products and provider of related supply chain management and logistics services) since 2013; President and Chief Executive Officer — Graybar Electric Company, Inc. from 2012 to 2013; Executive Vice President and Chief Operating Officer — Graybar Electric Company, Inc. from 2010 to 2012.

Director of Express Scripts Holding Company since June 2017.

Director of Federal Reserve Bank of St. Louis since January 2015; Chair of the Board since April 2016.

  Ms. Mazzarella has experience serving as the chief executive of a large corporation, developing expertise in the areas of logistics and supply chain management. During her 38-year tenure at Graybar, Ms. Mazzarella has held executive-level positions in sales, human resources, strategic planning and marketing. This diverse background combined with her deep and valuable experience leading various aspects of a customer-focused business will help the Company achieve its strategy to know and service its customers better than anyone in the industry. She also has experience serving on private and non-profit boards.

 

 

 
John C. Pope, 68
Director since 1997


 
Chairman of the Board — PFI Group (private investment firm) since 1994.

Chairman of the Board — R.R. Donnelley & Sons Company since May 2014; Director of R.R. Donnelley & Sons Company, or predecessor companies, since 1996.

Director of The Kraft Heinz Company, or predecessor companies including Kraft Foods Group, Inc., since 2001.

Director of Talgo S.A. since May 2015.

Former Directorships: Con-way, Inc., or predecessor companies, from 2003 to October 2015; Dollar Thrifty Automotive Group, Inc. from 1997 to 2012; and Navistar International Corporation from 2012 to July 2013.

  Prior to his service on the boards of multiple major corporations, Mr. Pope served in executive operational and financial positions at large airline companies for almost 20 years, providing him with extensive experience and knowledge of management of large public companies with large-scale logistical challenges, high fixed-cost structure and significant capital requirements. His background, education and board service also provide him with expertise in finance and accounting. Mr. Pope has served on the board of directors for many public companies for over 30 years.

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Director   Qualifications
Thomas H. Weidemeyer, 70
Director since 2005


 
Chief Operating Officer — United Parcel Service, Inc. (package delivery and supply chain services company) from 2001 to 2003; Senior Vice President — United Parcel Service, Inc. from 1994 to 2003.

President, UPS Airlines (UPS owned airline) from 1994 to 2003.

Director of NRG Energy, Inc. since 2003.

Director of The Goodyear Tire & Rubber Company since 2004.

Director of Amsted Industries Incorporated since 2007.

  Mr. Weidemeyer served in executive positions at a large public company for several years. His roles encompassed significant operational management responsibility, providing him knowledge and experience in an array of functional areas critical to large public companies, including supply chain and logistics management. Mr. Weidemeyer also has 15 years of experience serving on the board of directors for public companies.

          THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NINE DIRECTOR NOMINEES.

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DIRECTOR AND OFFICER STOCK OWNERSHIP

          Our Board of Directors has adopted stock ownership guidelines for our non-employee directors based on the recommendation of the MD&C Committee, as described in Non-Employee Director Compensation on page 14 of this Proxy Statement. Our executive officers, including Mr. Fish, are also subject to stock ownership guidelines, as described in the Compensation Discussion and Analysis on page 26 of this Proxy Statement.

          The Security Ownership of Management table below shows the number of shares of Common Stock each director nominee and each executive officer named in the Summary Compensation Table on page 44 beneficially owned as of March 19, 2018, our record date for the annual meeting, as well as the number owned by all directors and executive officers as a group. These individuals, both individually and in the aggregate, own less than 1% of our outstanding shares as of the record date.


Security Ownership of Management

Name   Shares of Common
Stock Owned(1)
  Shares of Common
Stock Covered by
Exercisable Options(2)

Bradbury H. Anderson(3)

  23,318  

Frank M. Clark, Jr. 

  30,315  

Andrés R. Gluski

  8,106  

Patrick W. Gross

  23,227  

Victoria M. Holt

  14,208  

Kathleen M. Mazzarella(4)

  6,018  

John C. Pope(5)

  51,973  

Thomas H. Weidemeyer(6)

  25,925  

James C. Fish, Jr. 

  180,832   76,222

Devina A. Rankin

  13,282   21,010

James E. Trevathan, Jr.(7)

  398,038   135,310

Jeff M. Harris(8)

  75,990  

John J. Morris, Jr. 

  50,791   21,397

All directors and executive officers as a group (18 persons)(9)

  959,073   335,960

(1)
The table reports beneficial ownership in accordance with Rule 13d-3 under the Exchange Act. The amounts reported above include 3,806 stock equivalents attributed to Mr. Fish and 2,140 stock equivalents attributable to Mr. Morris, based on their holdings in the Company's 401(k) Retirement Savings Plan stock fund. The amounts reported above also include 42,992 shares of Common Stock deferred by Mr. Fish and 54,785 shares of Common Stock deferred by Mr. Trevathan. Deferred shares were earned on account of vested equity awards and pay out in shares of Common Stock after the executive's departure from the Company pursuant to the Company's 409A Deferral Plan.

Executive officers may choose a Waste Management stock fund as an investment option for deferred cash compensation under the Company's 409A Deferral Plan. Interests in the fund are considered phantom stock because they are equal in value to shares of our Common Stock, but these amounts are not invested in stock or funds and are paid out in cash after the executive's departure from the Company. Phantom stock is not included in the table above, but it represents an investment risk based on the performance of our Common Stock. Mr. Morris has 2,323 phantom stock equivalents under the 409A Deferral Plan.

(2)
Includes the number of options currently exercisable and options that will become exercisable within 60 days of our record date.

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(3)
The number of shares owned by Mr. Anderson includes 100 shares held by his wife.

(4)
Shares are held by the Mazzarella Living Trust, a joint revocable trust for which Ms. Mazzarella and her husband serve as trustees.

(5)
The number of shares owned by Mr. Pope includes 435 shares held in trusts for the benefit of his children.

(6)
Shares are held by the Weidemeyer Living Trust, a joint revocable trust for which Mr. Weidemeyer and his wife serve as trustees.

(7)
The number of shares owned by Mr. Trevathan includes 170,171 shares that are pledged as security for a loan.

(8)
Includes 12,636 shares held by the Jeff Harris Revocable Trust, for which Mr. Harris serves as trustee.

(9)
Included in the "All directors and currently serving executive officers as a group" are 6,669 stock equivalents attributable to the executive officers' collective holdings in the Company's 401(k) Retirement Savings Plan stock fund and 118,378 shares of Common Stock deferred on account of vested equity awards pursuant to the Company's 409A Deferral Plan. This group also holds an aggregate of 3,285 phantom stock equivalents under the 409A Deferral Plan that are not included in the table.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

          The table below shows information for persons known to us to beneficially own more than 5% of our Common Stock based on their filings with the SEC through March 19, 2018.

 
  Shares Beneficially
Owned
Name and Address   Number   Percent(1)

The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355

   
35,150,743

(2)

8.1

BlackRock, Inc.
55 East 52nd Street
New York, NY 10055

   
32,155,558

(3)

7.4

William H. Gates III
One Microsoft Way
Redmond, WA 98052

   
31,894,679

(4)

7.4

(1)
Percentage is calculated using the number of shares of Common Stock outstanding as of March 19, 2018.

(2)
This information is based on a Schedule 13G/A filed with the SEC on February 9, 2018. The Vanguard Group reports that it has sole or shared voting power over 706,819 shares of Common Stock and sole or shared dispositive power over 35,150,743 shares of Common Stock beneficially owned.

(3)
This information is based on a Schedule 13G/A filed with the SEC on January 23, 2018. BlackRock, Inc. reports that it has sole voting power over 28,144,442 shares of Common Stock and sole dispositive power over 32,155,558 shares of Common Stock beneficially owned.

(4)
This information is based on a Schedule 13G/A filed with the SEC on February 12, 2016, which is the most recent Schedule 13G filed by the investor with respect to ownership of our Common Stock. Mr. Gates reports that he has sole voting and dispositive power over 13,261,007 shares of Common Stock held by Cascade Investment, L.L.C., as the sole member of such entity. Additionally, the Schedule 13G/A reports that Mr. Gates and Melinda French Gates share voting and dispositive power over 18,633,672 shares of Common Stock beneficially owned by Bill & Melinda Gates Foundation Trust.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

          The federal securities laws require our executive officers and directors to file reports of their holdings and transactions in our Common Stock with the SEC and the New York Stock Exchange. Based on a review of the forms and written representations from our executive officers and directors, we believe that all applicable requirements were complied with in 2017.

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EXECUTIVE OFFICERS

          The following is a listing of our current executive officers, other than Mr. Fish, whose age, experience and qualifications are included in the Director Nominees section of this Proxy Statement beginning on page 16, their ages and business experience for at least the past five years. Unless otherwise specified, all prior positions listed below were with our Company.

Name   Age   Positions Held and Business Experience for Past Five Years
Charles C. Boettcher     44   

Senior Vice President and Chief Legal Officer since January 2017.

         

Also served as Chief Compliance Officer from May 2017 to February 2018.

         

Vice President and General Counsel from September 2016 to December 2016.

         

Executive Vice President, Chief Financial Officer and General Counsel of Oilfield Water Logistics, a produced water gathering, transportation and disposal company, from November 2015 to August 2016.

         

Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary of Eagle Rock Energy Partners, L.P., a master limited partnership engaged in the midstream gathering and processing, the upstream exploration and production and a mineral/royalties business, from August 2007 to October 2015.



Barry H. Caldwell
    57   

Senior Vice President — Corporate Affairs and Chief People Officer since January 2017.

         

Senior Vice President — Corporate Affairs and Chief Legal Officer from November 2014 to December 2016.

         

Senior Vice President — Government Affairs and Corporate Communications from 2002 to November 2014.



Jeff M. Harris
    63   

Senior Vice President — Operations since 2012.

         

Senior Vice President — Midwest Group from 2006 to 2012.

         

Area Vice President — Michigan Market Area from 2000 to 2006.



Tara J. Hemmer
    45   

Senior Vice President — Operations, Safety and Environmental Compliance since January 2018.

         

Vice President — Disposal Operations, Closed Sites and Environmental Compliance from September 2017 to January 2018.

         

Vice President — Disposal Operations and Closed Sites from May 2017 to September 2017.

         

Area Vice President — Greater Mid-Atlantic Area from 2012 to May 2017.



John J. Morris, Jr. 
    48   

Senior Vice President — Operations since 2012.

         

Chief Strategy Officer from March 2012 to July 2012.

         

Area Vice President — Greater Mid-Atlantic Area from 2011 to 2012.

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Name   Age   Positions Held and Business Experience for Past Five Years


Leslie K. Nagy
    43   

Vice President and Chief Accounting Officer since November 2017.

         

Principal Accounting Officer and Controller, Parker Drilling Company, an oilfield services company, from April 2014 to November 2017.

         

Director of Finance and Assistant Controller, Parker Drilling Company, from 2011 to March 2014.



Devina A. Rankin
    42   

Senior Vice President and Chief Financial Officer since February 2017.

         

Also continued to serve as Treasurer from February 2017 to August 2017.

         

Vice President, Treasurer and Acting Chief Financial Officer from January 2017 to February 2017.

         

Vice President and Treasurer from 2012 to January 2017.



Nikolaj H. Sjoqvist
    45   

Senior Vice President and Chief Digital Officer since October 2017.

         

Vice President — Revenue Management from 2012 to October 2017.



James E. Trevathan, Jr. 
    65   

Executive Vice President and Chief Operating Officer since 2012.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

          The Company's Compensation Discussion and Analysis provides information about the Company's executive compensation philosophy and the components of its compensation programs. This includes information about how compensation of the Company's named executive officers for the fiscal year ended December 31, 2017 aligned with the Company's 2017 financial goals and performance. The Compensation Discussion and Analysis helps readers better understand the information found in the Summary Compensation Table and other accompanying tables located in this Proxy Statement.

          This Compensation Discussion and Analysis focuses on our executive pay program as it relates to the following executive officers, whom we refer to as the "named executive officers" or "named executives":

Executive Summary

          The objective of our executive compensation program is to attract, retain, reward and incentivize talented employees who will lead the Company in the successful execution of our strategy. The Company seeks to accomplish this goal by designing a compensation program that is supportive of and aligns with the strategy of the Company and the creation of stockholder value, while discouraging excessive risk-taking. The following key structural elements and policies further the objective of our executive compensation program:

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          Our business performed exceptionally well in 2017, as our strategy of improving pricing, adding profitable volume and controlling costs led to another year of significant earnings improvement. Our focus on delivering exceptional customer service while bolstering employee engagement yielded consistently positive operational performance throughout the year. Our cash flow generation has also continued to exceed expectations, allowing us to invest in assets that support continuous improvement through efficiency and innovation and return $1.5 billion to stockholders in dividends and share repurchases in 2017. The success that we achieved in 2017 reinforces our foundation for earnings and cash flow growth in 2018.

          In line with the Company's financial results, the Company exceeded target on each of the performance measures applicable to incentive compensation earned in 2017. Following is a summary of the 2017 compensation program results, which demonstrated the strong alignment between executive pay and the Company's performance:

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          The 2017 compensation program results continued to evidence our commitment to pay-for-performance, as the performance criteria underlying our incentive compensation successfully drove outstanding operational performance and correlated with total shareholder return. The MD&C Committee strives to establish performance goals that are challenging, but attainable, and the MD&C Committee believes that the above-target payouts on incentive awards for 2017 is the result of the named executives exhibiting tremendous dedication and discipline in tackling challenges and delivering exceptional results. Accordingly, the compensation of the Company's executive officers set forth in the Summary Compensation Table of this Proxy Statement is well-aligned with Company performance in a year when performance again exceeded expectations.

          When establishing 2017 compensation for the named executives, the MD&C Committee noted the results of the advisory stockholder votes on executive compensation, with at least 96% of shares present and entitled to vote at the annual meeting voting in favor of the Company's executive compensation every

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year since the advisory vote on compensation was implemented. Accordingly, the results of the stockholder advisory vote have not caused the MD&C Committee to recommend any changes to our compensation practices.

          The MD&C Committee continually reviews our compensation program to ensure that it is clearly aligned with the business strategy and best supports the accomplishment of our goals. The MD&C Committee is pleased with the results that were delivered under the 2015 — 2017 compensation program design, which aimed to support continued outstanding financial results while maintaining our focus on pricing, capital allocation and cost control. The MD&C Committee has approved keeping the 2018 annual cash and long-term incentive compensation program design consistent with the 2015 — 2017 compensation program design. This consistency reinforces the MD&C Committee's efforts to maintain a compensation program that is straightforward, easy to communicate and readily translates into actionable goals.

Our Compensation Philosophy for Named Executive Officers

          The Company's compensation philosophy is designed to:

          Additionally, our compensation philosophy is intended to encourage executives to embrace the Company's strategy and to lead the Company in setting aspirations that will continue to drive exemplary performance.

          With respect to our named executive officers, the MD&C Committee believes that total direct compensation at target should be in a range around the competitive median according to the following:

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Overview of Elements of Our 2017 Compensation Program

 
  Timing    
  Component    
  Purpose   Key Features    
                             
    Current     Base Salary       To attract and retain executives with a competitive level of regular income   Adjustments to base salary primarily consider competitive market data and the executive's individual performance and responsibilities.    
   
                             

 

 

Short-Term Performance Incentive

 

 

Annual Cash Incentive

     

To encourage and reward contributions to our annual financial objectives through performance-based compensation subject to challenging, yet attainable, objective and transparent metrics

  Cash incentives are targeted at a percentage of base salary and range from zero to 200% of target based on the following performance measures:

Income from Operations Margin – defined as Income from Operations as a percentage of Revenue – motivates executives to control costs and operate efficiently while focusing on yield (weighted 25%);

Income from Operations, excluding Depreciation and Amortization – designed to encourage balanced growth and profitability (weighted 50%); and

Cost Measure – defined as Operating Expense, less depreciation, depletion and amortization, as a percentage of Net Revenue, both less fuel – designed to support cost control innovation initiatives (weighted 25%).

   

 

 


 


 

 

 

 

 

 

 

The MD&C Committee has discretion to increase or decrease an individual's payment by up to 25% based on individual performance, but such modifier has never been used to increase a payment to a named executive.

 

 
   
                             
    Long-Term Performance Incentives     Performance Share Units       To encourage and reward building long-term stockholder value through successful strategy execution;

To retain executives; and

To increase stockholder alignment through executives' stock ownership

  Number of shares delivered range from zero to 200% of the initial target grant based on performance over a three-year performance period.

Payout on half of each executive's PSUs granted in 2017 is dependent on cash flow generation, defined as cash flow provided by operating activities with certain exclusions, which continues our focus on capital discipline, while also aligning the Company with stockholders' free cash flow expectations.

Payout on the remaining half of the PSUs granted in 2017 is dependent on total shareholder return relative to other companies in the S&P 500 over the three-year performance period.

   

 

 


 


 

 

 

 

 

 

 

PSUs earn dividend equivalents that are paid at the end of the performance period based on the number of shares earned. Recipients can defer the receipt of shares, in which case such shares of Common Stock will be paid out, without interest, at the end of the deferral period.

 

 
     
        Stock Options       To support the growth element of the Company's strategy and encourage and reward stock price appreciation over the long-term;

To retain executives; and

To increase stockholder alignment through executives' stock ownership

  Stock options vest in 25% increments on the first two anniversaries of the date of grant and the remaining 50% vest on the third anniversary.

Exercise price is the average of the high and low market price of our Common Stock on the date of grant.

Stock options have a term of ten years.

   
     
        Restricted Stock Units       Used on a limited basis (e.g. promotion and new hire) to make awards that encourage and reward long-term performance and increase alignment with stockholders   Restricted stock units ("RSUs") were granted to Mr. Fish in 2016 in connection with his promotion to Chief Executive Officer. Ms. Rankin received RSUs as part of her annual equity-based incentive compensation prior to her promotion to the senior leadership team.

Time-based vesting aids retention.

Dividends on RSUs accrue and are paid in cash upon vesting.

   
   

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          Deferral Plan.    Each of our named executive officers is eligible to participate in our 409A Deferral Savings Plan and may elect to defer receipt of portions of their base salary and cash incentives in excess of the annual compensation threshold established under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "IRC"). We believe that providing a program that allows and encourages planning for retirement is a key factor in our ability to attract and retain talent. Additional details on the 409A Deferral Plan can be found in the Nonqualified Deferred Compensation in 2017 table and accompanying disclosure on page 49.

          Perquisites.    The Company permits our President and Chief Executive Officer to use the Company's aircraft for business and personal travel whenever reasonably possible; provided, however, that personal use of the Company aircraft attributed to him that results in incremental cost to the Company shall not exceed 90 hours during any calendar year without approval from the Chairman of the MD&C Committee. Use of the Company's aircraft is permitted for other employees' personal use only with Chief Executive Officer approval, which seldom occurs. The value of our named executives' personal use of the Company's aircraft is treated as taxable income to the respective executive in accordance with IRS regulations using the Standard Industry Fare Level formula. This is a different amount than we calculate pursuant to the SEC requirement to report the incremental cost to us of their use. During 2017, neither our President and Chief Executive Officer, nor any other named executive, made personal use of the Company aircraft resulting in incremental cost to the Company that is required to be reported in the Summary Compensation Table.

          We also reimburse the cost of physical examinations for our senior executives, as we believe it is beneficial to the Company to facilitate its executives receiving preventive healthcare. Other than as described in this section, we have eliminated all perquisites for our named executive officers.

          Post-Employment and Change in Control Compensation.    The Company provides severance protections that aid in retention of senior leadership by providing the individual with comfort that he or she will be treated fairly in the event of an involuntary termination not for cause. The change in control provisions included in our Executive Severance Protection Plan, our stock option award documentation and, if applicable, employment agreements require a double trigger in order to receive any payment in the event of a change in control situation. Additional details can be found under "— Post Employment and Change in Control Compensation; Clawback Policies" and "Potential Payments Upon Termination or Change in Control."

How Named Executive Officer Compensation Decisions are Made

          The MD&C Committee meets several times each year to perform its responsibilities as delegated by the Board of Directors and as set forth in the MD&C Committee's charter. These responsibilities include evaluating and approving the Company's compensation philosophy, policies, plans and programs for our named executive officers.

          In the performance of its duties, the MD&C Committee regularly reviews the total compensation, including the base salary, target annual cash incentive award opportunities, long-term incentive award opportunities and other benefits, including potential severance payments for each of our named executive officers. At a regularly scheduled meeting each year, the MD&C Committee reviews our named executives' total compensation and compares that compensation to the competitive market, as discussed below. In the first quarter of each year, the MD&C Committee meets to determine salary increases, if any, for the named executive officers; verifies the results of the Company's performance for annual cash incentive and performance share unit calculations; reviews the individual annual cash incentive targets for the current year as a percent of base salary for each of the named executive officers; and makes decisions on granting long-term equity awards.

          Compensation Consultant.    The MD&C Committee uses several resources in its analysis of the appropriate compensation for the named executive officers. The MD&C Committee selects and employs

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an independent consultant to provide advice relating to market and general compensation trends. The MD&C Committee also uses the services of its independent consultant for data gathering and analyses. The MD&C Committee has retained Frederic W. Cook & Co., Inc. ("FW Cook") as its independent consultant since 2002. The Company makes regular payments to FW Cook for its services around executive compensation, including meeting preparation and attendance, advice, and best practice information, as well as competitive data. Information about such payments is submitted to the chair of the MD&C Committee.

          In addition to services related to executive compensation, FW Cook also provides the MD&C Committee information and advice with respect to compensation of the independent directors. FW Cook has no other business relationships with the Company and receives no other payments from the Company. The MD&C Committee adopted a charter provision requiring that it consider the independence of any compensation consultants it uses for executive compensation matters. The MD&C Committee has considered the independence of FW Cook in light of SEC rules and New York Stock Exchange listing standards. In connection with this process, the MD&C Committee has reviewed, among other items, a letter from FW Cook addressing the independence of FW Cook and the members of the consulting team serving the MD&C Committee, including the following factors: (i) other services provided to us by FW Cook; (ii) fees paid by us as a percentage of FW Cook's total revenue; (iii) policies or procedures of FW Cook that are designed to prevent conflicts of interest; (iv) any business or personal relationships between the senior advisor of the consulting team with a member of the MD&C Committee; (v) any Company stock owned by the senior advisor or any member of his immediate family and (vi) any business or personal relationships between our executive officers and the senior advisor. The MD&C Committee reviewed these considerations and concluded that the work performed by FW Cook and its senior advisor involved in the engagement did not raise any conflict of interest.

          Role of CEO and Human Resources.    Our President and Chief Executive Officer contributes to compensation determinations by assessing the performance of the other named executive officers and providing these assessments with recommendations to the MD&C Committee. Personnel within the Company's Human Resources Department assist the MD&C Committee by working with the independent consultant to provide information requested by the MD&C Committee and assisting it in designing and administering the Company's compensation programs.

          Peer Company Comparisons.    The MD&C Committee uses compensation information of comparison groups of companies to gauge the competitive market, which is relevant for attracting and retaining key talent and for ensuring that the Company's compensation practices are aligned with prevalent practices. For purposes of establishing the 2017 executive compensation program, the MD&C Committee considered a competitive analysis of total direct compensation levels and compensation mix for our executive officers during the second half of 2016, using information from:

          The comparison group of companies is initially recommended by the independent consultant prior to the data gathering process, with input from management and the MD&C Committee. The composition of the group is evaluated and a final comparison group of companies is approved by the MD&C Committee each year. The selection process for the comparison group begins with all companies in the Standard & Poor's North American database that are publicly traded U.S. companies in 15 different Global Industry

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Classifications. These industry classifications are meant to provide a collection of companies in industries that share similar characteristics with us. The companies are then limited to those with at least $5 billion in annual revenue to ensure appropriate comparisons, and further narrowed by choosing those with asset intensive domestic operations, as well as those focusing on transportation and logistics. Companies with these characteristics are chosen because the MD&C Committee believes that it is appropriate to compare our executives' compensation with executives that have similar responsibilities and challenges at other companies.

          The following chart sets forth various size comparisons to companies in the comparison group; this table is provided to evidence that the Company was appropriately positioned within its peer group for purposes of establishing 2017 compensation during 2016. All financial and market data are taken from Standard & Poor's Capital IQ, with financial data as of each company's 2015 fiscal year end and market capitalization as of December 31, 2015.

GRAPHIC

          For purposes of each of the named executives, the general industry data and the comparison group data are blended when composing the competitive analysis, when possible, such that the combined general industry data and the comparison group are each weighted 50%. Competitive compensation analysis for the other executive officers consists only of an average of size-adjusted median general industry survey data. For competitive comparisons, the MD&C Committee has determined that total direct compensation packages for our named executive officers within a range of plus or minus 20% of the median total compensation of the competitive analysis is appropriate. In making these determinations, total direct compensation consists of base salary, target annual cash incentive, and the annualized grant date fair value of long-term equity incentive awards.

          Allocation of Compensation Elements and Tally Sheets.    The MD&C Committee considers the forms in which total compensation will be paid to executive officers and seeks to achieve an appropriate balance between base salary, annual cash incentive compensation and long-term incentive compensation. The MD&C Committee determines the size of each element based primarily on comparison group data and individual and Company performance. The percentage of compensation that is contingent on achievement of performance criteria typically increases in correlation to an executive officer's responsibilities within the Company, with performance-based incentive compensation making up a greater percentage of total compensation for our most senior executive officers. Additionally, as an executive becomes more senior, a greater percentage of the executive's compensation shifts away from short-term to long-term incentive awards.

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          The MD&C Committee uses tally sheets to review the compensation of our named executive officers, which show the cumulative impact of all elements of compensation. These tally sheets include detailed information and dollar amounts for each component of compensation, the value of all equity held by each named executive, and the value of welfare and retirement benefits and severance payments. Tally sheets provide the MD&C Committee with the relevant information necessary to determine whether the balance between short-term and long-term compensation, as well as fixed and variable compensation, is consistent with the overall compensation philosophy of the Company. This information is also useful in the MD&C Committee's analysis of whether total direct compensation provides a compensation package that is appropriate and competitive. Tally sheets are provided annually to the full Board of Directors.

          The following charts display the allocation of total 2017 target compensation among base salary, annual cash incentive and long-term incentives for (a) our President and Chief Executive Officer and (b) our other named executives, on average. These charts reflect the MD&C Committee's 2017 desired total mix of target compensation for named executives, which includes approximately 56% of total compensation derived from long-term equity awards, while long-term equity awards comprised 66% of our President and Chief Executive Officer's total target compensation. These charts also reflect that approximately 86% of our President and Chief Executive Officer's total target compensation opportunities awarded in 2017 were performance-based, while approximately 77% of the total target compensation established in February 2017 for the other named executives was performance-based. We consider stock options granted under our long-term incentive plan to be performance-based because their value will increase as the market value of our Common Stock increases.

GRAPHIC

          Internal Pay Equity.    The MD&C Committee considers the differentials between compensation of the named executive officers. The MD&C Committee also reviews compensation comparisons between the President and Chief Executive Officer and the other executive officers, while recognizing the additional responsibilities of the President and Chief Executive Officer and that such differentials will increase in periods of above-target performance and decrease in times of below-target performance. Based on these considerations, the MD&C Committee concluded that the compensation paid to the President and Chief Executive Officer is reasonable compared to that of the other executive officers.

          Policy on Calculation Adjustments.    In 2014, the MD&C Committee adopted a policy on calculation adjustments that affect payouts under annual and long-term incentive awards in order to address the potentially distorting effect of certain items. Such adjustments are intended to align award payments with the underlying performance of the business; avoid volatile, artificial inflation or deflation of awards due to unusual items in either the award year or the previous comparator year; and eliminate counterproductive incentives to pursue short-term gains and protect current incentive opportunities. To ensure the integrity of the adjustments, the MD&C Committee has adopted guidelines that are generally consistent with the Company's approach to reporting adjusted non-GAAP earnings to the investment community, while retaining discretion to evaluate all adjustments, both income and expense, as circumstances warrant. However, beginning with long-term equity incentive awards granted in 2017, the MD&C Committee agreed that it shall not have the ability to use negative discretion with respect to the calculation of cash flow for purposes of the PSUs subject to that performance measure, in order to avoid variable accounting

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treatment for those awards. The MD&C Committee has determined that potential adjustments arising from a single transaction or event generally should be disregarded unless, taken together, they change the calculated award payout by at least five percent.

          Tax and Accounting Matters.    Our compensation programs were designed to permit the Company to deduct compensation expense under Section 162(m) of the IRC, which historically limited the tax deductibility of annual compensation paid to certain named executives to $1 million, unless the compensation qualified as performance-based. The Company also reserved the right to pay compensation that did not qualify as performance-based. Other than some limited exceptions relating to certain previously-granted awards, the ability to rely on this performance-based exception was eliminated in 2017, and the limitation on deductibility of compensation was expanded to include all named executive officers. As a result, the Company generally may no longer take a deduction for any compensation paid to any of its named executive officers in excess of $1 million.

          Section 409A of the IRC ("Code Section 409A") generally provides that any deferred compensation arrangement which does not meet specific requirements will result in immediate taxation of any amounts deferred to the extent not subject to a substantial risk of forfeiture. In general, to avoid a Code Section 409A violation, amounts deferred may only be paid out on separation from service, disability, death, a specified time or fixed schedule, a change in control or an unforeseen emergency. Furthermore, the election to defer generally must be made in the calendar year prior to performance of services. We intend to structure all of our compensation arrangements, including our 409A Deferral Plan, in a manner that complies with or is exempt from Code Section 409A.

          We account for equity-based payments, including stock options, PSUs and RSUs, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation ("ASC Topic 718"). The MD&C Committee takes into consideration the accounting treatment under ASC Topic 718 when determining the form and amount of annual long-term equity incentive awards. However, because our long-term equity incentive awards are based on a target dollar value established prior to grant (described in further detail under "Named Executives' 2017 Compensation Program and Results — Long-Term Equity Incentives"), this "value" will differ from the grant date fair value of awards calculated pursuant to ASC Topic 718.

          In December 2017, the MD&C Committee took action to make the payout of 2017 annual cash incentive awards in 2018 "fixed and determinable" as of December 31, 2017, qualifying such amount for deductibility for federal income tax purposes during the 2017 fiscal year. This action did not limit the MD&C Committee or the Company's discretion to make adjustments between different employees or classifications of employees, but instead set a minimum aggregate pool for annual cash incentive awards that must be paid out by March 15, 2018 (the deadline for deductibility).

          Risk Assessment.    The MD&C Committee uses the structural elements set forth in the Executive Summary earlier to establish compensation that will provide sufficient incentives for named executive officers to drive results while avoiding unnecessary or excessive risk taking that could harm the long-term value of the Company. During 2017, the MD&C Committee reviewed the Company's compensation policies and practices and the assessment and analysis of related risk conducted by the independent compensation consultant. Based on this review and analysis, the MD&C Committee and the independent compensation consultant concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

          Consideration of Stockholder Advisory Vote on Executive Compensation.    The MD&C Committee reviews the results of the stockholder advisory vote on executive compensation and considers any implications of such voting results on the Company's compensation programs. In light of the fact that at least 96% of shares present and entitled to vote at the annual meeting have voted in favor of the Company's executive compensation every year since the advisory vote on compensation was implemented,

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the results of the stockholder advisory votes have not caused the MD&C Committee to recommend any changes to our compensation practices.

          Promotion of Ms. Rankin.    In January 2017, Ms. Devina Rankin, the Company's former Vice President and Treasurer, was promoted to Vice President, Treasurer and Acting Chief Financial Officer, replacing Mr. Fish as the principal financial officer of the Company, and she received a $50,000 cash bonus in recognition of her additional interim responsibilities. In February 2017, Ms. Rankin's promotion was made permanent, and she was elected Senior Vice President, Chief Financial Officer and Treasurer. Her 2017 compensation established in February took into consideration her promotion. She continued to serve as Treasurer until a successor Treasurer was elected in August 2017, and she also served as the Company's principal accounting officer from August 2017 to November 2017.

Named Executives' 2017 Compensation Program and Results

          In February 2017, the MD&C Committee approved increases to the base salaries of named executive officers, consistent with our compensation philosophy and driven by competitive market data, internal pay equity considerations and individual performance relative to the executive's responsibilities and contributions. The table below shows 2016 annual base salary and 2017 annual base salary (effective as of March 26, 2017, except in the case of Ms. Rankin, whose base salary increase was effective as of her promotion to Chief Financial Officer on February 27, 2017) for each of our named executive officers.

Named Executive Officer   2016
Base Salary
  2017
Base Salary
 

Mr. Fish(1)

  $ 1,000,000   $ 1,100,000  

Ms. Rankin(2)

  $ 305,500   $ 500,000  

Mr. Trevathan

  $ 681,500   $ 738,000  

Mr. Harris

  $ 613,000   $ 691,000  

Mr. Morris

  $ 597,500   $ 634,000  

(1)
Mr. Fish's base salary was increased to $1 million upon his promotion to Chief Executive Officer in November 2016.
(2)
Ms. Rankin's base salary was increased to $500,000 upon her promotion to Senior Vice President, Chief Financial Officer and Treasurer in February 2017.

          The MD&C Committee develops financial performance measures for annual cash incentive awards to drive improvements in business operations, as well as support and fund the long-term strategy of the Company. The MD&C Committee found that the Income from Operations Margin performance measure continues to keep the Company focused on cost control, operational improvements and yield, while the Income from Operations, excluding Depreciation and Amortization, performance measure encourages balanced focus on growth and profitability. Finally, the MD&C Committee maintained the Cost Measure in 2017 and its focus on operating cost control, after successfully driving reductions in operating cost the

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prior years. When setting threshold, target and maximum performance measure levels each year, the MD&C Committee looks to the Company's historical results of operations and analyses and forecasts for the coming year. Specifically, the MD&C Committee considers expected revenue based on analyses of pricing and volume trends, as affected by operational and general economic factors and expected costs. The MD&C Committee believes these financial performance measures support and align with the strategy of the Company and are appropriate indicators of our progress toward the Company's goals.

          The table below details the performance measures set by the MD&C Committee for purposes of the named executive officers' annual cash incentive for 2017.

 
  Threshold
Performance
(60% Payment)
  Target
Performance
(100% Payment)
  Maximum
Performance
(200% Payment)

Income from Operations Margin

  17.7%   18.0%   18.3%

Income from Operations, excluding Depreciation and Amortization

  $3.713 billion   $3.965 billion   $4.084 billion

Cost Measure

  59.6%   59.3%   59.0%

          The following table sets forth the Company's performance achieved on each of the annual cash incentive performance measures and the payout earned on account of such performance.

 
   
  Income from Operations,
excluding Depreciation
and Amortization
(weighted 50%)
   
   
   
Income from Operations
Margin (weighted 25%)
  Cost Measure
(weighted 25%)
   
  Total
Payout Earned
(as a percentage
of Target)
Actual   Payout
Earned
  Actual   Payout
Earned
  Actual   Payout
Earned
18.2%     154.83 %     $ 4.007 billion     135.30 %   59.2 %   141.87 % 141.83%  

          As discussed above, the MD&C Committee has discretion to make adjustments to the performance calculations for unusual or otherwise non-operational matters in line with its policy on calculation adjustments. The calculation of 2017 annual cash incentive performance measures was made on a basis consistent with the Company's reporting of its 2017 financial results, including exclusion of asset impairments and unusual items and an $11 million charge in connection with withdrawal from a multiemployer pension plan. The 2017 cash incentive performance calculations were not otherwise adjusted.

          Target annual cash incentives are a specified percentage of the executives' base salary. The following table shows each named executive's target percentage of base salary for 2017 and annual cash incentive for 2017 paid in March 2018.

Named Executive Officer   Target Percentage
of Base Salary
  Annual Cash
Incentive
For 2017(1)
 

Mr. Fish

  135   $ 2,062,111  

Ms. Rankin(2)

  86   $ 572,398  

Mr. Trevathan

  90   $ 925,437  

Mr. Harris

  90   $ 859,127  

Mr. Morris

  90   $ 798,560  

(1)
Base salary increases for 2017 were implemented March 26, 2017, except in the case of Ms. Rankin, whose base salary increase was effective as of February 27, 2017. The calculations of annual cash

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(2)
In February 2017, upon her promotion to Chief Financial Officer, Ms. Rankin's target percentage of base salary was increased from 50% to 90%, yielding an 86% target percentage of base salary for the full year of 2017.

          Long-Term Equity Incentives — Our equity awards are designed to hold individuals accountable for long-term decisions by rewarding the success of those decisions. The MD&C Committee continuously evaluates the components of its programs. In determining which forms of equity compensation are appropriate, the MD&C Committee considers whether the awards granted are achieving their purpose; the competitive market; and accounting, tax or other regulatory issues, among others. In determining the appropriate awards for the named executives' 2017 annual long-term incentive award, the MD&C Committee decided to grant both PSUs comprising 80% of each named executive's award and stock options comprising 20% of each named executive's award, consistent with prior years. Payout on half of each named executives' PSUs granted in 2017 is dependent on cash flow generation. Payout on the remaining half of PSUs granted in 2017 is dependent on total shareholder return relative to the S&P 500. Meanwhile, stock options encourage focus on increasing the market value of our stock. Before determining the actual number of PSUs and stock options that were granted to each of the named executives in 2017, the MD&C Committee established a target dollar amount for each named executive's annual total long-term equity incentive award. The values chosen were based primarily on the comparison information for the competitive market and consideration of the named executives' responsibility for meeting the Company's strategic objectives. Target dollar amounts for equity incentive awards will vary from grant date fair values calculated for accounting purposes.

Named Executive Officer   Dollar Values of 2017
Long-Term Equity Incentives
Set by the Committee
(at Target)
 

Mr. Fish

  $ 5,000,000  

Ms. Rankin

  $ 1,000,000  

Mr. Trevathan

  $ 2,150,000  

Mr. Harris

  $ 1,500,000  

Mr. Morris

  $ 1,500,000  

          PSUs Granted in 2017.    Performance share units are granted to our named executive officers annually to align compensation with the achievement of our long-term financial goals and to increase stockholder alignment through stock ownership. Performance share units provide an immediate retention benefit to the Company because there is unvested potential value at the date of grant. The number of PSUs granted to our named executive officers corresponds to an equal number of shares of Common Stock. At the end of the three-year performance period for each grant, the Company will deliver a number of shares ranging from 0% to 200% of the initial number of PSUs granted, depending on the Company's three-year performance against pre-established targets.

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          The MD&C Committee determined the number of PSUs that were granted to each of the named executives in 2017 by taking the targeted dollar amounts established for total long-term equity incentives (set forth in the table above) and multiplying by 80%. Those values were then divided by the average of the high and low price of our Common Stock over the 30 trading days preceding the date of the MD&C Committee meeting at which the grants were approved to determine the number of PSUs granted. The number of PSUs granted in 2017 are shown in the table below.

Named Executive Officer   Number of
Performance
Share Units

Mr. Fish

  56,338

Ms. Rankin

  11,268

Mr. Trevathan

  24,226

Mr. Harris

  16,902

Mr. Morris

  16,902

          Half of each named executive's PSUs included in the table set forth above are subject to a cash flow generation performance measure; the cash flow generation performance measure requires focus on capital discipline and strengthens alignment with stockholders' free cash flow expectations. For purposes of these PSUs, we generally define cash flow as cash provided by operating activities, with the following adjustments: (a) capital expenditures are excluded; (b) costs associated with labor disruptions and multiemployer plan withdrawal liabilities are excluded due to being required as a result of past labor commitments combined with changing economic conditions and business climate; (c) strategic acquisition, restructuring, and transformation and reorganization costs are excluded in recognition of goals to increase customer and business base while minimizing operating costs; and (d) cash proceeds from the divestiture of businesses and other assets are included. The table below shows the required achievement of the cash flow generation performance measure and the corresponding potential payouts under our PSUs granted in 2017.

 
  Threshold   Target   Maximum
 
  Performance   Payout   Performance   Payout   Performance   Payout

Cash Flow

  $ 4.566 billion   60%   $ 4.951 billion   100%   $ 5.336 billion   200%

          The remaining half of each named executive's PSUs are subject to total shareholder return relative to the S&P 500. This measure directly correlates executive compensation with creation of stockholder value. Total shareholder return is calculated as follows: (Common Stock price at end of performance period – Common Stock price at beginning of performance period + dividends during performance period) / Common Stock price at beginning of performance period. The table below shows the required achievement of the total shareholder return performance measure and the corresponding potential payouts under our PSUs granted in 2017.

Total Shareholder Return Relative to the S&P 500
Performance   Payout

75th percentile (Maximum)

  200%

50th percentile (Target)

  100%

25th percentile (Threshold)

  50%

          If actual performance falls between performance levels for either of the PSU performance measures, then the number of PSUs earned will be interpolated between the two performance levels, rounded to the nearest 0.1%.

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          The different performance measure levels are determined based on an analysis of historical performance and current projections and trends. The MD&C Committee uses this analysis and modeling of different scenarios related to items that affect the Company's performance such as yield, volumes and capital to set the performance measures. As with the consideration of targets for the annual cash incentives, when the MD&C Committee established the cash flow targets, the MD&C Committee carefully considered several material factors affecting the Company for 2017 and beyond, including general economic and market conditions and economic indicators for future periods, to ensure that the cash flow targets align with the Company's long-range strategic plan.

          Payout on PSUs for the Performance Period Ended December 31, 2017.    Half of the PSUs granted in 2015 with the performance period ended December 31, 2017 were subject to the cash flow generation performance measure, and the remaining half of the PSUs granted in 2015 were subject to total shareholder return relative to the S&P 500. For the three-year performance period ended December 31, 2017, the Company generated cash provided by operating activities of $4.73 billion, exceeding the maximum of $4.133 billion; this performance level yielded a 200% payout in shares of Common Stock that were issued in February 2018. With respect to the PSUs with a three-year performance period ended December 31, 2017 that were subject to total shareholder return relative to the S&P 500, the performance of the Company's Common Stock on this measure translated into a percentile rank relative to the S&P 500 of 88.08%, resulting in a 200% payout in shares of Common Stock that were issued in February 2018. In line with the MD&C Committee's policy on calculation adjustments discussed above, no adjustments were made to the 2017 performance calculations for PSUs.

          Stock Options — The MD&C Committee believes use of stock options is appropriate to support the growth element of the Company's strategy. The grant of options made to the named executive officers in the first quarter of 2017 in connection with the annual grant of long-term equity awards was based on the targeted dollar amounts established for total long-term equity incentives (set forth in the table above) and multiplied by 20%. The actual number of stock options granted was determined by assigning a value to the options using an option pricing model, and dividing the dollar value of target compensation by the value of an option. The resulting number of stock options are shown in the table below.

Named Executive Officer   Number of
Options

Mr. Fish

  129,534  

Ms. Rankin

  25,907  

Mr. Trevathan

  55,699  

Mr. Harris

  38,860  

Mr. Morris

  38,860  

          The stock options will vest in 25% increments on the first two anniversaries of the date of grant and the remaining 50% will vest on the third anniversary. The exercise price of the options granted in 2017 is $73.335, which is the average of the high and low market price of our Common Stock on the date of grant, and the options have a term of ten years. We account for our employee stock options under the fair value method of accounting using a Black-Scholes methodology to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized to expense over the vesting period less expected forfeitures, except for stock options granted to retirement-eligible employees, for which expense is fully recognized at the time of grant.

          Restricted Stock Units — The MD&C Committee approved an award of 15,625 RSUs to Mr. Fish upon his promotion to President and Chief Executive Officer in November 2016. This promotional grant of RSUs to Mr. Fish was made in consideration of his increased responsibilities and the competitive compensation analysis, in order to encourage and reward long-term performance, and in order to promote retention and increase alignment with stockholders. One-third of the RSUs granted to Mr. Fish vested in 2017 on the first anniversary of the date of grant, and an additional one-third of the RSUs will vest on each

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of the second and third anniversaries of the date of grant. Ms. Rankin also received RSUs as part of her annual equity incentive compensation granted in February of each year up to and including 2016, prior to her promotion to the senior leadership team. Ms. Rankin's RSUs vest in full on the third anniversary of the date of grant. Dividends on RSUs accrue and are paid in cash upon vesting. RSUs may not be voted or sold until vested.

          The MD&C Committee anticipates that grants of RSUs to named executives will continue to be made on a limited basis in cases such as a significant promotion and increased responsibilities and to attract new hires, and that RSUs will not be a routine component of named executive compensation.

Post-Employment and Change in Control Compensation; Clawback Policies

          The post-employment compensation our named executives receive is based on provisions included in retirement and severance plan documents, employment agreements and equity incentive award documentation.

          Developments During 2017.    In December 2017, we adopted an Executive Severance Protection Plan (the "Severance Protection Plan") and each of Messrs. Fish and Morris and Ms. Rankin entered into new or amended and restated employment agreements (the "2017 Employment Agreements").

          The Severance Protection Plan covers each executive officer other than those individuals who have legacy employment agreements that provide for separate severance entitlements. The 2017 Employment Agreements do not contain separate severance entitlements, but instead provide for additional terms and protections relating to the respective executive's participation in the Severance Protection Plan. The 2017 Employment Agreements are intended to transition the Company's severance protections away from contract-based protections and onto a standardized and flexible plan-based approach. Going forward, the Company does not anticipate entering into new employment agreements with our executive officers.

          As described in our Form 8-K dated February 1, 2018, Messrs. Trevathan and Harris have both advised the Company of their intention to retire at the end of 2018. Due to these pending retirement plans, the Company left in place the existing employment agreements with Messrs. Trevathan and Harris, and they are not participants in the Severance Protection Plan. Additional details can be found under "Potential Payments Upon Termination or Change in Control" beginning on page 50.

          Post-Employment Covenants and Clawback Policies.    Both existing and recent executive employment agreements contain noncompetition and nonsolicitation restrictions that apply during employment and for a two-year period following termination. Additionally, the Severance Protection Plan applicable to Messrs. Fish and Morris and Ms. Rankin, as well as Mr. Harris' legacy employment agreement, both contain (a) a requirement that the individual execute a general release prior to receiving post-termination benefits and (b) a clawback feature that allows for the suspension and refund of termination benefits for subsequently discovered cause. The clawback feature generally allows the Company to cancel any remaining payments due and obligates the named executive to refund to the Company severance payments already made if, within one year of termination of employment of the named executive by the Company for any reason other than for cause, the Company determines that the named executive could have been terminated for cause.

          Our current equity award agreements also include a requirement that, in order to be eligible to vest in any portion of the award, the employee must enter into an agreement containing restrictive covenants applicable to the employee's behavior following termination. Additionally, our equity award agreements include compensation clawback provisions that provide, if the MD&C Committee determines that an employee either engaged in or benefited from misconduct, then the employee will refund any amounts received under the equity award agreements. Misconduct generally includes any act or failure to act that caused or was intended to cause a violation of the Company's policies, generally accepted accounting principles or applicable laws and that materially increased the value of the equity award. Further, our MD&C Committee has adopted a clawback policy applicable to our annual cash incentive awards that is

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designed to recoup annual cash incentive payments when the recipient's personal misconduct affects the payout calculations for the awards. Clawback terms applicable to our incentive awards allow recovery within the earlier to occur of one year after discovery of misconduct and the second anniversary of the employee's termination of employment.

Other Compensation Policies and Practices

          Severance Limitation Policy — The MD&C Committee has approved an Executive Officer Severance Policy that generally provides that the Company may not enter into new severance arrangements with its executive officers, as defined in the federal securities laws, that provide for benefits, less the value of vested equity awards and benefits provided to employees generally, in an amount that exceeds 2.99 times the executive officer's then current base salary and target annual cash incentive, unless such future severance arrangement receives stockholder approval.

          Policy Limiting Death Benefits and Gross-up Payments — The Company has adopted a "Policy Limiting Certain Compensation Practices," which generally provides that the Company will not enter into new compensation arrangements that would obligate the Company to pay a death benefit or gross-up payment to an executive officer unless such arrangement receives stockholder approval. The policy is subject to certain exceptions, including benefits generally available to management-level employees and any payment in reasonable settlement of a legal claim. Additionally, "Death Benefits" under the policy does not include deferred compensation, retirement benefits or accelerated vesting or continuation of equity-based awards pursuant to generally-applicable equity award plan provisions.

          Stock Ownership Guidelines and Holding Requirements — All of our named executive officers are subject to stock ownership guidelines. We instituted stock ownership guidelines because we believe that ownership of Company stock demonstrates a commitment to, and confidence in, the Company's long-term prospects and further aligns employees' interests with those of our stockholders. We believe that the requirement that these individuals maintain a portion of their individual wealth in the form of Company stock deters actions that would not benefit stockholders generally. Although there is no deadline set for executives to reach their ownership guidelines, the MD&C Committee monitors ownership levels to confirm that executives are making sustained progress toward achievement of their ownership guidelines.

          Additionally, our stock ownership guidelines contain holding requirements. Executives with a title of Senior Vice President or higher, which includes all of our named executives, must hold 100% of all net shares acquired through the Company's long-term incentive plans for at least one year, and those individuals must continue to hold 100% of all such net shares until the individual's ownership guideline is achieved. Once achieved, the requisite stock ownership level must continue to be retained throughout the executive's employment with the Company. Our MD&C Committee believes these holding periods discourage executives from taking actions in an effort to gain from short-term increases in the market value of our stock.

          The MD&C Committee regularly reviews the ownership guidelines to ensure that the appropriate share ownership levels are in place. Guidelines are expressed as a fixed number of shares and were revised in November 2016 to account for the Company's more recent sustained Common Stock market value. The ownership requirement of Mr. Fish, our President and Chief Executive Officer, was approximately 6.6 times base salary, using his base salary as of December 31, 2017 and an assumed $60 per share stock price. Using the closing price of the Company's Common Stock on March 19, 2018, the ownership requirement of our President and Chief Executive Officer is approximately 9.4 times his base salary as of December 31, 2017. Shares owned outright, vested RSUs and PSUs that have been deferred, stock equivalents based on holdings in the Company's 401(k) Retirement Savings Plan and phantom stock held in the Company's 409A Deferral Plan count toward meeting the ownership guidelines. Stock options, PSUs, RSUs and restricted stock, if any, do not count toward meeting the ownership guidelines until they are vested or earned.

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          The following table outlines the stock ownership guidelines and attainment for the named executive officers.

Named Executive Officer   Ownership
Guideline
(number of shares)
  Attainment as of
March 19, 2018

Mr. Fish

  120,500   150%

Ms. Rankin

  32,500   41%

Mr. Trevathan(1)

  31,000   735%

Mr. Harris

  18,000   422%

Mr. Morris

  18,000   295%

(1)
The table above does not include 170,171 shares that are pledged as security for a loan. The Company has a policy prohibiting pledges of Company securities by executive officers without Board-level approval (which was obtained in the case of Mr. Trevathan) and requiring that such pledged shares are not required to meet the executive's stock ownership guideline.

          As discussed under "Director and Officer Stock Ownership," the MD&C Committee also establishes ownership guidelines for the independent directors and performs regular reviews to ensure all independent directors are in compliance or are showing sustained progress toward achievement of their ownership guideline.

          Insider Trading — The Company maintains an insider trading policy that prohibits directors, executive officers and other "designated insiders" from engaging in most transactions involving the Company's Common Stock during periods, determined by the Company, that those individuals are most likely to be aware of material, non-public information. Directors, executive officers and other designated insiders must clear all their transactions in our Common Stock with the Company's office of the Chief Legal Officer in advance. Additionally, it is our policy that directors, executive officers and designated insiders are not permitted to hedge their ownership of Company securities, including (a) trading in options, warrants, puts and calls or similar derivative instruments on any security of the Company, (b) selling any security of the Company "short" and (c) purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engaging in transactions that are designed to or have the effect of offsetting any decrease in the market value of any security of the Company granted as compensation or held, directly or indirectly, by the director, executive officer or designated insider. Further, as noted above, the Company has adopted a policy prohibiting pledges of Company securities by executive officers without Board-level approval and requiring that such pledged shares are not required to meet the executive's ownership level under the ownership guidelines.

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EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION TABLES

          We are required to present compensation information in the tabular format prescribed by the SEC. This format, including the tables' column headings, may be different from the way we describe or consider elements and components of compensation internally. The Compensation Discussion and Analysis contains a discussion that should be read in conjunction with these tables to gain a complete understanding of our executive compensation philosophy, programs and decisions.


Summary Compensation Table

Year       Salary
($)

 
    Bonus
($)(1)

 
    Stock
Awards
($)(2)


 
    Option
Awards
($)(3)


 
    Non-Equity
Incentive Plan
Compensation
($)(4)



 
    All Other
Compensation
($)(5)


 
    Total
($)
James C. Fish, Jr.
President and Chief Executive Officer
               
2017       1,076,923             4,762,674       1,000,002       2,062,111       92,395       8,994,105
2016       705,996             3,104,074       344,002       1,013,304       59,482       5,226,858
2015       631,865             1,727,621       334,123       595,320       49,060       3,337,989
Devina A. Rankin
Senior Vice President and Chief Financial Officer
               
2017       470,077       50,000       952,569       200,002       572,398       34,062       2,279,108
James E. Trevathan, Jr.
Executive Vice President and Chief Operating Officer
               
2017       724,962             2,048,005       429,996       925,437       50,685       4,179,085
2016       676,885             2,055,089       344,002       882,920       79,740       4,038,636
2015       678,462             1,727,621       334,123       638,623       77,368       3,456,197
Jeff M. Harris
Senior Vice President — Operations
               
2017       673,000             1,428,853       299,999       859,127       68,869       3,329,848
2016       608,846             1,761,482       294,860       773,906       54,163       3,493,257
2015       610,124             1,442,184       278,922       510,496       62,786       2,904,512
John J. Morris, Jr.
Senior Vice President — Operations
               
2017       625,577             1,428,853       299,999       798,560       65,941       3,218,930
2016       593,462             1,761,482       294,860       754,350       52,630       3,456,784
2015       586,827             1,442,184       278,922       491,544       64,356       2,863,833
(1)
Ms. Rankin received a $50,000 cash bonus in January 2017 in recognition of her additional responsibilities while serving as Acting Chief Financial Officer. Ms. Rankin's promotion was made permanent in February 2017 and her compensation was further adjusted as of such date. Please see "Compensation Discussion and Analysis — How Named Executive Officer Compensation Decisions are Made — Promotion of Ms. Rankin" for additional information.

(2)
Amounts in this column represent the grant date fair value of performance share units granted to all named executives annually, and 15,625 restricted stock units granted to Mr. Fish in 2016 with a fair value of $1,048,984. The grant date fair values were calculated in accordance with ASC Topic 718, as further described in Note 14 in the Notes to the Consolidated Financial Statements in our 2017 Annual Report on Form 10-K. The grant date fair value of our performance share units subject to total shareholder return relative to the S&P 500 was based on a Monte Carlo valuation, and because total shareholder return is a market condition, projected achievement is embedded in the grant date fair value.

For purposes of calculating the grant date fair value of performance share units subject to the cash flow generation performance measure, we have assumed that the Company will achieve target performance levels. The table below shows (a) the aggregate grant date fair value of performance share units subject to the cash flow generation performance measure assuming target level of performance is achieved (this is the amount included in the Stock Awards column in the Summary Compensation Table) and (b) the aggregate grant date fair value of the same performance share units assuming the Company will reach the highest level of achievement for this performance measure and maximum payouts will be earned.

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  Year

 





Aggregate Grant Date
Fair Value of Cash
Flow Generation PSUs
Assuming Target
Level of Performance
Achieved ($)






 




Aggregate Grant Date
Fair Value of Cash
Flow Generation PSUs
Assuming Highest
Level of Performance
Achieved ($)
 

Mr. Fish

  2017         2,065,774         4,131,548  

  2016         921,475         1,842,950  

  2015         698,600         1,397,200  

Ms. Rankin

  2017         413,169         826,338  

Mr. Trevathan

  2017         888,307         1,776,614  

  2016         921,475         1,842,950  

  2015         698,600         1,397,200  

Mr. Harris

  2017         619,754         1,239,508  

  2016         789,825         1,579,650  

  2015         583,177         1,166,354  

Mr. Morris

  2017         619,754         1,239,508  

  2016         789,825         1,579,650  

  2015         583,177         1,166,354  
(3)
Amounts in this column represent the grant date fair value of stock options granted annually, in accordance with ASC Topic 718. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options are disclosed in Note 14 in the Notes to the Consolidated Financial Statements in our 2017 Annual Report on Form 10-K.

(4)
Amounts in this column represent cash incentive awards earned and paid based on the achievement of performance criteria. Please see "Compensation Discussion and Analysis — Named Executive's 2017 Compensation Program and Results — Annual Cash Incentive" for additional information.

(5)
The amounts included in "All Other Compensation" for 2017 are shown below (in dollars):

   


401(k)
Plan Matching
Contributions



 


Deferral Plan
Matching
Contributions



 
Life Insurance
Premiums
 

Mr. Fish

        12,150         78,801         1,444  

Ms. Rankin

        12,150         21,288         624  

Mr. Trevathan

        12,150         37,136         1,399  

Mr. Harris

        12,150         55,461         1,258  

Mr. Morris

        12,150         52,555         1,236  

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Table of Contents


Grant of Plan-Based Awards in 2017

    Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(1)


 
  Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)


 
  All other
Option
Awards:
Number of
Securities
Underlying





 
  Exercise
or Base
Price of
Option



 
  Closing
Market
Price
on
Date of




 
  Grant
Date Fair
Value of
Stock and
Option
                                       
      Threshold     Target     Maximum     Threshold     Target     Maximum     Options     Awards     Grant     Awards
Grant Date     ($)     ($)     ($)     (#)     (#)     (#)     (#)(3)     ($/sh)(4)     ($)     ($)(5)
James C. Fish, Jr.                    
Annual Cash Incentive       872,359       1,453,932       2,907,864                                                        

02/28/17

                              33,803       56,338       112,676                               4,762,674

02/28/17

                                                      129,534       73.335       73.32       1,000,002
Devina A. Rankin                                        
Annual Cash Incentive       242,148       403,580       807,160                                                        

02/28/17

                              6,761       11,268       22,536                               952,569

02/28/17

                                                      25,907       73.335       73.32       200,002
James E. Trevathan, Jr.                                        
Annual Cash Incentive       391,499       652,498       1,304,996                                                        

02/28/17

                              14,536       24,226       48,452                               2,048,005

02/28/17

                                                      55,699       73.335       73.32       429,996
Jeff M. Harris                                        
Annual Cash Incentive       363,446       605,744       1,211,488                                                        

02/28/17

                              10,141       16,902       33,804                               1,428,853

02/28/17

                                                      38,860       73.335       73.32       299,999
John J. Morris, Jr.                                        
Annual Cash Incentive       337,824       563,040       1,126,080                                                        

02/28/17

                              10,141       16,902       33,804                               1,428,853

02/28/17

                                                      38,860       73.335       73.32       299,999
(1)
Actual payouts of cash incentive awards for 2017 performance are shown in the Summary Compensation Table under "Non-Equity Incentive Plan Compensation." The named executives' possible annual cash incentive payouts are calculated using a percentage of base salary approved by the MD&C Committee. The threshold levels represent the amounts that would have been payable if the minimum performance requirements were met for each performance measure. The possible payouts for Ms. Rankin reflect that her target percentage of base salary was increased in connection with her promotion during 2017. Please see "Compensation Discussion and Analysis — Named Executive's 2017 Compensation Program and Results — Annual Cash Incentive" for additional information about these awards, including performance criteria.

(2)
Represents the number of shares of Common Stock potentially issuable based on the achievement of performance criteria under performance share unit awards granted under our 2014 Stock Incentive Plan. Please see "Compensation Discussion and Analysis — Named Executive's 2017 Compensation Program and Results — Long-Term Equity Incentives — Performance Share Units" for additional information about these awards, including performance criteria. The performance period for these awards ends December 31, 2019. Performance share units earn dividend equivalents, which are paid out based on the number of shares earned at the end of the performance period.

(3)
Represents the number of shares of Common Stock potentially issuable upon the exercise of options granted under our 2014 Stock Incentive Plan. Please see "Compensation Discussion and Analysis — Named Executive's 2017 Compensation Program and Results — Long-Term Equity Incentives — Stock Options" for additional information about these awards. The stock options will vest in 25% increments on the first two anniversaries of the date of grant and the remaining 50% will vest on the third anniversary. Although we consider all of our equity awards to be a form of incentive compensation because their value will increase as the market value of our Common Stock increases, only awards with performance criteria are considered "equity incentive plan awards" for SEC disclosure purposes. As a result, stock option awards are not included as "Equity Incentive Plan Awards" in the table above or the Outstanding Equity Awards as of December 31, 2017 table.

(4)
The exercise price represents the average of the high and low market price on the date of the grant, in accordance with our 2014 Stock Incentive Plan.

(5)
These amounts are grant date fair values of the awards as calculated under ASC Topic 718 and as further described in Note 14 in the Notes to the Consolidated Financial Statements in our 2017 Annual Report on Form 10-K.

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Table of Contents


Outstanding Equity Awards as of December 31, 2017

 

    Option Awards

  Stock Awards(1)
                               
 

Name


  Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(2)







  Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)







  Option
Exercise
Price
($)




  Option
Expiration
Date



  Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)(6)








  Market
Value of
Shares or
Units of
Stock
that
Have Not
Vested
($)(6)









  Equity
Incentive
Plan
Awards:

Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)(7)














  Equity
Incentive
Plan
Awards:

Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)(7)
 

James C. Fish, Jr.

                                                               
 

            129,534(3)       73.335       2/28/2027       10,416       898,901       82,264